Commons Sitting of 29 February 2000

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS

    GREENHAM AND CROOKHAM COMMONS BILL (By ORDER)
    Order for Second Reading Read.
    To be read a Second time on Tuesday 7 March.

Oral Answers to Questions
  HEALTH
  The Secretary of State was asked—
  HEALTH

    Team Midwifery
    Mr. Bob Russell: What progress has been made since May 1997 in extending team midwifery. [110853]
    The Parliamentary Under-Secretary of State for Health (Yvette Cooper): The last Department of Health survey of the extent of team midwifery was published in 1993. At present, there is no accurate information on the extent of team midwifery nationwide. That is why we have recently commissioned a comprehensive review of midwifery organisation locally. It will also examine the impact of different models of midwife care and report by the end of the year.
    Mr. Russell: Does the Minister accept that the changing child birth project resulted from a Select Committee on Health report and was introduced under the previous Government, but instead of extending women's choice and providing the best possible service for expectant mothers, are not the Government reducing child care, particularly by the midwifery service? I draw her attention in particular to the Iceni midwifery team in Colchester, which is threatened with disbandment.
    Yvette Cooper: I disagree with the hon. Gentleman. The Government are strongly committed to the values behind the changing child birth project, focusing on the women involved and keeping them at the centre of maternity services.
    I am aware of the situation with regard to the Iceni team and that various options are being examined locally. Obviously, it would be wrong of a Minister to pre-empt any local consultation that needs to take place, but I have
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    benefited from team midwifery in Pontefract and so am well aware of the benefits that team midwifery can provide as one model of midwife care.
    Mr. Tom Cox: Is my hon. Friend aware that in St. George's hospital, which is in my constituency, there is an excellent midwifery unit? On a recent visit there I saw the work that was being done, but it was pointed out to me that, sadly, local general practitioners are not always fully aware of the services that are on offer. Will she look at that matter?
    Yvette Cooper: My hon. Friend is right to say that the Tooting service is a great model of best practice from which people throughout the country can learn. The Government are strongly committed to having GPs, primary care groups and acute trusts working closely together to ensure that the best quality maternity care is provided for all women, wherever they should want it.
    Mrs. Marion Roe: Does the Minister accept that there is serious concern among pregnant women, particularly those who will become first-time mothers, that there is a possibility that they will be left alone during labour because of a shortage of midwives? Will she outline the Government's strategy for recruiting more midwives, thus ensuring that maternity services are good, reliable and give confidence to those who are about to face motherhood?
    Yvette Cooper: I can certainly reassure all first-time mothers and all mothers to be that the Department expects any woman who is in established labour who needs or who wants support to have it. We expect maternity care to be organised accordingly. However, the hon. Lady is right that decisions by the previous Government left us with a shortage of midwives, as well as a shortage of nurses and doctors. Given how long it takes to train midwives, nurses and doctors, we would be in a better situation if the previous Government had got their act together and increased recruitment several years ago.
    Since taking office, our national recruitment campaign has been extremely successful. I am glad to say that 2,790 nurses and midwives have already returned to employment in the NHS as a result of the campaign. A further 2,000 are preparing to join. Applications for midwifery courses in particular have risen significantly this year. We are training more pre-registration students. The figure has increased year on year, and we are now training 70 per cent. more than in 1993–94.
    Mrs. Gwyneth Dunwoody: Is my hon. Friend aware that, in most normal births, any midwife is worth a dozen doctors? If she is genuinely concerned, will she not just recruit new midwives, but look at the terms and conditions of existing midwives and ensure that those excellent and essential ladies are still knocking around, irrespective of what the doctors want?
    Yvette Cooper: My hon. Friend is right that we need to ensure that midwives' terms and conditions are such that we sustain their recruitment—we do not simply recruit them, but keep them in the profession. That is why, for example, the NHS is increasing family friendly

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    employment policies to promote things such as part-time working and to encourage midwives to stay in the profession.

    Ancillary Staff Pay
    Mr. Archy Kirkwood: What plans he has to review the level of ancillary staff pay in the national health service; and if he will make a statement. [110854]
    The Minister of State, Department of Health (Mr. John Denham): For the first time, we have offered a guarantee of real-terms pay increases for national health service staff who are outside the pay review bodies, not only for one year, but for a three-year period.
    Mr. Kirkwood: That longer period is certainly welcome. However, is the Minister aware that, this Monday, I met a support staff worker who is a married man, works a 39-hour week, but has only £139 in take-home pay—which is clearly below benefit levels? Is the Minister also aware that it is not only a matter of pay? Full-time support staff in the NHS are systematically being replaced by part-timers and by temporary workers, with the consequence that support staff consider themselves to be doing ever more work for ever less pay.
    Would the Minister be prepared to meet me and my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) to discuss the issue? Will he also try, in the upcoming pay review and in the Government's comprehensive spending review, to find the best way possible of providing better pay and conditions for people who now rightly believe that they are the forgotten people of the national health service?
    Mr. Denham: Of course I would be prepared to meet the hon. Gentleman and the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) to discuss those matters. It is worth bearing in mind that when we were elected, the starting point for an adult ancillary worker was £3.60 per hour, but from the coming year, because of the offer that we have made, the minimum will be £4. Furthermore, the structure of the deal that is on offer has been weighted towards those who are on the lowest income—with a flat-rate increase for the lowest paid, from which 75,000 workers benefited last year and 85,000 will benefit in the coming year.
    Ancillary workers are a key part of the health team. The way in which they do their jobs, and the flexibility with which they approach those jobs, are an important part of delivering modern health services. It is an issue that we want to address in the "Agenda for Change" negotiations that are being conducted with the trade unions.
    Caroline Flint: Does my hon. Friend agree that it is a shame that during 18 years of Tory Government the ancillary workers were often ignored? Is it not to be commended that, under the current Government—with their working families tax credit, child care tax credit, reduction in national insurance and the 10p starting rate—we are really able to help to make work pay for those who are at the poorest end of the scale?
    Mr. Denham: My hon. Friend is absolutely right. Last week, I was very pleased to meet a health worker in a
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    south London trust who, as a result of the working families tax credit and the child care tax credit, was fully £80 per week better off than she had been before the introduction of those changes.
    Mr. Gerald Howarth: May I draw to the Minister's attention the plight of medical laboratory scientific officers? On Friday, my hon. Friend the Member for Surrey Heath (Mr. Hawkins) and I went to see the MLSOs at Frimley Park hospital. MLSO-1 grade staff are on a maximum of £17,200 annually, which is only about £2,000 per year more than the starting pay for nurses. Does the Minister agree that MLSOs are extremely important people, who do all the blood tests and other tests performed in hospitals, but that the Government have neglected them?
    Mr. Denham: Has the hon. Gentleman ever wondered how on earth that state was reached? I am very pleased to say that the offer that we have made, which I mentioned earlier, puts on the table quite significant increases for some of the lowest-paid MLSOs. More than 1,000 staff have on offer more than the basic 3 per cent. increase, and, for some staff, the offer proposes an increase as high as 26 per cent. Only yesterday, my right hon. Friend the Secretary of State said that, in time, the recruitment campaign that is being directed at nurses would be rolled out to encompass other members of the health team.
    The particular needs of that staff group are ones that I hope we shall be able to deal with in the "Agenda for Change" negotiations with the trade unions, which are seeking a new pay system for the national health service.

    Intermediate Care Services
    Mr. Jim Cunningham: If he will make a statement on the development of intermediate care services. [110855]
    Mr. John Austin: If he will make a statement on the development of intermediate care services. [110858]
    The Secretary of State for Health (Mr. Alan Milburn): The national beds inquiry, which I published earlier this month, outlines the case for development of new services, especially for older people. Intermediate care services can prevent unnecessary hospital admissions and enable people to regain independence in their own homes after a period of active rehabilitation. That is why the Government will develop those services.
    Mr. Cunningham: How does my right hon. Friend intend to expand the number of intermediate care beds, not only to take patients out of hospital acute beds, but, more importantly, to ensure that elderly people receive the proper treatment that they deserve?
    Mr. Milburn: My hon. Friend is right. The results of the national beds inquiry show that there are a lot of older people in hospital beds who need not be there. They have gone into hospital for an operation and then found themselves trapped in a hospital bed because there is nowhere else for them to go. They face a bizarre choice between staying in a hospital bed or going home without adequate support. That is why it is important to build a

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    bridge between the hospital and the home by developing new care services. That means that we have to invest in more active rehabilitation and recovery services than we have in the past. We can do that partly in NHS hospitals, partly by giving new life to cottage hospitals, and partly, when necessary, by entering into new arrangements with the private sector to develop intermediate care services.
    Mr. Austin: I draw my right hon. Friend's attention to the excellent work being done at the Bevan intermediate care unit in Thamesmead, which provides high-intensity nurse and therapist-led treatment, care, recuperation and rehabilitation, with medical input from general practitioners, thereby providing greater job satisfaction for the staff involved and giving a more appropriate form of care at approximately a third of the cost of an acute bed in a district general hospital. Will he make a special allocation of money or ring-fence money following the beds survey for the development of intermediate care?
    Mr. Milburn: As I understand it, the Bevan centre in my hon. Friend's constituency has ring-fenced some of the funding available to it. Such active rehabilitation and recovery services are popular among staff and could give a new role to nursing and physiotherapist staff, getting them working at a level appropriate to their skills. The services are also very popular with patients. That, and how effective they are, counts more than cost. I am slightly more doubtful about ring-fenced funding. It is important to try to overcome some of the fragmentation in funding that there has been in the past. That certainly characterised the old internal market. We must recognise that hospitals, community services, intermediate care services, primary care services and social services are part of one system, rather than being separate systems. The funding structures must support that rather than inhibiting such developments.
    Mr. Nick Harvey: I welcome the announcement of new intermediate beds, but I should like more detail on what they will comprise. Will the Secretary of State reassure us that there will not be a return to geriatric wards, which tended to be dumping grounds for the elderly? Is there an opportunity for a reprieve for some of the community hospitals under threat of closure? Some of them have been closed even while the inquiry was going on. Will there be a rehabilitative role for the new beds? Will there be an expansion in occupational therapy and physiotherapy to ensure that there is genuine progress and that we do not just move along the bed blocking problem?
    Mr. Milburn: The hon. Gentleman is right on two counts. The new intermediate care services have the potential to give a new lease of life to cottage hospitals, but it is pointless retaining cottage hospitals unless they perform a useful function in the care system. Some do and some do not. We want to move away from passive systems of care that assume that older people in particular are going to deteriorate. We should assume that the care system can rehabilitate them and literally get them back on their feet so that they can have what we all want—an independent life in our own home. Intermediate care services can do that. We shall put in investment to make that happen.
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    Part of the solution is to ensure that we have the appropriate numbers of staff doing the right things. The hon. Gentleman is right to raise the issue of physiotherapists, occupational therapists and other nursing staff. As I was able to say yesterday, there is good news in that area. We are making progress and beginning to turn the corner on nursing shortages. Of course, there is still some way to go, but if we continue our policies of giving nurses and other staff decent pay rises and changing the way in which they are employed to use their skills to best effect, we shall continue to make progress.
    Mr. Stephen Dorrell: I welcome the Secretary of State's ideas for the development of intermediate care. They follow on from work that was going on before the general election, including the development of some community hospitals in Devon, to which he might have drawn attention. I hope that he will not lose sight of the opposite pressures in the health service—for example, overcentralisation in acute services such as maternity care and sometimes accident and emergency care. In developing his welcome ideas for intermediate care, will he explain some of the disciplines that he intends to introduce to ensure that we have some check against the natural tendency to overcentralise care in large acute hospitals?
    Mr. Milburn: I suppose that it was predictable that the right hon. Gentleman would claim credit for the development of intermediate care services. However, in too many parts of the country such services are absent altogether. Indeed, this morning, when I visited St. Thomas's hospital with my right hon. Friend the Prime Minister, staff from the accident and emergency department to the acute sector were telling us that, in addition to real pressures in the system—
    Mr. Bob Russell: Was it a media opportunity?
    Mr. Milburn: It was not a media opportunity; it was an opportunity to speak to the staff. If Liberal Democrat Members took that opportunity more often, they would have a rather more sensible health policy.
    The staff told us, quite rightly, that throughout the health care system, at all levels, there is a lot of pressure, and that in addition patients are placed inappropriately within the system. That needs to be freed up and to do that we have to build a new level of care. That is precisely what we are doing. As for the overcentralisation of services, of course that has to be resisted. We have to ensure that when we design services in the NHS the patients' point of view must be paramount. The service exists to serve patients, not any other interests—including, sometimes, professional interests.
    Mr. Philip Hammond: The Secretary of State referred to the national beds inquiry report. The numbers of beds have continued to fall under the present Government. Will he demonstrate the commitment of which he has spoken by giving an

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    undertaking today that he will not approve any further proposals by health authorities that result in a net loss of beds in that health authority area?
    Mr. Milburn: No, I will not do that. Sometimes there are good reasons for changes in the beds system. Let me give the hon. Gentleman an example. At the moment in Norwich, there is a hospital that dates back to the 18th century. It operates on two sites. It is inappropriate in the 21st century, so we are going to replace it with a brand new hospital. We are doing that for a simple reason: it is not possible to deliver 21st century health care in some hospitals that were built in the 20th century or, indeed, the 18th century.
    Mr. David Hinchliffe: I do not know whether my right hon. Friend has had the opportunity to look at reviews in the press today of a book called "A Tourist Guide to the British", which was published yesterday and includes the following disgraceful slur:
    A rare smile on the face of a Yorkshireman will be a sign only of impending breaking wind.
    As you know, Madam Speaker, there are many other things that bring a smile to the face of a Yorkshireman, such as receiving free rather than means-tested care. In developing the concept of intermediate care, are the Government any nearer ending the nonsensical distinction between means-tested social care and free nursing care, which would bring smiles to the faces of Yorkshiremen?
    Mr. Milburn: I am glad that my hon. Friend went off in that direction rather than the one that I anticipated. As he knows, I announced to the House last December that we were looking seriously at a proposal by the royal commission on long-term care on free nursing care. We are looking at that proposal in the round because it is important that we consider it in the context of what we should do about elderly care services generally. Of course, we have to sort out some of the funding anomalies, but it is equally important that we make sure that the quality of care that elderly people receive, whether it is in the social care sector or the health care sector, is always provided at the highest possible standard. That is precisely what we shall do. As I said to the House last year, following the spending review announced in the summer we shall announce our final conclusions on the royal commission and publish a White Paper.

    Trolley Task Force
    Mr. Christopher Chope: If he will make a statement about the work of the trolley task force. [110856]
    The Parliamentary Under-Secretary of State for Health (Ms Gisela Stuart): Last year we set up an accident and emergency modernisation programme team, backed by an investment of £115 million, to spearhead improvements in accident and emergency departments. The programme has a much wider remit than looking at trolley waits. The team produced an interim report last
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    November, which is available in the Library. Its final report will be presented to Ministers within the next three months.
    Mr. Chope: That answer shows, in effect, that this is another new Labour broken promise. The Prime Minister addressed a big conference of health administrators on 20 June 1996 and said:
    Today I want to announce that in Government we will set up a task force to report urgently on how we can end trolley waits in the NHS for good.
    That has not happened. Will the Minister now set up a task force to look into the delivery of Government policy?
    Ms Stuart: I hate to suggest that Opposition Members could be mistaken, but on this occasion I am afraid that I have to do so. As my right hon. Friend the Prime Minister said on his visit to St. Thomas's A and E department, we are witnessing a revolution in critical care and in casualty care. One element of that is the process of how we deal with patients between the ambulance and the A and E department, and then subsequently.
    Trolley waits are being studied by the winter planning team and by the A and E modernisation programme team. Chief executives of hospital trusts were given strict instructions over the winter regarding the management of trolley waits. Any wait of more than four hours is directly reported to the hospital's chief executive and any wait of more than 12 hours is reported to the regional director. A senior manager in each hospital has been given personal responsibility for trolley waits. As a result, since October the incidence of trolley waits of more than 12 hours has fallen by 48 per cent., and of more than 24 hours by 90 per cent. Far from breaking our promise, the Government have delivered far more than we initially promised.
    Mrs. Louise Ellman: I thank my hon. Friend for the £700,000 spent on accident and emergency at the Royal Liverpool hospital, which virtually eliminated long trolley waits over the Christmas period. I also look forward to the completion of the new medical assessment unit at the hospital. That is being built, at a cost of £1.4 million, to support the work of the A and E services.
    However, does my hon. Friend agree that A and E services cannot be addressed in isolation? Does she also agree that we need more investment in our overall hospital services, such as the £15 million that has already been made available for the Broadgreen site in Liverpool? Can she promise that there will be further support for services in Liverpool to remedy the cuts in the years of Tory Government?
    Ms Stuart: My hon. Friend is right: the problems in A and E departments cannot be dealt with in isolation. That is why we are reviewing ambulance services and making extra investment available. It is also why, as part of the national beds inquiry, we are reviewing the way that beds are used. That review includes observation units, acute beds and step-down facilities.

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    My hon. Friend requested more money for her constituency. We shall take that into account when we consider all the other bids.
    Dr. Liam Fox: What was interesting about the Prime Minister's casualty stunt this morning was that there was no mention of how new Labour would abolish trolley waits in accident and emergency departments, nor of the fact that in 1999 patients waited for up to 49 hours on trolleys, nor of the fact that the average wait in casualty has risen to between four and five hours. To be fair to the Prime Minister, however, he did mention that there would be more nurse prescribing in casualty. If that is a real change, and not a stunt, will the Minister say what changes to the Medicines Act 1986 will be required?
    Ms Stuart: To assume that an accident and emergency department will never use trolleys is to misunderstand how admissions to such departments work. Patients will always have to wait on trolleys for a certain time while assessments and tests are carried out before a permanent bed can be made available.
    The hon. Gentleman asked about the changes that might have to be made to the Medicines Act 1986. We are looking into that matter at the moment.
    Dr. Fox: The Minister could not answer my question. Her answer means that Downing street has not yet told the Department of Health what the Department's policy on A and E departments is to be. It is No. 10 that determines health policy, not the Secretary of State and his Ministers.
    Today, the Prime Minister promised us that nurses would be able to prescribe and order blood tests and X-rays, both of which are already being done. He also said that major cases would be separated from minor ones in the A and E department, and that too is already being done. We are used to the Government reannouncing financial decisions, but now they appear to want to reannounce what is current medical practice and call that a revolution. Is not the £20,000 that Ministers will spend on replacing the tropical plants in their headquarters likely to be far better window dressing than the Prime Minister's waffle this morning in St. Thomas's?
    Ms Stuart: The hon. Gentleman might find it useful to spend some time looking at what happens in the accident and emergency departments in our hospitals around the country. Some of the announcements that were made today are about things that are happening in some parts of the country. The legacy of the previous Government is the huge difference in the services that are being provided across the country. That is why we invested £115 million to ensure that every major hospital that needs improvement will get it. There are some 244 projects for improvement, and about 80 per cent. were finished this summer. It is clear that the previous Government would not have spent £115 million on improving the health service.

    Beta Interferon
    Mr. Nicholas Winterton: When the National Institute for Clinical Excellence will conclude its assessment of beta interferon. [110857]
    The Minister of State, Department of Health (Mr. John Denham): The timetabling of the work programme is a matter for the National Institute for Clinical Excellence, although I understand that it should have finalised its deliberations on beta interferon by 30 May, leaving time for appeals and dissemination of the results. The results of NICE' s appraisals should be available in late summer this year.
    Mr. Winterton: I am grateful to the Minister for that reply, but how does he reconcile the addition of affordability to the remit of NICE with the Government's policy statement in June 1998 that NICE would not become a national council for rationing? Does he not agree that all patients in the national health service should expect the best possible drug for the treatment of their condition?
    Mr. Denham: It is certainly the case that NICE will provide authoritative guidance on the clinical effectiveness and cost-effectiveness of treatments. That will enable us to ensure that clinically effective and cost-effective treatments are spread as quickly as possible throughout the national health service, and that the best use is made of NHS resources. I think, to be fair, that the hon. Gentleman has misunderstood the nature of the amendment to the establishment order of NICE earlier this year, which was to ensure that it could examine questions of cost-effectiveness.
    Mr. John Healey: Will my hon. Friend reaffirm that one of the principal purposes of NICE is to overcome the long-standing problems of postcode prescribing of drugs such as beta interferon? What assurances can he give multiple sclerosis sufferers that the current NICE study will lead to greater consistency, transparency and equity in prescribing this drug?
    Mr. Denham: My hon. Friend is absolutely right. One of the features of the national health service that, regrettably, we inherited from the previous Government was the unacceptable variations in access to care and treatment in different parts of the country. The guidance that is being followed on beta interferon was introduced by the previous Government. One of the great strengths, we hope, of NICE is that by providing consistent guidance to health authorities and to clinicians, those unacceptable variations in treatment and care for a whole range of conditions will be tackled effectively.
    Mr. Douglas Hogg: Is the hon. Gentleman aware that I have been in correspondence with his Department about the problems in the Lincolnshire health authority area? Is he further aware that over the past four and a half years, of those for whom beta interferon has been recommended as treatment 81 per cent. remain untreated? Is he also aware that the Lincolnshire health authority contends that those numbers are because there are insufficient funds available within the Lincolnshire health authority area to treat more

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    people? Given that, what advice does he have that will ensure that more people can be treated with beta interferon in the Lincolnshire health authority area?
    Mr. Denham: I am grateful to the right hon. and learned Gentleman for recognising in his question that the variations in access to care stemmed from the previous Administration. My advice is that the reason for referring beta interferon—and a range of other important, controversial, questioned drugs such as the taxanes—to NICE is to ensure that authoritative guidance is available to the right hon. and learned Gentleman's authority, and to others, which they should take full account of when making decisions.
    Such guidance did not exist previously and that is why, on a range of treatments, health authorities take different decisions about priority or about the effectiveness or availability of different drugs. The National Institute for Clinical Excellence will enable us to tackle that problem.
    Mr. Peter L. Pike: One of my constituents moved from Burnley to Cheshire to obtain beta interferon under the present arrangements, which, as my hon. Friend rightly pointed out, came from the previous Conservative Government. Will he give an assurance that everything possible is being done to ensure that when the current assessment has been completed, provision will be clinically based—on medical need and not on cost?
    Mr. Denham: My hon. Friend raises the sort of example of which all hon. Members will be aware. NICE will give guidance both on the clinical effectiveness and the cost-effectiveness of the drugs—that is the basis on which the institute was set up. It will ensure that the most clinically and cost-effective treatments are spread rapidly throughout the NHS and that we make the best use of NHS resources—both factors will be taken into account.
    Rev. Martin Smyth: One understands the role of NICE, but can we have an assurance that cost-effectiveness will not rule out modern, more expensive drugs that could be cheaper for the health service in the long run and more effective in the care of patients? What about those patients who have already benefited from beta interferon, but have been taken off the drug because they were taking part in a random test? The patients and the clinicians discovered the benefits; cannot the patients continue their treatment?
    Mr. Denham: The hon. Gentleman raises a couple of important points. When any drug is under consideration by the national institute, it is expected that manufacturers and others—such as patients' groups—will submit evidence on the best use of both NHS and personal social services resources, so that the full economic impact can be taken into account. Indeed, it will be open to people to submit evidence over a wider range of costs. I hope that that reassures him.
    Sometimes, however, there are cases in which highly hyped new drugs are not necessarily any better than long-standing treatments. One of the advantages of NICE is that it distinguishes between them. As for clinical tests, the job of NICE will be to look at those procedures that have completed their clinical trials and would, in normal
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    circumstances, be made available to the health service and to assess them to see which are clinically and cost-effective.

    Knee Replacement Operations
    Mr. Harry Cohen: If he will make a statement on the number of knee replacement operations carried out in the NHS in 1998–99. [110859]
    The Secretary of State for Health (Mr. Alan Milburn): According to provisional data for 1998–99, 28,876 primary knee replacement operations were carried out in national health service hospitals in England.
    Mr. Cohen: I have had a letter from my constituent, Mr. Bracewell, which describes as "great news" and "a miracle" his successful knee operation. He said:
    as a Godfearing man, you will be rewarded for helping in due course.
    Although such knee operations are not high profile, is it not vital to keep the elderly mobile and the young up and running? Is my right hon. Friend aware that in my health area, Redbridge and Waltham Forest, there have been 193 such operations over the past year and 500 over the past three years? That is a rising trend. When I praise the NHS for that, I am sure that the House will appreciate that it is not a knee-jerk reaction.
    Mr. Milburn: It was going so well until then. I am sure that my hon. Friend will receive his due reward.
    I can only agree with my hon. Friend. Indeed, I cannot do anything other than agree with the Conservative central office briefing for today's Health questions, which makes very impressive reading.
    Dr. Liam Fox: You must be getting desperate.
    Mr. Milburn: Indeed I must be if I am reading that. The briefing states:
    Knee replacements are important to enable patients to retain mobility and, therefore, independence. They should be available according to clinical need.
    That is right; they should be available according to clinical need. However, the hon. Member for Woodspring (Dr. Fox), the shadow Secretary of State, told The Sunday Times, on 16 January, that
    conditions…like hip and knee replacements, hernia and cataract operations
    should be covered by private medical insurance. Why did he say that? His hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) told Sky News on 31 January that, under Conservative plans, people would look to the NHS
    when they had serious, life-threatening conditions and would look to their private insurance to help them with the rest.
    Why did the hon. Gentleman say that?
    The Conservative central office briefing is right. That treatment should be provided according to clinical need, not ability to pay. Why does Conservative central office say one thing while those on the Conservative Front Bench say another? I know that Conservative central

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    office spends half its time briefing against those on the Front Bench, but I did not realise that it had taken to doing so in writing.
    Mr. Graham Brady: My constituent, Mr. James Hickson, agrees with the Secretary of State that such treatments should be provided according to clinical need. Yet six months ago, after an interminable wait under this Government to have a seriously diseased hip replaced, he was forced to go the private sector for an operation. He is without private health insurance and I have at least one other constituent who has been forced, under the Labour Government, to resort to private treatment without having insurance to pay for it.
    Will the Secretary of State now recognise what is happening under his stewardship of the Department of Health and reimburse my constituents who have to pay but who have not got private health insurance?
    Mr. Milburn: The hon. Gentleman rails against private treatment for hip and knee replacements. People talk about joined-up government, but what about a bit of joined-up opposition between Conservative Back Benchers and Front Benchers? Once again, Front Benchers say one thing and Back Benchers say another, and the Conservatives' health policy is in tatters.
    Mr. Barry Gardiner: Will my right hon. Friend assure the House not only that the Government will eschew any suggestion that we go down the route of postcode health care provision, but that they will eschew what Conservative Members would suggest—bank sort code health care provision?
    Mr. Milburn: My hon. Friend is right. It is about time those on the Conservative Front Bench came clean. They give interviews to newspapers and to television companies, and it is the Conservatives' policy in which people are interested. Overwhelmingly, cataract, hip and knee operations are operations of old age. Older people will therefore literally pay the price of Conservative health policy. They will pay the price in a new tax on old age if the Conservatives have their way.
    Conservative Members are now threatening to take a host of procedures out of the public sector, where they are free in the NHS, and instead force people to go private. That policy will not work and the people will not vote for it, either.

    Independent Hospitals
    Sir Geoffrey Johnson Smith: What assessment he has made of the role the independent hospitals can play in easing demands on national health service hospitals. [110860]
    The Parliamentary Under-Secretary of State for Health (Ms Gisela Staurt): We have considered at length the role that independent hospitals can play in easing demands on NHS hospitals. Our existing policy on commissioning health care services from the private sector allows the NHS to negotiate with the private sector where no local NHS beds are available, and where it is cost-effective. It has also been a long-standing practice in the NHS to use the independents sector where historically
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    there has been little or no provision in the NHS—for example, for mental health secure units and termination of pregnancy.
    We do not believe that we need to change our existing policy. Health authorities and NHS trusts are already aware of their powers and of the availability of private provision in their areas. We believe that commissioning from the private sector must be decided at local level, by those who are most familiar with their local circumstances.
    Sir Geoffrey Johnson Smith: That contradicts everything that I have heard takes place not many miles from my home and in a wide area of the south-east. The complaint is—it follows very much the statement attributed to the Secretary of State, who came down like a ton of bricks on anyone who had anything to do with the private sector—that in point of fact—
    Mr. Andy King: Ask a question.
    Sir Geoffrey Johnson Smith: I am coming to the question. Why does the prevailing evidence suggest that the national health service is prevented from sending its patients to charitably and independently financed hospitals that would help to relieve pressure on the national health service? Someone must have got the truth wrong in the information provided to the Minister.
    Ms Stuart: Circumstances on the ground may not be precisely those rumoured to exist. Some hospitals—such as in Bristol, which had a shortage—negotiate with and use the private sector. This winter, local hospitals negotiated with social services and private providers. It is not true that there is a surplus of private beds that the NHS does not use. It is true that we need to build capacity across NHS. Beds in the private sector that are registered but not supported by staff would not be available for use.
    Sir Geoffrey Johnson Smith: Madam Speaker, in view of the conflicting evidence that I have—
    Madam Speaker: Order. I thought that the right hon. Gentleman was seeking to withdraw and to have an Adjournment debate.
    Sir Geoffrey Johnson Smith: Yes, Madam Speaker.
    Madam Speaker: In that case, I cannot proceed. That is reasonable.

    Cataract Operations
    Mr. David Kidney: What progress is being made in reducing the waiting times for cataract operations. [110861]
    The Minister of State, Department of Health (Mr. John Hutton): The Government have launched action on cataracts—a major programme to ensure that all local NHS eye services can match the best in providing a modern and convenient service. It will enable us to build on the substantial progress that we have already made, which has seen the number of cataract operations rise from 157,000 in 1996–97 to more than 200,000 last year.

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    We have also allocated £20 million over two years to modernise and to cut waiting times for cataract surgery. That cash will enable about 50 local centres to streamline cataract treatment, so that patients can make fewer visits to the optician, General Practitioner, and hospital.
    Mr. Kidney: I am delighted that the Government are planning for the best quality NHS cataract surgery nationally. That is also a feature of the strategic review of South Staffordshire health authority, which last year paid for 1,762 NHS cataract operations. Does my hon. Friend agree that it is right to reassure patients of improving free NHS cataract surgery, not threaten them—as the Conservative party would—with having to take out medical insurance to pay for operations privately?
    Mr. Hutton: I strongly agree. It is clearly the Government's ambition to improve the quality of NHS services for people who need cataract operations—unlike the Conservative party's, whose intention is to privatise that aspect of the NHS, and whose policy is not popular with the country. I am sure that ours is popular with my hon. Friend's constituents, who have benefited from free operations on the NHS.
    Mr. Nick St. Aubyn: A constituent recently wrote to me about his wife, who went blind in both eyes while waiting for a cataract operation, owing to the much longer waiting lists under the present Government. Does the Minister think it preferable to any other alternative that under the Labour Government, old people who are going blind are forced to go private and spend their savings, never having thought that they would need private health insurance? Does the Minister think that is the best system for this country's health care?
    Mr. Hutton: The hon. Gentleman ought to check his facts. If he will write to me with the details of the particular case he mentioned, I will look into it. This Government reintroduced free eye tests for pensioners—something that the last Conservative Government withdrew. If he is complaining that his constituents have to go private, he might like to take up his concerns with his own Front Benchers. The Conservative party wants to make sure in future that patients who need such operations go private rather than use the NHS.
    Dr. Liam Fox: Does the Minister accept that the problem with all waiting lists—including those for cataract operations—is that the Government's waiting list initiative is distorting clinical priorities? Dr. Peter Wilde, consultant cardiologist at the Bristol Royal infirmary, said this morning that heart patients are dying unnecessarily because they were waiting too long for surgery. Tragically, that is not due to a lack of resources.
    Ministers are forcing health authorities to perform minor procedures to shorten waiting lists faster—even if that means sicker patients, such as those of Dr. Wilde, having to wait longer. Is that not an unfair, unethical and immoral way to run a health service? Patient care gets worse so that Minister's press releases can get better.
    Mr. Hutton: I do not accept any of the hon. Gentleman's points. If he studies the December waiting list figures, he will see conclusive proof that the opposite is the case. We have always made it clear that clinical
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    need alone should determine patient access to the NHS. If he is complaining about the Government's record on cataract operations, he ought to reconcile that with the concerns expressed by his hon. Friends about Conservative policy—which is to take the procedure out of the NHS and force people to go private. That is a completely unacceptable state of affairs.
    Dr. George Turner: I am clear about the need for the initiative to improve the rate at which cataract operations take place, as there are 22,000 pensioners in my constituency and I hear of sad cases of some disabled pensioners having to wait month after month after month. Deteriorating vision must make their lives much more miserable, not least because of the risk of falling. Can the Minister give us any idea of how long a wait he would think reasonable once the Government have achieved their objectives—and how quickly will we reach that day?
    Mr. Hutton: The average waiting time for cataract operations is falling. Currently, it is about seven months. Everyone in the House, including my hon. Friend, would want us to make further progress in reducing the waiting times—that is precisely what the initiatives that I have outlined to the House will do—but he, like me, would agree that the best way to ensure equitable access to health care for older people, particularly those who need cataract operations, is to ensure that a first-class national health service is available to meet their needs. That is what the Government are committed to doing, but sadly it is not the policy of the Opposition.

    Acute Services
    Mr. Andrew George: If he will make a statement on the number of NHS acute hospital beds and staff to support them. [110862]
    The Secretary of State for Health (Mr. Alan Milburn): The latest figures show that there are 108,000 acute beds in the NHS. We are currently consulting, through the national beds inquiry, on how we can best secure an increase in the number and the type of beds. Crucial to that are increases in nurse and doctor numbers. Both are rising under this Government.
    Mr. George: I am grateful to the Minister for that reply, but does he not accept that under successive Governments, Secretary of State hospital bed numbers have declined by 2 per cent. a year since 1980, even though patient numbers have increased by 3.5 per cent. a year? The problem is not of the Government's making; but does he accept that, rather than the Government going ahead with the 1p in the pound tax cut, the British public would rather see that money spent on the national health service?
    Mr. Milburn: We are spending more money on the NHS—a damn sight more than the Liberal Democrats promised in their manifesto at the previous general election—but we need to reverse a 30 or 40-year decline in the number of beds in the whole system. Given the demographic pressures and our ageing population—we have seen this winter some of the pressures that they cause in hospitals—the Government want to expand services in the NHS. That is what we are about and my strong view

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    is that the decline in hospital bed numbers cannot continue. That is not only a question of getting the number of hospital beds right, however. We have to make sure that there are enough beds in the whole care system and we are committed to achieving precisely that.
    Mr. Mike Gapes: Will my right hon. Friend consider the serious problems and pressures in north-east London? In particular, I draw his attention to the recent letter from the chief executives of the Redbridge trust and the Redbridge and Waltham Forest health authority to the NHS London regional office, urging additional beds for the King George hospital site in my constituency.
    Mr. Milburn: I am aware of the pressures in my hon. Friend's area and in other parts of London, too. The answer, as Christine Hancock of the Royal College of Nursing rightly said recently, is not only an increase in the number of beds. We can get beds on any high street, but we cannot get trained nurses. It takes time to train the nurses, but I can tell my hon. Friend that we are beginning to turn the corner as regards nurse shortages. There are 4,500 more nurses in the NHS now than there were a year ago. That is good progress. There is still some way to go, but the signs are positive.
    We have more nurses coming back in and more nurses in training, and the number of people applying for nurse training courses is increasing. Those are all positive signs. We shall continue to build on them, but to achieve an increase in capacity in the system we also need to reform the way in which people work. It is very important that we allow nurses to take on new roles. That, in turn, will help to make nursing, midwifery, health visiting and the therapy services, which are so important to the NHS, even more attractive careers.
    Mrs. Caroline Spelman: I am glad to hear that the Secretary of State acknowledges that the 15,000 nursing vacancies have such a disastrous impact on acute bed capacity. Given that the Royal College of Nursing estimated that there were 12,000 departures from nursing last year, is not the Secretary of State's claim to have turned the corner, with the equivalent of 3,000 full-time new recruits, a bit like the Home Secretary's over-optimism about the number of extra police officers?
    Mr. Milburn: No, the hon. Lady obviously has not been listening. There are not 3,000 full-time equivalent returners; there are an extra 3,000 nurses working in the national health service—that is the full-time equivalence. There are 4,500 extra nurses. Many of them are taking advantage of precisely the sort of flexible employment that we are opening up to nurses, so the total full-time equivalence is fewer than 4,500: it is 3,000— [Interruption]—as I have just told the hon. Member for Runnymede and Weybridge (Mr. Hammond), if he would care to listen.
    We are making progress, and frankly we shall take no lectures from the Conservative party, which reduced the number of nurses and, more importantly, cut the number of nurse training places. Never was there such a short-sighted policy in the NHS, and we are beginning to turn it around.

    Mental Health Act 1983
    Dr. Lynne Jones: When he expects to report on Government proposals for the reform of the Mental Health Act 1983. [110863]
    The Minister of State, Department of Health (Mr. John Hutton): Our proposals, which are set out in the Green Paper, are subject to consultation until 31 March. We will report on the outcome later this year.
    Dr. Jones: I was pleased to hear the Secretary of State earlier reinforce the point that the NHS exists to serve patients. Will my hon. Friend ensure that the main purpose of the review of the Mental Health Act is seen to be to give patients the right to first-class care and treatment, rather than to reinforce the negative stereotypes of mentally ill people as being a danger to the public?
    Mr. Hutton: I can certainly reassure my hon. Friend that it is precisely the purpose of our proposals to improve mental health services. Those proposals do not consist only of the Green Paper; I am sure that she will be aware of the national service framework that we published in September and the additional £700 million that we are making available to modernise mental health services over the next three years. The entire thrust of our proposals is to ensure that people with mental health problems have access to a first-class national health service, and I am sure that she will be supporting them.
    Mr. Tony Baldry: Can the Minister assure the House that those who are detained compulsorily under the Mental Health Act will always have a voice? There is a concern that people get lost and forgotten. Will the Minister give consideration in the consultation paper to ensuring that those people have an advocate so that they are not simply lost in the system?
    Mr. Hutton: Yes, I can assure the hon. Gentleman about those points. I hope that if he has had a chance to study the Green Paper, he will agree that in addition to improving the protection of staff, patients and the public, we have struck a better balance between resolving those issues and ensuring that patients who may in future be subject to compulsory treatment have access to a better process of decision making about their treatment. That has certainly been our intention in proposing detailed reforms in the Green Paper, and it makes a significant change in the way we deal with such issues in legislation. I hope that he will, in his own way, be able to support them.
    Mr. Mike Hancock: Last year, the Secretary of State announced that there would be 231 new secure places in mental hospitals, 31 of which would be in the south-east. Where have the Government got to with those plans? Is the Minister aware of the case of my constituent, a patient who was attacked in a unit in St. James's hospital when a cup of boiling water was thrown over him? That resulted in his being taken to the special burns unit and the offending patient being held in a ward that should take five patients; so four patients had to be moved to accommodate one patient with seriously disturbed behaviour.
    Mr. Hutton: I can tell the hon. Gentleman that the 221 beds to which he is referring have already been provided in the national health service. My right hon. Friend the Secretary of State announced in November that we were increasing the total number of additional secure beds that we wanted to provide in the NHS from 300—a target that we set in the national service framework—to 500, and that we were bringing forward the meeting of that target by a year, so those additional 500 beds will be available in the NHS by April 2001.
    Dr. Brian Iddon: I welcome reform of the Mental Health Act 1983, but will my hon. Friend pay attention to the anxiety expressed by members of the general public in the past few weeks about the protection of the mental health of children, especially regarding the over-use of mood-modifying drugs such as Ritalin?
    Mr. Hutton: I am well aware of the concerns that have been expressed about the use of Ritalin. That is why its use has been referred to the National Institute for Clinical Excellence. I hope that the institute will be able to provide authoritative guidance on the use of Ritalin in the future.
    I should reassure my hon. Friend that we want the maximum safeguards in any future legislation to be available to children. There are no specific safeguards available to children under the current Mental Health Act, and the purpose of our consultation exercise is to initiate a wide debate about the future of that legislation. If any serious proposals are made about children in relation to any future legislation, we will of course examine them carefully.

Road Casualties
3.30 pm
Mr. Bernard Jenkin(by private notice): To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on the Government's new proposals to reduce deaths and injuries on our roads.
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill): We shall be publishing the road safety strategy tomorrow. To the best of our knowledge, there is no precedent for making a statement to the House about road safety policy, but I am happy to come here today to tell the House some of the measures that will be in our strategy. It will be a long document, so I shall not be able to cover all the details.
This country has, overall, a good road safety record, second only to Sweden in Europe, but our record on child pedestrian safety is not good. We have, historically, been near the bottom of the European league table for child pedestrian deaths. Although we had a better year in 1998, 103 child pedestrians were still killed.
The strategy will therefore include a major thrust on child safety, and a separate casualty reduction target for child deaths and serious injuries of 50 per cent. by 2010. We shall set a reduction target for all road deaths and serious injuries of 40 per cent. over the same period.
We do not, of course, disregard slight injuries. We have not been so successful in reducing those. They went up by 16 per cent. between 1981–85 and 1998. During that period, traffic increased by 55 per cent. We shall set a target to keep slight injuries well below the rate of traffic growth.
There will be new measures, and reinforcement of existing ones, to support those targets to improve road safety for all road users. Many of the measures will be aimed at increasing the safety of children, so we will strongly encourage local authorities to use their powers to create 20 mph zones—powers that we gave to them last summer—especially around schools and on the way to school. That fits in well with our policies to encourage walking and cycling to school, which will happen only if they are thought to be safe.
We have for the first time placed road safety in the national curriculum. We do not accept the proposition that we should not tell children about road dangers. We plan properly researched practical training for child pedestrians.
There will be a range of other measures in relation to speed, which is the greatest contributor to accidents. We must persuade drivers to slow down, and make speeding as socially unacceptable as drinking and driving. The speed review, published tomorrow, will demonstrate overwhelming evidence of the dangers.
However, such persuasion must be effective. It is no good just changing speed limits in the hope that they will be observed. We need to target our measures. Of course, limits have a part to play and we will give details of what we propose at greater length tomorrow. It will be a mixture of targeted changes in limits, appropriate safety engineering in vehicles and roads, and persuasion of drivers by presenting them with the facts and improved enforcement of limits.
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We shall publish a range of measures to reduce the number of deaths and injuries in which new drivers are involved, in response to the helpful and timely report of the Select Committee on the Environment, Transport and Regional Affairs. We shall concentrate on improving the training that new drivers receive, and indeed, the training of all drivers.
We shall tackle the problems of irresponsible drivers—those who have had too much to drink, which is a continuing problem although much progress has been made. Most measures will tackle the worst offenders. Drug-driving has long been an offence, but we suspect that it is more prevalent now. We have proposals to provide effective means of controlling it, but we also need to know far more about it. That is why we shall continue to undertake ground-breaking research, especially on the effects of cannabis. We also need to give more publicity to the effects of tiredness on drivers. We now suspect that tiredness contributes to 10 per cent. of all accidents.
We shall propose measures to protect walkers and cyclists in line with our policies to encourage those activities. We are committed to reviewing the strategy and the targets every three years. We shall do better if we can.
We shall naturally set out the strategy in more detail in a written answer tomorrow. We had always intended to do that. Copies of the strategy and associated documents, including the review of speed policy, will be placed in the Library from 10 o'clock tomorrow morning.
Mr. Jenkin: I welcome the broad thrust of the Minister's response. Conservative Members have always attached the highest priority to improving road safety. The Labour Government inherited an enviable record from the Conservative Administration—one of the best road safety records of any developed country.
However, I agree with the Minister that the number of road casualties remains intolerable. They are the equivalent of 100 Paddington disasters every year. We therefore welcome the Minister's intention to set new casualty reduction targets and I would be grateful if he could specify them to the House.
Given the supreme importance of road safety, where is the Secretary of State? Will the Minister confirm that, had we not tabled this private notice question, the Government would have given Parliament no information before the Minister for Transport delivered a speech elsewhere tomorrow? Is that the priority that the Government attach to road safety—no statement to Parliament and no Secretary of State?
Why were the Government so reluctant to address the House on the issue, when many hon. Members on both sides would wish to support their objective of reducing road casualties? Why have the Government taken so long to introduce their policies? The strategy was promised for last year.
Will the Minister assure the House that he has given a full statement of all the Government's proposals that were due to be announced tomorrow? Does he accept that a successful road safety strategy depends on a combination of improvements in vehicle and road design, the right penalties—appropriately enforced—for dangerous driving, and better awareness among all road users of the risks and responsibilities of using the road?

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Does the Minister agree that speed is only part of the equation? I welcome the fact that he has dropped plans to prosecute every minor speeding offence, which would have absorbed a huge amount of police time in pursuing largely law-abiding motorists.
I also welcome the Minister's confirmation that there are no plans for blanket reductions in speed limits, which would be an ineffective short cut rather than a proper review of speed limits with a formal timetable and a budget.
Will the Minister confirm that the Government have dropped their more extreme proposals, such as raising the driving test age to 18? I support retaining the current drink-drive limit, but urge the Government to target the small minority to which the Minister referred.
I also welcome the proposed initiative to pursue training for company car drivers. We read about that in the papers, but the Minister did not tell us about it today. Company car drivers represent only 10 per cent. of drivers. Nevertheless, if they are responsible for almost half of all accidents, it is sensible and imaginative of the Government to make the suggestions that they have outlined.
What are the Government doing through public education for the generality of drivers and pedestrians, who comprise half the casualties on our roads? If we are to create the same intolerance of dangerous driving as that of drink-driving, will the Minister commit the Government to the necessary public information campaigns that will achieve that?
How can we expect our courts to hand out stiffer penalties for dangerous driving in an atmosphere that is still too tolerant of bad driving and accidents on the roads?
Will the Minister also acknowledge that the savage cuts in the roads programme included cuts in many schemes that would have reduced deaths on the roads, according to the Government's own appraisal tables?
What measures will the Government introduce to deal with the increasing incidence of driving while under the influence of drugs? Is the Minister aware that the Transport Research Laboratory is merely repeating research that has already been undertaken in other countries, and that there are many who believe that the Government could act now on this issue?
I welcome the special target for child casualty reduction and the proposals for educating child pedestrians. What are the particular measures the Minister proposes to reduce the number of child casualties on our roads? If he plans to leave this entirely to local authorities, what figure will he put on the resources he will give them to achieve the 10-year child casualty reduction target?
Finally, will the Minister confirm that the way to reduce the number of casualties on our roads is not to demonise the car, but to work with car manufacturers and responsible representative organisations of all road users, including cyclists and pedestrians, and to increase public awareness of how many lives can be saved by working with the grain of people's common sense?
Mr. Hill: I think that on the whole I can express my gratitude for the brief elements of welcome in the remarks of the hon. Member for North Essex (Mr. Jenkin) in
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response to my statement. We heard the grinding of a few rather ancient axes, such as the charge that the present Government are in some way anti-motorist. That is not the experience of motorists, who are benefiting this year from an increase in the road maintenance budget, which is absolutely critical to road safety, of no less than £450 million on the levels projected by the previous Administration.
However, I do not want to be wholly churlish. Indeed, I fully accept the hon. Gentleman's remarks about the success of the road casualty reduction targets initiated by his Government. 1 go even further and pay particular tribute to the hon. Member for Worthing, West (Mr. Bottomley) who, as the junior Transport Minister, was responsible for setting those targets. The remarkable decrease in the level of deaths and serious casualties on our roads will be an abiding monument to his contribution to British public life.
I wish that I could pay tribute to the contribution of the hon. Member for Tunbridge Wells (Mr. Norman). The hon. Member for North Essex referred to the absence of my right hon. Friend the Secretary of State, but we are getting used to thinking of the hon. Member for Tunbridge Wells as the silent Member on the Conservative Front Bench.
I should like to pick up one or two of the specific points raised by the hon. Member for North Essex, who asked a wide range of questions. I shall not be able to answer all of them in detail, but I shall try to answer some.
On targets, I reiterate that our objective is a 40 per cent. reduction by 2010 in the number of people killed or seriously injured; a 10 per cent. reduction in the slight casualty rate; and a 50 per cent. reduction in the number of children killed or seriously injured.
The hon. Gentleman asked about public education. As I said in my statement, the Government are committed to a major programme of investment in a campaign to improve attitudes towards speeding. That is partly a matter of enforcement measures, but we have to effect a cultural change among drivers. Drivers must recognise that speeding is as socially unacceptable as drink-driving. We are committed to a major programme of public education.
The hon. Gentleman also asked about proposals with regard to those travelling for work. It is our intention to improve safety standards in work-related driving, and we are about to set up an inter-agency task group to examine the scale of the problem and how to manage it. We shall consider the development of an occupational highway code.
The hon. Gentleman asked about our proposals to improve the safety of children. That is central to our concerns. I have already mentioned our target for reducing the number of deaths and serious injuries. Within the terms of the local planning system, we shall be encouraging local authorities to create more 20 mph zones, to provide safe crossing facilities and to make enforcement more effective. As the House will recall, last year the Government announced the establishment of nine pilot home zone schemes in England next year: we hope that they will be a success, and that more can be created in due course.
We shall be instructing the Highways Agency to establish child friendly areas on trunk roads near schools and residential localities. That is one of a range of

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measures designed to enhance children's safety. Many of them were announced a couple of months ago when we published the report of the School Travel Advisory Group, which contained many practical suggestions that we want to implement at the earliest opportunity.
Mr. Andrew Miller: As my hon. Friend will know, in my capacity as chairman of the all-party parliamentary group for justice for road traffic victims and their families 1 have made representations to a wide range of Departments. I am pleased by the progress that I have made.
I entirely accept that a cultural change is needed, and I hope that it will be led by hon. Members on both sides of the House. May I ask specifically, however, whether any of the proposals relating to sentencing policy and the role of the judiciary will be dealt with tomorrow? At present, the judiciary in particular do not seem to understand the needs of victims and their families when they are dealing with such difficult circumstances.
Mr. Hill: I pay tribute to my hon. Friend's excellent work. He asked about enforcement. We want to make penalties and enforcement more effective, and more appropriate to the seriousness of the offence. The Home Office is to conduct a major review of all road traffic penalties—for example, for speeding and drink-driving.
We take on board my hon. Friend's point about the way in which the relevant authorities deal with victims' families, and are giving the subject wider consideration.
Mr. Michael Moore: I welcome the broad thrust of what the Minister is saying, but, like others, I regret the fact that he had to be forced to make his statement here. Does he recall what the Deputy Prime Minister said on the occasion of his rail safety statement last week? He said:
there are always complaints about leaks and whether statements are made to the House. It has always been my intention—and my history—to make statements for which I have responsibility to the House.—[Official Report, 22 February 2000; Vol. 344, c. 1383.].
Can the Minister tell us whether he has instigated a leak inquiry into how some reports have appeared in the press?
Given the Minister's statement that there are a great many more details yet to be released, will the House have a proper opportunity to debate important issues? As has been pointed out, road safety, especially that of children, is an important issue for the country, and one that has been ignored for too long. Will the Minister also confirm that he intends to ensure that local authorities have the resources that they need to implement the proposals, and that police forces will have the resources that will enable them to enforce those proposals?
Mr. Hill: I shall take the hon. Gentleman's questions in reverse order.
Many of the measures designed to improve safety will be the responsibility of local authorities, and we expect them to be included in authorities' transport plans. I need hardly remind the hon. Gentleman that this year investment in local transport plans, at £755 million, is 20 per cent. higher than it was last year; next year, it will increase by a further £250 million to the great sum of £1 billion. Part of the guidance that we offer local
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authorities says that we are looking for precisely such road safety measures to be included in their transport plans. The resources are there to sustain them.
With regard to the opportunity for a debate, the hon. Gentleman raises a proper point. It is not, of course, for me to decide what issues are debated in the Chamber. It is not only for the Government to decide which issues are debated here.
Last week, my right hon. Friend the Deputy Prime Minister made it crystal clear when he came to the House to make his statement on rail safety that my Department was not in the least responsible for any of the leaks. He has a first-class record on honouring the conventions of the House and making the appropriate statement to the Chamber. There is no question of instituting a leak inquiry about the plans.
Mrs. Gwyneth Dunwoody: Is my hon. Friend aware that the target on reducing deaths among children will be warmly welcomed by every sensible parent in the land? It is not just the amount of resources available to local authorities and others who have to implement the new measures that will make the difference, but the degree of monitoring of the results. Too many young males are killing themselves and other people regularly. We need to know why, and how to stop them. We need to explain to our population the devastation that is caused by that unnecessary and unacceptable form of death.
Mr. Hill: I need say nothing more than that, as ever, my hon. Friend makes important and apposite points about the need for monitoring. That falls within our plans. I entirely agree with the sentiments that she expressed.
Mr. Peter Bottomley: I thank the Minister for the way in which he made his statement. He is right to focus on crashes and casualties. Can we hope that, tomorrow, there will be acknowledgement of the work of the police, paramedics and major trauma centres, because post-crash treatment has helped to reduce deaths and serious injuries by a fair number?
I thank the Minister for his kind words to me. I read an article by Auberon Waugh, I think on 15 February 1986 in The Spectator, about the death of his sister in a hit-and-run crash. He said that only a fool would inquire into the causes. I was the fool. He is now the fool. The Minister is right to be concerned with reducing the devastation.
Tomorrow, will consideration be given to asking the Scottish Executive whether they would agree to changing to summer time in winter, which would save about 100 lives? Will the Executive be asked whether that can be considered in the interests of the Scots, as well as of those further south? I know that it is a sensitive issue, but there are 100 lives there to be saved.
If the Minister's general approach is to listen to what those with experience and expertise have to say, he will receive support throughout the House for the things that work. The reason that this country has done relatively well is that we have tended to avoid the things that do not work and we have done the things that do.
Mr. Hill: I am grateful to the hon. Gentleman for his remarks. I join him in paying tribute to the fantastic work done by police, paramedics and trauma centres in dealing with victims of road accidents.
I am not aware of any intention to seek to prevail on the Scottish Executive to change whatever their attitudes are to British summer time. My recollection is that, when the matter has come to the House, there has been a free vote. On that matter, as on a number of others, the hon. Gentleman and I have stood shoulder to shoulder, but that was on an entirely personal level.
Mr. David Kidney: I strongly welcome the announcement that there will be a separate target for reducing child casualties. I hear what my hon. Friend the Minister says about reducing casualties through reducing speeds. Can I take it, therefore, that road traffic enforcement will be a core policing function?
Mr. Hill: I fully understand the points made by my hon. Friend, and have already described the measures for improved enforcement that the Government are contemplating. Although we take those measures extremely seriously, on this occasion I shall have to ask him to wait for the detail that will appear in the very detailed report which will be in his hands from early tomorrow morning.
Mr. Patrick McLoughlin: Will the Minister give an assurance that there will be no changes tomorrow to the age at which people can take their driving test?
Mr. Hill: I sometimes feel that there is nothing more deadly than a helpful intervention in the Chamber, and I was the victim of such assistance in that case.
The hon. Gentleman raises the issue of young drivers. The Government's intention is to tackle bad and irresponsible driving. We intend to propose a package of measures to raise driving standards, especially for young and newly qualified drivers, who are more at risk. We shall consult the public on a range of measures—for example, on probationary plates for new drivers. Our aim is to encourage people to get more experience before they take their driving test, and we will consult the public on how to improve the casualty record of young drivers. Raising the driving age may be one way of doing that, but we want to work through with the public what they think about the issue.
Mr. Jeremy Corbyn: May I take the Minister back to expenditure on local road safety campaigns? What monitoring does he propose to introduce to ensure that local authorities have sufficient funds to continue campaigning, particularly among children, on the need for improved road safety, and particularly to ensure that the many young people who ride bicycles—I welcome the fact that the number of such young people is growing—receive proper safety and cycle proficiency training? In many boroughs, there is insufficient funding for all children to be trained in how to ride bicycles safely. Will he ensure that such campaigning and training is considered in future standard spending assessment allocation, to protect local expenditure in addressing those issues?
Mr. Hill: I am grateful to my hon. Friend for those questions, and certainly take extremely seriously the
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issues that he has raised. Indeed, I have the pleasure and privilege of being the chair of the National Cycling Committee. The Government intend that local transport plans should include measures to increase cycling, walking and safety improvements. We also intend to promote and monitor cycle helmet wearing. It is certainly our intention, as I have explained, to devote to local authorities significant new sums to pursue their local transport plans, of which safety issues are an absolutely essential and critical part. I give my hon. Friend that assurance.
Mr. David Lidington: Will the Government empower and encourage the courts to disqualify from driving drivers who are found to have cannabis or another banned drug in their bloodstream?
Mr. Hill: As I have explained, we are certainly aware that the issue of cannabis and drug-driving has become more prevalent. We are conducting significant new research to identify the role of drugs in road accidents. As the hon. Gentleman will know, drug-driving has long been an offence. It is certainly our intention, when we have the right evidence, to ensure that there is better public education on, and better enforcement against, that particular offence.
Mr. Gareth R. Thomas: I welcome my hon. Friend's comments thus far, and look forward to tomorrow's publication of the strategy document. Will he pay particular attention to improving road safety on what are commonly known as rat runs? At 7.30 this morning, I met some of my constituents who live in Sherwood road and in surrounding roads, in south Harrow, and they were rightly very concerned about the speed of traffic along local roads. May I commend road safety on such roads as an issue that is worthy of further attention both in the Department and in relation to local authority SSAs?
Mr. Hill: I am grateful to my hon. Friend for that question. I am certain that his constituents, particularly those living in Sherwood road, south Harrow, will be grateful that he has raised their concerns in the Chamber. Rat running is a matter of concern to people across the country. It is a major issue on which we all receive representations during our advice surgeries. A number of measures are available to deal with it, including a variety of traffic calming devices. I also draw attention to the new powers that we have given to local authorities to introduce 20 mph zones. All the evidence, including that from the previous Government, is that such zones are very effective in road traffic reduction. They should be expanded and increased.
Miss Anne McIntosh: The Minister said that he wished to change the culture of driving. Does he agree that reducing the speed limit to 20 mph will not work because it will not be policed and implemented properly? Reducing the permitted amount of alcohol in the blood will also not be helpful. The best way to proceed is to pursue persistent speeding offenders and those who are grossly over the alcohol limit. In the same vein, will he join me in a campaign to target company car drivers who persistently cause accidents and have the damage reclaimed on the company insurance? They should be

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responsible for their insurance claims. Does he also agree that if we are to tackle the problem of cannabis in the blood, we need a drugsalyser?
Mr. Hill: I am grateful to the hon. Lady for her proposals. We shall look at all those issues. She will find that the reports that we are about to publish take up a number of them. She and I might disagree about some of the details of her ideas. We intend to develop a national framework for determining appropriate speeds for all roads. There is not necessarily a cut and dried, black and white answer on all such matters. The speed review does not recommend changing existing speed limits. That is also a matter for further examination.
Ms Claire Ward: I thank my hon. Friend for bringing forward these important measures, which I am sure will be welcomed by my constituents. As one who is keen on joined-up government, may I ask him whether he feels that the support of the Department for Education and Employment is sufficient to ensure that children are fully aware of road safety issues?
Mr. Hill: I sometimes have reservations about the phrase "joined-up government" on the grounds of slight overuse, but it is appropriate in this case. That is why I was delighted to be joined two months ago by my colleagues from the Department for Education and Employment and the Department of Health to launch the STAG report. It is essential that all critical Departments work hand in hand on issues relating to the safety of children travelling to school.
Mr. Bob Russell: Does the Minister agree that greater investment in traffic calming and 20 mph speed limits is good value for money? Will he confirm that the cost to the public purse of a fatal road accident is more than £1 million, the cost of a serious injury accident is more than £100,000, and that of a slight injury accident is £10,000? Would it not make sense to give local authorities more money to invest in road safety, thus saving lives and public money? Finally, will he confirm that he will be supporting the Transport and General Workers Union in its "Say No to Tired Drivers" lobby this afternoon?
Mr. Hill: On the hon. Gentleman's last point, I might have been with the lobby had I not been detained elsewhere.
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The hon. Gentleman speaks good sense, as ever. It is important that he should draw to our attention the shared economic costs of road accidents, although the main issue in all our hearts and minds is the tragic consequences for individuals. He asks whether more money will be made available to local authorities to invest in road safety. As I have said, this year there was an additional 20 per cent. in the resources available to local authorities for their local transport plans. The figure was £755 million, and next year it will be £1 billion. The money is there and it is forthcoming. We very much hope and expect that local authorities will devote a good deal of it to road safety measures.
Mr. Andrew Dismore: In the context of child safety, I remind my hon. Friend of an issue that I have raised with him concerning MOT tests. It may come as a surprise to right hon. and hon. Members that child seats fitted to cars are not subject to MOT tests, despite substantial evidence that they are frequently badly fitted or adjusted, and that may potentially increase child casualties. Will my hon. Friend look again at making the fitting of child seats part of the MOT test?
Mr. Hill: I am grateful to my hon. Friend and I am certainly aware of his long campaign, which has been extremely helpful in highlighting the seriousness of the issue that he has raised. We shall certainly consider his proposal.
Let me explain the central thrust of our proposals. Motorists suffer the worst casualties on our roads as a result of road accidents, therefore motorists stand to gain most from decent, proper driving practices. I am glad to say that we are confident that motoring organisations broadly support our strategy. It goes without saying that we have consulted the motorists' forum which welcomes our proposals.
Mr. Peter Bottomley: On a point of order, Madam Speaker. Can we take it that, unless the Minister says otherwise, if you or any other right hon. or hon. Member wants to go to the press conference at 9.30 am tomorrow at the Institution of Mechanical Engineers in Birdcage walk, we might be able to do so?
Madam Speaker: That is a form of advertising. It has not much to do with me.

Control of Hedgerows in Residential Areas
4.7 pm
Mr. Jim Cunningham: I beg to move,
That leave be given to bring in a Bill to amend the Environmental Protection Act 1990 by extending powers to environmental health officers to intervene in neighbourly disputes involving hedgerows in residential areas; and for connected purposes.
I should like to thank Hedgeline, which has campaigned hard for a change in the law regarding nuisance hedges; the Styvechale ratepayers association and many other residents associations in Coventry; the constituents who have written to me in support of the Bill; and all the members of the public up and down the country who have given me their support. I also pay tribute to the hon. Member for Faversham and Mid-Kent (Mr. Rowe) and my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) for their tireless work on the issue. Their efforts demonstrate the cross-party support for the Bill.
I am pleased that the Government published the Green Paper called "High Hedges: Possible Solutions". It is reassuring to know that the Government are listening to the concerns of thousands of people from all over the country. I would like to see a solution to the problem as soon as possible, either through Government legislation or through the Bill that I am putting before the House today.
There is no proposal in the Bill to ban leylandii or any other tree or hedge. The Bill provides for conciliation between neighbours by environmental protection officers. Failing agreement, environmental protection officers will be able to make binding and enforceable decisions about the height of trees or hedgerows.
We should not dismiss nuisance hedges as a trivial issue. It is a real problem causing suffering to thousands of people. I have received a number of letters from constituents complaining about it. The social and emotional problems described in those letters persuaded me to try to do something. I am sure that hon. Members on both sides of the House have received similar letters in their postbags and are all too aware of the distress that is being caused.
The advent of the leyland cypress has made hedge problems far more widespread. It is a new tree, an unlikely hybrid between two distantly related North American cypress species. It was first bred towards the end of the 19th century. Its phenomenal growth rate is alarming because it is not known how high the tress can eventually grow. For example, a tree in Kent is more than 150 ft high and still growing. If a tree is not a nuisance, it should not be cut down. However, we need to take action now to prevent the situation from getting far worse.
These hedges can threaten roofs, guttering, drains and, in more serious cases, even a building's structure. They can deprive unwilling sufferers of light in their homes, and can prevent them from using their gardens in the way that they would choose.
As it stands, the law is biased almost entirely towards protecting those who want to grow leylandii and other high hedges. It offers no protection to people affected by an intrusive hedge. People can grow rows of fast-growing conifers to any height and as close to other people's properties as they like. Neighbours can cut branches and
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overhanging fences, but the continual expense and demands on time fall on the person who derives no benefit from the trees.
Trees lacking maintenance can be grown by an individual so that the burden of continual and sometimes hazardous work falls on the offended neighbour—a person who does not want a high hedge and who is prevented by law from reducing its height. The task of cutting back a high leylandii hedge to the perimeters of one's property can be daunting, especially for the elderly. The trees can grow by between 3 and 4 ft a year. Some of the many offending hedges have now reached considerable heights. As the hedges increase in size, they can be a cause of extreme anxiety.
Civil law has proved inadequate at dealing with hedge disputes between neighbours. Such actions can drag on for years, bringing further stress to a victim's life. The legal costs can be enormous. The sums involved can threaten life savings, and sometimes even a person's home.
The present legal situation forces the victim to plead with his or her neighbours to take action and, basically, to rely on the good will of others. The victim has no legal recourse to demand that an offending hedge be shortened or removed; the owner of the tree has the legal upper hand.
The Environmental Protection Act 1990 outlines a variety of nuisances, ranging from noise pollution to the treatment of animals. I urge the Government to look closely at such matters. My Bill would cause tall hedgerows to be included as environmental nuisances. In doing so, it would give legal recognition to the grave impact on people's lives often caused by nuisance hedges.
At the moment, environmental protection officers are reluctant to act. Their legal position is unclear, but the Bill will clarify it. It will allow environmental health officers to make a judgment. It will resolve disputes much more cheaply, easily and quickly, and without half the distress and cost now incurred.
We must strike the right balance between rights and responsibilities. No one wants to dictate the plants or furnishings that a person enjoys in his garden, but the right to make such choices must be accompanied by a responsibility not to intrude into other people's peaceful lives.
I hope that the House will agree that the measures in my Bill do not unnecessarily erode a person's right to enjoy his property as he chooses, because it is just as much a person's right to be free from the invasive practices of another. We must take action now.
I commend the Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Jim Cunningham, Mr. Alan Hurst, Mr. Tom Clarke, Dr. Lynne Jones, Mr. Simon Burns, Mr. Andrew Rowe, Mr. David Taylor, Mrs. Christine Butler, Mr. Richard Allan, Dr. Evan Hams, Mr. Lindsay Hoyle and Mr. Ian Pearson.

CONTROL OF HEDGEROWS IN RESIDENTIAL AREAS
Mr. Jim Cunningham accordingly presented a Bill to amend the Environmental Protection Act 1990 by

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extending powers to environmental health officers to intervene in neighbourly disputes involving hedgerows in residential areas; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 24 March, and to be printed [Bill 74].

Orders of the Day
  Government Resources and Accounts Bill
  As amended in the Standing Committee, considered.
  Government Resources and Accounts Bill
    New Clause 7

      INVESTMENT: LIMIT
      ".—(1) The Treasury shall ensure that the aggregate of outstanding expenditure under section 16(1)(b) and (c) does not at any time exceed £400 million.
      (2) For the purpose of subsection (1)—

      (a) outstanding expenditure in respect of the acquisition of assets, securities and rights shall be taken to be the aggregate of amounts paid for the acquisition of assets, securities and rights which have not been disposed of,

      (b) outstanding expenditure in respect of a loan shall be taken to be the amount outstanding in respect of the principal,

      (c) outstanding expenditure in respect of a guarantee shall be taken to be the aggregate of amounts which have been paid in fulfilment of it and in respect of which the Treasury has not been reimbursed, and

      (d) the Treasury shall make arrangements for evaluating outstanding expenditure in respect of anything done under section 16(1)(b) or (c) which is not addressed by paragraphs (a) to (c) above.

      (3) The Treasury may by order substitute a new amount for the amount for the time being specified in subsection (1).
      (4) An order under subsection (3)—

      (a) shall be made by statutory instrument, and

      (b) shall not be made unless a draft has been laid before, and approved by resolution of, each House of Parliament.'.[Miss Melanie Johnson.]

      Brought up, and read the First time.
      4.15 pm
      The Economic Secretary to the Treasury (Miss Melanie Johnson): I beg to move, That the clause be read a Second time.
      Madam Speaker: With this it will be convenient to discuss the following: Amendment No. 8, in clause 16, page 8, line 44, after "on", insert "upstream".
      Amendment No. 9, in page 8, line 44, after "business", insert "activities".
      Government amendments Nos. 27 and 28.
      Amendment No. 10, in page 9, line 6, after "provide", insert "further".
      Amendment No. 11, in page 9, line 7, leave out from "connection" to end and insert—
      "with the carrying on of its business, equal to 200 per cent, of the total finance provided under subsection (1)'.
      Amendment No. 12, in page 9, line 9, leave out from "conditions", to the end of line 11 and insert—
      "but may not comprise the following forms—'.
      Amendment No. 13, in page 9" leave out line 13 and insert—
      "() long term equity investments in public-private partnership projects'.

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      Amendment No. 16, in page 9, line 13, at end insert—
      "(5) The accounts of a body to which financial assistance is provided under subsection (1)(b) or (3) shall be open to inspection of the Comptroller and Auditor General and that body shall give such explanations of those accounts as he may reasonably require.'.
      Amendment No. 14, in clause 17, page 9, line 14, leave out subsection (1) and insert—
      "(1) In section 16, "upstream public-private partnerships activities" means acting as a manager in the organisation of public-private partnership projects, providing public sector organisations with expert advisory and implementation skills, providing interim finance for feasibility studies for local government public-private partnership projects and negotiating the necessary arrangements for particular public-private partnerships with the relevant government departments and the Treasury.'.
      Amendment No. 15, in page 9, leave out lines 34 to 36 and insert—
      "(b) references to public-private partnership projects include those carried on outside as well as within the United Kingdom.'.
      Government amendments Nos. 29 to 31.
      Miss Johnson: The Government are introducing new clause 7 to provide a statutory limit to the level of investment that the Treasury can make in Partnerships UK. When the matter was discussed in Committee, I indicated that the Government had no objection in principle to the imposition of a limit, that we had been considering the matter and that we would return to it after further consideration. I also made it clear in Committee that we would ensure that our commitments were the minimum necessary to ensure the successful launch of PUK, while at the same time ensuring that they represented value for money. I also said, however, that we should not impose a restrictive limit because of the position that PUK will occupy. It is important to ensure that the company is funded to a level that will allow its continued development over time.
      Opposition Members will note that the limit that we have set is £100 million below the figure that was suggested in Committee by the hon. Member for Arundel and South Downs (Mr. Flight). The £400 million limit will apply to all forms of investments, including any loans or guarantees. It is a fixed, aggregate figure that is not insulated against inflation.
      The limit is subject to change only by means of affirmative resolution. That ensures that the procedure for changing the level of the investment in the new company, which may be proposed by this or, indeed, any other Government, will be open to consideration by the House. I should like to take this opportunity to mention that my officials consulted the National Audit Office on the matter of a limit, as requested by the right hon. Member for Haltemprice and Howden (Mr. Davis), who has just joined us.
      I shall speak briefly on the issues covered by the other Government amendments on PUK. Amendments Nos. 27 and 28 have been introduced to provide clarity of purpose. The redrafted clause gives a more accurate explanation of the Government's financial commitments to the new body. Partnerships UK will be a public-private partnership, and the Government will invest on a basis that ensures the best value for money. All financial provision by and on behalf of the Treasury will be on commercial terms.
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      Amendment No. 28 also makes it clear that the moneys provided may be used in connection only with a public-private partnership business. Under that amendment, the position remains that investment may be made only in one body. Those points, along with the imposition of a limit, should allay the fears of those who are concerned that the Treasury will be providing a blank cheque.
      Amendments Nos. 29 to 31 are drafting amendments. They are necessary to remove from the Bill some text that is no longer required. I agreed to introduce these amendments during an exchange with the hon. Member for Arundel and South Downs in Committee.
      Mr. Howard Flight: If I may put it thus, the Government have, somewhat trickily, put into a Bill about Government resource accounting the legal provisioning to set up Partnerships UK. Announcements were made by the Government last July on the scope and activities of Partnerships UK. They included putting private finance initiatives into better shape more quickly, pump-priming for feasibility studies for local authority projects, expanding the range of projects that can be undertaken and seeking to make good the public sector skills deficit in putting together private finance initiative deals.
      I submit, having looked at clauses 16 and 17, that what the Government intend Partnerships UK to do is unclear. The provisions go much wider than the announcements that were made last year, after considerable debate and spinning on the subject. The clauses as drafted would indeed enable the new body to step into territory that has been raised by the TUC, the CBI and the existing private finance initiative industry, which could lead to major conflicts of interest.
      Mr. John Bercow: Before my hon. Friend expatiates on that point, will he confirm that he heard the Minister say that the investment limit would be increased only after "consideration" by the House? Trawl through the measure as I may, I can find no reference to "consideration"—only a reference to approval by resolution. Would my hon. Friend care to try to get the Minister out of the conundrum into which she has plunged herself?
      Mr. Flight: I thank my hon. Friend for his, as ever, valuable contribution. New clause 7 is almost as opaque and as lacking in clear description of its intent as the existing clauses. It seems that the Government's intent is that anything in excess of the prescribed limit of £400 million should require the affirmative resolution of both Houses—but I question whether that is what the words in the measure really add up to.
      Moreover, new clause 7 contains a loophole: apparently the £400 million limit applies only to subsections (1)(b) and (c) of clause 16 and not to subsection (1)(a). As subsection (1)(a) empowers the Government to put up finance for the body, how much do they intend to provide up front?
      As the Minister commented, the figure is £100 million less than I had suggested as a maximum for all forms of finance—as a cap to prevent things from running out of control. I welcome the acceptance of the principle that there should be a cap defined by an amount of money. However, as I have pointed out, I am somewhat doubtful

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      as to how powerful the cap is. What is the total likely to be, including the initial expenditure under subsection 1 of clause 16?
      Mr. Michael Fallon: When there were previous caps that could be increased—for example, in the nationalised industries—in each case the increase had to be made by a specific Bill. Throughout the 1970s and 1980s, the House was presented with measures for borrowing-power increases and so on for the nationalised industries. If the cap is to be increased, surely it would be far better if it were done by primary legislation, which would be properly considered by the House.
      Mr. Flight: I thank my hon. Friend for that sensible and pointed suggestion based on his prior experience. I agree that, for a cap to be meaningful, it would be better if any increase were made under primary legislation.
      Will the Minister say a little more about how the Government expect that money to be spent? Ministers have stated that Partnerships UK will have a balance sheet of £1 billion. A balance sheet implies the taking of deposits. Is that £1 billion target only to be the total net assets? The Government are supposed to be putting up 49 per cent., with 51 per cent. from the private sector. A £1 billion target certainly implies about £490 million from the Government.
      Will the Minister clarify the meaning of subsection (2)(d) of the new clause, which contains some rather strange wording? It refers to
      arrangements for evaluating outstanding expenditure in respect of anything done under section 16(1)(b) or (c).
      That means matters that are not covered by the definitions of assets, loans and guarantees in the preceding subsections. It is not clear what the Government will be required to do under that provision, nor is it clear to which type of situation it will relate—apart from those already prescribed. Will the Minister also tell us how the Government intend to account for their investments in PUK, both in the new format of the national accounts and in terms of prospective forecasts of Government spending?
      The crucial issue relates to what PUK will do. In that regard, I come to amendments Nos. 8 to 15, which were tabled by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) and me. Amendments Nos. 8 and 9 are designed to limit the purposes and activities of PUK to those which the Government have described to date and which the industry, lawyers advising on such matters and the PFI team in the Treasury have defined as reasonable activities that would not cause major conflicts of interest.
      There is also an issue of European law. The process of procurement for private finance initiative projects is required under European law to be fair and to ensure a level playing field. If, as appears to be the Government's present intention, PUK is to have a privileged position in investing in PFI projects, that is likely to contravene European law.
      Amendment No. 14 defines the specific territory of upstream public-private sector activities. We have subsequently defined the term "upstream", and I shall come to that in due course; it is well understood in the PH industry and contrasts with the concept of downstream activities, which involves the management of equity investment after the financial closing of PFI deals.
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      Although the Government do not seem to have resolved what they want PUK to do and how they want it to develop its business, there has been substantial debate about it across the industry. The conclusion has been that upstream activities make sense in the provision of support and assistance to the public sector prior to financial close. It is unclear how the key features that have been outlined will be implemented, however. The aims of PUK appear—on the face of it, at least—to involve idealistic but clashing objectives: making money as a private sector entity and helping the public sector.
      As described, PUK will be there to advise the public sector and to hold equity interests in projects. It will act as co-sponsor with Government Departments, but, at the same time, have a private sector business and culture. It will develop a revenue stream to finance its activities, but it is not supposed to compete with the private sector. How will those fundamental conflicts be reconciled? What do the Government expect PUK to do?
      The principal focus appears to be the requirement on PUK to develop a skills base, to develop the means of financing PFI businesses and to support that skills base, but those aims seem to be an afterthought. That is contrary to the sensible way of setting up a business. It is generally accepted that the PFI team in the Treasury has been a great success and played a key role in negotiating with the Treasury and related Departments to make PFI projects happen, where previously many proposals had gone round in circles. The original proposals in the Bates report envisaged the main objective of Partnerships UK as being to continue the role of the Treasury taskforce but to "PFI-ise" it. That is dramatically different from the Bill's provisions and the range of activities described subsequently.
      4.30 pm
      The role of Partnerships UK as we believe the Government originally intended was to assist with deal flow. On 20 September 1999, the Chief Secretary to the Treasury confirmed in a speech to launch the Institute for Public Policy Research that Partnerships UK would act as a project manager for PFI deals, providing public sector organisations with expert advisory and implementation skills. He said that it would help get more PFI deals done better and more quickly. Helping deal flow and providing upstream support to public sector bodies is welcome and the Chief Secretary's approach is generally supported. It has been said that there will be a pump-priming role, in putting up finance for local authority PH feasibility studies—to be repaid when PH deals are signed off.
      Partnerships UK will encourage the public sector not to impose unnecessary risks on the private sector, and it will promote stability and intelligent standardisation. That is welcome in all parts of the House and throughout industry.
      In the early days of PFI, many deals were undeveloped owing to a lack of funds, to funds being misspent or to delayed decisions. If Partnerships UK can be a mechanism for the commercial testing of projects, that also makes sense.
      Historically, the key private sector concern has been that the public sector is not sufficiently incentivised to close deals efficiently. Partnerships UK will incur its own costs during negotiations. That is a positive factor and

      175
      should encourage a deal-doing mentality. It is important that PUK seeks to streamline the bid process, to create a greater flow of deals.
      In developing the skills base, it is important to acknowledge the difficulties involved in attracting and retaining staff for Partnerships UK. The existing pool of experienced PFI professionals is relatively small, and demand for them is high. Partnerships UK should not be staffed with project and corporate finance executives with limited or no PFI experience, as that would undermine the logic of establishing PUK. The standard of public sector project managers varies. It is key to the successful development of the PFI that each spending Department should be able to develop its own skills base.
      How will PUK continue successfully with the two key existing roles of the Treasury team? Will it potentially serve as the negotiator with Departments for all PFI deals, or only for those in which it becomes involved? Will it play the same role in negotiating with the Treasury? How can it reasonably combine those roles with commercial roles, if it is to have them?
      The relationship with other Departments and public sector bodies needs considerably more thought. There will have to be a close working relationship with the Office of Government Commerce, and historically the British Government have not been particularly successful in developing relationships with non-governmental bodies. If PUK is launched without the full support of Departments most active in PFI, that will clearly put considerable risk in front of its success.
      We argue strongly that PUK should not be involved in the downstream side and I repeat that that seems to be the collective view of businesses and the trade union movement. The Government have not made clear whether it will be involved downstream, although the Bill would enable that to happen. There are concerns about PUK's involvement with the management and equity investment of project companies after financial close—that being the definition of downstream activities—and major conflicts of interest could arise here. How could PUK advise a public sector client on achieving the best commercial deal if it also had a commercial interest in the reverse occurring? The competitive bidding process would become compromised as PUK would participate in choosing the preferred bidder, in which it would have a future investment.
      PUK could, for example, recommend for selection the bidder that offered it the most favourable participation. As it will not pay the on-going tariff, it is also difficult to see how its interests in that regard would identify with those of its co-sponsor, the public sector purchaser. Confidential information gained as a shareholder or lender in one transaction could be used against the same private sector bidders in later transactions. As a participant in a project management company—either as a shareholder or a lender needing to make returns and reduce investment risks—how could it negotiate effectively against the public sector tariff payer, its co-sponsor, during the concession life on a refinancing or a variation required by the public sector?
      PUK's exit criteria may be different from those of the rest of the shareholders or the lenders to the concession, particularly if it needs liquidity to pay its overheads.
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      The natural exit from a deal for PUK would be at a financial close, when it would be paid for its services in cash out of the proceeds of the project finance, in the same way as other advisers.
      On European requirements, the procurement process for PFI projects is governed by European law. All projects need to be advertised in the Official Journal of the European Communities and to follow certain well-established rules to ensure that the process is fair and conducted on a level playing field. It involves moving through each selection stage on the basis of an evaluation that establishes technical competence to perform the project and, later, the best price. There are usually several stages. A number of potential bidders are chosen in pre-qualification and, following interviews, three or four are invited to tender. Further negotiations usually follow. After that, a preferred bidder is chosen, which takes the process through to financial close.
      From advertisement in the Official Journal to financial close, the process takes between 18 months and two years to complete. Fundamental to that is the integrity of the process, which requires a clear separation between client and bidders. The client or its advisers must have no conflict of interest in the outcome, otherwise the process would be tainted and in breach of Official Journal rules and European Union law.
      If PUK had the opportunity to invest in the equity of the winning bidder, and played a part in its selection, there would be a major risk that such conflict would arise and it would be accused by the losers of preferring certain bidders over others during the competition. In that case, the process would be tainted and the playing field uneven. That aspect has not been discussed adequately, and the Government have not fully focused on the integrity of the competitive process.
      It has been argued that PUK should be a provider of last resort of equity in projects where the market is not willing to provide equity on sensible terms, and that PUK's investment guidelines might require it, on all transactions, to answer positively that the equity market had been approached and was unwilling to provide the required funding.
      If such equity investment were limited to those situations, it could be argued that that practice would avoid PUK crowding out the private sector, but even that slant is inappropriate because PUK will be majority-owned by the private sector and there seems little logic in private sector shareholders wanting the business to invest long term in PFI projects that no one else will touch. Even though conceptually that argument might appear to make sense to the Government, I cannot see how it can work commercially.
      Government amendments Nos. 27 and 28 remove references to financial assistance and grants and seek to make it clear that subscriptions to PUK will be for investments. I repeat: what sort of investments? Going back to the heart of the issue, is PUK to be essentially a skill advisory body or an investing body?
      The amendments leave in the Bill the ability to provide finance by way of guarantee. The Minister wrote to me following the debate in Committee to make it clear that those guarantees would be provided on the same basis as other guarantees, but I note from her response that they will appear as contingent liabilities in the supplementary statements to the consolidated fund and national loans fund accounts.

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      The essence of our concerns about guarantees is that they are at the bottom of the page, on a contingent basis, and it will become ever more difficult to know what the real commitment is. Technically, one clearly cannot put guarantees in as capital expenditure to be depreciated, but we will stray into an area where, as Government guarantees mount, their real liabilities become more and more obscure.
      Our amendments Nos. 10 and 11 seek to provide an alternative cap on Government expenditure and certainly to include the expenditure under clause 16(1). We are broadly happy to accept in principle the Government's approach, with the proviso that we want to know what will be included under subsection (1).
      Amendments Nos. 12 and 13 seek to exclude from financial assistance guarantees and long-term equity investment in public-private partnership projects. The amendments have not been published in the form in which I tabled them, but that is their intent. As I have just said, there is no need to use the guarantee mechanism for putting up finance; it is much sounder if finance is provided up front and then appears clearly in the Government accounts.
      4.45 pm
      The central question is what the Government intend Partnerships UK to do. The industry does not know, Parliament does not know, I am not clear, and I question whether the Minister is entirely clear. She speaks of allowing it to develop and to have sufficient flexibility in the future. The danger of that approach is that it will develop major conflicts of interest and the same bad habits as the equity bank of the 1960s.
      On amendment No. 16 to clause 16, it is of course correct and desirable that Partnerships UK's accounts should be open to inspection by the Comptroller and Auditor General, but what will be the accounting policies of Partnerships UK? What will be its depreciation policies?
      The Government have an interest in PUK at one remove and as a minority shareholder. The accounting principles of Partnerships UK and who will determine them are a crucial matter still to be resolved. Few topics could be more relevant to the issues raised by the rest of the provisions. Unless the rest of the Bill is changed as proposed, no one will have a clue what the Government's interests are in Partnerships UK or how they will account for its activities.
      I shall deal now with amendment No. 14. Reading through Government announcements at the time when Partnerships UK was launched, I attempted to distil its intended role as the Government perceived it. We have sought to limit the definition of Partnerships UK's role to those activities. As amendment No. 14 states,
      "upstream public-private partnerships activities" means acting as a manager in the organisation of public-private partnership projects, providing public sector organisations with expert advisory and implementation skills, providing interim finance for feasibility studies for local government public-private partnership projects and negotiating the necessary arrangements for particular public-private partnerships with the relevant government departments and the Treasury.
      Those are the activities that the Government claimed when they spun the story of the setting up of Partnerships UK. The definition offered by the amendment is
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      considerably more explicit and narrower than that provided by the Bill, which is broad and unclear and which opens the door to all sorts of conflicts of interest.
      The first potential conflict of interest arises from the fact that Partnerships UK exists in an idealistic sense to give good advice to public sector bodies, but it also aims to grab the business as profitably as possible for itself.
      The second potential conflict of interest is that Partnerships UK will have privileged access to private finance initiative deals and a privileged position in its relationships with the Treasury and Government Departments, but it is majority owned by the private sector. It is therefore in competition with a considerable number of other bodies in the PFI industry. The Bill gives it a privileged position which will be impossible to manage. It would be improper for Partnerships UK to be permitted to participate as a long-term investor in PFI equity projects.
      The rest of the amendments are relatively straightforward. Government amendments Nos. 29, 30 and 31 broadly cover the same territory as amendment No. 15. They try to make it clear that Partnerships UK can be involved in PFI business outside the United Kingdom. That involves less conflict than does such business in the United Kingdom, and it is clearly welcome if PUK can make money through business outside the country.
      Mr. Bercow: My hon. Friend hinted at a possible conflict between the Bill and European law. Given the unimaginable embarrassment that this Government of Europhiles would suffer if, in the context of the clause and the amendments, they faced legal action from the European Union, does he agree that it would be helpful if they published the legal advice that they received on the matter?
      Mr. Flight: I thank my hon. Friend for his pertinent remarks. I suspect that this Europhile Government may not even have thought of the problem, just as they had not sufficiently considered European Court of Justice issues in relation to the Financial Services and Markets Bill.
      I apologise if I have spent too much time in taking hon. Members through the precise arguments for the amendments, but I hope that I have made it clear that a potential problem exists unless the activities of Partnerships UK are limited to the upstream activities that I defined.
      The Bill is at its Report stage, yet clauses 16 and 17, which are tucked away, provide substantial powers for Partnerships UK without giving a clear definition of its activities. The Government have not resolved that. The Government have been warned by the industry, business and the trade union movement that, if the measure is left as wide as it currently stands, it will put Partnerships UK in a position in which it will face unacceptable conflicts of interest.
      For those reasons, our amendments try to limit and define much more precisely the activities of Partnerships UK. If there was reasonable scope for those activities to broaden in future, they could be reconsidered in further legislation. The argument that we must have the widest possible measure now to enable Partnerships UK to develop does not stand up. I urge the Government to

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      reconsider what they want out of Partnerships UK. The other place, if not the House, will need to follow up our points and limit the role of Partnerships UK to that which is proper.
      Mr. David Davis: I want to speak briefly about three amendments in the group. First, I want to comment on the limitation that the Minister mentioned at the beginning of our proceedings. Secondly, I want to consider amendment No. 16, which is in my name and the names of the right hon. Member for Swansea, West (Mr. Williams) and the hon. Member for Newbury (Mr. Rendel). I also want to probe the Minister slightly on the philosophy that underpins the accounting for Partnerships UK.
      I welcome the Government's decision to accept our suggestion in Standing Committee on limitation. That is sensible. I also thank the Minister for consulting the National Audit Office on that; it was clearly worth while. I want to ask a question that may turn out to be about a technical point, but I hope that the Minister will clarify it when she winds up. Does the limitation refer to proposed new paragraphs (b) and (c) of clause 16(1), but not to subsection (1)(a), which states:
      The Treasury may incur expenditure in respect of the establishment of a body for the purpose of carrying on public-private partnership business?
      That opens up the option of creating a dowry. I do not think that that was the intention; I suspect that it is just the way in which the wording is made rather general. But I should like to hear that that is the Government's view. There may be a need for amendment by the Government in the other place.
      The second issue is raised by amendment No. 16, in my name and the names of two of my colleagues on the Public Accounts Committee, the right hon. Member for Swansea, West and the hon. Member for Newbury. It says:
      The accounts of a body to which financial assistance is provided under subsection (1)(b) or (3) shall be open to inspection of the Comptroller and Auditor General and that body shall give such explanations of those accounts as he may reasonably require.
      The amendment is designed to remedy an omission from the Bill. It provides for the Comptroller and Auditor General's access to Partnerships UK. The Government intend to establish the body as a limited company to exercise a key role in developing the private finance initiative. Partnerships UK will take decisions having a wide impact on the use of public money. The Treasury will be able to use public money to fund it. It will take on functions that are currently performed by a taskforce within the Treasury, whose work is currently open to scrutiny by the Committee of Public Accounts through the Comptroller and Auditor General's current statutory access rights.
      Mr. Oliver Letwin: Does my right hon. Friend agree that this is an interesting test case of whether the Government intend to constrict the applicability of the National Audit Office and the Comptroller and Auditor General, since, after all, the body in question is one that they are setting up de novo, and they have claimed
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      repeatedly that they have tried to allow all new bodies to be within the purview of the Comptroller and Auditor General?
      Mr. Davis: I do not agree with my hon. Friend. As will be clear in a second, it is a test case of something else, of whether or not we can have in statute, rather than by Executive promise, the rights that apply.
      The Chief Secretary, giving evidence to the Committee of Public Accounts last month, acknowledged the important role of the Committee in scrutinising the apportionment and transfer of risk under public-private partnerships and private finance initiatives. He gave a commitment that the Committee would have full scrutiny of and oversight over public money paid to Partnerships UK, as well as of money going into projects for which Partnerships UK will be responsible. That commitment is welcome; it was unanimously welcomed in the Committee. The amendment would simply secure in statute the mechanism for providing the Committee with the oversight role, by giving the Comptroller and Auditor General the necessary access powers to obtain information to inform the Committee.
      Mr. Letwin: I accept my right hon. Friend's correction. It is encouraging to many of us to hear of that commitment. However, does he agree that if the Government are reluctant to accept the PAC's amendment it would suggest that that commitment may be temporary?
      Mr. Davis: I am perhaps more generous than my hon. Friend in my judgment of the Government. The problem here is not so much that the commitment of today's Government may be temporary; it concerns the commitment of some future Government. All Bills set the framework for the Government and Parliament in the future.
      Mr. Nigel Griffiths: The right hon. Gentleman speaks with much knowledge of the position inherited by the present Government, when, against all the appeals from the Public Accounts Committee, none of the outside arms-length agencies that were set up were required to be vetted by the National Audit Office. But I know that the right hon. Gentleman supports me and the rest of the Committee in applauding what the present Government have done to ensure that all arms-length bodies have been included since the last election.
      Mr. Davis: Not quite all—19 out of 21. If the hon. Gentleman had been in the Chamber the other day he would have known that I tabled an amendment on behalf of the National Audit Office about the Financial Services Authority. That was not accepted. So the matter is not as clear-cut as he suggests.
      The point that the hon. Gentleman perhaps wanted to make was that over the decades from the 1960s onwards Governments have slipped by this particular problem. It is one that should be straightened out for ever now.
      However, let me return to my generous tone, which was to accept and applaud the Chief Secretary's commitment. It should properly be put into statute, for good reason. The private finance initiative is still new; it is still finding its feet; we are still discovering its weaknesses and its strengths. In the development of such a policy, one that is

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      common to both sides of the House, the gains from value for money studies are enormous. They relate not just to the particular body or project that is being considered at any one time, but to all the projects that may benefit from them in the future. The Public Accounts Committee has already published a report demonstrating the lessons learned from four PFI studies. Considerable leverage is given by the ability to scrutinise and to report.
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      Of course, another important scrutiny function relates properly to Parliament, and should not be a discretionary consideration for Government. Parliament's rights are involved here, not the Government's wishes or the Government's good will. The amendment is offered not in any spirit of conflict, but because I—along with the other Members in whose names it is tabled, and others—believe that Parliament's rights should be recognised. The House is being asked to approve the statutory funding of Partnerships UK; the amendment would secure in statute the House's right to scrutinise the use to which that money is put.
      May I ask the Minister another question about accounting for Partnerships UK? There is a philosophical point that we did not have time to consider in Committee, but which needs to be understood. The private finance initiative is, in my view, worth while, and I applaud the Government's intention to increase its use. It will give us better management, risk transfer, and a valuable weapon for the pursuit of output-oriented government. But how we account for the private finance initiative, or the private-public partnership, is critical, because it may lead to a perverse incentive in the way in which the PFI is used—an incentive driven by the way in which we account for it on the Government's balance sheet.
      Traditionally, decisions about whether to put an item on a company's balance sheet are based on how the risk is allocated—whether it falls on the project or on the company. There is a good reason for that: the interest of those who are most concerned with the balance sheet. Both the company's shareholders and its creditors have an interest in the financial risk that afflicts it.
      The taxpayer's interest in the Government's accounts is rather different. Most taxpayers do not expect the Government to go bankrupt tomorrow; neither do most of their creditors. The Government may be a late payer, but they are not going to go bankrupt. The taxpayer's interest is in the future taxation incurred by Government's decisions. That is why I want to know how the Minister expects Partnerships UK to be accounted for, in the context of the Government's overall accounts and the balance sheet that the Comptroller and Auditor General will be required to audit at some time in the future.
      I think it proper for capital accounting for the PFI—the liability that goes on to the Government's balance sheet—to reflect, irrespective of risk transfer, the stream of cash that taxpayers will have to fund in the future. How does the Minister expect that to be dealt with? It is, 1 think, one of the key issues in relation to whether the PFI is treated properly. If it is not treated properly, future Governments will be tempted to try to minimise the apparent liabilities on the balance sheet by, as it were, having public services on the never-never, and none of us would approve of that.
      Mr. Edward Davey: I think the House is grateful to the hon. Member for Arundel and
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      South Downs (Mr. Flight) and the right hon. Member for Haltemprice and Howden (Mr. Davis) for their analysis of the amendments and the Government's proposition. The Committee was also grateful for their analysis of Partnerships UK. The Liberal Democrats support almost all that they have said today; we also support the Government's new clause 7, which deals with expenditure limits. The Minister suggested in Committee that the Government would table such a measure, and they have delivered on that promise, for which hon. Members—including those who were members of the Committee—are grateful.
      Mr. Letwin: Does the hon. Gentleman agree that there is the lacuna that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) pointed out: because subsection (1)(a) is not covered, the Government could under the Bill put in, for example, £1,000 million at the start and not be limited by the £400 million?
      Mr. Davey: I am grateful to the hon. Gentleman. He has anticipated what I was about to say. With that exception, we welcome the new clause. I hope that the Minister will say that that was an oversight and that the Government will fill that lacuna in the other place.
      I hope that the Minister will talk a little more about the philosophy behind the Government adopting the expenditure limit. The point was not touched on in Committee. Although an expenditure limit could prevent abuse of the Government guarantee for Partnerships UK and ensure that there is a level playing field for other companies, there is an alternative to such a limit. The Government could have ensured that the constitution setting up Partnerships UK had a no bail-out clause saying that they would not give it any guarantees after the initial funding, and would in no way come to its rescue if it encountered difficulties.
      I would be interested if the Minister said why the Government did not choose that route, which is perfectly legitimate. Other countries have used it for corporations that have been set up by statute. The Liberal Democrats have examined it in other areas such as London Underground and the Post Office. It would perhaps have been one of the most appropriate ways to look at innovation in public sector finance and could have brought many of the benefits that the Government seek from setting up Partnerships UK, without having to have the expenditure limit. I make it clear: we are not against the expenditure limit approach. We would like to hear why the Government have gone down that route and not another.
      The hon. Member for Arundel and South Downs spent some time talking about the role of Partnerships UK and rightly sought from the Government clarification of what activities the body will undertake. I hope that the Minister will expand on that because many of us have worries that they have no clear direction for the body. Perhaps they will want it to take over more and more of the capital management of the public sector, but with no clear criteria about the sort of projects that will be most appropriate for Partnerships UK.
      That is one of the problems with the private finance initiative. It is welcome in many areas of the public sector and has brought many benefits. Many projects have gone ahead that otherwise would not have done. Many lessons

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      and skills have been learned by public sector managers, particularly on procurement. It has clearly brought many benefits, but, as we all know, there have been many examples of PFI projects having problems, where assets have been undervalued and money has disappeared.
      That is why some of us are concerned that Partnerships UK is being created without any clear framework for its activities. Although it may be the right approach, we do not feel that the Government are setting down the guidelines that are needed at this early stage.
      A few weeks ago, members of the Sub-Committee of the Select Committee on the Treasury took evidence from various advisers on the PFI and looked at where it had been successful and where it had not. It was clear that there were a significant number of successful PFI projects but, equally, a range where the PFI was not so appropriate and had not worked so well. That tended to be where the body had many different parts—say, a large hospital—a service there was being PFIed, but was used by a number of different people. The transaction costs in performing that re-arrangement proved to be not only very high, very complicated and time consuming, but did not deliver good value for money.
      In their remarks to the Committee, the specialist advisers made it clear that the PFI could generally be characterised as a case of learning on the job and of trial by error. That is not a good way of trying to discover the best way of maximising value for taxpayers' money and of ensuring that capital projects are completed in the most efficient manner. It is about time that the Treasury—perhaps using outside advisers, perhaps from academia—analysed rather more intelligently the most appropriate cases for use of the PFI.
      If public sector managers operate a PFI project, they will have the benefit of cheaper capital and—potentially, in some cases—of lower transaction costs. However, those gains have to be set against the efficiencies that could be gained in many spheres by private sector management. There is therefore a trade-off in deciding who is best able to operate parts of a PFI project. Moreover, it seems almost self-evident that it is possible to analyse the spheres in which such a trade-off will work.
      I hope that Partnerships UK will not have to learn by experience, and that, in a few years, we shall not have to contemplate a series of failures and projects in which money has been wasted.
      Mr. David Davis: Some of the issues that the hon. Gentleman has raised were addressed in the Public Accounts Committee's report on the PFI. However, rather than focusing on the trade-offs that he has described, the report made it clear that design of PFI projects is critical to their success. The report also made it clear that, in the public sector, understanding of the separation of risk is very primitive indeed. Under the previous Government, the pricing mechanism used in road projects, for example, served to increase risk, making projects more expensive than they needed to be. There is, therefore, much to be gained in addressing the issue of project design. Moreover, in relation to project design, Partnerships UK is a good development. However, the report also
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      reinforces the point that value for money studies not only demonstrate the good and bad aspects of a project, but provide lessons to be learned for the future.
      Mr. Davey: I certainly agree with the right hon. Gentleman on value for money studies, which would be promoted by his amendment No. 16, and which we must ensure are continued in all PFI projects. I do not think that he and I disagree on that. Liberal Democrat Members believe, for many of the reasons that he has outlined, that the PFI could be very useful in many spheres. His comments on project design also reinforce my previous comments. Although some projects can be designed so that the private sector is readily able to assist in improving efficiency, it is very difficult to see how other projects—I gave an example of one earlier—can be designed to ensure that we receive best value for money. I therefore hope that the Minister will say a little more—as she was pressed to do earlier by the hon. Member for Arundel and South Downs—on the activities of Partnerships UK.
      Amendment No. 16 was tabled by the right hon. Member for Haltemprice and Howden and other members of the Public Accounts Committee, and is not, as the hon. Member for Arundel and South Downs said, a Liberal Democrat amendment. However, Liberal Democrat Members are certainly happy to support it and, in many ways, wish that we had got there first.
      Throughout our proceedings in Committee, the Government demonstrated a surprising unwillingness to expand the role of the National Audit Office. In Committee, although Ministers described their interest in and support for expanding that role, and even boasted about their record in doing so, when we made specific proposals, they moved away. We are now debating another specific proposal, and it will be interesting to see whether the Minister goes down the same road. In Committee, she made it clear that she was not attracted by such an amendment. She said that Partnerships UK would be a risk-taking private sector body, with the majority of its members being private sector investors and that those were not the normal conditions under which a body would be inspected by a public sector audit body.
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      Mr. Letwin: Does the hon. Gentleman agree that, in the light of the interesting information that we have received from my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, that there has been a Damascene conversion in the Treasury and the Chief Secretary has made a commitment to allow the Comptroller and Auditor General in, it is extraordinary that the Government should apparently resist an amendment that merely locks in that commitment?
      Mr. Davey: During the evening we may find that the hon. Gentleman anticipates what I was about to say on a number of occasions. The Chief Secretary has made that commitment. It follows that Ministers should accept amendment No. 16.
      Mr. Letwin: I promise that I shall not pre-empt the hon. Gentleman this time, because I want to ask him

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      a question. Would he care to speculate on why there might be such a discrepancy between that commitment and a willingness or otherwise to accept the clause?
      Mr. Davey: I was not about to go on to that, but I shall answer the hon. Gentleman. Perhaps the reason is that the Government are concerned about setting a precedent, because Parliament would then be entitled to say that many other corporations and trading companies with public sector involvement should be overseen by the National Audit Office. I suspect that that lies behind the Government's possible opposition to amendment No. 16, but we shall see.
      Another reason why the Government should deliver on the Chief Secretary's commitment is that such public bodies, created by statute by the House of Commons, ought to be audited by the National Audit Office. Partnerships UK would not exist if statute did not create it. It is not a private company. That creates a prima facie case for National Audit Office involvement.
      We know from new clause 7 that public money will be involved. Moreover, Partnerships UK will be a key tool of public policy. The Government want to develop the private finance initiative and public-private partnerships. There is no disagreement about that basic aim. Elsewhere in the Bill, the Government say that a body should be under the jurisdiction of the National Audit Office only if its role could be carried out by a Government Department. A Department clearly is undertaking the role of Partnerships UK. The Treasury set up a taskforce, which started work soon after the Government came to office. Yet again, by the Government's criteria, Partnerships UK ought to be under the institutional jurisdiction of the Comptroller and Auditor General.
      Mr. Flight: The hon. Gentleman has just raised the nub of the matter: is Partnerships UK going to take on the Treasury taskforce's role, as has been advertised, or is it going to do something entirely different? The Bill empowers it to do something totally different that may even be harmful to the present role that the Treasury taskforce has carried out well.
      Mr. Davey: The hon. Gentleman makes a fair point. I may be naive in accepting that the Government were going to do what they had said elsewhere that they intended to do. It is the Government's stated intention that the responsibilities of the Treasury taskforce will be taken on by Partnerships UK, but the hon. Gentleman is right to say that, given the drafting of the Bill, Partnerships UK could go much wider. The point made in amendment No. 16 is that the body should come within the scope of the National Audit Office.
      The Liberal Democrats want the Government to deliver fully on their commitment. We want them to ensure that all public money that goes to Partnerships UK is properly audited. We want to make sure that the commitment given by the Chief Secretary to the Treasury is delivered and we believe that the best way to do that is for amendment No.16 to be agreed to.
      Finally, let me say a word in favour of public sector managers. When we debate private finance initiatives and Partnerships UK, we are often left with the feeling that right hon. and hon. Members believe that civil servants cannot procure capital goods or get good value for
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      taxpayers' money. In reality, over many decades they have performed those functions very well. Indeed, in many areas they are still charged with the responsibility for capital procurement for the public sector. Whether or not Partnerships UK develops and takes on more of that work, many public sector managers will retain that responsibility.
      I hope that, in establishing Partnerships UK, the Government will ensure that public sector managers are able to learn from Partnerships UK, and that they are not simply able to get advice from Partnerships UK, but are brought in for their skills and expertise as they will still be in charge of much of the capital spending in the public sector.
      Mr. David Davis: I applaud the hon. Gentleman's comment about public sector managers and draw attention to one factor that we in Britain take entirely for granted—the fact that more than 99 per cent. of our public sector managers are totally honest. We cannot take that for granted in respect of everything that happens on behalf of the Government. When something goes wrong, it is often at the interface between the public and private sectors. We are increasing precisely that possibility by going down the PHI route—not wrongly—and we have to be aware of it.
      Mr. Davey: The right hon. Gentleman is absolutely right. The Government should accept his amendment so that the public-private partnership can be developed with the probity that we have come to expect from our civil servants.
      Sir Michael Spicer: What worries me about new clause 7, and particularly the way in which the Minister spoke to it, is that the £400 million cap is the wrong cap. It is focused on what might broadly be called the operating costs of the monopoly organisation that has been set up to administer the public sector element of the PFI scheme. However, it does not restrict or contain the public moneys that are going into the PFI and that really should worry right hon. and hon. Members in the context of the Bill and the proposed new clause.
      The Minister gave the impression that the new clause provided a real cap on heavy spending by the public sector on the PFI. That is quite manifestly not the case. As the provision is spurious and there is no such cap, there are all sorts of unfortunate consequences, some of which have been referred to by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis).
      For instance, more and more of a fudge is emerging between capital and current spending. The expansion of PH in a totally unconstrained way is resulting in the breaking of the Government's own golden rules. Borrowing is being conducted through spurious capital expenditure, unconstrained through the PFI, which actually turns out to be current expenditure. That puts a horse and cart through the Government's self-proclaimed golden rules. More generally, this kind of mishmash of Government and private spending in an uncontrolled way will be combined with the phoney privatisation schemes that are beginning to emerge—the Post Office being one example. We shall have to wait for the result of the mayoral contest to find out whether the underground will be another. Less and less control is being exerted and certainly, as my right hon. Friend said, totally unaccountable control is being exerted over public spending, particularly capital expenditure.

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      That is increasingly worrying. The Select Committee on the Treasury interviewed the Governor of the Bank of England this morning. There was discussion about the fact that, contrary to the public perception and the Government's propaganda, there is reason to believe that public spending is beginning to get out of control.
      A report published yesterday by the Lombard Street research group showed clearly that the growth of public spending is taking off, and that it is matched by falling growth in tax receipts. Everyone thought that the deficit gap had been solved, thanks to the sound finances handed over by the previous Administration. It had been, for a while, especially when the Government took over the previous Administration's tight expenditure plans.
      However, there is now the real possibility of laxity in this country's fiscal management. That would have all sorts of consequences, as the Select Committee discussed this morning. One of the reasons why our interest rates are on their way up is that there is an anticipation that public spending is getting out of control, as a result of the ways that the Government have found to get around their own rules and public expenditure constraints. There is a clear need for capping and constraining public expenditure.
      New clause 7 is spurious. Its impression of great control and probity by an open Government contrasts with what is really going on. The Bill is part of a fudge that disguises loss of clarity and accountability in the Government's conduct of the public finances, as my right hon. Friend the Member for Haltemprice and Howden rightly said. Many issues arise connected with risk, for example. There is a contrast between what the Bill proposes and the way that risk is managed in the private sector.
      The Government are pretending to have achieved a match between private finance and public finance, and between risk and reward, in a way that is satisfactory to the private sector. However, their fudge means that public expenditure is gradually getting out of control. That is a worrying trend.
      Mr. David Ruffley: I wish to draw particular attention to amendments Nos. 8 and 9, at whose heart is the critical distinction between upstream and downstream activities.
      Upstream activities are defined in a later amendment as a set of activities that provide for support and assistance to the public sector prior to the financial close. Downstream activities are defined elsewhere as involvement in the project's management and equity investment after that close. As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, it is the inclusion in the Bill of a role in downstream activity for PUK that most troubles Opposition Members, City practitioners and commentators.
      That worry was noted when details of PUK were leaked to the newspapers last summer and aroused much confusion. The more one studies the Bill, the more one sees that many details are not covered. It was also clear in Committee that there were lots of loose ends. The devil really is in the detail. There are conflicts that have not been resolved thus far because of insufficient understanding of the critical difference between upstream and downstream activities.
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      My hon. Friend correctly observed that with regard to downstream activity, a body advises the public sector on how to get the best deal while being able to take an equity stake by way of remuneration for its involvement in the deal. That equity stake will involve it in trying to get the best deal for itself as a shareholder. That inherent structural conflict is built into these provisions.
      PUK will seek to develop a revenue stream to finance its activities, but we are being told that that will not and should not crowd out private sector activity. That is clearly another conflict.
      The Minister will probably tell us a great deal about Ministers' consultation with the private sector before drafting the Bill and how the Government listened to Opposition views in Committee. They may have listened and they may have consulted, but they have not come to the proper conclusions. It is to some of the outstanding points that have not been tackled that I would like to turn my attention.
      I do not think that anyone has a problem with upstream activities. They are typically undertaken by the Treasury taskforce—and a very good job it did in the main.
      Mr. Letwin: Does my hon. Friend agree that if the upstream activities constitute the main burden of the Government's case, clause 16(1)(a) should have been captured by the £400 million limit? It cannot conceivably be the case that the upstream activities would require to have more than £400 million spent on them all told, including the initial investment.
      Mr. Ruffley: Given my hon. Friend's premise, he is of course right, but he misunderstands me if he believes that I think that the burden of the Government's case is the importance that they attach to upstream activities. The importance that they attach to downstream activities is my concern. However, given his premise, he is right in making that logical and typically powerful point.
      Mr. Letwin: Following his own logic, would my hon. Friend then agree that the fact that clause 16(1)(a) has been omitted from the £400 million limit is virtually proof that the Government intend the body to have a great deal to do on the downstream side?
      Mr. Ruffley: My hon. Friend has it. That is exactly the point of my remarks further downstream, if I may make such a pun. It is at the forefront of Conservative Members' concerns.
      Let us remember what upstream activity is and why it is important. To demonstrate what a reasonable chap I am, I will gladly pray in aid the view of the Chief Secretary to the Treasury. In a speech to the Institute for Public Policy Research on 20 September 1999, he suggested that the importance of PUK was in helping to
      get more PFI deals done better and quickly.
      We would all like that. It is what the Treasury taskforce was dedicated to ensuring, so there is no problem thus far.
      PUK will also encourage the public sector not to impose unnecessary risks on the private sector. That is another of the Government's stated aims. We have no problems with that. It is also implicit in the logic of the role carved out for PUK's upstream activity that it should

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      promote greater standardisation of contracts. That is most important, as is the fact that PUK should try to streamline the bidding process so as to encourage greater deal flow.
      However, when we try to find out what the measure says about upstream activity—the subject of amendment No. 8—we seek in vain. We cannot discover ways in which that pre-closing and troubleshooting advice could be delivered. We have what is technically a private sector company, which will employ staff who represent a better skill base; that is what we are asked to believe. The company will be better than the embodied form of the Treasury taskforce.
      However, concerns remain as to the kind of staff who will be attracted to PUK and retained. The pool of experienced PFI professionals is relatively small and the demand for their services in the private sector is high. Will the Minister tell us what is being done to recruit and retain staff who will deliver high-quality, upstream activity advice?
      As one considers the significance of upstream activity, another question automatically leaps out. What relationship will PUK have with other Departments? Those people who have wandered the corridors of Whitehall in a previous life will understand that some Departments are not awfully good at interacting with non-governmental bodies. Will the Minister tell us what mechanisms—if any—the Government have put in place to incentivise Departments to work efficiently, promptly and in a co-operative spirit with PUK when it has been set up?
      I cannot close my remarks on the importance of upstream activity—the subject of amendment No. 8—without adverting to the points in other amendments about downstream activity to which my hon. Friend the Member for West Dorset (Mr. Letwin) referred a few moments ago. The Opposition regard downstream activity as dangerous. My hon. Friend the Member for West Worcestershire (Sir M. Spicer) alighted on that fact.
      Let us consider briefly why the involvement of PUK in downstream activity—the management of investment and the participation in equity investment during a PFI or public-private partnership deal—could be problematic. What conflicts of interest might arise if PUK indulged in the downstream activity of which we disapprove?
      PUK will be advising public sector clients on how to achieve the best commercial deal. However, at the same time, it will, in some cases, have an equity stake in the deal. The commercial interests in securing the best return on that stake would be diametrically opposed to the interests of the public sector client to whom PUK was giving the advice in the first place. The competitive bidding process could be compromised if PUK participated in choosing a preferred bidder in which it had a future investment interest. In other words, PUK could recommended a bidder to be selected if it offered the most favourable participation to PUK.
      Mr. Charles Wardle: Is not everything that my hon. Friend says in support of his amendments and about the pitfalls likely to be found in downstream activities a powerful argument in support of amendment No. 16, which was tabled by my right
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      hon. Friend the Member for Haltemprice and Howden (Mr. Davis) and relates to the Comptroller and Auditor General's right of access?
      Mr. Ruffley: I concur with my hon. Friend's assessment that our right hon. Friend, who is Chairman of the Public Accounts Committee, has alighted on an important point. That is why he tabled an amendment to act as an important set of belt and braces if we cannot get rid of downstream activity. I fear that, despite the power of our arguments, we may not succeed in doing that today. However, that amendment would ensure that there would be proper accounting of the PUK's spending and scrutiny by the National Audit Office.
      Mr. Letwin: Even if we do not succeed today, does my hon. Friend not agree that it is almost certain that, if the Government continue to resist such amendments, the other place will ensure that they are not allowed to continue with their proposals for downstream activities?
      Mr. Ruffley: I stand corrected by my hon. Friend. Perhaps, I am too much of a pessimist. I heard what he said, and I now share his optimism that the Government will listen to the objections that we are making in a reasoned and sensible spirit about the risks posed by the downstream activity envisaged in the Government's new clause.
      I return to the list of potential conflicts of interest. Confidential information that PUK gains as a shareholder or lender in one transaction could be used against other private sector bidders in later transactions.
      Mr. Letwin: I am sorry to interrupt my hon. Friend again, but I have just caught up with his lightning intellect and realised what he was saying. Does he really mean what he said? Is it not likely that the Government will not so much listen as hear an enormous shout from the other place? Eventually, they will be compelled to listen.
      Mr. Ruffley: I hope that the Government will be compelled to listen to the points that we have made, and that the other place will no doubt make, about the dangers of downstream activity. My hon. Friend is right in that regard.
      We have a further concern about downstream activity. If PUK is a participant in a project company either as a shareholder or a lender and needs to make returns and reduce investment risk, how will it negotiate effectively during the life of a deal against the public sector tariff payer that is its co-sponsor if that deal has to be renegotiated? For example, it might need to be re-financed and, in those circumstances, there will be a clear conflict of interest.
      We are not totally clear from the Bill what price PUK will charge for its services. It has been observed in many quarters outside the House that a natural exit from a deal for PUK would be at the financial close, when it would be paid for its services in cash from the proceeds of the project, financed in the same way as other advisers. If that route were followed, services could be clearly priced. Other advisers could see how much PUK was charging, which would result in benefits from more competition. My hon. Friend the Member for Bexhill and Battle (Mr. Wardle) observed that we are entering the realm of monopoly providers, when we want more competition.

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      5.45 pm
      If remuneration were paid up front, it would increase PUK's liquidity and avoid the need to scramble for sweat equity, which would be unattractive to many parties—not least bid sponsors and the public at large in the shape of taxpayers.
      My hon. Friend the Member for Buckingham (Mr. Bercow), in an intervention on my hon. Friend the Member for Arundel and South Downs, referred to the way in which European law impacts on the way that PFI procurement is undertaken in the European Union. All projects must be advertised in the Official Journal of the European Commission and follow well-established rules, to ensure that the process is deemed fair and conducted on a level playing field.
      The process, which is lengthy, begins by establishing the technical competence of bidders and goes on to examine whether best value and best price have been secured. Pre-qualification involves a number of potential bidders from a wide field. Following the third or fourth round of beauty contests, an average of three or four bidders are invited formally to tender. Thereafter, further negotiations are conducted, normally resulting in two bidders being invited to put their best and final offers. Then a preferred bidder is chosen, which should take the process to final closure.
      That legal—and legalistic—process can take one and a half to two years to complete. I should like to hear from the Minister whether the integrity of that process is compromised in any way by the kind of conflict of interest that I and others of my hon. Friends have outlined in relation to downstream activity. It is widely suggested by eminent legal practitioners in the City of London that, under that regime, there should always be a clear separation between the client and bidder in the interests of fairness, transparency and integrity. The client and its advisers—PUK in this example—should have no conflict of interest in the outcome, otherwise the process could be tainted and possibly in breach of EU law.
      I repeat the question posed by my hon. Friend the Member for Buckingham. What legal advice have Treasury Ministers received in relation to conflicts of interest compromising or breaching EU law? If the Minister will not publish that advice, perhaps she will tell us whether she was given any in the first place or thought it prudent to request such before introducing the Bill. I think that I saw rubric to the effect that the Bill is deemed to accord with the principles of the European convention on human rights. Does it accord with the principles of EU law, other than the ECHR?
      I should like to go on—
      Mr. Thomas McAvoy: The hon. Gentleman is going on and on.
      Mr. Ruffley: If the hon. Gentleman stops muttering and wants to stand up to engage in the debate I shall happily give way, but I see from his rather strange expression that that is probably beyond him.
      The Government pray in aid various arguments to the effect that they are well intentioned, that none of those conflicts of interest will conceivably come to pass and that one should not be concerned about breaches of law, conflicts of interest or double dealing. But it is worth
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      reminding ourselves of their professed intent when they introduced the proposals. We were told that PUK would recover the cost of financing any public-private partnership feasibility studies by direct reimbursement from the Treasury, that the Treasury would be reimbursed when the projects got ahead and that it would not always or even necessarily be the case that PUK would have to take an equity stake to recover its costs. We were also informed that it saw its role as merely supporting Departments, acting as a co-sponsor with them and smoothing the passage of PPP projects that it had worked up in co-operation with public sector clients.
      I am afraid that that is not good enough because the Government clearly want PUK to be a significant pump primer and, as has already been observed, the figure of £0.4 billion should make us all pause and scrutinise the thinking behind the creation of PUK. We are in the realm of empire building and the Bill does not spell out exactly what is going on. I refer to comments by Sir Stephen Robson and Mr. Adrian Montague, the chief executive of the Treasury taskforce. Let me quote Mr. Montague on why there will not be any conflicts of interest that should bother anyone. He said:
      in designing the capital structure we won't allow PUK to be taken hostage by anyone on the private sector side of the fence in order to gain unfair preference.
      As for the worry that PUK will do down the public sector to achieve a better return for itself, he said:
      the one thing that is not understood is that PUK will have a single client—the public sector.
      The suggestion is that
      If PUK does a single deal, which the public sector regards as gouging, or exploiting a conflict of interest, it is dead. No one would ever deal with it again
      and that it will have to be terribly careful as
      Its goodwill is single source and precarious.
      We are being asked to rely on the suggestion that we do not need to write any of that down and do not need to worry about conflicts of interest because they will not happen as PUK will be so sensitive to commercial and City opinion that it would not dream of gouging or doing a preferential deal when an equity stakeholder.
      However, in the same breath Mr. Montague said:
      it is not enough to rely on the underlying understanding. We will have to have rules in place
      to prevent the evil that he identified and that we have been identifying. I have looked in vain in the Bill and in Committee proceedings for the rules to prevent gouging or preferential deals arising from a conflict of interest. There are no answers to those questions.
      Guarantees go to the heart of the Government's attitude to the PFI, which is why our amendment No. 12 would remove references to PUK making guarantees. We believe that giving guarantees in any particular deal and using taxpayers' money so to do would undermine the demand that private sector contractors strive to achieve the very best efficiencies, savings and cost-effectiveness under a PFI or PPP deal. The problem is that if a bail-out occurred during a deal as a result of a guarantee being given, that would look like nothing but shadowy, off-balance-sheet public spending. That is all that those guarantees would amount to and, for that reason, our amendment is very important.
      The PFI and private sector contractors enjoying the benefit of guarantees that could run to many millions of pounds—if the Government amendments and new clauses

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      are anything to go by—should worry us all because that is not in the spirit of the PFI and represents a poor deal for the British taxpayer.
      Mr. David Rendel: This will not be my main contribution—amendments and new clauses in my name and those of other Opposition Members appear in every subsequent group—but as my name is attached to amendment No. 16, I am delighted to speak to it briefly. I strongly support the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, who said that—for some reason that is not fully explained and which I want to explore—the Government appear to be unwilling to put in statute their stated intention to give the National Audit Office and the Comptroller and Auditor General the right to study the accounts of Partnerships UK to make sure that its finances are properly ordered and that it is using the money granted to it by Parliament for proper purposes.
      The Government were prepared to give that commitment, but appear unwilling to include it in the Bill. That seems odd, particularly in the light of a perhaps slightly unfortunate party political remark made by the hon. Member for Edinburgh, South (Mr. Griffiths). I am sorry that he is no longer present as he seemed to suggest that the blame for the NAO's lack of access lay with the Conservative party, and the previous Conservative Government in particular. He rightly praised his Government for the number of new bodies that they have established over which the Comptroller and Auditor General has full audit rights. I echo that praise and, although the figure may not be quite 100 per cent., most have him in charge of their audit. We all welcome that.
      6 pm
      If the Government reject the amendment, we will lack a safeguard against any changes being made in future. Of course, we accept that the Government intend the amendment's effect to come into play, but if the amendment is not made, a future Government may make a different decision. Indeed, this Government may make a different decision in future, although presumably they do not, at present, intend to do so.
      The hon. Member for Edinburgh, South made it clear that he was worried about what might happen if, God forbid, we ever had a Conservative Government in charge of the country again. If that is a worry for him, I hope that he will be supporting the amendment wholeheartedly, in line with his support for the Public Accounts Committee's report, which suggests that the amendment should be made so that the Government's commitment would be in statute.
      The Government said that the commitment should not be in statute because that was not the Bill's original purpose. They have used that argument in a number of instances during discussions on the Bill. It is an unfortunate argument for two reasons.
      The first, and general, reason is that it seems rather odd that if a measure is right and proper and will benefit the public and Parliament, it should not be included in the Bill simply because it was not part of the Bill's original purpose. That indicates an almost childish pique on the part of the Government. It is almost as if they are saying, "We did not think of it first, and we are not prepared to allow you to get the credit for having thought of it, so we
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      will not include it in the Bill." That is a silly way to behave, and I hope that the Government will recognise that and stop behaving in that way.
      The second reason is particular to PUK. Part of the Bill's original purpose was to set up PUK. Part of setting up such a body is laying down how its accounts will be properly verified and audited and by whom. It is, therefore, part of the Bill's original purpose that statements on how that auditing should be carried out should be in statute. In this case the Government have even less reason for using their excuse about the Bill's original purpose than they do with other aspects of the Bill.
      I hope that the Government will see the sense of amendment No. 16 before we come to vote on it at heaven knows what hour tonight or tomorrow morning. It would make a valuable change to the Bill; it is in line with the Government's thinking, and the Government could easily accept it without losing face.
      Mr. Fallon: I do not entirely agree with my hon. Friend the Member for West Worcestershire (Sir M. Spicer) that the new clause gives the impression of control—that is not the way that I read it. However, I agree with him that the Government have chosen precisely the wrong cap.
      It is after all ironic that the Treasury, which is telling every other Department of State that what matters is the quality of spending, not the quantity, and is negotiating public service agreements all over Whitehall, is simply setting a quantitative cap on the expenditure of its own body, rather than a qualitative cap. It is saying that it does not matter what the body gets up to, provided that it does not spend more than £400 million.
      I would far rather that new clause 7 fleshed out the meaning of the terms and conditions in clause 16. At the moment, PUK and the Treasury can simply make things up as they go along. They can draft whatever terms and conditions they like under which assistance can be provided. Rather than setting a quantitative cap of £400 million, the Minister should have come to the House with a new clause that imposed qualitative control over the type of assistance provided, whether grants or equity, and gave us a handle on that process in statute, so that it was not left to the Treasury or to PUK to define the terms and conditions themselves. That is a central weakness of the new clause.
      A second weakness of the new clause and of clause 16 is the coyness about what the body is. I notice that even my hon. Friends refer to it as a "body". Let us be clear that it is a bank. The Government deny that. In a written answer to me last July, the then Chief Secretary said:
      There are no plans for a state investment bank.—[Official Report, 16 July 1999: Vol. 335, c. 367W.]
      Now we are to have a body that is enabled by the state to make investments on behalf of the state. If it sounds like a bank and looks like a bank, it probably is a bank, and we should refer to it as a bank, because it has banking functions. They are set out clearly in clause 16 and new clause 7. They are functions of lending and of taking an equity stake, whether in assets or securities.
      Mr. Letwin: My hon. Friend raises an interesting question. Does he imagine that the body would or should

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      be under the control of the Financial Services Authority? Does he believe that the Bank of England might want to take an interest in it?
      Mr. Fallon: I shall deal later with the way in which the valuation is carried out, but my hon. Friend touches on an important point. A banking function will be carried out by an agency of the Treasury, so perhaps that function should be subject to supervision by the banking authorities.
      The first step in the whole process is for us to stop being coy and to call the body a bank. It is a state investment bank. I know why the Minister does not want to call it a bank: it conjures up rather dismal memories of the 1970s, which you, Mr. Deputy Speaker, will recall. The previous Labour Government made a rather unhappy attempt to pick winners through the National Enterprise Board, but none turned out to be a winner—"picking losers" might have been a better description of its activity. It would have been helpful if the Minister had clarified the purpose of this body.
      I turn now to the lending function. The body will be able to commit money in the form of a loan, so it is essential that it is subject to terms and conditions that it does not itself define. There must be independent assessment. We shall come to the accounting function later, and that is the afterthought because it consists of examining whether the money has been properly spent for the purpose for which it was designated. However, we cannot get a handle on the accounting function unless we can measure and audit what the loan was intended for in the first place.
      As the Bill is drafted, nobody is clear about who can decide the terms and conditions under which financial assistance may be provided. Clause 16(4) simply says:
      Financial assistance … may be provided on terms and conditions…
      That is completely meaningless; it does not even make it clear whether PUK or the Treasury will set the terms and conditions, or whether the terms and conditions will be made public.
      There is a good example of that practice in public-private partnerships in the new commercial freedom being given to the Post Office. Even before legislation was brought before the House, the Post Office was enabled, under secret terms and conditions, to go wandering around Europe, playing at being an international business and buying outfits such as German Parcel. When we asked what were the terms and conditions under which the Treasury had allowed the Post Office to purchase other businesses, we were told that they could not be made available because the memorandum of understanding could not be published. Now the Government have had to bring legislation before the House and the matter may well become a little clearer.
      There is no point in the Minister saying that the Government cannot clarify the terms and conditions or tell hon. Members exactly how the money will be lent, but they can tell us that, however messy it all is, at least the amount involved will not be more than £400 million. That does not help us at all, and that is a weakness in the new clause.
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      The third aspect of the new clause to which I want to draw the attention of the House is PUK's power to take an equity stake. I am surprised that, even at this late stage, the Minister has not had second thoughts about that. Everyone else thinks that it is a thoroughly bad idea. The Minister will have seen—it has been published—the evidence taken on the matter by the Select Committee. The Major Contractors Group, the Business Services Association and the CBI all think that it is a bad idea, and even the Trades Union Congress was opposed to the Government taking an equity stake through Partnerships UK.
      The reason is simple. Even the TUC understands that once Partnerships UK can take an equity stake in some projects rather than in others, the projects that it chooses will be labelled and endorsed. There will be an A list and a B list. There is obviously the danger that Partnerships UK may cherry-pick the best projects. There is equally the danger that having invested political capital in particular projects, it will start interfering with the contract terms to make sure that it achieves the right outcome. The project must succeed if Partnerships UK has not only been working on it but invested in it.
      There is a huge danger that there will be two different types of project—those in which there is a significant equity stake, and all the others. There is nothing in new clause 7 to eliminate that danger or to clear up the confusion. I was pleased to hear my hon. Friend the Member for Arundel and South Downs (Mr. Flight) draw attention to the difficulties that Partnerships UK will have with other bodies, particularly with the Office of Government Commerce, which will try to police this aspect.
      I am not sure what powers of supervision the Office of Government Commerce will have over Partnerships UK. Perhaps my hon. Friend, who has been labouring on the Bill in Standing Committee, is a little clearer. I am not at all sure what will happen when Partnerships UK has taken an equity stake in a project with a high political profile and the project starts to go wrong. If PUK starts tweaking the original terms of the contract, will the Office of Government Commerce be able to come in at that stage in a supervisory role and prevent PUK from doing that? Can my hon. Friend enlighten me?
      Mr. Flight: I am as unclear as my hon. Friend, but there is a further matter on which he may wish to comment. How can Partnerships UK negotiate in the same way with the Treasury and Government Departments in circumstances in which it is an equity investor, and in circumstances in which it has no involvement at all? How can it continue the existing role of the Treasury taskforce if it is charged as an investor?
      Mr. Fallon: That is precisely the weakness of giving Partnerships UK a banking function. That is tantamount to asking PUK to construct within it a Chinese wall that cannot be constructed.
      Everyone will know which projects Partnerships UK will invest in or is considering investing in. If we are to go down that route, we will have to hear a great deal more about the Office of Government Commerce and give it more supervisory power, to make sure that PUK does not abuse its position, otherwise PUK will be able to muscle all over Whitehall and all over the contracts, putting others at significant risk.

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      In an earlier intervention—I apologise, Mr. Deputy Speaker, for having to slip out of the debate for another meeting—I referred to the weakness of subsection (3). What is the point of setting the limit at £400 million if the Government can increase it any time they want? I do not understand that.
      As I said earlier, every time a nationalised industry in the bad old days wanted to extend its borrowing limit, which happened often enough, with British Shipbuilders, British Coal and all the other endless drains on the taxpayer, at least it had to come back to the House. It was, perhaps, allowed to increase its borrowing limit once, by another £100 million or whatever, but thereafter, in each case it had to get permission from the House through primary legislation—through another borrowing powers Bill.
      6.15 pm
      Mr. Ruffley: Is my hon. Friend as troubled as I am about how the figure £400 million was arrived at? How were limits determined in the 1960s and 1970s for nationalised industries? What was the methodology?
      Mr. Fallon: I cannot assist my hon. Friend. I was not in government at the time. I do not know how that was done, but at least the nationalised industries recognised some restraint. They gave themselves power to borrow up to a particular sum, which could be increased once, by order, and that was it. They then had to come back, which they did, with fresh legislation—another British Shipbuilders borrowing limits increase Bill, for example.
      As the new clause is drafted, the Minister does not have to come back to the House, except through statutory instrument, and there is no limit to the number of statutory instruments that she can promote. She can come back and help herself to another £100 million, week in, week out. Indeed, she can double or treble the £400 million.
      That is a meaningless limit, because the new clause that introduces it gives the Minister the power to increase it, which she can do by statutory instrument. We all know the deficiencies of that procedure. I hope that when the Minister sums up, she will give us some reassurance that the £400 million limit is for the first five years or whatever, and that she has no immediate plans to come back when Partnerships UK takes a fancy to a particular investment proposal, or, as we get nearer to an election, is cajoled into investing in a project that has a high political profile but which the market otherwise would not touch.
      We are justified in asking the Minister to do that. The reason is simple. The £400 million is being provided, essentially, for Partnerships UK to invest in projects in which the market is not prepared to invest fully; otherwise it would not be necessary. The Minister should at least be able to clarify where the figure of £400 million came from, the time scale over which it will last—I assume that it is not an annual total—and the prospects of her coming back to extend it.
      Subsection (2)(d) of the new clause deals with the arrangements that the Treasury proposes to make for "evaluating outstanding expenditure". I have not seen that phrase before. Evaluating outstanding expenditure should be done by some body other than the Treasury. It is the Treasury's money, which it is giving to Partnerships UK, and we will want to judge not just the record of PUK in spending its way through the £400 million, but the
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      Treasury's wisdom in giving it the money in the first place. The Treasury should not be judge and jury, deciding how well the money was spent.
      I would support any of the independent arrangements proposed in other amendments. Indeed, I would have hoped that the evaluation could have been done independently, and that the Treasury would have seen no problem in inviting another body—the NAO or the CAG, for example—to make the evaluation.
      Amendment No. 14 is a helpful amendment. It distinguishes much more carefully between the upstream and the downstream activities. There was an exchange on that involving my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). When my hon. Friend ran through a little menu of upstream activities, he did not touch on the provision of interim finance. He described his approach as reasonable, but I wonder whether he and my hon. Friend the Member for Arundel and South Downs are not being a little too reasonable in the drafting of the amendment.
      I am not at all clear what "interim finance" for a feasibility study is. Either it is finance, or it is not. How can it be "interim"? Is it a loan? Is it a grant? If it is a loan or a grant, how can it be justified as an upstream activity? Perhaps my hon. Friend can help.
      Mr. Flight: The activity is upstream because it ceases when the PFI deal is signed. Finance is provided for feasibility studies of, for example, potential local government PH projects. As I said in my speech, when those projects are finally negotiated and put to bed, the money will be repaid from the total finance for the project. The Treasury could repay it. The inclusion of that in upstream activities is intended to support the objective for Partnerships UK—
      Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman cannot make a winding-up speech in an intervention.
      Mr. Fallon: I apologise, Mr. Deputy Speaker, if I tempted my hon. Friend too much. However, I want to press the point. What happens if the feasibility study recommends that the project should not go ahead? What will happen to the finance? Will it be repaid? If so, who will repay it? Does it constitute a grant that will simply be written off? I am unhappy about allowing Partnerships UK to go even further than the existing Treasury taskforce and start spraying public money around town halls on all sorts of feasibility studies for projects such as supertrams that will not be realised, and for which we will not get our money back. Perhaps my hon. Friend the Member for Bury St. Edmunds can assist?
      Mr. Ruffley: I seek not to assist my hon. Friend but to ask a question. If the Treasury taskforce were involved in upstream activity, who would bear the loss if a feasibility study was undertaken but the project did not go ahead?
      Mr. Fallon: The Treasury would bear the loss. I hesitate to criticise my hon. Friend because he is a distinguished lawyer, but perhaps the phrase "interim finance" needs more work. However, amendment No. 14 is helpful.

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      I hope that my hon. Friends on the Front Bench will be robust about new clause 7. I oppose it. My hon. Friends have already criticised it so strongly that I conclude that we should not accept it and I hope that, such is the power of their arguments, the Economic Secretary will reconsider it. At least she said that she was trying to allay some concerns and did the House and the Committee the courtesy of acknowledging that anxieties exist. They have been expressed to the Select Committee by all sorts of reputable bodies and by those who we want to be engaged in the specific work that we are considering.
      If the Economic Secretary acknowledges the problem, I hope she will also recognise the solution. We need much firmer controls on the expenditure that we are discussing, and they must be qualitative as well as quantitative. Simply sticking a figure into the Bill and claiming that, however messy matters become, at least the amounts will not exceed £400 million does not satisfy the genuine anxieties of Conservative Members and industry.
      Mr. Letwin: Before I begin, I shall reiterate the declaration of interest that I have made repeatedly on Second Reading and in Committee in relation to the Bill and the amendments: slightly ironically, when I have spoken, it has been against my interests.
      The most important feature of the debate on new clause 7 and the accompanying amendments has been that we have revealed a symptom of the problem with the Bill. Hon. Members have tackled the vexed question of the scope of the application of the £400 million limit for which new clause 7 provides. I do not generally prefer to spot a conspiracy when error will serve as an explanation. On the principle of Occam's razor, one should always choose the simpler explanation. It could be mere oversight, as the hon. Member for Kingston and Surbiton (Mr. Davey) suggested, that the £400 million limit does not cover clause 16(1)(a). However, if that is the case, I am surprised that the Economic Secretary has not brought it to our attention. I have two reasons for supposing that it is not the case.
      First, the articulation of new clause 7 and amendment No. 28, and the original distinctions in clause 16(1), lead one to conclude that there is meant to be a difference between incurring expenditure in the initial phase and thereafter. That suggests that the £400 million limit has been specifically targeted at expenditure after the initial phase, rather than through mischance. It is notable that new clause 7(1), to which amendment No. 28 refers, makes it clear that the original phrase in clause 16(1)(b)—"may provide financial assistance"—needs to be expanded. In amendment No. 28, proposed new paragraphs (b) and (c) of subsection (1) read:
      may incur expenditure for the purposes of investing in the body … and may provide loans and guarantees and make other kinds of financial provision.
      New clause 7 invites us to perceive a fundamental difference between clause 16(1)(a), which will not be capped by the £400 million limit, and provides that the Treasury,
      may incur expenditure in respect of the establishment of a body,
      and proposed new paragraphs (b) and (c) of subsection (1), which provide that the Treasury,
      may incur expenditure for the purposes of investing
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      in the body, or
      may provide loans and guarantees.
      There may be some deep inwardness that we laymen miss. However, if that is the case, I am again surprised that the Economic Secretary has not seen fit to intervene and correct us amateurs on the basis of advice from her gurus.
      On a layman's statutory construction, I incline to the view that the scope of clause 16(1)(a) is not only uncapped but unlimited. To take an absurd example, it could permit the expenditure of billions of pounds on
      the establishment of a body.
      I am sure that the Economic Secretary will tell us that it is not the intention of the prudent Chancellor of the Exchequer to permit billions of pounds of expenditure to be incurred. However, if I am right, and the scope of clause 16(1)(a) would allow for such investment, the massive concession that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) so painstakingly eked out of the Government—that new clause 7 should impose a limit of £400 million—is vapid, nugatory, empty and meaningless: the £400 million limit is no limit.
      I draw the House's attention to that not only because it is important—although several of my hon. Friends have proved its importance through eloquent speeches—but because it is symptomatic of a general problem, which is that matters are not as they appear. There appears to be a control, just as there seems to be proper accounting in other provisions, which we shall discuss later. We have a limit that is unlimited, a concession that is not a concession and a control that is uncontrolled.
      6.30 pm
      The problems with the £400 million limit, so called—the unlimited limit—do not end there. The situation gets considerably worse. Here, I am much indebted to prolonged discussion with my hon. Friends. The scope of the £400 million limit is constricted in another respect: it very specifically refers to the expenditure of moneys by the Treasury, not to the expenditure of moneys by the body itself—the body which my hon. Friend the Member for Arundel and South Downs referred to as a bank. My hon. Friend the Member for West Worcestershire (Sir M. Spicer) pointed out that the £400 million limit in no respect limited the totality of PFI expenditure. This we must agree, and knew.
      I am speaking not of that failure of control, which might be expected in such a new clause, but of the fact that there is no limit on the activity of the body which it was the purpose of my hon. Friend the Member for Arundel and South Downs to have limited: there is a limit only on the expenditure by the Treasury on that body. According to my reading of the new clause, the body itself is capable of piling up unlimited liabilities that are not capped by the £400 million limit: indeed, there is no articulation in the new clause that would allow such liabilities to be capped.
      After traversing some other ground, I shall come on to the question of the accounting of those liabilities, which is a vexed question indeed. Before we come to that, let us deal with the economics. I take it that it is part of the body's purpose that it should not be utterly controlled in its day-to-day operations by the Chancellor of the Exchequer, because were it to be so, as my hon. Friend has repeatedly pointed out, the purpose of transferring

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      from a Treasury taskforce to a separate body would be nil. PUK may well seek to build up large liabilities in carrying out its business, and if it does, the following economic question arises: is the full faith and credit of Her Majesty's Government behind this body in what may be sizeable guarantees?
      If those guarantees should, for example, grow to billions of pounds—or tens or hundreds of billions of pounds—over time, will Varley Marshall Assurance principles obtain? Will ECGD principles obtain? Which principles will obtain? Who can say how much Parliament will find Her Majesty's Government have turned out—on purpose or by error—behind liabilities that we thought, or might have thought, would be capped at £400 million but which in practice have not been capped at any amount, £400 million or otherwise?
      Mr. Edward Davey: Does the hon. Gentleman think that the solution is to introduce in another place a cap on the liabilities, or does he think that Partnerships UK should have in its constitution a no-bail-out clause? I was probing the Minister for her views on that. Does the hon. Gentleman think that it may be the way forward?
      Mr. Letwin: The hon. Gentleman and I are swapping inclinations. I was about to observe that I thought that his proposal of a no-bail-out clause to handle this potential problem was highly intelligent. I do not know, and I do not know whether the Government's lawyers in all their wisdom—and they have much—know, whether a no-bail-out clause would work. I do not know, because I do not think there has yet been a case that has been seen to work.
      We all recall the vexed situation when local councils got into considerable financial difficulties and lenders found to their surprise that there was no bail-out, without that having been stated. But there have also been cases—British Leyland and Varley Marshall Assurance, to which I alluded, are cases in point—in which it was at least believed that full faith and credit might operate, notwithstanding the fact that the original agreements had been so constructed as to avoid its operating. This is a vexed area of law, about which great experts may disagree. It may be that a robust no-bail-out element could have been inserted in the new clause; I do not know.
      What is clear is that either Ministers did not intend such a result, or that the draftsmen did not know how to achieve the desired result because it cannot effectively be achieved in law, or that Ministers did not consider the question. If Ministers did not consider it, of course the draftsmen would not have considered it. In fact, no one would have considered it. That, I suspect, is the empty box into which we are staring.
      I think that what happened is that the force of rhetoric of my hon. Friend the Member for Arundel and South Downs in Committee, and the force of logic behind his rhetoric, were such that Ministers said, "We are in a frightful fix. The PAC, the Liberal Democrats and the Conservatives—and, for all we know, many of our own Members—are worried that we are doing something that may not be quite kosher. Officials—go away and construct the best limits you can that will have the following characteristics: they will not limit anything or even seek to impose a limit that would actually limit anything because they will not to any degree control the activities of the body but will merely control the
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      Treasury. And just in case there is any kind of gap in the total discretion that we shall allow ourselves, just make sure as well that we can give PUK however many billions we want up front without any control whatever." If that is what happened, it is a symptom of an attitude to our proceedings in Committee and on Report that is very distressing.
      Another possible interpretation, I admit, is simply that there was undue haste. It is possible—it may even be plausible—that the problem with the new clause was brought about by undue haste. The whole of the Bill has been afflicted by the insertion of an extraneous foreign body. In the first place, there is no reason for clauses 16 and 17 being in the Bill; they belong in quite another Bill—a serious Bill dealing with the serious matters concerned—and got into this Bill, where they now sit, by the mysterious processes of Cabinet committees and the like. The Government have been in undue haste to get the whole of the rest of the Bill, which deserved prolonged consideration, through because they are so desperate to get clauses 16 and 17 through. That, at least, is what we have been told.
      If the result of that is that, through honest error, new clause 7 has been introduced in its present form—with a limit that is not a limit and does not address the problem—the situation is much less distressing. There is the possibility of the Government's bringing forward on slightly more mature reflection—for which I have no doubt their lordships will give them ample opportunity, because I hope that another place will reject the new clause as it stands—a proper new clause that provides the limit that we seek. Then we can ditch all the ghastly conspiracy theories and recognise that the problem was simply one of undue haste.
      Why this haste? I know that this is a matter of Government policy, but there are many Government policies. It does not seem to me to be a matter of life or death whether these provisions are passed tomorrow or the day after. I cannot see that there is such a rush. This is not controversial—so in principle it will not be got rid of by a future Government. We all accept in principle that the PFI is an excellent thing.
      In constructing the new clause, therefore, Ministers should have had in mind the necessity for something with consensus behind it—something that provided a robust solution in the long run for a policy that hon. Members on both sides of the House support. The new clause certainly does not do that in respect of control.
      Mr. Edward Davey: Has the hon. Gentleman considered two other possible reasons why the Government have not adopted the no-bail-out solution to their problems? One may be that they are concerned that it would set a precedent that could be applied to other public corporations or corporations in the public sector in which they have an interest. The other is that the Treasury is so used to exercising absolute power that it does not believe that, if a no-bail-out clause were written into the constitution of such a body, Parliament would not, because it is sovereign, simply override it.
      If the hon. Gentleman agrees with that second possible answer to the question of why the Treasury did not go down that route, does he not think that that demonstrates the dinosaur attitude in the Treasury?
      Mr. Letwin: I do not think that the first explanation can be right. If, in this instance, the Treasury were

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      concerned about the maintaining of control or power—as the hon. Gentleman knows, we will allege that later, but in respect of other matters—it would surely have introduced provision for a genuine control, phrased, perhaps, as "a limit on the total liabilities" that could be incurred by the body. The fact that it neither did that nor introduced a no-bail-out clause suggests that the Treasury was not in control mode on this occasion.
      The hon. Gentleman suggested a second possibility: that the Treasury, or the draftsmen—or, indeed, Ministers—did not wish to create a precedent. I am well aware that Whitehall is particularly keen not to create precedents. Government are not like other bodies; they are often afflicted by precedent, and often take steps that they do not consider right in particular cases because they are influenced by the argument that they have done the same in other cases. They may have acted without due heed.
      I accept that that is frequently a powerful argument, and it is possible that the desire not to create a precedent is one of the causes—or even the cause—of the opposition to a no-bail-out clause; but, if that were the explanation, it would be irrational. I see no reason for the Treasury to object to such a clause becoming a widespread precedent: it is the bail-out clauses that create the precedent to which, on a rational basis, the Treasury should object. The idea of a range of bodies that are somehow associated with the state, but against which no claim ought to be made entailing a claim on the state and in respect of which no faith and credit are given by the state, is surely attractive to the Treasury. It might not be attractive to a Department wanting to achieve a particular result in particular circumstances, but I should have thought that it would be highly attractive to the Treasury.
      I cannot think that that is the explanation; certainly, I hardly ever accuse Her Majesty's Treasury of being irrational. I think that the explanation is either undue haste, or a mild conspiracy. I hope that the Minister will tell us that it is a case of undue haste: that would give us an opportunity to reverse the position, and improve on new clause 7.
      My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) and other PAC members have tabled an amendment dealing with the important question of the scope of action of the Comptroller and Auditor General—a theme that we shall traverse in awesome detail when we discuss the general issue of the CAG's scope of action in regard to non-departmental public bodies, which we debated at length in Committee.
      The amendment presents us with an interesting example. My right hon. Friend rightly corrected me when I made the improper assertion that the Government did not want the PAC, the National Audit Office and the Comptroller and Auditor General to be involved. He corrected me because he had information that I should have possessed, but did not. It appears that after the Minister had said in Committee that she would not have the Comptroller and Auditor General anywhere near this stuff—I parody slightly—her esteemed colleague the Chief Secretary to the Treasury went to the PAC and said that, as a matter of fact, the Comptroller and Auditor General would not just be somewhere near but would be allowed to audit the body.
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      That proposition, which we welcome, led to this question: why is the PAC amendment—amendment No. 8, if I recall correctly—necessary?
      Mr. David Davis: I fear that, for the second time today, a slight misapprehension has arisen. The amendment requires access, not audit rights: that is a milder requirement. Audit rights would not be possible, because the organisation would be constituted as a company, and it is not currently possible for the Comptroller and Auditor General to audit companies. The amendment asks for access, so that Parliament can know that its money has been spent properly.
      6.45 pm
      Mr. Letwin: My right hon. Friend is right to correct me. I slipped into talking of audit when I should have talked of access, which is one of the two limbs of what the PAC seeks to impose on a wider scale. That is all that is sought in this instance—but this question remains: why is it necessary to table an amendment to put in statute what we now discover that the Chief Secretary wants to do in any event? I invited both my right hon. Friend and the hon. Member for Kingston and Surbiton to speculate about that, but I am not yet satisfied that we have got to the bottom of the matter.
      The Economic Secretary had ample opportunity to intervene during that discussion, and, if she catches your eye, Mr. Deputy Speaker, she will have another opportunity to explain. I am, of course, prepared to be corrected if my speculations prove to be wrong; but I am bound to say that it is a rum situation when a Government have an avowed intent to do something that they have an open statutory opportunity to do without any delay or difficulty, and do not do it.
      Normally, when Ministers do not want to enact proposals, they say that they have no time in which to legislate, but if the Economic Secretary said that this evening, it would be a slightly weak excuse, because here we are, legislating. There cannot be a drafting difficulty, as my right hon. Friend the Member for Haltemprice and Howden has behind him just about the largest group of drafting assistants available to any living human being, in the shape of the National Audit Office. In any case, the draft is blissfully pellucid.
      The hon. Member for Kingston and Surbiton speculated that it might again be a matter of precedent—that the Treasury wanted to avoid setting a precedent by giving the PAC access to a body such as this. But why should it want to avoid setting such a precedent? If the Chief Secretary has decided that the Comptroller and Auditor General should have access to one body, it presumably follows that the same should apply to other such bodies. I see no logic that should lead to one conclusion without leading to the other.
      Mr. Edward Davey: I tend to agree that the logic suggests that it should be possible for all such bodies to be scrutinised by the NAO. However, the Secretary of State for Culture, Media and Sport recently made it clear that the Government were not willing to allow the NAO properly to scrutinise the BBC, which is a not dissimilar body. Surely the Government are not following the logic of the Chief Secretary in any respect in regard to corporations such as this.
      Mr. Letwin: The hon. Gentleman tempts me to agree with him—and, indeed, I do, in the case of the BBC.

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      I wish that we could debate that subject, but you, Mr. Deputy Speaker, ruled that the amendment concerned should not be selected.
      There may be deep concern about the possibility of extension to bodies such as the BBC. The fact is, however, that if the Chief Secretary thinks that he can avoid having that precedent argued against him when he has conceded the precedent in this instance, he is much mistaken. I have no doubt that my right hon. Friend the Member for Haltemprice and Howden and his pack of hounds from both sides of the House in the PAC will assail the Chief Secretary daily with points about the precedent that he has set, and rightly too.
      The Chief Secretary has set the precedent anyway, and I cannot for the life of me see why he should make it worse for his own cause—his own bad cause, in this instance—by incorporating in legislation a provision that will have the effect that he says he wants in any event. The only people he could possibly limit are a future Government, and that will not involve him. He cannot feel that, having said something to the PAC—that awesome and solemn body—he can go back on it. Putting the provision in statute would involve no loss to him.
      I apologise for coming up repeatedly with the same febrile explanations, but I am bound to say yet again that I consider this to be a case of undue haste. I think that the Government feel that the PAC is being a frightful nuisance. They are willing to tell the PAC that they are going to do things and then, no doubt, to do them. When the Chief Secretary—a thoroughly reasonable man—is in front of the PAC, he finds himself compelled to make thoroughly reasonable utterances. When the Government talk to the draftsmen, however, their basic instruction is "Press ahead. Delay not. Do not tarry. Do not instil in the Bill anything that could lead to further doubt or hesitation. We want the thing out quickly. If the PAC presents an amendment that is not drafted quite correctly we might find that it would have to be revised later. There might have to be Government amendments; the Lords might be given more of an opportunity to delay. No, keep it out: we will give the assurance, and the PAC will go home to bed."
      The presence of my right hon. Friend the Member for Haltemprice and Howden proves that the PAC has not gone to bed, and is not going to. If this is a matter of undue haste, it is also a matter of hastening slowly. The Economic Secretary to the Treasury would do better to slow down, to incorporate my right hon. Friend's amendment and to proceed deliberately to consider applying the access rights to a wider range of non-departmental public bodies, as should, indeed, happen.
      I turn to the next element of the debate on this important Bill. I admit that it is an odd topic in the context of the Bill. It is the broad range of questions about the forethought—or rather, I regret to say, the lack of forethought—that the Government have displayed on the purpose of the entity or, to use the phrase that my hon. Friend the Member for Sevenoaks (Mr. Fallon) used, the bank. May I say in passing that I genuinely do not know whether it is a bank. As there is no reference to the Securities and Futures Authority, I take it that it is not a bank. If it is not, what it is I do not know. I suspect that
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      my hon. Friend was trying to say that none of us has the foggiest clue exactly what the item is. It would be helpful if someone told us.
      Mr. Fallon: I hope that my hon. Friend is not suggesting that he does not know what this body is. He is supposed to know what it is. Does he agree that, if it has a lending and an investment function, it will be a bank?
      Mr. Letwin: My hon. Friend raises an interesting question—the sort of question that is much debated in the City, when it has time to debate things, which is not often: whether an investment bank is a bank, particularly when it is not a licensed deposit taker. The body is not a licensed deposit taker, and it may or may not be an investment bank. I am not clear whether it has the capacity even to be funded as an investment bank is funded, or to gear itself up as an investment bank does. The honest truth is that no one the length and breadth of Whitehall has the foggiest clue what the answers to those questions are.
      My hon. Friend is slightly unfair in saying that I should know. It is not possible to know the nature of something that has been created by people who do not know what it is.
      Mr. Fallon: May I clarify? I was not implying that my hon. Friend should know something because he should know it. I was implying that, because of his background and great expertise, if anyone in the House could judge what it is, it would surely be him. That is why we look forward to him throwing further light on that particular vehicle.
      Mr. Letwin: I am charmed and delighted that my hon. Friend, who is a much greater expert in these matters than I am, thinks that I have some expertise on what is a bank and what is not, but my problem is that I do not even know what this body does in the first place. Even if I knew that it was to be a bank, as my hon. Friend the Member for Arundel and South Downs has abundantly and eloquently pointed out, we do not know whether it will engage in investments. We do not know at which stage in the process it will intervene, or is meant to intervene.
      There is a possible explanation, which is roughly the one that Ministers, in certain moods, have given of the entity: it is a sort of consultancy or facilitator. Another possible explanation arises from reading the Bill, which my hon. Friend the Member for Sevenoaks has done, with all his customary acuity: it looks very much like a bank. If something is made to look in statute very much like a bank and, in descriptions of it by those who founded it, very much like a consultancy, we are left with the question: what is it? Does anyone know what it is? My answer to those questions is that I do not know and no one else knows.
      Mr. Fallon: Does my hon. Friend at least accept that, if the body—let us call it a body—takes an investment under subsection (4)(c), it will not be a consultancy?
      Mr. Letwin: I feel that we are going to intrude on your good will in a moment, Mr. Deputy Speaker, but there are consultancies that take investments. Every time a consultancy takes a success fee, it takes a kind of

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      investment. I suppose that the bank or consultancy—whichever it may be—might take success fees, call them investments and thereby satisfy the terms of the Bill, yet might be in no sense a bank.
      If the body is designed to deal with what, in the hideous jargon, is called the "upstream" bit of the activity—which means consultancy, helping a project off the ground—it could agree, for example, to offer its services for equity, which is a sort of success fee and investment but not a banking activity. However, if it is intended, as my hon. Friend the Member for Arundel and South Downs suspects, to use the clause 16(1)(a) loophole to spend a large sum of money from the Government and, no doubt, from the private sector to finance projects in which, in a conflict of interest, the body has previously engaged as an adviser, it verily is a bank making proper investments, but is not the item that Ministers have described in their various statements. I repeat: I genuinely do not believe that we have the slightest idea what the body is. What is much more worrying is that I do not believe that Ministers have the slightest idea what it is.
      I suspect that the account that Ministers would give, if they were being honest and at the same time as transparent as possible, is that it is an advantage not quite to have decided what the body is because they want to leave a little flexibility—they do not quite know how it will operate and there is an experiment going on. We could have some sympathy with that proposition, except that statutes are not the places in which to base experiments. Experiments are much better done on an administrative basis, under all the control that that allows. Statutes are much more applicable to things about which one has a pretty clear idea, so that the statute clearly describes the controls and the nature of that which it sets up.
      I would have thought that that was a reasonable principle of legislation. I do not think that Ministers have followed it. I assume that they are being straightforward; I do not think that they are trying to pull a fast one on us. If they are being straightforward, they are setting up the basis for a widespread, over-hasty experiment without a clear idea of where they are going.
      It is not really on those matters that I wanted to concentrate in relation to new clause 7. Above all, I wanted to draw out the impact of the new clause and of how it relates to clause 16 on our understanding of matters that are to come before us later. I think that the impact is profound and that I have at last understood how deep the problem with clauses 16 and 17 is in the context of the rest of the Bill—and hence how deep the problem with new clause 7 is.
      It is not just that we do not know what the body is, which might be regarded as an ontological problem that Parliament does not need to concern itself with. There is a much more practical problem: we have not the foggiest clue how it will be accounted for.
      I admit to being a simple man when it comes to such matters, but the Bill is entitled Government Resources and Accounts Bill. It is meant to be the Bill in which the Government set up a system of accounts in which things will be accounted for—
      Mr. Flight: Properly.
      Mr. Letwin: Properly, as my hon. Friend helpfully says from a sedentary position. That is the whole purpose of
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      the rest of the Bill. Clauses 16 and 17 are in the Bill, I admit, by sleight of hand, but they are there. They should display, if any provision should, the principles of proper accounting that are meant to be enunciated in the rest of the Bill. It will be a sad day for accounting if this is meant to be a sparkling example of clarity about how something should be accounted for.
      Despite repeated entreaties about these matters in Committee, as far as I can see, new clause 7 contains not a single mention of the accounting treatment of that mysterious body, whose nature we have already owned we cannot discern. As my hon. Friend the Member for Sevenoaks has pointed out repeatedly, if we look at new clause 7 and clause 16, to which it refers, it may be that the body will incur considerable liabilities in respect of guarantees, loans and non-equity investments. How will those be accounted for?
      The body may have investment assets. We may be told by Ministers that that is not the intention, but I repeat: that is what is provided for in the Bill and, by implication, in new clause 7. The very first paragraph of the register of assets, which underlies the whole of the Bill, states:
      The National Asset Register covers all central Government departments together with their executive agencies (including trading funds).
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      Is Partnerships UK a trading fund? We are back to the ontological question. I do not know whether it is a trading fund, but I suspect that it is not. I may be wrong about that, and am open to correction. Is it an Executive agency? I do not think that it is. I may be wrong, and am more than happy to be corrected on that point, too. However, I am convinced that it is not a central Government Department, so its assets will not be in the National Asset Register.
      Therefore, the first point about the body's accounting is that the asset side of its balance sheet will not be there—it is Macavity; it is gone; it has disappeared. It has, in fact, not even appeared. It is pretty bad news, is it not, to discover not only that a body being established by the Government Resources and Accounts Bill will be exempt from the access of the Comptroller and Auditor General, but that the body's whole purpose will be entirely mysterious and its assets will not be accounted for? That is genuinely self-parodic.
      The situation is much worse on the liabilities side. In what, I have to admit, is one of the most remarkable and brilliant pieces of apparent clarification ever offered by a Minister to a Standing Committee member, the Economic Secretary has cast a profound veil of obscurity over the issue of liabilities. In Committee, my hon. Friend the Member for Arundel and South Downs raised the pertinent issue that I am raising now in relation to new clause 27. He asked how the liabilities, and particularly the guarantees, that the body might give, and that might be given to the body by the Government, would be accounted for.
      On 10 February, the Economic Secretary replied at some length to my hon. Friend in a letter. Although I would be surprised if it were the intention that anyone

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      should be able to understand what she said to him in that letter, I am certainly assured that no Opposition Member in the Chamber has the slightest understanding of it. She said:
      Firstly, you asked about the procedure for reporting guarantees and whether any guarantees given to PUK will appear in Government accounts or in a note to them. I can assure you that Parliamentary reporting arrangements in respect of contingent liabilities—which includes those arising from guarantees—will not change under the GRA Bill.
      Therefore, the first thing that we are told is not the answer, but that nothing will change. As we did not know what the situation was in the first place, that is not helpful. Nevertheless, the Economic Secretary went on to say:
      As I said in Committee, there is no intention to hide guarantees. The arrangements for reporting guarantees are set out in section 26.3.13 of—
      at this moment in reading the letter, one hopes to hear the "Resource Accounting Manual", which is the document that has been produced in line with the Bill, but no. The letter says that the arrangements
      are set out in section 26.3.13 of Government Accounting,
      which I take it is to be superseded, or at least outdated, by the very item that underlies the Bill that we are discussing.
      The letter continues:
      "In respect of PUK this would mean—
      or that item that was no longer relevant would mean—
      that a statement would be laid before both Houses of Parliament in the event that a guarantee were given. Such a statement would indicate that the liability would be charged to the Consolidated Fund. Any guarantee provided would appear, like other contingent liabilities, in the Supplementary Statements to the Consolidated Fund and National Loans Fund Accounts.
      We have before us two of the most distinguished members of the Government, but I venture to prophesy that they have never seen, let alone read or studied, the supplementary statements to the consolidated fund and national loans fund accounts. I suspect that there is not an hon. Member who has the slightest idea which guarantees are or are not contingent liabilities recorded in those supplementary statements.
      I may be wrong about that. Perhaps, all of a sudden, the Financial Secretary and the Economic Secretary will leap up and tell me the exact figure for the contingent liabilities recorded in the supplementary statements to the consolidated fund and national loans fund accounts. I doubt it, however, not only because those are among the most profoundly mysterious documents that have ever been produced by Whitehall, but because they are intended to be so.
      Mr. Edward Davey: Is not the hon. Gentleman simply criticising the whole Supply procedure? Such documents exist, and they are very important documents that Ministers and the House should examine. The fact that the House does not properly examine the Government's estimates is the real reason why those documents do not receive the attention that they should receive.
      Mr. Letwin: The hon. Gentleman is right. At a more serious level, I am saying the same. He says the same in other amendments that we shall discuss later, and with which we profoundly agree. There is a massive issue here that goes way beyond the scope of new clause 7, and we shall discuss it later in our proceedings. Perhaps the most
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      interesting development in Committee was that we touched on the issue, when some of us began to understand the profound lack of parliamentary scrutiny that occurs because of the intense opacity of the arrangements that have been constructed for the control of genuine public liabilities.
      I am making the much narrower point that the Economic Secretary's letter was a masterpiece of opacity, the purpose of which was to tell us about an outdated system, which itself was obscure, for making a contingent liability disappear. The letter said nothing about how contingent liabilities will be accounted for in the system that the Bill—this is the supreme irony—establishes. One might have thought that that would be relevant to the question of how far, in the Bill, the liabilities from the new body to the Government and from other entities to the new body will be accounted for. That, of course, takes us straight to the "Resource Accounting Manual".
      The extraordinary thing is that when we go to the manual, we discover nothing more, or at any rate nothing more that is in any way clear. The point is very pertinent to the concerns that my hon. Friend the Member for Sevenoaks expressed about the nature of the beast.
      In paragraph 4.7.6 of the "Resource Accounting Manual", we are told:
      separate disclosure of information about a particular contingency need not be made if that information has a protective marking.
      There are, therefore, certain types of information that have a "protective marking", about which not even a statement on contingent liability needs to be made. As I cannot understand paragraph 12.1.23, I do not know what it is to have had a protective marking or what qualifies as having a protective marking. I understand from paragraph 12.1.23 that the description of protective markings is given in the "Manual of Protective Security: Framework and Guide", issued by the Cabinet Office. I spent a while with that document, which, for all I know, my right hon. Friend the Member for Haltemprice and Howden is the author of or a guru on. However. I have to admit that my paltry intellect was quite incapable of deciphering the rules for protective marking.
      Mr. Davey: In Committee, did not the right hon. Member for Haltemprice and Howden describe protective markings as sophisticated and not for National Audit Office eyes?
      Mr. Letwin: The hon. Gentleman may have a valid point. However, let me pass on from all of that.
      Let us assume for a moment that the protective marking is not an issue, and simply ask ourselves whether the contingent liabilities that we are discussing will have to be disclosed. The answer is that we do not know, because we do not know whether my hon. Friend the Member for Sevenoaks was right about the nature of the beast.
      If, broadly, Partnerships UK will give financial guarantees—which are almost certain to be called if the risks that they are covering materialise—and if the chances of those risks materialising are high, according to the "Resource Accounting Manual", it will be necessary to disclose those contingent liabilities, although they will remain simply a disclosed item and not on the Government's balance sheet. Conversely, if the body will not give those types of guarantees, but something quite different, it is unclear whether those will have to be listed as contingent liabilities.

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      The long and the short of it is that on neither the asset side nor the liability side of the balance sheet do we have the slightest idea—nor, if we are to judge by what Ministers have said in new clause 7 and in the Bill, do Ministers have the slightest idea—how the body that Ministers are creating will be accounted for. That is in the realms of self-parody.
      Miss Melanie Johnson: It is important to say first that Partnerships UK will fill a unique role. The Government make no apologies for that. There will be nothing to equal it in the private sector to address the weaknesses in the public sector, particularly in skills and commercial experience. I take nothing away from the good quality of management that we have in various areas of the public sector, which the hon. Member for Kingston and Surbiton (Mr. Davey) celebrated. PUK's role will be that of co-venturer, strengthening the public sector client in private finance initiative and public-private partnership transactions. PUK will help the public sector to raise its game, as the Treasury taskforce has done to date. It will enable the public sector to become a more effective client. That should mean more opportunities for everyone, more deals, lower costs and greater clarity and speed in PFI and other PPP deals. PUK will not only improve the deal flow in existing PFI sectors, but open up new sectors and develop new models of public-private co-operation.
      The Opposition amendments would do nothing to further those aims. There could be a reason for that. They may not be intended to help us to pursue those aims, but perhaps that is uncharitable. I am a little confused by the debate, because some hon. Members seem to be experiencing extremely bizarre problems. The hon. Member for Arundel and South Downs (Mr. Flight) believes that the relevant clauses are tucked away. I am not sure how a clause can be tucked away in a Bill. I await elucidation.
      If we accepted the amendments, PUK would be unnecessarily restricted. Its role should be to adapt to fit the needs of particular public sector bodies and projects. Under the amendments, PUK could help to negotiate arrangements for a PPP project with Whitehall Departments, but not, for example, with NHS trusts or non-departmental public bodies. I am not sure why Opposition Members have made that distinction and why they appear to want to leave out NHS trusts and some NDPBs. In addition, PUK would not be able to participate in PPP deals as a co-developer with public bodies, as we envisage that it should. It must have the freedom to develop in a changing PPP market if it is to build on our reforms to the PFI process and the current success of the taskforce.
      Opposition Members have expressed concerns that the body will have an unfair advantage because of limitless funding from the Government purse. That is not the case. I shall deal with some of the specific points that have been raised. The hon. Member for Arundel and South Downs raised what he saw as a conflict between making money and helping the public sector. PUK will act as a co-venturer and co-developer of projects. Its role will be structured to maximise the overlap of interests with the public sector. There will also be appropriate checks and balances in the corresponding structure to ensure that PUK works in the public interest.
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      There is no question of PUK competing unfairly. It is not a bank or a general adviser. Opposition Members spent a long time speculating on whether it was a bank and entertained themselves greatly on the subject. That entertainment was not universally experienced. Apparently, they had not listened to a word that was said in Standing Committee. In a brief contribution on 20 January, I said:
      Partnerships UK will not operate as a bank. It must retain the flexibility to generate new business.—[Official Report, Standing Committee A, 20 January 2000: c. 266.]
      I could not have given a clearer statement of the fact that we do not view it as a bank. It will not invest or pick winners or losers. Its core business will be to make the public sector a better procurer and to make the PH work better.
      7.15 pm
      Mr. Letwin: I entirely accept that the hon. Lady said the words that she has quoted from column 266, which I have before me. I mentioned that she had said that. Does she accept that new clause 7 wholly fails to put those principles into the Bill?
      Miss Johnson: No, I do not accept that. PUK has a distinct role that will address the skill deficit in the public sector. I thought that Conservative Members appreciated the work of the Treasury taskforce and recognised that someone needed to fulfil that role. The hon. Member for Arundel and South Downs asked why we did not continue with the Treasury taskforce. Private finance needs private sector skills. Private sector people cannot be kept in the public sector for ever. It is likely that in the longer term they would go native or leave. The only way to sustain private sector deal-doing expertise over the longer term for the benefit of the public sector is in a PPP classified to the private sector, which can offer appropriate rewards and disciplines. If we were to carry on with the Treasury taskforce, we would need to expand it. That is another point that Opposition Members have not considered.
      Departments will choose whether to use PUK. We are consulting public bodies during the business planning on PUK. Reaction from them and from the City has been favourable. A question was raised about the role of the Office of Government Commerce. The OGC, PUK and the Treasury will work together. We made that clear when we published the Gershon and Bates reviews.
      PUK will not be out cherry-picking. Because it is a private sector organisation with a clear public sector mission, its focus will be on those parts of the public sector that currently find it hard to engage in PFI projects. It should result in additional business. Like its predecessor, the taskforce, PUK will have selection criteria for the deals that it chooses and will concentrate on difficult, complex and awkward projects where it can add most value. The public sector will use PUK on a voluntary basis when it believes that it can add most value.
      The hon. Member for Sevenoaks (Mr. Fallon) asked whether PUK was a state investment bank. As I have said, it will not operate as a bank and it will not be state-owned. Its core business will be to make the public sector a better purchaser. It will be a private sector body and will not invest on behalf of the Government.
      There has been considerable discussion about expenditure under clause 16(1)(a). That issue was initially raised by the right hon. Member for Haltemprice and

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      Howden (Mr. Davis). That paragraph relates to the establishment of Partnerships UK. Opposition Members have suggested that large sums—I believe that there was a mention of dowries—could be provided to PUK. I assure hon. Members that that is certainly not the case. Such sums would relate to on-going activities and would be covered by clause 16(1)(b) and subject to the limit. That is a good reason for introducing a specific limit, which Opposition Members have accepted in principle.
      Mr. Flight: I specifically asked what the intended establishment costs were.
      Miss Johnson: I hesitate to put a figure on that, but we are talking about less than £10 million. I think that we will probably come in under that maximum, but I hesitate to specify a figure, because only when the body is established can we be clear about the cost. We are certainly not talking about sums anything like the overall figure of £400 million or to any figures that might be mentioned in relation to dowries.
      Mr. Letwin: I am grateful to the hon. Lady who has been very good about giving way. Would she consider the possibility of including those costs within the £400 million so that the whole issue can be laid to rest?
      Miss Johnson: I am happy to take that idea away and think about it, but I can give the hon. Gentleman no specific assurances.
      Mr. David Davis: I support my hon. Friend's suggestion. I raised the matter in the first instance because the phrasing of the Bill is not very clear. I did not believe that the Government had another agenda; it seemed to me that the phrasing in the Bill ought to be clear. I would not object if those costs were included within the limit and the limit was increased by £50 million, or whatever figure was appropriate. That would be a sensible move.
      Miss Johnson: I am grateful to the hon. Member for West Dorset (Mr. Letwin) and the right hon. Member for Haltemprice and Howden for those suggestions. I am particularly grateful to the right hon. Gentleman for clarifying his response. I shall give the matter further consideration, but I can give no specific assurances. It is important to emphasise, however, that our intention is no different from what the right hon. Gentleman is saying. He is concerned that the provision is not sufficiently clear. Parliamentary draftsmen and my advisers clearly believe that it is, but the point has been debated this evening.
      In regard to the £400 million, I feel that I should not have listened to the hon. Member for Arundel and South Downs. Having virtually taken up the suggestion that he made in Standing Committee, I sat here this evening and listened to complaints from some Conservative Members—not the hon. Gentleman—that any figure had been included in the provision. Others complained that the figure had been set at £400 million. However, the hon. Member for Arundel and South Downs said in Committee that at one stage the Government
      said that the figure should be taken seriously. A maximum of £500 million should be more than sufficient to finance whatever substantial portfolio of start-up feasibility studies may be necessary in the public and local authority sectors.
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      We agreed with him, but we thought that £500 million was a little too much and that we should look at a lower figure. We have come up with £400 million, which I believe is the right ballpark figure because it provides maximum benefit at minimum cost. It will still allow the new company some flexibility.
      Mr. Letwin: I am grateful to the hon. Lady, but perhaps she should take another look at column 256. My hon. Friend the Member for Arundel and South Downs said:
      £500 million should be more than sufficient to finance whatever substantial portfolio of start-up feasibility studies may be necessary…
      My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) then said:
      It will be useful to draw attention to the potentially unlimited expenditure in which the new body could engage.—[Official Report, Standing Committee A, 20 January 2000; c. 256.]
      There were serious signals to the Minister that we needed an overall limit on the financing of the body and its expenditure.
      Miss Johnson: I accept the hon. Gentleman's point, however there has been a certain lack of charitableness in the Opposition's response to our picking up the exact drift of the intentions of the hon. Member for Arundel and South Downs and his hon. Friends in Conunittee.
      As I have said, we have no objections in principle to imposing that limit, and within the limit we shall ensure that our commitments are the minimum necessary to enable the successful launch and development of PUK. At the same time we shall make sure that they are on terms that represent a sensible investment for the public sector.
      Mr. Fallon: I am grateful to the Minister who is being extremely kind in giving way. I know that she is trying to answer a number of points, but if she is leaving the £400 million limit, will she say for how long it is likely to apply? Will it be one year or five years? Will she explain why it is extendable only by order?
      Miss Johnson: I shall come to that in just a moment. First, let me turn to Opposition amendment No. 16.
      Mr. David Davis: I could have raised this matter on a point of order. The Minister describes amendment No. 16 as an Opposition amendment, but the amendment is in my name, that of the right hon. Member for Swansea, West (Mr. Williams) and that of the hon. Member for Newbury (Mr. Rendel). It reflects the Public Accounts Committee report on the matter.
      Miss Johnson: I am grateful to the right hon. Gentleman for that clarification. Of course I am aware of which right hon. and hon. Gentlemen have put their names to the amendment. However, it is not a Government amendment. Perhaps I should refer to it as the Public Accounts Committee amendment. It seeks to open PUK's accounts to scrutiny by the Comptroller and Auditor General. As I said in Committee, PUK will be a risk-taking private sector body. It will have a majority of private sector investors who will expect a return on their investment. PUK will, of necessity, need to act commercially to raise finance and make a success of its business. That is a job for a Companies Act auditor appointed in the normal way for private companies.

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      There has been some question as to the accountability for PH and PPP projects which will, as now, remain with Whitehall Departments and other public sector bodies that commission them. The National Audit Office has already reported on a considerable number of private finance schemes. In addition, last July the Treasury issued guidance on the standardisation of private finance contracts which make it clear that PH contracts should include an appropriate clause which will ensure appropriate NAO access. So I do not believe that there should be a problem with the NAO securing the access that it needs to PFI projects, although the matter has been raised several times during the debate.
      Any Government investment in Partnerships UK under the provisions of the Bill will come out of voted money, and so will be covered by appropriation, or soon by the resource accounts, which are also audited by the NAO. It is no different from other payments to the private sector by various Government Departments, so I do not believe that the Comptroller and Auditor General does not have the access that he requires to do his job effectively.
      I now turn to some other points that were made in the debate. I start with some more specific comments on the interest of the taxpayer in relation to the accounting in whole of Government accounts to which the right hon. Member for Haltemprice and Howden referred in his opening remarks.
      PUK will be accounted for in accordance with the guidance on the PFI schemes which has been reviewed by both the Accounting Standards Board and the Financial Reporting Advisory Board and has been incorporated in the "Resource Accounting Manual". In terms of accounting mechanisms it is fully covered and we have set out very clearly the way in which we intend it to be treated. It is difficult to believe that there should be any problem with that.
      Mr. Letwin: Will the Minister give way?
      Miss Johnson: I should make some progress as we have spent a considerable time on this motion.
      Any financial provision to PUK will be out of voted money. As I said, the NAO can audit those sums. As my right hon. Friend the Chief Secretary has made clear, as a private company in a commercial environment, it would be entirely appropriate for PUK to have commercial audit arrangements. That means that the NAO should not have unfettered access to PUK's accounts. I hope that the right hon. Gentleman accepts that.
      Mr. David Davis: Although I do not expect a response from the Minister, I want to put on record that her judgment of what is the appropriate access for the National Audit Office is clearly different from that of the Comptroller and Auditor General. Amendment No. 16 was drafted by the National Audit Office on the basis of the Comptroller and Auditor General's judgment of what he needs. His judgment is obviously different from that of the Government.
      7.30 pm
      Miss Johnson: The right hon. Gentleman said that he did not expect a response, so I shall take up that generous offer and not give one.
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      The hon. Member for Kingston and Surbiton commented on the objectives for managers and the objective of making the public sector more efficient. He should remember that the Office of Government Commerce is being set up to find £1 billion in savings through better procurement.
      The hon. Member for West Worcestershire (Sir M. Spicer) is not in the Chamber, but he asked about the limit of expenditure. I believe that I have answered that point. That limit was never the purpose of new clause 7, so he must have been confused when he asked his question.
      The hon. Member for Bury St. Edmunds (Mr. Ruffley) spoke about EU public procurement rules. Policy advice to Ministers is confidential, as the hon. Gentleman—who is a former special adviser to the Treasury—should know, but the Government, of course, will adhere to those rules.
      The hon. Member for Arundel and South Downs asked about the affirmative resolution procedure in the House. I explained that any changes to the limit would be subject to that procedure. I do not understand what the problem is with that. If the Government were to consider any changes to the limits, there would have to be a debate in the House. At present, the limits are set at specific sums, rather than being inflation-proofed. I think that that also covers the point raised by the hon. Member for Buckingham (Mr. Bercow), who is also absent from the Chamber.
      In conclusion, the process of procuring a PFI project under the European procurement arrangements will be just as it is now, but more tightly managed. There is no question that PUK's return, whether as a royalty or an equity, will affect the selection of the preferred bidder. Arrangements will be put in place so that that will be impossible. All bidders will make bids on the basis of the same information.
      As to where the guarantees appear in the accounting, I can tell the House that Government accounting rules apply to the guarantees for PUK in exactly the same way as they do for any other body. As I said in my letter—which I am delighted has been much pored over—all the relevant detail will appear in supplementary statements. Nothing will be hidden—a possibility that has exercised Opposition Members.
      I commend new clause 7, and the associated Government amendments, to the House.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 1

      INDEPENDENT BODY
      ".—(1) The Treasury shall by order designate an Independent Body, which shall have the functions assigned to it in this Act.
      (2) The Independent Body shall be either—

      (a) an existing body serving the accounting profession in the UK; or

      (b) an existing international body serving the accountancy profession; or

      (c) a new body, established for the purpose, whose members are appointed solely upon the basis of their expertise in

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      accounting practices and who are not subject to dismissal by the Treasury or by any Minister.'.—[Mr. Letwin.]

      Brought up, and read the First time.
      Mr. Letwin: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this, it will be convenient to discuss the following amendments: No. 1, in clause 5, page 2, line 41, leave out "the Treasury" and insert "the Independent Body".
      No. 2, in page 3, line 1, leave out "the Treasury" and insert "the Independent Body".
      No. 3, in clause 9, page 5, line 7, leave out "the Treasury" and insert "the Independent Body".
      No. 4, in clause 10, page 5, line 15, leave out "the Treasury" and insert "the Independent Body".
      No. 5, in page 5, line 17, leave out "the Treasury" and insert "the Independent Body".
      Mr. Letwin: After the hors d'oeuvre of the previous debate, we now come to the main meal, the central feature of all our arguments over the Bill so far. New clause 1 has been moved, in the irenic spirit of compromise, to make the Government change their mind. We have been joined in that endeavour by Liberal Democrat Members. I hope that we shall garner support also from those members of the Public Accounts Committee who are present. If the Government do not accept the new clause, I am confident that, in due course, we shall garner support from many in another place, from all parties.
      When the Economic Secretary studies new clause 1, she will see that it has gone a long way to accommodate the valid points that she made in Committee. I hope that she will accept it. If she does not, I fear that the Government will be in the bizarre position of having to employ the Parliament Acts to force through a measure to achieve stable and transparent Government accounting that should be based on consensus.
      The new clause has attracted cross-party support in both Houses of Parliament. All hon. Members, of all parties, agree that transparent resource accounting should be implemented as quickly as possible, so it would be extraordinary if the Government had to railroad through the Bill as drafted because they were unwilling to accept an amendment that has commanded such cross-party support.
      Conservative Members, in conjunction with Liberal Democrat Members and members of the Public Accounts Committee, first signalled our concern about the matter addressed by new clause 1 on Second Reading. The Economic Secretary will know that we made very clear our unease that the Bill provides that the Treasury, rather than some independent body, should determine the definitions governing all the accounts set up by the Bill.
      Our attempt to draw attention to that matter on Second Reading can be found at column 581 of Hansard of 6 December. In repeated debates, we tried to draw the attention of the Standing Committee to the need for an independent body. At that time, we suggested a particular form for that body, to which we remain marginally attached. It is the form of independent body specified in new clause 1(2)(c), to which I shall turn in a moment.
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      However, our main purpose in all the debates on this matter, on Second Reading and in Committee, was not to establish some deep-seated preference for the form of independent body that we were recommending—an independently formed national accounts commission. Our purpose, rather, was to bring to Ministers' attention the inherent conflict of interest in the public policy sense between a Government who are seeking, inevitably, to satisfy an electorate and are bound to present themselves, quite legitimately, in the best light possible, and their need under the Bill as drafted—without new clause 1—to be the monitor of the accounting standards against which their performance as a Government will, in part, be judged. We argued with irrefutable logic that there was a public policy conflict of interest for the Government to set the standards, accounting for themselves, according to their own standards, when they had the proper, democratic incentive to present themselves in the most favourable light.
      I say that our logic was irrefutable because I had the opportunity, in preparation for this stage of our debate, to read the Committee proceedings in which that point came up day after day. I do not think that the Economic Secretary can deny that there was an occasion on which she even took that argument head on. She said many things; she said some true things. Yet she never said anything that suggested that she had an argument against the fundamental proposition—shared, as I repeat, between my right hon. and hon. Friends, Liberal Democrat Members and members of the Public Accounts Committee—that there was a conflict of interest.
      Perhaps tonight we will, for the first time, hear a genuinely reasoned argument from the hon. Lady that refutes our fundamental proposition. Perhaps we will hear why the conflict of interest that we see does not exist, but I doubt it. I do not think that such an argument can exist, because our fundamental proposition is unambiguously true. However, I am prepared to be proved wrong on that point.
      If there is no argument against that proposition, and if there is a conflict of interest, how is it best addressed and will addressing it carry a penalty greater than any benefit to be derived? The Economic Secretary did not make that argument in Committee either. She did not say that she accepted that there was a conflict of interest and that that was a problem about working in a democracy. She did not say that she accepted that there was a deficiency in the proposals, whose cost in public policy terms would outweigh the advantage of addressing the conflict of interest. That would have been a reasonable structure for an argument. I do not feel so confident that we could have defeated it as I do that we could defeat any argument purporting to show that there was no conflict of interest. However, as I say, the Economic Secretary never put that argument either. I do not know what her argument would be; perhaps we will hear it tonight. I hope that if she refuses to accept new clause 1 tonight, we will hear her reasons. It would be by far the most powerful way in which she could justify such an attitude.
      I doubt whether we will hear that argument tonight, because if it can be heard tonight, it could have been heard in Committee. If there is an identified cost in public policy terms to addressing this conflict of interest, it surely would have been identified in the many months that have passed while the Government have been considering these matters.

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      Resource accounting is not, after all, a newborn babe. It was first conceived four or five years ago. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) knows better than I when the previous Government first began to discuss it.
      Mr. David Davis: Six years.
      Mr. Letwin: My right hon. Friend says six years, from a sedentary position. I should have thought that in six years, whatever the public policy cost of addressing this conflict of interest, it would have been identified. If it had been identified, given the merciless grilling that, to my shame, we gave the Economic Secretary in Committee, I think that she would have told us what that cost was and would have put her argument in those terms.
      I think that the Economic Secretary will probably not tell us this evening that there is no conflict of interest of the kind that we assert, or that there is one but the cost of addressing it is too great. I do not think that we shall hear either argument. What, then, could be the hon. Lady's argument for not addressing the problem addressed in new clause 1?
      Mr. Edward Davey: May I caution the hon. Gentleman not to be too hard on the Minister? She said in Committee to the right hon. Member for Swansea, West (Mr. Williams):
      I am promising to continue to think about the matter…-[Official Report, Standing Committee A, 11 January 2000; c. 65.]
      Perhaps the hon. Gentleman will reflect on that. Does he think that the Minister, having promised to continue to think about the matter, is in a position not to advance arguments against new clause 1 but to accept it?
      Mr. Letwin: The hon. Gentleman has spotted something which, in my perusal of the Committee proceedings, I overlooked. I am delighted that he did not. As the Minister promised to think about this, I may well be proved wrong and she will have thought sufficiently either to accept the compromise or to come up with one of the two arguments that I described. I remain slightly sceptical about the latter possibility. I attach my hopes to the former possibility—that the Minister has thought sufficiently to accept the compromise in new clause 1.
      We discovered in Committee that it is profitable to eliminate arguments in advance—at least, those that are not good. Therefore, I want to eliminate a third argument that the Economic Secretary might be tempted to bring up this evening if she intended to refuse to accept new clause 1. She might argue what she half began to argue, I now see, in Committee—that somehow or other it is impossibly inflexible for the Government if there is to be an external setter of the standards and definitions in the accounts. I say that she half began to argue that because what she argued in Committee was that by and large the Government were going to apply the standards set up by the accounting standards body. She pointed on several occasions to the long lists that had been prepared by the Treasury on her behalf, indicating the particular reporting standards that were going to be applied that had derived from the accounting standards body.
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      The hon. Lady's line of argument was that those would be applied and there would be a few exceptional cases in which it would be necessary—she talked of necessity rather than desirability—to adapt the accounting standards of the accounting standards body, derived as they are for the private sector, when applying them to the public sector. I hope that I am not travestying her remarks by saying that that was the only argument that she used for supposing that it was not necessary or desirable to have an independent body set the standards. Taken at face value, that is no argument at all. The fact that there are only a few occasions on which it may be necessary to depart from the accounting standards body's reporting standards does not imply that it is not worth having an independent body deciding on which occasions it is necessary to depart from the accounting standards and on which it is neither necessary nor desirable to depart from them. There is no implication from one to the other. So the Economic Secretary's sole argument was no argument at all.
      To be generous to the hon. Lady, as I have tried to be, I think that she was trying to get at the idea that it would be insufficiently flexible for the Government if the Treasury was not in a position to determine for itself these few occasions on which it was necessary to depart from the accounting standards body's standards.
      That is the beginning of a recognisable logical form. It looks like an argument for the case; it has the right shape to be an argument for the hon. Lady's position. The problem is that it is not compelling because it does not acknowledge the force of the conflict of interest argument. The problem is mind-numbingly boring to most Members of Parliament and probably to most people sitting in the Chamber at present and certainly to most of our fellow countrymen. Nevertheless it is acute and profound. A working democracy needs transparent Government accounts that cannot be fiddled to present the Government as well as possible.
      If democracy is reduced to being an argument about whether the data presented are an accurate or inaccurate reflection of what is going on, democracy becomes a shouting match rather than a rational discussion.
      7.45 pm
      Mr. Andrew Tyrie: Does my hon. Friend agree that it is not merely whether the accounts are fiddled, but whether there is a perception that they could be fiddled? That in itself would be enough greatly to erode the value of any numbers.
      Mr. Letwin: My hon. Friend is right. We are talking about the Caesar's wife phenomenon. Not only do the accounts need to be transparent, they need to be seen to be transparent. Nobody in their right mind will be confident—to put the case at its weakest—that the accounts are transparent if the people who are responsible for setting the standards, or rather for setting the deviations from the independently set standards, are the very people who have an interest in ensuring that the deviations occur when it is convenient for the Government, and do not when it is not.
      Miss Julie Kirkbride: My hon. Friend is an acknowledged expert on such matters. For those of us who are newer to the debate, will he speculate on how

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      wide the Government could make the figures that would not apply if our amendment were accepted? Will he help us to understand just how wide their scope could be?
      Mr. Eric Forth: What does Caesar's wife have to say about it?
      Mr. Letwin: I shall not be by tempted by that intriguing sedentary intervention from my right hon. Friend. Instead, I shall answer my hon. Friend the Member for Bromsgrove (Miss Kirkbride). She is right to draw attention to the point that she raised. She is too polite to put it in these terms, but, in effect, she asked whether I was wittering on about a row of beans—a matter that need not concern us—or whether fundamental issues were at stake. The answer is that, abundantly, there are fundamental issues at stake. Before I return to my argument, I shall retail some of them for the benefit of the House.
      We are talking about whether the public sector pension funds—unfunded liabilities—are to be recognised as liabilities. Nobody knows the amount at present, but it is many billions of pounds. We are talking about whether the basic state pension liabilities are to be recognised as liabilities. Some assessments suggest that the present value of those liabilities may be about £300 billion.
      We are talking about whether the PFI liabilities—an unquantifiable number of billions of pounds over the period—are to be on the balance sheet as liabilities. We are talking about whether the liabilities of new bodies and of half-extraneous, non-departmental public bodies will be on the balance sheet, if they are in the form of contingent guarantees. We heard an example of that this evening, when the Economic Secretary failed to tell us—because she does not know—whether the assets or liabilities of a body she is creating under the Bill will be accounted on the balance sheet.
      So far, I have totted up a figure that is probably broadly equivalent to the gross domestic product of this country. That is the scope of the lack of clarity as to how far things will be accounted on the liability side. However, I have not mentioned the biggest question. That relates to those things that are, or are like, benefits. Public concerns and private companies typically account for certain kinds of sickness benefit, for example. A question arises that is deeply material to public policy and to the whole structure of accounting: should disability benefits, in some form, be on the liabilities side of the whole of Government accounts, or should they not? That is an enormous potential sum.
      On the assets side, we are talking about how far Government accounting ultimately includes all sorts of contentious items, some of which are currently included while others are not such as schools, hospitals or large elements of the Ministry of Defence estate. How are the latter to be accounted for? What does one do with tanks or nuclear missiles?
      We then come to revenue and expenditure and the notorious question of whether the working families tax credit is a tax credit, and hence a negative tax, or a piece of public expenditure. Which side of the income and expenditure and cash flow statements should it be on?
      There are many similar items—not least because the Chancellor of the Exchequer has shown us that he intends to expand, if possible, the scope of tax credits, perhaps
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      widely. It is not inconceivable that, without an independent body, most of the non-pension public expenditure of the benefit sort might be transferred to being a negative tax. Some £70 billion a year could be removed from both sides of the income and expenditure account.
      I hope that my hon. Friend the Member for Bromsgrove is beginning to get the picture. We are not talking about a row of beans. We are talking about the shape of the whole public economic system. We have not the slightest idea of what the Treasury will decide when making critical decisions about the definitions that will govern the public policy debate on most of the items that are most contentious in that debate. That is a sorry state of affairs.
      Mr. Edward Davey: The hon. Gentleman is well aware that I share many of his concerns. However, I caution him not to overstate the case. That sorry state of affairs has existed for many years. The Bill is about modernising Government accounts. The Government talk to us about modernising government, so surely the argument that the Conservatives and Liberal Democrats should be making is that the Government should take this opportunity to modernise the public finance system properly and thoroughly.
      Mr. Letwin: The hon. Gentleman is right. It is a sorry state of affairs, but that is not the fault of the Labour Government; it is the fault of our predecessors in Parliament and in government, of both parties over a prolonged period.
      Mr. Davey: All parties.
      Mr. Letwin: I hope that the hon. Gentleman will forgive me—all parties, of course. It is the collective failure of our democracy to address the issue since Gladstone took a large step forward. Broadly speaking, Gladstone took that step and the rest of us—collectively—held our breath from that date to this. The hon. Gentleman is right. In effect, we are saying that a glorious and golden opportunity is being missed to put the matter right.
      Mr. William Cash: Will my hon. Friend give way?
      Mr. Tyrie: Will my hon. Friend give way?
      Mr. David Davis: Will my hon. Friend give way?
      Mr. Letwin: That is more than a richesse. I give way to my right hon. Friend the Member for Haltemprice and Howden.
      Mr. Davis: That was a rush of assistance to my hon. Friend.
      I agree, as I said in Committee, that the matter is one for which the blame—if that is the right word—falls on a series of successive Governments of all parties, but there is an acute problem at present. My hon. Friend touched on the tax credit issue and the calculation of tax burden. If the amendments proposed by him and the hon. Member for Kingston and Surbiton (Mr. Davey) are accepted, it is almost certain that the Government's judgment on the calculation of tax credits would be overturned. Every other

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      western country takes a different stance on that matter, because when there is no tax liability, a payment is made. That is the test—whether it is a payment rather than a negative tax. The tax credit system fails that test. As a result, it is almost certain that, were such an independent body to exist, the Government would have to account in the same way as the rest of the Organisation for Economic Co-operation and Development. In that sense, there is a large price tag on the amendment, which makes it much more difficult for the Government to accept.
      Mr. Letwin: I was trying not to prejudice the chances of the Minister accepting the amendment by drawing out the implications that, I am afraid, my right hon. Friend has with great perspicacity made abundantly clear. He is right to say that the position has been made significantly worse by the fact that there has been an accounting fiddle, if I can put it in those terms without being unduly prejudicial.
      8 pm
      However, if I had to judge, I would say that the biggest cause for concern is not the Government's fault. It is something that goes back a long way and has plagued the public policy debate to the extent that it has distorted the entirety of our policy on the matter. That concern is the treatment of pensions. I believe profoundly that an independent analysis of the definitions would bring pension liabilities in some way into recognition, whether as a note or as an item in the balance sheet. If those liabilities were included in the accounts, the nature of the discussion on social planning and social provision would change.
      Mr. Cash: Does my hon. Friend agree that there is another dimension to the subject that may have been considered earlier in the debate or when the Bill was in Committee? I refer specifically to the interaction between our public accounts and the accounts of the European Union. Just in case anyone should be surprised that I raise the matter, I note that my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, rightly surmises that that is an issue of enormous importance.
      If there is a fiddle, such as that which occurred with the convergence criteria, and if the pension liabilities are not properly taken into account, we cannot make any useful complementary analysis of what is happening in this country vis-a-vis the economic rules established under Maastricht and what is going on in other countries. I have every intention of exploring that point a little further, but will my hon. Friend enlighten me on whether that subject has been thoroughly investigated—or will I have an opportunity to do that this evening?
      Mr. Letwin: My hon. Friend has cheered me up no end. I had thought that this debate—not least my speech—might be dull, but now I know that it will be lively. The subject was not debated in Committee and I look forward to hearing his remarks on it. The Bill, wide though its scope is, does not extend to forcing our comparator countries into the paths of righteousness on accounting liabilities. The problem of comparability might arise even
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      if we cure the accounting problem here. None the less, I look forward with bated breath to my hon. Friend's analysis of these important matters.
      If the Economic Secretary wants to expand the argument that she half began to make in Committee—that it would be unduly inflexible if the Government were forced into a straitjacket by an independent body and were unable to decide on the deviations from the accounting standard practices that were proposed by the accounting standards body—she should resist that temptation. She should resist it because it would be to misunderstand what the ability to play with definitions does to Government. Part of our argument is about the rights of a democracy as represented in Parliament. My right hon. Friend the Member for Haltemprice and Howden is principally concerned with those issues, and rightly so as Chairman of the Public Accounts Committee.
      However, part of our argument—we have this in common with those on the Liberal Democrat Benches—is about the effect on the Government's making of policy. It is not to their advantage, except in the very shortest term—a few weeks or a few months—to put themselves in a position where they may be tempted to conceal from themselves the real effects of their actions. They can do that by adjusting accounting definitions so that they purport not to be doing what they are in fact doing. That is not in the long-term, or even medium-term, advantage of the Government because they will be doing what they are doing. In the end, pension liabilities will exist whether they are on the balance sheet or not; the Government will have obligations under the PFI whether they are on the balance sheet or not; public sector pensions will or will not be funded; and there will be expenditure under the working families tax credit. All those things will happen. They are economic facts that will hit taxpayers, the macro-economic system, interest rates and, ultimately, the Government.
      Mr. Edward Davey: After the election.
      Mr. Letwin: It may be before or after an election, but those facts will certainly hit the Government at some time. That is not in the interests of government as conceived narrowly. However, I accept that the hon. Gentleman is right. If a Government are just this side of an election that they think they will lose—I wonder whether the Government think that they will lose the next election—they might try to conceal from themselves, and from their successors, the effects of actions that will be visited upon their successors.
      Mr. Cash: I am a mere novice in this subject, but my hon. Friend made a bold and justifiable remark on the volumes of moneys that would be involved if public sector pensions, state pensions, PFI liabilities and contingency guarantees were aggregated. He said that that was equivalent to the whole gross domestic product of this country. I am developing my thinking on this issue, so I wish to ask him a simple question. He has referred to the integrity of the accounts and democratic accountability, so is the calculation of the 3 per cent. deficit of GDP in relation to the Maastricht criteria a figure that could be distorted by eliminating the items that he mentioned from the calculations? We might get a completely different figure that might well suit the

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      Prime Minister, come July, if he makes an announcement on the amount of money that he will make available in the public sector.
      Mr. Letwin: As ever, my hon. Friend is eagle-eyed as to the implications of Maastricht. He is right that such accounting changes could have a significant impact on our deficit and its relationship to the Maastricht rules. When I tried to illustrate for my hon. Friend the Member for Bromsgrove the scale of the implications, I was consciously confusing stock with flow. Some of the items that I mentioned are flow, or current spending, items; some are the present values of long-term liabilities, and some are assets. I tried to give a sense of the scale by adding them all up and wondering what they might all amount to. Once the figures have been so illegitimately added together, I do not know whether they would come to half, one, or one and a half times GDP. However, it would be of that order of magnitude.
      In practice, on a flow basis and in terms of the annual deficit, the figure is nothing like that big. As a consequence, it is unlikely—although it is possible—that adherence or failure to adhere to the Maastricht criteria on a given occasion would be decisively influenced by such matters. However, public policy choices made in ignorance of the real liabilities could lead you to fail or succeed in meeting Maastricht or other criteria.
      Mr. Deputy Speaker (Mr. Michael Lord): Order. I am aware the that the hon. Gentleman is responding to an intervention from a Back Bencher, but he should address the Chair.
      Mr. Letwin: I apologise, Mr. Deputy Speaker. Moreover, you were kind not to mention the fact that I may have departed to some degree from my observations on new clause 1, to which I speedily return.
      I was trying to argue that the Economic Secretary should resist the temptation to complain about the inflexibility that might be imposed on Government by an independent body's setting the definitions. She should recognise that, although in some particular circumstances—the hon. Member for Kingston and Surbiton (Mr. Davey) and I were beginning to expose them—there might be a political advantage in cooking the books, shifting the definitions is dangerous for Government when conceived as something that goes on for a year or so, as well as for the operation of our parliamentary democracy. It is just as dangerous for Government because they have terrible difficulty knowing what is going on. That is their biggest difficulty.
      Most of the time, most people in Government do not know much about the effects of their actions or the circumstances in which they are operating. The last Administration discovered much of what was happening in the miners' strike by turning on the television in No. 10 Downing street. Governments are often ill informed and find it difficult, however brilliant their Ministers or officials, to get a grip on what is really going on with the immensely complicated beast of public spending, tax and the economy. If Government allow themselves to be flexible, they end up being confused about the effects of their own actions and making decisions that they did not intend, which often rebound on them.
      It is not true that there is no conflict of interest. There is, because short-term interest is at stake in fiddling the figures from time to time. It is true that there is no
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      long-term conflict of interest. If the Government view the matter from enlightened long-term self-interest, they will accept the straitjacket imposed by new clause 1, not unwillingly but joyously—seeing it not as a restriction on flexibility but as a way of ensuring that they know what is going on in the multitude of affairs over which they have control.
      I want next to explain the differences between new clause 1 and our amendments in Committee, to demonstrate to the Economic Secretary how far we have gone to accommodate the points that she made. The Minister said in Committee that she was concerned about the prospect of a national accounts commission, and argued that there were already bodies sufficiently well equipped to deal with accounting standards. Subsections (2)(a) and (2)(b) recognise that such bodies exist. We have offered an olive branch to the Minister by abandoning our preference—which we shared with the Liberal Democrats and the PAC—for a new, independent national accounts commission and have opted instead for the existing body. Any practical difficulties otherwise associated with an independent national accounts commission thereby evaporate. No extra costs would be entailed. I am sure that the Accounting Standards Board, if asked, would be perfectly willing to take on that extra task without charging the Treasury a huge amount of money.
      The ASB has every possible expertise. It is not lacking in any kind of knowledge or skill required. We have a body that exists, would not be expensive to run and knows what needs to be done—and we are saying that will do nicely. We have gone further. As we recognise that the Economic Secretary might think that, in the world of increasing global convergence, it would be retrograde to insist on standards in the UK, we have offered a second option. The International Accounting Standards Committee or some other such international body could be chosen in place of the Accounting Standards Board.
      Mr. Cash: My hon. Friend is aware that accountancy proposals and directives have been compiled and applied in respect of the European Union. I wonder whether he has taken account of those directives in relation to the other international bodies to which he referred and the criteria applied there.
      Mr. Letwin: My hon. Friend will not be surprised to hear that my personal first choice for a body would not be a European-level body. Mirabile dictu that he should say it, but my hon. Friend is right. That could be a solution encompassed by subsection (2)(b). If I had to accept that as a means of getting the Minister to concur with the general proposition in new clause 1, I would do so.
      We recognise that the Economic Secretary might have difficulty with the particular shape of the body we proposed. She gave us some cause for concern, referring on several occasions in Committee to the Financial Reporting Advisory Board. She thought that body already did a good job of determining deviations from standards set by the ASB. As a third option, we have redesigned our proposal by making it more general. Subsection (2)(c) expressly allows for a new form of the FRAB as an alternative to our national accounts commission.

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      8.15 pm
      Surely the Economic Secretary's resolve on the technical issue must crumble at this point. Surely she cannot maintain that the body she argued in Committee was doing a good job cannot do the job. If she accepts new clause 1, all she need do is take the FRAB, re-establish it as a new body, ensure that all its members are appointed solely on the basis of their expertise in accounting practices and make the change that those people cannot be dismissed by the Treasury or any Minister. That could be done in a trice.
      We have tried to provide in subsections (2)(a), (2)(b) and (2)(c) the widest possible latitude to the Minister and the Treasury in implementing any form of independent body. The only thing they all have to be is specified in subsection (1)—independent. The Minister cannot argue that there is a conflict of interest because there is not—and she has not tried to argue that. The Minister cannot argue that there is a conflict of interest but public policy cost outweighs it because that is not true—and she has not tried to argue that. The Minister should not argue that which she was half tempted to argue—that the proposal would be too inflexible for Government—because flexibility will be an advantage in the medium and long term.
      If the Minister is compelled to accept the logic of an independent body, and given that we have offered every form of independent body that anyone could imagine as a range of options—including the body to which she referred to first and second as an option—I am genuinely stumped as to why she should object to new clause 1.
      I draw attention to the amendments that flow from new clause 1, particularly for the benefit of hon. Members who were not in Committee, and to the scope of the discretion restricted by the application of new clause 1 through amendments Nos. 1 to 5. Clause 5(2) states:
      Resource accounts shall be prepared in accordance with directions issued by the Treasury.
      No limitation, no control, no transparency—entirely unfettered discretion to decide how reporting will be done. The Economic Secretary repeatedly informed hon. Members on Second Reading and in Committee that it was the Government's intention merely to amend existing standards as necessary for the public sector. That is not reflected in subsection (5)(2) or any Government amendment or new clause tabled in Committee or now. She has never sought to limit the Treasury's discretion in any way.
      By replacing the words "the Treasury" with "the Independent Body", we are making up for that gross lack. That is exactly how we have gone about amendments Nos. 2, 3, 4 and 5—each of which replaces the Treasury, as the body with total discretion to decide its own accounting standards, with the independent body.
      I refer to another element of great importance, to which we shall return later this evening. There is no doubt that the independent body that sets the accounting standards will be the natural locus of decision making on the form in which the performance measures are to be embodied. The Comptroller and Auditor General is a natural office for enforcement, but the natural body to decide what performance measures will measure the policies that the
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      Government have announced is the independent body that we recommend. That would solve two problems at a stroke: the conflicts of interest that would otherwise muddy Government accounts, and the measurement of performance by the Government of the Government.
      If the Minister sensibly accepts the new clause, that will represent a great improvement in the operation not only of parliamentary democracy, but of Government. If she does not, we shall argue that our friends and colleagues of all parties in the other place should seek to obtain the result that I mentioned at the beginning of my speech and send the new clause or a similar measure back to the House—for as long as is necessary and no matter how arduous that is—to draw the Government's attention to the fact that they would be using a parliamentary majority and the Parliament Acts to achieve a result that would be wholly at odds with the proper functioning of our democracy.
      Mr. Edward Davey: Let me begin by discussing how this issue is likely to be dealt with in the other place if the Government reject the new clause—which is where the hon. Member for West Dorset (Mr. Letwin) ended. Although I have been a Member of the House for a only short time, it is clear that these events are almost unprecedented. I have served on a number of Finance Bill Committees, as well as on the Committees that brought independence to the Bank of England and set up the Greater London Authority. The Liberal Democrats often found common cause with the Government—with whom we voted fairly often against amendments tabled by the Conservatives—but that has not occurred on this occasion because the issues to which the Bill gives rise go above party politics: as many members of the Committee said, they are constitutionally important, so taking a party line and playing party politics is not appropriate.
      Conservative Front Benchers and Liberal Democrats have together tabled the new clause, and I pay tribute to the ingenuity of the hon. Member for West Dorset for dreaming up a measure that gives the Government so many options and so many ways out of the predicament in which they have managed to land themselves. Their lordships will read our proceedings and note that the new clause is wide-ranging and that Members of different parties have come together to support it. Not only Liberal Democrat and Conservative peers but independent-minded Labour peers and Cross Benchers will place some weight on the fact that we are witnessing a rather unusual process, and will recognise why we have agreed on it. As the hon. Gentleman said, when they recognise that, they will act accordingly to uphold Parliament's powers and rights in relation to Government accounts.
      Mr. Letwin: I thoroughly agree with the sentiments that the hon. Gentleman is expressing. Does he agree that we are also considering Executive control? This is a case not of the Labour party voting in a certain way but of a Government using their majority in the House of Commons to assert Executive power. We are looking to our friends and others in the other place to reassert the power of Parliament against the Executive.
      Mr. Davey: The hon. Gentleman is exactly right. It is important that those in the other place realise that that is what we are about, because, as he said, they may have to fight hard and be prepared to push the Government to the

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      wire. We should give the Government due warning that if they remain completely inflexible, we shall encourage our colleagues in the other place to stare them in the face and challenge them to invoke the Parliament Acts to get the Bill through. As the hon. Gentleman said in a previous debate, the Government have legislated hastily—perhaps because they want to make progress with the Partnerships UK proposals—but it should be borne in mind that such a delay would substantially undermine aspects of their programme. Neither he nor I want those aspects to be delayed, even though we have mentioned our concerns about them. If that is the unintended effect, we shall have to bear the cost, because the principles are so important: I believe that we are prepared to do so to win through on this key issue.
      Mr. Letwin: I am grateful to the hon. Gentleman for giving way again. His remarks are of the greatest importance because they will be read by those in the other place. With that in mind, does he share my experience, which is that some Labour Members who shall remain nameless have said privately that they have considerable sympathy with our position? For the sake of causing them no embarrassment, I shall not name those hon. Members, but is the hon. Gentleman also aware that one or two have said in open court—on television—that they have some sympathy with our position?
      Mr. Davey: The hon. Gentleman is right. I have had similar conversations with Labour Members, and I am tempted to suggest that even Ministers have some sympathy with our arguments, although they have not put that on the record. When we were debating clause 5 and an amendment similar to new clause 1 in Committee, the Minister said that she was open-minded and would think about the issue. She made no promises or guarantees, but she was at least prepared to think about it, and I like to believe that that is because she and her Treasury colleagues have some sympathy with our case.
      The Chief Secretary spent many years in opposition and he is probably well aware of the frustrations felt by an Opposition trying to do their job and hold the Executive to account without having the proper information. On Budget day and when the public expenditure plans are published, we are given figures. We have great difficulty in understanding or believing what the Government are trying to tell us, so we cannot do our job properly. That is the crux of the issue.
      If we vote to establish an independent body, we will improve the way in which individual MPs on both sides of the House can do their jobs, not only on macro-issues of public spending but on constituency spending issues. With an independent framework for accounts, we will be able to see more clearly what is going on and—most important—to have faith in the figures that purport to show us what is going on.
      8.30 pm
      Mr. Letwin: Does the hon. Gentleman agree that, oddly, the situation that he so vividly describes will worsen if the Bill is passed without the new clauses and amendments? Members of this House and the other place will then have before them a balance sheet and details of cash flow and profit and loss, and will think that they understand what is going on as we do not because we do not have such clear information. They will not in fact
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      know, however, because they will not know whether the definitions on which their understanding is founded are fair and consistent.
      Mr. Davey: The hon. Gentleman is trying to push his argument slightly too far. I want the House to be in no doubt that Liberal Democrat Members believe that moving to resource accounting and budgeting is a major step forward, and that the information will assist us in our work. The hon. Gentleman is right to say that the information will come with the same caveats and problems as all the information that we have received from previous Governments, as it will be the Government who set the definitions and frameworks. However, the quality of the information will be better. It will not be perfect, and that is why new clause 1 is needed, but the hon. Gentleman goes too far in suggesting that we will be in a worse position if the Bill is passed.
      Mr. David Davis: I had not intended to participate in this part of the debate, but the hon. Gentleman's point strikes me as a little doubtful. We all agree that resource accounting, at its broadest, will be a major advance in the way that the country is run. However, we should not ignore that, in moving from what is effectively a cash system of accounting, which is hard to manipulate, to a system that involves many depreciations and other considerations, we are opening up judgments that will, without the new clause, give the Government more scope for manipulation, and therefore for corrupting the benefit that we all desire.
      Mr. Davey: I take the right hon. Gentleman's point that there is a trade-off between the potential for manipulation and the fact that we will have so much more information. The problem with the existing cash accounting system is that it is almost meaningless, and the data that we have make it incredibly difficult to analyse what is going on in Departments.
      The extra information and improvements that we will receive through resource accounting and budgeting, albeit with the problems that we are debating, are of such an order that the Bill is a step forward. That is why we have been supportive of the move and have always tried to persuade the Government that accepting the new clause and the amendments, which have been jointly tabled by Liberal Democrat and Conservative Members, is in their interests and follows the logic of what they are trying to do.
      Mr. Letwin: I am grateful to my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) for intervening. I wholly accept the point made by the hon. Member for Kingston and Surbiton (Mr. Davey) that the move to resource accounting is overwhelmingly important and that we should not resist it in any way, but does he agree that, if the new clause is not accepted, not only will a golden opportunity have been missed, but until the problem is corrected, the situation will paradoxically have moved backwards? That would be a tragedy. It does not mean that there is an argument for not going ahead with resource accounting—
      Mr. Deputy Speaker (Mr. Michael J. Martin): Order. Since I entered the Chamber a few minutes ago, I have noticed that interventions are extremely long. We cannot have such long interventions.
      Mr. Davey: I understand the point that the hon. Member for West Dorset makes. New clause 1 is designed

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      to deal with the potential danger about which we are both worried. Resource accounting and budgeting brings a distinct advantage.
      When the hon. Member for West Dorset introduced the new clause, he explained how independent bodies that already exist in the UK and abroad, and bodies that could be devised, would all fit the terms of the new clause.
      Mr. George Stevenson: I have listened to the debate with great interest, although I was not a member of the Standing Committee, and I have heard the forceful arguments that have been advanced.
      As I understand it, the proposed independent body would have the power to move the goalposts if it wished to do so. If that happened, I assume that it would be accountable to no one, whereas if the Treasury had that authority as the Bill stands, at least it would be accountable to Parliament. Do I misunderstand the position and, if so, can the hon. Gentleman help me?
      Mr. Davey: As we argued in the Standing Committee that established the independence of the Bank of England, the great advantage of an independent body is that its moves are transparent and public. Through that transparency and openness, accountability is improved. The problem that we seek to resolve by establishing an independent body is that the Treasury is often not accountable for its actions on matters such as setting accounts, because it is opaque: it does not report properly to Parliament about what it does. One finds out years down the line, if at all.
      Accountability can be exercised in a meaningful way only if those who make the decisions are forced to publish their decisions. Because the independent body would be a separate body, and would have to publish its recommendations and make it clear to Parliament and to the public what it wanted the Government to do, accountability would be increased.
      Mr. Stevenson: I am grateful to the hon. Gentleman for giving way again. Even with his assistance, I am a little more confused than when I asked the question. Is not his response to my intervention a criticism of the procedures of the House, rather than an exposition of the principle of which he and the hon. Member for West Dorset (Mr. Letwin) have been trying to convince the House? Is it not more important for us to consider the procedures of the House to achieve accountability, rather than setting up a separate body that is not accountable at all?
      Mr. Davey: I am grateful to the hon. Gentleman for his comments. The cause of reforming the procedures of the House is dear to my heart. My hon. Friends and I tabled an amendment which unfortunately was not selected—for good reasons, no doubt—to set up what we called a resource estimates commission to report on the procedures of the House when it considered the Budget and to make recommendations for improving those procedures.
      The Select Committee on Procedure, of which I used to be a member, made recommendations along those lines. It proposed an estimates office to provide hon. Members
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      with the information that they would need to scrutinise the Budget properly. I entirely agree with the hon. Gentleman on that point.
      My criticism was not of the procedures of the House, but of the way in which Whitehall works. Often Whitehall is not open and does not tell Parliament what it is doing in the people's name and with the people's money. Unless we can be reassured about the accounting standards and the framework to which it must adhere and on which it must report to the independent National Audit Office, there will always be a suspicion in the minds of hon. Members and of the public that some skulduggery has occurred. It is that perception that is the problem.
      Mr. Cash: The amendment refers to the functions assigned to the body by the Bill. Those are not specified in subsequent amendments—perhaps the relevant amendments were not selected. That could be redressed in the other place if the matter is taken forward. Accountability and its relation to the functions of the independent body is another matter. Perhaps the body would be similar to the Audit Commission. To a certain extent, I share the view of the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) that the matter could be refined in future debates.
      Mr. Davey: I would be worried if it were refined in the way in which the hon. Member for Stoke-on-Trent, South suggests. As I said earlier, the hon. Gentleman and his colleagues rightly gave the Bank of England independence to set interest rates. He supported that. That step improved accountability for monetary policy because it set a clear, publicly set goal for the independent Bank of England to undertake monetary operations on a daily basis and to try to hit the inflation target.
      The Monetary Policy Committee's actions are recorded in minutes. The Governor of the Bank of England appeared before the Treasury Committee today. My colleagues and I asked the Governor, the Deputy Governor and other members of the Monetary Policy Committee questions that held them to account. That structure has massively improved accountability in the way in which monetary policy is made. A similar framework for setting accounting standards would likewise improve accountability. There has never been accountability for setting standards for Government accounts. To my knowledge, there has never been a debate in the House about the directions that the Treasury gives Departments.
      Mr. Stevenson: I do not wish to be a nuisance, but I am sure that the hon. Gentleman wants to help me to solve my dilemma. He refers to the Monetary Policy Committee, but I am not sure whether we are comparing like with like. The House sets the terms of reference for the Monetary Policy Committee. If I understand the arguments for the independent body correctly, however, it will change the accounting principles if it believes that that is right, and will be accountable to no one. Surely there is a big difference.
      Mr. Davey: I do not accept the hon. Gentleman's view. The House is considering a Bill that would establish the framework for the independent body, which will therefore always remain accountable to the House and be subject to the Select Committee procedure. Just as the Monetary

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      Policy Committee is accountable to the Treasury Committee, the members of the independent body could be brought before the Treasury Committee or the Public Accounts Committee and held to account for their actions. Accountability would be greatly enhanced because those actions would for the first time be transparent, public and open.
      Mr. Flight: There is a close analogy between the independence of the Bank of England in setting interest rates and the subject of our debate. The Government acknowledged the impossible conflict of interest that arises when Governments fix interest rates, and weighed the short-term advantage of elections against the long-term advantage. The Chancellor made his decision to escape that conflict of interest, which is analogous to that which exists when Governments determine their accounting policies.
      Mr. Davey: The hon. Gentleman is right. When we debated the matter in Committee, I made that comparison. I also made an analogy with the BBC. There is cross-party consensus that politicians should not have their fingers on the BBC's broadcasting policies and approach. It would be improper. The Government's approach must be at arm's length.
      Some public policy functions, for example, public broadcasting, setting interest rates, and setting accountancy standards for the public sector are so important that we must be reassured that they are removed from the party political debate.
      The effects of some of their decisions last not just for a Parliament, but for decades—indeed, for centuries. We heard from the hon. Member for West Dorset about the pension liabilities. Some of these issues that arose from the matter of accounting standards are just too great to be left to political Ministers who happen to be in office for a short while.
      8.45 pm
      The amendment gives the Government a wide choice of bodies that they could select to be the independent body. In Standing Committee, the Minister seemed to go down the route of preferring the Accounting Standards Board. She said that the Government
      do not believe that a separate standard-setting body is needed, not least if it implies a body that will be in competition with the Accounting Standards Board. The Government are content to follow the standards issued or approved by the ASB, which already apply to all private and many public sector bodies.—[Official Report, Standing Committee A, 11 January 2000; c. 60.]
      The Minister was right. I wish she would be prepared to extend the remit of the ASB and give it the independence for which we are arguing in the new clause, which is a vehicle that would enable her to do that.
      The ASB already has a sub-committee, the public sector and not-for-profit committee, which looks at many of these issues. Its remit is not as wide as would be required by the sort of body we are talking about in the new clause, but its existence shows that the Accounting Standards Board has already considered some of these issues, and has some expertise and skills in this area. Members of the ASB have sat on the Financial Reporting
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      Advisory Board. If the Minister believes that we need a single standard-setting body, the ASB is probably the sensible one to choose.
      Other opinions have been expressed, both here and outside. The Chartered Institute of Public Finance and Accountancy, in a report entitled "Setting Accounting Standards for the Public Services" a few years ago, thought that the sub-committee of the ASB was still too narrow, and favoured a totally new body, which it called the Public Services Accounting Advisory Board. However, it was not quite advisory in the way the name suggests, as CIPFA proposed that there should be a requirement on statutory bodies to follow the board's recommendations. Therefore, I believe that "advisory board" was an inappropriate title for CIPFA' s suggested model.
      The point is that there are many views about the sorts of bodies that could take on this role, both natural evolutions from the ASB and other bodies that already exist, such as the Financial Reporting Advisory Board. Therefore, the Government have plenty of bodies that they could turn to. They have to give us good reasons, as the hon. Member for West Dorset argued, for not going down this road. They failed to do so in Committee, which was a shame.
      I return to my point about the importance of standard setting and why this issue should be seen on a par with setting interest rates and with broadcasting policy. It is because it goes not just to the heart of the financial management of the public sector, but to the heart of the quality of all decision making by Ministers throughout Whitehall.
      The hon. Member for West Dorset talked about how Ministers are extremely busy and often do not have to hand all the information about what is going on in their own Departments. He is clearly right. Both by the activities of the hon. Gentleman's party, through privatisation, and now through the activities of the Government, with devolution, the leviathan state is being trimmed.
      Mr. David Davis: Divided.
      Mr. Davey: Liberal Democrats would totally disagree with the right hon. Gentleman about that. We believe that the devolution process is helping to ensure that the United Kingdom remains a united kingdom, and that it is assisting better decision making, because it is taking decisions away from Ministers who already have too much to do in this place.
      Our proposal would help to transform the leviathan state. It would help ever-busy Ministers, who do not have perfect information at their fingertips, by ensuring that the information with which they were provided was transparent and consistent. It would also ensure that they and their civil servants did not spend time worrying about changing depreciation rates and changing accounting standards, because that would be a given. Instead, they would be able to focus on what they should be focusing on: policy, policy making, making better decisions, and ensuring that the taxpayer is given better value for money.
      Mr. Letwin: After popping out for a sandwich, I reflected on the hon. Gentleman's answer to an earlier intervention. Does he agree that the answer to the

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      comparison with the private sector advanced by the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) should, in fact, be that directors should set their own accounting standards because they are accountable to shareholders, whereas accountants should not because they are independent?
      Mr. Davey: I shall deal later with that wider issue, and with the parallel that the hon. Gentleman seeks to make; but I am sure that the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) appreciates the power of his intervention.
      The hon. Member for Stoke-on-Trent, South also raised the issue of the procedure of the House with regard to Supply. It is an important issue in the context of accounting standards. As the hon. Gentleman and I seem to agree, the procedures governing Supply in this place are, to say the least, inadequate: they are completely outdated, and effectively mean that the House allows just three days' debate on the subject. Moreover, often no amendment has been tabled to change the proposed spending plans, and the days tend to be taken up with Select Committee reports. Unfortunately, that rarely involves discussion of departmental spending plans. It is left to the PAC to do the real job; however, that is ex post rather than ex ante.
      Partly because of existing procedures and partly because of customs that have grown up, the House and its Select Committees do not do their job in scrutinising supply. That is analogous with, and has the same effect as, the problems that we are discussing in respect of accounting standards, because, again, it lowers the quality of decision-making. Ministers do not have to come to the House and fully defend their budgets, and the hundreds and thousands of decisions that Departments make about those budgets.
      If Ministers had to do that, they would have to be properly briefed. If they had to be properly briefed, their civil servants would have to ensure that they too were properly briefed, and that questions about their budgets were fully explored with Ministers. I believe that the dynamic that that would create, leading to a reform of estimates procedures, would make Ministers pay more attention to their budgets—that, indeed, Parliament and their civil servants would require them to do so—and that such a hands-on approach would enable them to spot problems. It would form part of the process enabling Ministers to root out poor decisions in respect of value for money for the taxpayer. I think that, if Ministers had such responsibility, there would be far better outcomes in regard to the money that the House votes to the Government through taxes.
      The parallel with the supply process is clear. I think that if we could improve supply procedures—I suggested the establishment of a resource estimates commission—and the way in which accounting standards are set, we could make a second leap forward in regard to the quality of policy-making and fiscal policy generally. I describe it as a second leap forward because the first leap forward relates to resource accounting and budgeting. If we can get the supply procedures right, and if we can get the accounting standards-setting process right, I think that over quite a long period—10, 20 or 30 years—we shall see far more effective public spending. That may mean
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      that we can afford to do more public spending, or to reduce taxes. That choice will be open to the Government of the day. What a wonderful choice it would be, arising from the reform of procedures of the House and accounting standards setting.
      The hon. Member for West Dorset tried to tempt me to talk about the conflict of interest when the Government set their own accounting standards. He is right. There is clearly a conflict of interest. It parallels the conflict of interest that would arise in the private sector if company directors could set their own accounting standards. A shareholder would not be happy with that. Equally, members of the public and hon. Members should not be happy with the Government proposal to set their own accounting standards.
      The hon. Gentleman speculated on the reasons why the Government are prepared to live with that conflict of interest. He got close to their key concern when he said that, with a body such as the Accounting Standards Board setting accounting standards, the system might be seen to be inflexible. I am sure that civil servants in many Departments may be slightly worried that there could be slight delay in changing accounting standards that they think are genuine, rational and necessary for a new policy, or a new area of Government activity, for example, if they had to wait until the ASB had given its approval.
      Potentially, that might involve a slight cost, but how large will it be? How often will it occur? As the hon. Gentleman implied, will there always be a cost? Will there not sometimes be a benefit? Having some inflexibility over setting accounting standards seems quite a good idea. Surely, what we want from accounting standards is consistency and fixity. We do not want them to change the whole time. That would be totally inappropriate for such an important part of the financial system. Therefore, the argument that the Government could use against the measure seems weak and could be used against them.
      Mr. Letwin: The hon. Gentleman is doing an important job in disinterring the internal logic of inflexibility. Does he agree that policy inflexibility is another type of inflexibility that the Government might be worried about? An ostensibly beneficial economic effect might be thought to be prevented by a rigid accounting system simply because it exposed things that the markets, for example, reacted to irrationally. What is the right answer to such a concern?
      Mr. Davey: Given this country's fiscal position, I would have thought that more transparency over our accounts was beneficial. Presumably, the hon. Gentleman wants me to speculate on a circumstance where greater transparency would not be beneficial. That may lie behind the Government's arguments, although we have not heard them say so. We might have to pay a price. I do not suggest that there is no cost to greater transparency. There is always potentially a political cost to the Government of the day.
      We have had that debate more generally with the Freedom of Information Bill, which is before the Houses of Parliament at the moment. When one considers such costs, one has to examine the wider picture and whether the benefits far exceed them. Having listened to the hon. Gentleman and other hon. Members in

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      Committee, I am left in no doubt that the benefits outweigh the costs to an extraordinary degree. I have no second thoughts.
      Mr. Flight: If there were some powerful argument for a particular accounting principle that was, for example, different from that in the private sector and that was in the national interest, could not the Government present that argument to the independent body? That body might even judge that that was the case, so the measure does not rule out the Government having a separate accounting principle from that of the private sector, where it is appropriate.
      Mr. Davey: The hon. Gentleman is exactly right. I expect that the body established in new clause 1 would ensure that there are different standards, as different policy problems have to be dealt with by the Government, from nuclear missiles to the extent of pension liabilities. The problems faced by the Government, compared with those faced by private sector companies, are different only in degree—although it is quite a large degree.
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      I should think that, on many issues, the independent body will treat accounting standards for public accounts differently from the treatment of private sector accounts, and that those standards will entail moves away from generally accepted accounting practices. I also think that that would be acceptable. As the different standards would be transparent, published and debated, and as members of the independent body could be brought before a Select Committee and questioned on them, I do not see a problem with them. Indeed, they would ensure that difficult public sector dilemmas could be solved more efficiently.
      Mr. Letwin: Does the hon. Gentleman agree that the example of New Zealand—which is far more exposed than the United Kingdom to the markets, and is perhaps the most transparent example—shows that it is possible to get away with transparency perfectly well, even in such an exposed economy, and realise the long-term benefits?
      Mr. Davey: Indeed; in this sphere, New Zealand is so far ahead of us that we can only struggle to catch up. Its example should be a lesson to the Government. In Committee, I referred right hon. and hon. Members to the New Zealand Government's website, at www.gov.newzealand. With a few clicks, one can access New Zealand's Acts of Parliament, including the Financial Reporting Act 1993, which established the type of independent accounting standards body that we propose in new clause 1.
      Subsequently, the New Zealand Act has been amended several times, based on New Zealand's experience of some of the matters that we have been debating. It started off by saying that the board should simply adhere to generally accepted private sector accounting practices, but, because of experience, it has seen fit to amend those instructions. However, we could learn lessons from New Zealand. We could ensure that, in establishing the board, its remit goes slightly wider than New Zealand originally envisaged.
      Mr. Cash: Is the hon. Gentleman aware that the original advice given to the New Zealand Government on
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      its new independent banking arrangements, and undoubtedly also on financial control, derived from Professor Charles Goodhart, who is a member the Monetary Policy Committee? If the Government sought to do so, they undoubtedly could have access to the type of advice that the hon. Gentleman is mentioning.
      Mr. Davey: I have always admired Professor Charles Goodhart and thought that he was a great authority on monetary policy, but I did not realise that his expertise and skills have been sought on those aspects of fiscal policy. I am grateful to the hon. Gentleman for enlightening me on that.
      The Treasury seems to have a problem in relation to the Accounting Standards Board and Departments' internal accounts. In evidence—I think to a Select Committee—Professor Likierman really focused on that issue. He said that he believed that the ASB had little experience in dealing with private sector internal accounts, and that it would therefore be inappropriate for the ASB to consider public sector internal accounts. However, I do not think that the two cases are related. The House could develop the ASB as we want it to be developed.
      In the private sector, the various regulatory bodies are increasingly passing regulations, guidelines and advice on how internal management accounting should be performed within companies. The public sector could benefit from that information and learning, and from those processes in the private sector. The arguments against our proposals—to the extent that we have heard any from advisers or Ministers—do not stand up to analysis.
      I conclude by reiterating the importance of the new clause. This place ought to take financial accountability far more seriously than it does and should realise its significance in the life of the nation. If we do not ensure that the information provided to the House is of the highest quality and has the mark of legitimacy and credibility so that we can have faith in the accounts, the whole process will be undermined.
      Mr. Letwin: Does the hon. Gentleman agree that, shamefully, we have something to learn from local government? We would never tolerate the arrangements that are being proposed for this place and the Government being applied to local government.
      Mr. Davey: The hon. Gentleman is right. Local government has had aspects of resource accounting for some time. Local government financial scrutiny is far from perfect, but it is better than in this place. On my local council, the royal borough of Kingston, the opposition parties—I am sure that this is true for all local authorities—table amendments to move resources from one spending area to another. The House does not have procedures for such amendments. We do not examine accounts properly. Local government is way ahead in accounting standards practice and the way in which debates take place. I hasten to add that there is massive room for improvement, but the room for improvement in central Government accounting and reporting is so huge that it does not compare.
      We come down to an issue of democracy. Are the Government happy for their policies to be properly reported on and accounted to Parliament? It will be a great

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      shame if they do not accept the new clause and questions will increasingly be asked about what has happened to their modernising agenda.
      Mr. David Davis: I had not intended to speak on the subject, largely because the Public Accounts Committee has not opined on it recently, but I have been provoked to offer a few words, however briefly, because this is a constitutional issue of some magnitude.
      Democracies live on a diet of truth. Indeed, they die when they get the opposite. That is why the House spends a great deal of time battling over what is the real information in front of us. When the previous Government were in power, the battle tended to be about whether the unemployment figures were correct and whether the multiple changes in calculating them were properly founded. Now there are battles about issues such as tax burdens and hospital waiting lists.
      Unfortunately, the battle in the Chamber does not serve to ground the real truth in the statistical areas that we are talking about, be they accounting numbers or performance numbers. That falls to a much more technical process. To some extent, the Select Committees do a better job. That is why they have been the jewels of this faded House in recent times. We are dealing with the fundamentals of the figures that will be in front of us if we are to see the public service revolution that the hon. Member for Kingston and Surbiton (Mr. Davey) referred to.
      Labour recognised that in opposition. One of the jewels of the Labour manifesto was the notion of an independent national statistics office with an independent director of statistics. That has not yet come about, but its inclusion was a measure of the importance of the issue, particularly to Oppositions, but also to Governments and democracies in general. It is of course a pity that, if the figures are left subject to political influence of Ministers of whatever party, there is always a temptation to alter the numbers to suit the Government of the day.
      Mr. Letwin: Does my right hon. Friend agree that whatever logic gave rise to making the statistics function more independent must also apply to the accounting functions?
      Mr. Davis: That is my general point. Whatever the argument—and it is one based on the importance of accurate factual data for a democracy—it applies to all data, whether they are accounting numbers or performance figures.
      One of the few conversations with my right hon. Friend the Member for Henley (Mr. Heseltine) in which I have agreed with him 100 per cent. was when he and I agreed that when we first became Ministers we were both shocked by the complete absence of decent management information in Whitehall. Ministers arrive and are interested in the effect of their policies, but they find it almost impossible to get a measure of it. I see the Chief Secretary smiling at me. He probably recognises the syndrome—certainly most Ministers do. When I was at the Cabinet Office trying to make the citizens charter work, I remember asking for examples of how it was working, only to be told by the civil servants that it was not possible to get those examples or the aggregate data
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      that would tell us whether we were delivering a performance for the citizens. That is a disgrace in a small organisation; it is a total disgrace in an organisation as large, complex and public service oriented as the Government.
      Resource accounting offers the first step towards that. Eventually, the existence of resource accounts, in conjunction with public service agreements, will mean that there will have to be management information systems within Whitehall. However, we face a serious risk if something like the amendments proposed today—I am concerned not so much with the amendments, but with the principle that they encompass—is not espoused by the Government or their successors. The temptation to bend the figures or to choose one set of figures rather than another because they are more favourable to the Government of the day will have the effect in due course of corrupting not just the numbers, but the belief in the numbers. That is very important. If the people who run the public service do not believe the information or it has no credibility for them, their actions on the basis of those numbers will be weakened. They will worry more about the perception than the reality.
      Back in the 1960s there was a wave of creative accounting in the private sector, partly as a result of changes in accounting standards with which the hon. Member for Kingston and Surbiton will be familiar. That had a massively deleterious effect on the operation of British business, which in my judgment was just as bad as some of the trade union problems that existed at the time. It was the capitalist half of the equation. All those factors undermined the entire decision-making mechanism in British industry. If we do not have some external standard, be it an independent FRAB, the ASB or some other body, we shall be taking a risk with that standard.
      Mr. Letwin: Does my right hon. Friend agree that in a sense the situation is even worse in the public sector because the Government necessarily have to deal with highly inadequate data on the macro-economic front? The only aspect of macro-economics which they could account for properly is their own income and expenditure if there were an independent body.
      Mr. Davis: Of course my hon. Friend is right. However, I wish to focus on the single issue of the effect on the amount of information within the Government. The hon. Member for Kingston and Surbiton spoke eloquently about the prospective revolution in public service delivery that we face in the next couple of decades arising directly from resource accounting and its associated measure of performance—output-related government and outcome- oriented government. They offer a massive transformation. I think that was rather too reticent about that. New Zealand is a good example, but it is only half way there. If the set of numbers that we are about to create in the next two or three years is not founded in such a way that it has the entire confidence of the public service and the public behind it, that threatens to undermine that transformation, which will be a massive cost to pay for what is in my view a short-sighted perspective on the proper approach to this method of resource accounting.
      9.15 pm
      Mr. Cash: I am intrigued by the title of the Bill. Before now, I had not taken great notice of it, but by chance some hon. Friends mentioned to me that I might find it interesting, and I do.
      For some time I have been an adviser to the Institute of Company Accountants, and the Bill makes some reference to accounting standards. However, I am concerned about the way in which the Treasury would acquire vastly increased power under proposals whose principal I otherwise endorse.
      For example, the resource accounting system would deal with income—which, in this context, means tax. It would also deal with expenditure, which here means expenditure on public services. The question of assets and liabilities depends on the balance between what is acquired by the private sector, and what remains in the public domain. That raises complex questions.
      Clause 5(1) states:
      A government department for which an estimate is approved by the House of Commons in respect of a financial year shall prepare accounts (to he known as resource accounts) for that year detailing…resources acquired, held or disposed of by the department during the year, and…the use by the department of resources during that year.
      That is the balance that has to be struck. However, clause 5(2) states:
      Resource accounts shall be prepared in accordance with directions issued by the Treasury.
      The hon. Member for Stoke-on-Trent, South (Mr. Stevenson) spoke about how independence could be affected by the procedures of the House and so on. However, I am realistic enough to know that the Government's huge majority will ensure that the Bill will be approved at the end of our debate, despite the manful attempts of Conservative and Liberal Democrat Members to prevail against it. Although I do not know what the House of Lords will do, I assume that clause 5(2) will remain in the Bill when it leaves this House.
      However, the words "in accordance with directions" raise several questions. First, will the directions be general or specific? We do not know. In my past legal career, I spent some time advising many bodies, including public bodies, about the nature of directions, and about remedies in judicial law with respect to them. Is it intended that the directions will be subjected to judicial review? If so, the questions that arise are closely related to the objectives of new clause 1.
      Mr. Letwin: Is my hon. Friend aware that the Bill talks about both general and specific directions? The general directions are contained in manuals; no doubt, the specific directions will be the interpretation of the manuals. If it comes to judicial review, how will the courts respond?
      Mr. Cash: Indeed—
      Mr. Deputy Speaker: Order. The hon. Gentleman has mentioned clauses other than new clause 1. He has also referred to the Bill in its entirety. We are dealing with a specific amendment, which is the new clause before us.
      Mr. Cash: I am grateful to you, Mr. Deputy Speaker, because I am mindful of the fact that we are dealing with new clause 1. However, the group also contains
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      amendments Nos. 1 to 5, and it is to those amendments that I address my comments, because they are relevant to the points that I am making.
      I do not know whether the provisions have been devised in accordance with rules that have been concocted, not necessarily exclusively in-house within Her Majesty's Treasury, but in respect of the European Union as well. To achieve the degree of convergence that some claim should be achieved—which I prefer to deny—between the member states to enter the single currency arrangements, there are rules which are, in common, devised at a European Union level. Will the directions to be issued by the Treasury be connected with rules that go outside purely domestic considerations, but are devised within a framework of law that is devised by directives produced by the Central Bank, which we might be shadowing, or by specific directives that apply to us? What is the relationship between the Bill and our economy, having regard to the fact that considerable amounts of our taxpayers' money comes back into the British economy and is then called European money? In relation to achieving targets such as the 3 per cent. deficit rule of gross domestic product imposed by the Maastricht arrangements, will those directions seek to achieve the degree of convergence that is necessary between our economy and those of other member states? This must be relevant, because it is about the question—
      Mr. Deputy Speaker: Order. The hon. Gentleman's point is not really relevant; it goes wide of the amendment, which is about changing from replacing "the Treasury" with "the Independent Body". That is far more constrained than the matters which the hon. Gentleman is raising.
      Mr. Cash: With respect, Mr. Deputy Speaker, the question is also related, as I have just said, to the question of whether resource accounts
      shall be prepared in accordance with directions issued by the Treasury.
      Mr. Deputy Speaker: Order. The hon. Gentleman is referring to the amendments that we previously mentioned. Those amendments would delete the word "Treasury" and replace it with "the Independent Body". Therefore, we cannot take the whole clause relating to that amendment and say that that is what will be discussed. All we can do is speak to the amendments. If the hon. Gentleman wishes to have a clause stand part debate, we cannot do so.
      Mr. Cash: I am extremely grateful to you, Mr. Deputy Speaker, as ever, for your guidance in these matters. However, if one is to substitute the nature of the body that will issue the directions, it follows that one must be able to make a comparison between the proposed body that is being put forward—in this case described as the independent body—and the Government's proposal that the body should be the Treasury. I am simply seeking to point out that comparing those two proposals means that we have directions issued by the Treasury—
      Mr. Deputy Speaker: Order. If the hon. Gentleman confines his remarks to new clause 1—and there is plenty of meat in new clause 1—he will be able to go along with my ruling. He is concerning himself too much with what

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      is further along the line, saying that under the amendments "Treasury" is replaced with "the Independent Body". Of course that is so, because they are consequential amendments, as the hon. Gentleman is well aware.
      Mr. Cash: As ever, I am grateful for your guidance, Mr. Deputy Speaker. I have the greatest respect for your rulings in all these matters. I shall address my remarks specifically to new clause 1.
      Mr. Letwin: Will my hon. Friend help me? Is the burden of his argument that an independent accounting body, identified under new clause 1, would not have the temptation so to adjust the standards that the Government would be able to meet—for example—Maastricht criteria?
      Mr. Cash: Absolutely. Under new clause 1, it is clear that any such independent body—
      Mr. Stevenson: Will the hon. Gentleman give way?
      Mr. Cash: I shall be happy to do so, but perhaps the hon. Gentleman will allow me to finish the sentence.
      Any such independent body would have regard to the fact that many fiddles go on in the EU—fraud has a significant impact on public resources and accounting. That independent body would thus be exceedingly vigilant in ensuring that those matters were thoroughly investigated. I shall come to that matter in a moment, but first I give way to the hon. Member for Stoke-on-Trent, South—I would almost like to call him my hon. Friend.
      Mr. Stevenson: I am grateful to the hon. Gentleman for giving way. I am sure that Hansard would have corrected his slip.
      The hon. Gentleman referred to the possibility of judicial review against the Government and to European accounting directives. If the independent body were to deviate from accepted practices, would it not follow that it too could be open to judicial review?
      Mr. Cash: That is true. Furthermore, if I were right when I pointed out that there was some connection between the provisions of the Bill and more generalised European jurisdiction, there would, ironically, first be a judicial review in this country at the High Court and in the House of Lords and then a review at the European Court of Justice. That is the point I am trying to make.
      If we have now entered a new world—a brave new world of European financial controls and economy, central banks and so on—it follows that it is essential to have the highest degree of impartiality, transparency and analysis at every stage, right up to the Court of Justice, if the provisions could be reviewed by that court.
      I should be trespassing too far if I went into an enlarged argument as to the merits or demerits of the European Court. However, the hon. Gentleman's point has substance. As I pointed out earlier, when the Bill moves to another place—the hon. Member for Kingston and Surbiton (Mr. Davey) told us that they even intend to take it as far as the Parliament Acts, if necessary—some adjustment to new clause 1 may be needed, in order to clarify the extent to which the proposals for an
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      independent body could be changed, in line with the points made by the hon. Member for Stoke-on-Trent, South to take into account the public functions and procedures and the degree of accountability and parliamentary control that would be needed over that body. Such provisions would, indeed, be needed for the Treasury itself. A body can hardly be described as independent, if it is not subject to the higher surveillance of those who are elected.
      I do not criticise the new clause; I am trying to offer some constructive help. It raises some important questions. I asked whether the words,
      which shall have the functions assigned to it in this Act,
      referred to subsequent functions that may have been included in amendments that were tabled, but which were not selected—no doubt because of the wisdom of the Chair.
      9.30 pm
      Mr. Letwin: Perhaps I can help my hon. Friend. That phrase refers to the functions that are assigned under amendments Nos. 1 to 5, which systematically replace the word "Treasury" with the phrase "the Independent Body".
      Mr. Cash: I am grateful to my hon. Friend. That is one of the points on which you, Mr. Deputy Speaker, prevailed on me not to pursue too far.
      My point is slightly different. Irrespective of whether those functions are referred to in amendments Nos. 1 to 5, the difficulty is that the independent body would have a degree of statutory authority that would exceed that of any other body or person that I can think of, except perhaps the Comptroller and Auditor General, whose functions are circumscribed by an Act of Parliament. Therefore, it is necessary to consider the position of the independent body in relation to its accountability to Parliament. It would be a little odd to find that the independent body was not subject to any surveillance by those who are elected even though it would have a role in tax, public expenditure, resource accounting and analysis and other complex matters, as well as in the labyrinth of European financing, accounting, pension liabilities, convergence criteria and all that goes with that. The New Zealand model was mentioned and that might be a subject for consideration as the Bill progresses.
      Mr. Letwin: Is my hon. Friend thinking of the possibility that a Select Committee, a new Joint Committee, a Special Standing Committee, the Public Accounts Committee or some such body should scrutinise the activities of whatever independent body is designated under the Bill?
      Mr. Cash: It might be such a Committee. However, it might be possible for a new schedule to be added to the Bill. That could more closely define the nature of the independent body, so that we have a clearer picture of its functions in relation to the fabric of parliamentary procedure. It is difficult for me to try to come up with ideas off the cuff, so I will not do so now. However, my hon. Friend's point is worth considering.
      The relationship between the independent body and the Comptroller and Auditor General is another issue. The proposals for the body take me back to the time when some of my hon. Friends lost the Whip, not over Maastricht, as is sometimes suggested, but over a

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      subsequent Finance Bill. The issue was what resources should be made available to the Government of the day from the European Union and what the balance between income and expenditure should be.
      At that time, I was very much engaged in trying to identify fraud. In a nutshell, my amendment to that Finance Bill tried to demonstrate the necessity for other member states to have similar bodies to our own. By extension, the independent body in the new clause would require a series of analogous of bodies in other members states to complement it. It would be ludicrous—as I argued in Committee—to have public accounts committees in other member states performing the same function for the sake of maintaining the democracy that is at the heart of new clause 1. At the same time, if there were to be such a thing as an independent body subject to the reservations I have expressed, it would be necessary to have a similar body in other member states. Given the acquis communautaire and all that goes with economic and monetary union, we may say that we will have one set of standards and analysis and the consequences of forming the adjustment as between resources and accounting in this country will be X. However, that will not be complemented by similar requirements in other member states.
      Mrs. Gwyneth Dunwoody (Crewe and Nantwich): Is the hon. Gentleman seriously suggesting that if other European Union countries do not want to maintain high accounting standards, we should not do so ourselves? That is an interesting reversal of his normal position.
      Mr. Cash: I am making exactly the other point. Consistent with all that I have ever said on the subject, if we do not know that other member states will insist on the same standards that we expect, we will end up being cheated and gipped by them. A degree of equivalence is essential. I am not advocating that because I do not want the extension of powers to other member states. But if we are to have an independent body as proposed by new clause 1, I would want to know that the same degree of probity, transparency and accountability will apply in other member states. For sure they cheat us now. With proposals of this kind, we can manage to prevent that happening.
      Mr. Stevenson: Is the hon. Gentleman saying that unless similar bodies are established in other member states or the EU accepts the proposed independent body, it would lack any credibility?
      Mr. Cash: I am saying that the independent body would be able to provide—with the adjustments and reservations that I have described—a degree of objective transparency, provided that it was ultimately subjected to surveillance by elected politicians and Parliament. That is the burden of my argument. I agree with the idea that there should be a degree of independence as reflected by the principles that underlie new clause 1. If that is good enough for this country and if over my dead body—and that is probably true—we were to go into the single currency, we became absorbed by a megastate and our accounts were totally intermingled with those of the EU, it is essential that the same degree of transparency and accountability be applied to other member states, to ensure they do not cheat on us. That has been going on.
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      I tabled an amendment to a Finance Bill to be sure that we would achieve a degree of correlation between our PAC and the committees of other member states. Sitting more or less where the hon. Member for Stoke-on-Trent, South is seated now, I had an arrangement on that very question, through the Government Whips, with the then Prime Minister.
      Mr. Deputy Speaker: Order. The hon. Gentleman is going wide of the amendment.
      Mr. Cash: The anecdote is quite interesting but I take your point, Mr. Deputy Speaker.
      Mr. Deputy Speaker: Order. It may be interesting but it is beyond the scope of the amendment.
      Mr. Cash: I accept that. If I do not have the opportunity to recount it in the House, I shall have to include it in my memoirs. It has often been said that the best way to keep a secret is to make a speech in the House of Commons.
      I much agree with the remarks of my hon. Friend the Member for West Dorset (Mr. Letwin), who made a superb speech, and of the hon. Member for Kingston and Surbiton, who addressed the question with a balance between technicalities and constitutional objectivity, which is essential.
      On the face of it and by any reasonable standards the Bill is as boring as a Bill can be, until one considers the principles that underpin it. They are the key issue and I pay tribute to my hon. Friend the Member for West Dorset for drawing attention to the democratic principles that lie at the root of the new clause to emphasise the necessity of achieving objectivity, transparency and accountability. The Government ought to give serious consideration not only to the arguments that have been made, but to what will happen when the House of Lords gets its hands on the proposals.
      Notice has been given that the Parliament Acts will be invoked, but if they are and if the Liberal Democrats, the Cross Benchers and Opposition Members in the House of Lords combine—as they have, to considerable effect—the Government will experience increasing difficulties. Whether they accept the new clause or not, in the context of these myriad arguments they will find themselves required to consider the necessity for greater objectivity in relation to these provisions.
      Mr. Tyrie: I am delighted to have listened to the speech of my hon. Friend the Member for Stone (Mr. Cash), which was an impressive tour de force that raised a number of interesting issues that I had not thought about at all. I have three main points to make: the first concerns the relationship between obtaining better numbers and ensuring that there is public confidence in them, which is central to the new clause; secondly, I shall develop the argument that only an independent body can deliver that public confidence; and, thirdly, I shall argue that some of the benefits of an independent body would go way beyond the narrow intentions of the new clause to the benefit of macro-economic policy as a whole.
      However, I want to touch on some of what has been said by others, although not at length, as it is worth considering further, if only as questions. For example,

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      might it be possible that the courts, through judicial review, could achieve some of what we hope an independent body would achieve by another route? That interesting idea had not crossed my mind, but should have done. My guess is that it would be extremely difficult for them to achieve that because they would be unlikely to be able to obtain the detailed information that would be required. Much of it will simply never surface in the public domain and always stay in the Treasury. A challenge would be difficult to mount, but I am not a legal expert and it would be helpful to hear a view on that.
      Mr. Letwin: I agree that an interesting question has arisen. In the absence of the new clause, if a citizen felt aggrieved because of a particular accounting decision and if that citizen persuaded the High Court that the decision on the accounting principle had been taken unreasonably might there not indeed be grounds for judicial review?
      Mr. Tyrie: I certainly think that there would be theoretical grounds for judicial review, but I would not be happy to leave that to the courts and drop the new clause. I would rather include it in the Bill.
      Mr. Cash: Under the new clause, my point—which takes us back to the point made by the hon. Member for Stoke-on-Trent, South (Mr. Stevenson)—also applies. The independent body's activities could be subject to judicial review. I am not certain, but I believe that the superior jurisdiction—which could give rise to an action in the High Court initially and subsequently in the European Court of Justice—may apply, given that those provisions fall in the general remit of economic and monetary union.
      Mr. Deputy Speaker: Order. The hon. Gentleman's intervention is far too long.
      9.45 pm
      Mr. Tyrie: Again, I could not possibly answer the question, but it is well asked because the possibility of judicial review of the independent body itself could have significant implications.
      My hon. Friend mentioned the EU budget in his speech. It had not crossed my mind until this evening that the Bill's scope might stretch as wide as the EU budget. Does the Bill's scope in any way influence the requirements for scrutiny of EU spending in the UK? That is an interesting question, and I should be grateful for an answer from the Minister.
      My hon. Friend asked whether accounting fiddles that might take place in the absence of new clause 1 could be used to meet the terms of the Maastricht treaty. The answer must be no, because the European central bank, in conjunction with the Commission, sets its own definitions and accounting standards for meeting the terms of the treaty. I cannot think of any circumstances in which those standards would not apply, and meeting the terms of Maastricht will therefore be dependent on those, and not on resource accounting standards.
      Miss Kirkbride: Will my hon. Friend give way?
      Mr. Tyrie: In a moment.
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      It is true, however—I shall not dwell on this point—that Italy and Germany in particular managed to fiddle their terms of entry. Whether or not the terms of the Bill applied would be scarcely relevant in trying to work out what damage could be done in respect of the Maastricht treaty.
      Miss Kirkbride: My hon. Friend has made the point that I was about to make. Why does he suggest that the EU would impose standards that could not be contravened when we know that when countries were seeking to meet their Maastricht convergence criteria, they fiddled their books? What gives him confidence that everything will be all right?
      Mr. Tyrie: The answer is simply that Governments will have to satisfy not only their accounting standards but the standards of the ECB, so whatever their domestic arrangements are, those standards will not, at least in principle, be relevant. However, I shall not dwell on that point.
      Mr. Deputy Speaker: Order. I am pleased to hear that the hon. Gentleman will not dwell on that—he read my thoughts.
      Mr. Tyrie: I should like to pick up on one point—
      Mr. Cash: Will my hon. Friend give way?
      Mr. Tyrie: I think that I had better not.
      Mr. Cash: My hon. Friend has mentioned a number of points that I made.
      Mr. Tyrie: Well, in that case, I will give way.
      Mr. Cash: In the context of new clause 1 and the argument that my hon. Friend has just been making, for independent body, read also Court of Auditors.
      Mr. Tyrie: I shall not pursue that intervention because I foresee all sorts of trouble if I do so.
      I shall move on to an equally interesting point made by the hon. Member for Stoke-on-Trent, South (Mr. Stevenson). He asked whether the independent body would be able to move the goalposts without any political scrutiny. That is a concern about new clause 1 which had not crossed my mind. The hon. Member for Kingston and Surbiton (Mr. Davey) did not give the hon. Gentleman a full answer on that point. There are two possible answers. One is that it would be possible for the Government to include a clause in the Bill to enable the Treasury, with a good deal of public scrutiny, to override the independent body.
      Mr. Stevenson: In view of the hon. Gentleman's reputation and expertise, his last remarks are significant. Is he saying that the independent body would have to have some override from the Treasury to ensure that it acted in the public interest on all occasions?
      Mr. Tyrie: There is an override clause in the Bank of England Act 1998, for example. I am not sure whether it is a good idea, but no one is suggesting now, after some

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      years of practice, that the Bank of England has not been able to exercise a measure of independence. Perhaps it should be given more independence. I am in favour of that. I thought that the 1998 Act was inadequate. The override approach could be taken with respect to new clause 1.
      I do not, however, favour the override route. An alternative route would be to make the independent body accountable to a Committee of the House—probably the Public Accounts Committee—and for the PAC to scrutinise an annual report from the independent body on its work.
      Mr. Letwin: I assure my hon. Friend, and, through him, the Minister, that if the Government introduced either of those possibilities, provided that in the first case that the override was sufficiently transparent and difficult to achieve, and that in the second case the scrutiny was properly conducted, it would be entirely acceptable to the Opposition.
      Mr. Tyrie: I am glad that, while sitting in the Chamber, I have been able to think of two answers to what I thought was an interesting point from the hon. Member for Stoke-on-Trent, South.
      I want to get on with my speech, rather than dealing with interventions. The first point with which I said I would deal was the relationship between getting good numbers and making sure that the public were aware that they were good and that there was public confidence in the numbers. That is the main purpose of new clause 1.
      I am not sure that resource accounting is worth having without new clause 1 or a similar measure. The benefits of resource accounting include better information about what is going on. We have heard from several speakers how difficult it is to find out what is going on in government, and I agree with them on the basis of my experience. We will get more information as a result of the Bill.
      However, if that does not inspire public confidence—indeed, if it erodes public confidence—that will be worse than the present situation. It is worth having resource accounting only if it is accompanied by an increase in the transparency of the numbers. Both the hon. Member for Kingston and Surbiton and my hon. Friend the Member for West Dorset (Mr. Letwin) made that point.
      The main reason why we need transparency is straightforward. If one does not get good numbers in the private sector, the penalty for failure or for misinterpreting them is business death—bankruptcy. The reward for success is higher profits.
      In the public sector, there is no such direct reward or penalty mechanism. Unless there is powerful scrutiny and transparency, the gains theoretically available from the better numbers are unlikely to materialise. That is because the incentives for the Government to reap them will almost certainly not be strong enough.
      It is often said that the price of freedom is eternal vigilance. The price of avoiding growing public sector waste is also public vigilance about where the Government's money is going.
      Mr. David Heath: Has the hon. Gentleman considered the inadequate provisions of the
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      Freedom of Information Bill, which is going through Parliament at present? That would give class exemptions to—
      Mr. Deputy Speaker: Order. We are dealing with a narrow amendment.
      Mr. Tyrie: Resource accounting will work only if we get better numbers and they are better scrutinised. That is the nub of my first point. That is why, as has been said, the Bill is about the relationship between the Executive and Parliament. It is our job to exercise that scrutiny. If we are unable to do that because we do not have sufficient confidence in the numbers that we are given, we weaken the relationship between the Executive and Parliament and erode a fundamental part of our democracy.
      Mr. David Heath: I shall try again. The Treasury would be exempted from providing information whereas the independent body would not. That is a problem with the class exemptions that have been suggested. The new clause is important because it provides the transparency that the hon. Gentleman seeks.
      Mr. Tyrie: The hon. Gentleman is probably right. He also made a point about the relationship between new clause 1 and other means by which to obtain much of the information. So much information is technical and requires judgment and a great deal of expertise to analyse it that, even with an effective Freedom of Information Act, which we do not have, or powerful judicial review, I am not convinced that we would get the benefits that new clause 1 would provide.
      In the absence of new clause 1, it is relevant to ask how much confidence we can have in the numbers that we are given. I worry that, as matters stand, we cannot rely on the National Audit Office alone to do the scrutiny job. Clause 11 grants a great deal of power of scrutiny to the NAO. It sounds good. Clause 11 states:
      The Treasury shall send accounts … to the Comptroller and Auditor General.
      The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself that they present a true and fair view.
      The problem is that the Treasury controls the standards and definitions that lie behind that auditing process.
      The nub of the need for new clause 1 can be found in clause 5(2) and (3), which state:
      Resource accounts shall be prepared in accordance with directions issued by the Treasury.
      The Treasury shall exercise the power to issue directions under subsection (2) with a view to ensuring that resource accounts conform to generally accepted accounting practice subject to such adaptations as are necessary in the context of departmental accounts.
      In other words, the Treasury can do more or less what it likes. We have only assurances to protect us from the Treasury's exercise of almost arbitrary power.
      Lest there be doubt about the Treasury's arbitrary power, it is worth considering clause 9. I did not serve on the Standing Committee that considered the Bill. I started to come to the view that I am expressing this evening

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      through reading the clause carefully recently. Hon. Members should take its phraseology into account. Clause 9 states:
      The accounts shall contain such information in such form as the Treasury thinks fit, and be designed to conform to generally accepted accounting practice—
      Mr. Deputy Speaker: Order. I have difficulty with the hon. Gentleman's reading various clauses. We are considering new clause 1, and the hon. Gentleman should refer to that.
      Mr. Tyrie: The purpose of new clause 1 is to ensure that the Treasury cannot merely decide that the
      accounts shall contain such information in such form as the Treasury thinks fit, and be designed to conform to generally accepted accounting practice subject to such adaptations as are necessary in the context,
      but that it should be subject to what an independent body says. That is nub of the argument. Far from straying from the point, Mr. Deputy Speaker, I believe that I was right on the button when I read out clause 9(2).
      Mr. Gerald Bermingham: On a point of order, Mr. Deputy Speaker. If the Chair makes a ruling that a point is out of order, is it right for an hon. Member to challenge the Chair without having the decency to allow the Chair to answer?
      Mr. Deputy Speaker: I am very capable of dealing with these matters.
      Mr. Tyrie: I have never doubted that, Mr. Deputy Speaker. For the sake of the record, I should like to say that I was not for one moment seeking to challenge your authority or your ruling, as I think you will understand.
      It being Ten o'clock, the debate stood adjourned.
      Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),
      That, at this day's sitting, the Government Resources and Accounts Bill may be proceeded with, though opposed, until any hour.—[Mr. McNulty.]
      Question agreed to.
      As amended in the Standing Committee, again considered.
      Question again proposed, That the clause be read a Second time.
      Mr. Tyrie: I would describe clause 9(2) as the ultimate "Trust us" clause: "Do whatever the Treasury thinks fit, and we can just jog along."
      In fact, the situation is much worse than that, because in other parts of the Bill, the NAO's powers of access are being restricted: access to service providers to find out information, access to information on quangos, access to enable it to audit departmental performance measures and much else that we shall come on to later and that I shall not discuss at any length now. The fact that the NAO does not have unfettered powers of access is a further cause for concern and a further reason why the new clause may ameliorate the situation.
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      Clause 9 says, "Trust the Treasury". Why should we? I used to work in the Treasury, and I can assure every hon. Member that it is a great place, full of stout chaps and chapesses, full of very able people. But, although the Treasury is Whitehall's policeman, it is ultimately an institution which itself needs to be policed.
      It was partly with that in mind that after I worked in the Treasury I started to write a long pamphlet, or a short book, on the control of public spending, in which I proposed a new clause 1. Of course, it was not called "new clause 1". The paper was finally published in 1996. I wrote:
      A further safeguard … would be to create a small independent fiscal policy committee with a few full-time staff. Answerable to the Public Accounts Committee,—
      that answers the point raised a moment ago—
      … its primary role would be to police the definitions—
      that is, the standards—
      in the public accounts (including 'capital accounts'),
      which is a crucial issue in the whole debate.
      So the idea of new clause 1 is not new. I did not invent it; I picked it up off ideas that were floating around in New Zealand at the time. I did not use the internet to find that out; I dropped them a line. The idea of having an independent body to police parts of fiscal policy and the accounts is of very long standing and is one that should commend itself to the House.
      I hesitate to read out the new clause, because I do not want to be ruled out of order. Subsection (2)(c) is targeted specifically at the deficiencies of an institution that already exists, the Financial Reporting Advisory Board. The main weaknesses of that body are that the Treasury appoints its members and that it reports not to Parliament, but to the Treasury.
      Mr. Letwin: The body could be the FRAB in a new form—I am sure my hon. Friend is about to come on to that—or to a specially constituted national accounts commission, which is where we started.
      Mr. Tyrie: As I understand it, the FRAB has a very worthy role. It advises the Treasury on how to reconcile public and private accounting practices, but in my view it cannot do much to bolster the credibility of the numbers in resource accounting, because it is not independent of the Treasury. Clearly, it cannot be independent if it is appointed by the Treasury and answerable to it.
      I do not want to suggest that all these problems have suddenly developed out of thin air. The Bill has not suddenly created a huge new crisis in the accounts. The existing system is not perfect, which is why the Bill is being brought forward. It is worth bearing in mind the system that we have in place—the Gladstonian system of scrutiny, which would be partly replaced by the new clause.
      Mrs. Dunwoody: I hope that it will not come as too much of a shock to the hon. Gentleman to learn that hon. Members are often not astonished when the Treasury manages to fiddle the figures. We are only astonished that it ever does anything else.
      Mr. Tyrie: Having worked in the Treasury, I can assure the hon. Lady that, although fiddles may occasionally have happened, they were the exception

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      rather than the rule. I shall say more shortly about how these ghastly practices get going in the Treasury, and about whether they are more prevalent now than they were in the old days; but I shall take her intervention as well meant, which I am sure it was.
      Let me say something about the existing system. Earlier, I asked whether, if we could not have new clause 1, it was worth having resource accounting at all. The alternative to resource accounting is the existing system, which is at least fairly clear and understood by most Members. Incidentally, I thought that that was what the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) was going to say. Under the existing system, Parliament votes annual cash amounts, Departments explain how they are spent in appropriation accounts, the NAO checks that those Departments have done what they said they would do with the money, and the PAC reports to Parliament on the reports produced by the NAO.
      As I said, the system of cash accounting is fairly clear and well understood, although it has led to many problems historically, largely as a consequence of inflation. Gladstone devised the system in a deflationary era, but it did not stop a lot of ripping wheezes getting into the accounts. I use the phrase "ripping wheezes" because it was used in a book by Joel Barnett, now Lord Barnett, called "Inside the Treasury", in which he described how he used to engage in such activities. He would sit down with a group of officials, and work jolly hard at getting as many ripping wheezes as possible into the accounts to fiddle the public sector borrowing requirement.
      It is not just coincidence that no such passages will be found in the memoirs of Nigel Lawson or Geoffrey Howe. As far as I know, no such committees were convened to fiddle the accounts at that time. I believe that, on the whole, the problem of ripping wheezes has been more prevalent under Labour than under Conservative Governments. There is a good reason for that. On the whole, during most of the post-war era, Conservative Governments have been keener to see a lower PSBR than Labour Governments. That does not mean that the PSBR has not sometimes become unacceptably high under Conservative Governments, but it reflects a difference of intent, and a different level of concern about the PSBR, which has led, partly, to the package of confidence-building measures that the incoming Labour Chancellor felt obliged to introduce as soon as he took office in 1997.
      Mr. Bermingham: I sit here quietly amazed—indeed, I have sat here for years, although mostly on the Opposition Benches, quietly amazed—at the misleading information that has been given. Am I to understand that the hon. Gentleman, a former employee of the Treasury, is blatantly admitting that over the years the Treasury has fiddled the figures time and again? If so, I—who declare an interest as a prosecuting counsel—shall be only too happy to call him as a witness against his own Government.
      Mr. Tyrie: Hansard will reveal whether I am right, but I thought that I was saying that ripping wheezes—itself a phrase used by a former Labour Chief Secretary to the Treasury—were very prevalent under Labour Governments, and far less prevalent under Conservative Governments. As far as I can recall, when I was an adviser to a Conservative Chancellor I never sat at a table with others trying to work out ripping wheezes, but when
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      I consult the memoirs of former Labour Treasury Ministers, I find that they are happy to describe their participation in just such events. Indeed, they are proud to have been inventive enough to find ways in which the PSBR could be massaged down to stave off yet another crisis in the markets.
      Ripping wheezes are still prevalent in the existing system. One that has carried on under both Conservative and Labour Governments is export credit guarantees. I have had a serious go at looking at the accounts of the Export Credits Guarantee Department. They are completely impenetrable; they are utterly incomprehensible. Why? Because they often conceal several billion pounds a year of public money, which is being poured down the drain for purposes that I have not yet fully been able to fathom.
      The PFI is another ripping wheeze. It can easily turn into a means of passing to future generations the cost of benefits that we are enjoying now. It is a dangerous precedent.
      Mr. Desmond Swayne: On the PFI, does my hon. Friend share my scepticism about the PFI attempting to draw the private sector into the provision of finance at which the state is much better? The taxpayer often gets a worse deal.
      Mr. Tyrie: My hon. Friend makes his own point in his own way. I enjoyed it very much.
      Mr. Oliver Heald: Would my hon. Friend like to comment on the concept of the year-end?
      Mr. Tyrie: I am at risk here. I think that I will leave the year-end for another week, if not another year.
      I could mention one other little fiddle that the Government have engaged in: the working families tax credit. As it has been talked of in some detail, I will not develop it further.
      I have argued that we need independence and the drawing-up of standards and definitions in accounts. That is already a significant problem in the system that we have now, but it is likely to become much worse under a system of resource accounting. I wish to cite a few areas where there is a risk of the problem becoming more serious.
      How will some of the Government's assets be valued—for example, recreational facilities such as public parks? How will we score parks under resource accounting? Does that not leave huge scope for massaging the figures? How will defence assets be scored under resource accounting? How much confidence can we have in the assumptions that the Government make when putting them into resource accounts? Would it not be better if an independent body scrutinised the definitions and standards that were applied?
      The key PFI issue with respect to resource accounting is: are PFI projects to be on the balance sheet of the Department? Huge future commitments are involved with the PFI. There is a clear case for putting them on the balance sheet.
      What about provisioning, which has not been raised at all? How will the public sector be protected from the pernicious effects of what is known as teaming and lading? I cannot possibly expect the Minister to know the

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      answer off the top of her head, but I should be grateful for some response from her via the Box on provisioning, which is central to time-sensitive issues in public accounts. That is what resource accounting is intended to improve.
      Resource accounting can all too easily become a means for getting future generations to pay for present spending. We should be extremely cautious about that. That is why new clause 1, which creates an independent body, will be such a help.
      10.15 pm
      I said at the start of my speech that I wanted to discuss briefly some of the wider benefits that I think will come from the creation of an independent body. There are several such benefits, which will go far beyond merely clamping down on the scope for creative accounting.
      The body could, for example, give much greater credibility to the Red Book and assist in giving the public a wider understanding of macro-economic policy. I have not met anyone who understands the current Red Book. I do not understand it, although I used to try to help to draft earlier ones. I used to sit down with late drafts of the Red Book and try to improve them.
      I do not have a clue about the current Red Book. It does not matter which way up it is held, it is basically gibberish. All the definitions have been changed, there is no continuity in the series, and many of the phrases and much of the language is impenetrable. It has become a glossy apology for the lack of an explanation of what is going on in the economy.
      Without an independent body to keep an eye on all that, I can easily see how resource accounting will make the Red Book even more difficult to understand, as we shall have a series of resource accounting standards built into a whole host of numbers. For a start, we shall have several sets of parallel accounts that could be extremely difficult to cope with.
      I should give an example of one crucial concept that could get badly mucked around by resource accounting in the Red Book. The golden rule is a key notion in which the Government place great store. I think that it is a lot of nonsense, and, these days, so do the German Government, who more or less invented it. Nevertheless, just as the German Government have more or less abandoned the notion, the Labour party has discovered it.
      On Second Reading, when I asked the Economic Secretary—who is having a chat at the moment—whether resource accounting would affect the calculation of the golden rule, which will be applied in the Red Book, she said:
      I should not imagine that it would.—[Official Report, 6 December 1999: Vol. 340, c. 650.]
      I must admit that I was a bit perplexed by that answer. Much nearer to the right answer is one that I received, via the Library, from the Office for National Statistics, which states:
      Initial estimates, based on dry run resource accounts for 1998/99, suggest an upward revision of the estimated capital stock of central government at end-1998 of around £6 billion. However, this is offset by downward revisions to the figures for local authorities and public corporations based on evidence from other sources. Overall the public sector depreciation charge for 1998 might be revised up by around £¾ billion.
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      Resource accounting will therefore have huge effects—£5 billion or £6 billion in one direction, and £5 billion or £6 billion in the other—on the calculation of the golden rule. Although the Government say that the golden rule is one of the most fundamental concepts that they have introduced—I believe that it is a nonsense concept—the Minister was not even aware that it might be seriously affected by the introduction of resource accounting.
      The independent body could, because it would truly be independent, decide to examine such issues. It could thereby give much greater credibility to the accounts, including the accounts provided in the Red Book. It could also help to establish a commonly agreed set of public accounting concepts by which Government performance could be judged, not only on individual spending programmes, but on overall macro-economic policy.
      I fear that, far from moving in that direction, we are moving in the opposite direction. We are seeing the National Audit Office being used to give an air of respectability and stamp of approval to a whole range of tasks and issues, including the national accounts, when in fact no such respectability is deserved. The Government pretend that the fiscal forecast, for example, is being properly vetted by the NAO. However, in truth, the NAO does not examine the revenue or the expenditure assumptions in any detail at all. It cannot do so, it is not authorised to do so, and it does not have the resources to do so. In any case, the Treasury would not want it to.
      The truth is that there is no real scrutiny of the fiscal forecast at all. It is just the type of function that a truly independent body, once created, could get its teeth into, and that would be immensely beneficial to assist with an understanding of what is going on in the public accounts, in enabling a wider public debate, and, ultimately, in strengthening democracy. That is why I favour an independent body with a name along the lines of "Fiscal Policy Committee". That would be preferable to some of the other names that have been suggested.
      As I have tried to explain, the existing code for fiscal stability is meaningless, because the numbers are so easily subject to manipulation by the Treasury. That is true even before resource accounting. I shall give one example of how easy it is to fiddle the numbers. I should be fascinated to know what assumptions are built into the forecast for the oil price. Perhaps the Minister will be able to tell me—or perhaps she will decide that she does not want to. Do the Government assume that the oil price next year will he the same as it is today? Have they taken an average of the past three months, six months, nine months or 12 months, or is the price for oil in the futures market being used? Each of those assumptions will have dramatically different effects on the bottom line—the public sector financial deficit, as we now have to call it, although it is nearly the same as the public sector borrowing requirement. It is one of those numbers that has been put in the Red Book more to confuse than enlighten us. The NAO is not authorised to go into such detail, but an independent body along the lines suggested in the new clause could eventually do so. That would be all to the good.
      The case for an independent body is overwhelming. I cannot think what possible reasons the Government have for opposing the new clause, unless it is that they want to retain the freedom to carry on with the ripping wheezes and fiddles. I understand that by accepting the new clause, the Treasury would be passing up the

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      opportunity for a good deal of leeway for creative accounting, but the Government must realise that not just all the logic but much accounting practice worldwide points to the creation of such an independent body.
      I said at the start of my speech that resource accounting without full public scrutiny and transparency would not deliver enough public confidence and might not be worth having. Ministers need to think carefully about that issue. I strongly urge them either to accept the new clause or to come forward with a similar proposal to ensure public confidence and bolster democracy.
      Mr. Swayne: I came late to the debate from Standing Committee F. I came with some suspicion, because I do not normally support consensus. I am normally particularly suspicious when there are such strange bedfellows as those who tabled the new clause. However, having listened to the debate, I am increasingly persuaded of the merits of the new clause. The Bill would be a poor affair without it.
      In the interests of brevity, I shall deal with subsection (2) and then go on to the purpose of the new clause outlined in subsection (1). Whatever those who have framed the clause might be accused of, it cannot be of not presenting sufficient choice to the Government. The Government have a wide range of options to debate on how the independent body should be constituted.
      I shall run briefly through the three options. Subsection (2)(a) refers to
      an existing body serving the accounting profession in the UK.
      One of my annual pleasures in this place has been to chair parliamentary gatherings of the Southern Society of Chartered Accountants. A finer body of men there could not be. They might well fulfil the function outlined in the paragraph, but their concerns might lack the national focus that would be required.
      Equally, paragraph (b) identifies
      an existing international body serving the accountancy profession…
      That would be a fundamental requirement, as the international angle is very important. However, such a body would lack the proper focus of the Southern Society of Chartered Accountants with its parochial concerns. There has to be a balance between the two, so undoubtedly we are led by a process of elimination to paragraph (c), which identifies
      a new body, established for that purpose,
      as such a body would have the advantages of the Southern Society of Chartered Accountants and the international accountancy profession, with their national and regional perspectives and, I would suggest, the parliamentary gate-keeping role of the Public Accounts Committee, chaired by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). Only a combination of all those attributes would produce a body that was truly fitting of the term "Independent Body" as set out in subsection (1) of the new clause.
      Mr. Graham Brady: Is not my hon. Friend concerned that the process of appointment to a new body might be suspect, or not as rigorous as one would wish, whereas paragraphs (a) and (b) would allow the designation of an existing body of undoubted standing and repute?
      Mr. Swayne: That is entirely true, but the possibilities outlined in paragraphs (a) and (b) are simply too narrow.
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      They do not fit the bill, so inevitably we shall have to take the risk that my hon. Friend has quite properly drawn to our attention. If the new clause was tabled because we do not trust the Treasury, one of the drawbacks of establishing a new body is that we do not trust the Treasury to make appointments to it. Nevertheless, to fulfil properly the challenge presented by the new clause, we have to choose option (c), despite the clear risk in respect of appointments to that body. However, if we take elements of (a) and (b) and merge them into a new (c), we shall end up with a body that will command the respect that subsection (1) of the new clause demands of it.
      I now move briefly into my analysis of subsection (1), which goes to the heart of the Bill and provides a remedy to the problem that emerges from the Bill and our distrust of it, and to the problem that the Bill attempts to address—namely, our concern about resource accounting within the wider concept of national accounting.
      Ever since the national accounts were first framed, we have argued about what they meant and what they were supposed to mean. We needed to draw up those accounts within the perspective of resource accounting because we wanted a measure of economic activity rather than just numbers. We wanted to know that economic activity represented genuine economic welfare. Initially, there was a requirement for an independent body to calculate what constituted economic activity in the first place, and that role was taken by academics at the universities. However, they could not agree what constituted the economic accounts, taking into account resource accounting.
      Many hon. Members will remember the study by E. J. Mishan, which pointed out that the accounts meant the reverse of what they purported to mean, that many of the benefits of economic growth were in fact costs, and that therefore the accounts were meaningless because of their inability to provide a true measure of the resource in resource accounting. As a result, the Treasury found itself responsible for calculating the national accounts.
      10.30 pm
      The national accounts grew out of the desire to measure economic activity at a time when it was fashionable to believe that the Government could determine the level of economic activity. That was the essence of the science of macro-economic management, and the national accounting procedure was a means of measuring the effectiveness of Government policy. However, giving the Treasury the means of measuring the effectiveness of Government policy makes nonsense of independent scrutiny—the poacher is thereby turned gamekeeper.
      Mr. Edward Davey: I am slightly perplexed. Is not the hon. Gentleman confusing the national accounts that measure economic activity with those that measure the state of the public finances?
      Mr. Swayne: No, I do not believe that I am. The purpose of resource accounting is to take into account the wider concept of assets and liabilities. They are the essence of the national accounts, in terms of the measurement of economic activity and welfare.
      However, I want to concentrate on the problems with the Bill. There was always considerable debate about what constituted the national accounts, and how they should be interpreted. Over recent years, the order of that debate has

      259
      changed. What was once an academic and proper dispute is now based on distrust. I trace that to our entanglement with the European Union.
      Much of the negotiation that takes place in the EU is clouded with the proper secrecy of diplomacy. No one can reveal his hand in negotiations, because neither adversaries nor partners should know what that hand contains. A culture of secrecy and deceit—
      Mr. Deputy Speaker: Order. The hon. Gentleman is straying rather wide of the new clause.
      Mr. Swayne: I accept your stricture, Mr. Deputy Speaker. However, my point is that the tendency towards secrecy and clouding true meaning in all aspects of policy was typified by the Treasury. The result is that we now dispute any figure that the Treasury or any other Government Department produces. At Question Time every day bar Friday, for at least an hour hon. Members in this Chamber dispute what figures mean and argue about their accuracy. That is symptomatic of the problem that new clause 1 attempts to resolve.
      I suggest that the new clause is absolutely desirable for that reason alone. The requirement for an independent body to scrutinise the figures would at least mean that we could agree what the figure was. We could then concentrate our arguments on the interpretation of that figure. However, people everywhere believe that Governments—of all parties—set out to deceive them.
      A number of hon. Friends have mentioned examples of how that phenomenon manifests itself. I do not want to go down that road, but in a brief intervention on my hon. Friend the Member for Chichester (Mr. Tyrie), I took up his example about the private finance initiative. That is an area on which an independent review body would shed a great deal of light. My view is that the Government can raise finance rather more cheaply than any other body in the realm. Therefore, it is unlikely that they will be bettered by private initiatives, which are normally required for management rather than financial purposes.
      Mr. Deputy Speaker: Order. We are talking about an independent body, and I should be grateful if the hon. Gentleman would refer his remarks to that.
      Mr. Swayne: My suggestion was that the independent body would clarify issues of resource accounting where they are currently unclear.
      Mr. Robert Syms: Does my hon. Friend consider that any independent body should have both gender balance and ethnic representation?
      Mr. Swayne: No, I do not, because as my hon. Friend knows, I am gender blind. I have never divided humanity into two antithetical categories whose interests differ. However, I think that it is now proper to return to the discussion of what should constitute that independent body.
      I have already rehearsed the arguments with respect to the opportunities afforded by new clause 1(2)(a), (b) and (c). I reiterate my preference for paragraph (c), which would shed a great deal of light on the issues that have been brought before the House this evening.
      Miss Melanie Johnson: I have listened very carefully to the points raised by Opposition Members and by my hon. Friends. Very few of the points made by Opposition Members had not been made before, and at considerable length. We heard some very reiterative speeches. Perhaps it was typical of the standard of some of the contributions to the debate that the hon. Member for Chichester (Mr. Tyrie), in discussing ripping wheezes—which was probably a ripping wheeze itself—referred to that as an expression that Joel Barnett had used in his book: although it was used and quoted by Joel Barnett, it was dreamed up by Harold Lever. I presume that that was symptomatic of the accuracy of the hon. Gentleman's general grasp of this whole area.
      Mr. Tyrie: Will the Minister give way?
      Miss Johnson: No, I am not giving way, I am afraid.
      Mr. Tyrie: Will the Minister give way?
      Miss Johnson: No, I am giving way to no one.
      The Government do not accept that it is necessary to designate an independent body to specify the detailed accounting requirements for resource accounting and budgeting and whole of Government accounts. We believe that our proposals to follow the generally accepted accounting practice gap, modified only as necessary to take account of the specific requirements of resource accounts and the requirement for accounts to present a true and fair view, provide a robust and professional framework for determining departmental accounting policies. All accounting policy issues are subject to the oversight of the Financial Reporting Advisory Board which provides an independent scrutiny and which can, and does, report to Parliament.
      My hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) made a good point about Conservative Members' failure to explain the difficulties of the new clause. The Treasury, unlike the proposed independent body, is accountable to Parliament. It is simply not feasible to put Parliament in charge of accounting policies. The Treasury is accountable to Parliament; obviously the independent body would not be. No one managed to address that point in the lengthy speeches in favour of the new clause and the amendments. The Government's policies—
      Mr. Edward Davey: Will the hon. Lady give way?
      Miss Johnson: No, I am sorry; I am not giving way.
      The Government's proposals will mean that the Treasury has little discretion in the setting of accounting policies. That is in contrast to the present system, in which the Treasury has almost total freedom to determine the policies to be followed. The proposed system does not require the designation of either an existing body, or a new body, to determine those policies.
      A framework has already been put in place—indeed, it was established by the Conservative Government—to ensure that there are limits on the Treasury's discretion. That framework is working—unlike some of the other measures introduced by the Conservatives.
      The Maastricht—[Interruption.]—The hon. Member for Ribble Valley (Mr. Evans) asks whether I am taking interventions. He has only just entered the Chamber—no

      261
      doubt, he has just come back from dinner. I took many interventions during my previous summing-up but given the quality of the debate on this group, I propose—
      Mr. Deputy Speaker (Mr. Michael Lord): Order. Hon. Members must not enter the Chamber and shout remarks from sedentary positions.
      Miss Johnson: Thank you, Mr. Deputy Speaker. I am not proposing—
      Mr. Heald: On a point of order, Mr. Deputy Speaker. You will have heard the Minister refer to her remarks as "summing-up". Is it in order for her to sum up? Should she not be replying to the debate?
      Mr. Deputy Speaker: The words that the Minister uses are entirely a matter for her.
      Miss Melanie Johnson: In response to the points made by the hon. Member for Stone (Mr. Cash), who is no longer in the Chamber, the Maastricht convergence criteria are measured on the basis of the European system of accounts definitions. The national accounts prepared by the Office for National Statistics are, and will continue to be, prepared according to those definitions. The problems that the hon. Gentleman foresees are non-existent.
      Mr. Ruffley: Will the hon. Lady give way?
      Miss Johnson: No, I shall not give way.
      On the points made by the hon. Member for Chichester, provision in the resource accounts will be determined in accordance with strict criteria laid down in financial reporting standard No. 12, issued by the Accounting Standards Board.
      The hon. Gentleman referred to the place of judicial review. Clause 5 should not give rise to an action for judicial review. It covers only the preparation of resource accounts by Departments. It would be impossible for an individual to identify a decision taken by the Treasury in issuing directions in respect of departmental resource accounts affecting him or her personally that could give rise to such an action.
      Mr. Tyrie: Will the hon. Lady give way?
      Miss Johnson: No, I am not giving way.
      Several hon. Members rose—
      Miss Johnson: I have already pointed out to Opposition Members that I gave way many times earlier. Unfortunately, the quality of the debate does not merit my giving way during its conclusion.
      The amendments also specify that the independent body should be given the duty of issuing accounts directions to Departments for resource accounts. That is unacceptable to the Government. Responsibility for the preparation of accounts must lie with the bodies preparing the accounts. In the case of Departments, that responsibility must lie with the Treasury to ensure consistency across Departments. Giving the responsibility to an independent body would lead to a confusion of responsibility. It might
      262
      also result in conflicts between the requirements of budgeting and public expenditure control operated by the Treasury and the accounting requirements.
      It was interesting that several Opposition Members were pushed into difficulties by my hon. Friends. My hon. Friends referred to the independence of the Bank of England and to the fact that the Monetary Policy Committee still operated under guidelines, and pointed out that Opposition Members could cite no parallels in their proposals.
      In the "Foreword to Accounting Standards", the Accounting Standards Board acknowledges that prescription of accounting requirements for the public sector in the UK is a matter for the Government. Even the board accepts that.
      The new clause and amendments have little to recommend them. I trust that, when they are put to a vote, hon. Members will oppose them.
      10.45 pm
      Mr. Flight: The Government are being what I would describe as extremely 18th century on this subject. It is extraordinary to move towards the greater complication of resource accounting without accepting what New Zealand accepted seven years ago and what the overwhelmingly body of opinion in this country accepts. It is in the country's and the Government's interests to move, at the same time, to an independent body to determine accounting principles.
      The case made for the new clause and amendments, especially by my hon. Friend the Member for West Dorset (Mr. Letwin), was overwhelming. The hon. Member for Kingston and Surbiton (Mr. Davey) correctly pointed out that we would think it extremely strange if companies' accounting policies were determined by their directors. It was also said that we would not tolerate in local government the approach that is being argued for in respect of national Government. It will be strange if, as is likely, the Government end up using the Parliament Acts to enable the Treasury to continue to cook the books. That will not enhance their reputation.
      The point that emerged above all others is that it is in the national interest to take party politics out of public policy on matters such as interest rates, the BBC and the subjects covered by the Bill. It is inevitable that Governments are motivated to cook the books just as they are motivated—if they can—to pursue an interest rate policy in the short term that is designed to help win elections. It is a compliment to this Chancellor of the Exchequer that he has made an art form of that.
      New clause 1 is a compromise and would give the Government substantial choice as to how they might constitute an independent body. As the Minister has pointed out, they are halfway to the requirement with the Financial Reporting Advisory Board, although the central issue is that that body remains advisory, so that, without new clause 1, the Treasury will still have the power to do what it wants.
      The onus is on the Government to tell us why it is not appropriate and in the national interest to have an independent body. They have not made any convincing arguments of principle either in Committee or in this debate. Their one argument was that there was concern that an independent body might not give proper attention to the public interest. Opposition Members have said that

      263
      we would accept a reasonable transparency of override by the Treasury. We have also said that it would be appropriate for an independent body to receive the scrutiny of the Public Accounts Committee.
      An independent body would offer the proper resolution of the many accounting issues in the public sector which are increasingly difficult to resolve. As others have pointed out, the same logic applies to the new statistics commission, which has been widely welcomed across the nation. It is disappointing that the Prime Minister is now trying to restrict the independent scope of that commission. The Government appear to wish to limit its comments to topics that Ministers have requested it to examine, which means that key issues such as police numbers and hospital waiting lists, which are currently outside the scope of national statistics, will remain excluded.
      It is clear that the public are utterly fed up with being given questionable data. They do not believe the data that they are fed. They want accurate, independent data on the Government's performance against their targets, and on the basis of national statistics.
      Mr. Gordon Marsden: That is an extraordinary argument from a Front-Bench member of a party that fiddled unemployment statistics 21 times during its period in office.
      Mr. Flight: If the hon. Gentleman had been in the Chamber longer, he would have noted the to and fro on both sides. It is generally conceded that the current Government have made that into an art form, as compared with the previous Government' s attempts. The reason why we want an independent body is that there is an irresistible temptation for all Governments to endeavour to massage data and statistics in any problematical area. New clause 1 is essentially about preventing that from happening.
      Democracies need the truth. The public are fed up. I participated in a TV debate on the subject a week ago and was pleased to note that one of the brightest rising members of the Labour party utterly supported the case for an independent body. The risk is that Governments will start misleading themselves, will believe data that are misrepresented and will take wrong policy decisions.
      The House might give some thought to the massive new accounting issues that will arise as a result of resource accounting, which should be resolved in a transparent manner: it is in the interest of Governments that they be so resolved. My hon. Friend the Member for West Dorset drew attention to pension liabilities and growing PFI liabilities, as the volume of PFI activity increases. There are the difficult territories of contingent liabilities, Crown immunity and potential NHS liabilities—now running at close to 10 per cent. of budget. There is the issue of whether to account for welfare benefits on a gross or net basis. There are military depreciation and IT depreciation policies, and differences in depreciation policies as between different Government Departments. There is the growing territory of how we account for intellectual property or depreciate it as an asset.
      264
      As to tangible assets, there are the issues of valuation and revaluation. As current events demonstrate, there is a big accounting issue in relation to BNFL.
      Mr. Wardle: If resource accounting takes the ultimate form of a consolidated balance sheet for the whole of Government, can my hon. Friend imagine what the notes to the balance sheet would look like with all the contingent liabilities that he has just described? Is it not vital that the CAG has access to every aspect of the spending of taxpayers' money—particularly in respect of contingent liabilities?
      Mr. Flight: Absolutely right. We will come to that aspect later. It is essential not only that the CAG should have such access but that there should be independent accounting and depreciation policies under which vastly more complicated accounts can be kept. As system that simply relies on an advisory role, when the present system allows different Departments to have different depreciation policies, is non-operable.
      Eventually, there will be consolidated resource accounts that are relatively meaningless. Therefore, I would argue that it is not only against the national interest but foolish for Governments not to see the advantages of having the many difficult decisions of principle that need to be taken resolved for them on a properly transparent and open basis. Governments have to take decisions in difficult areas, many of which involve self-evident conflicts of interest between what might be good for them and what might be correct, and a Government who keep them unto themselves will be accused of taking the wrong decisions—indeed, they could be blamed for decisions wrongly taken for wrong reasons, which may prove embarrassing subsequently.
      The move to resource accounting will be completely untenable unless the new clause is accepted. Cash accounting has remained for nearly 140 years since being established by Gladstone, largely because it is much less complicated. It is much less difficult to cook the books under cash accounting than under resource accounting, which is why the Government sector is out of date in having reached the millennium with cash accounting—but we are moving to all the complications of resource accounting while leaving decisions to the 18th-century approach whereby the Treasury ultimately says what the accounting principles will be. It will have the power to change depreciation policies during the course of the year: to my mind, that simply does not stand up. In essence, it is absurd not to have the one without the other.
      I repeat the point with which I started: the onus must surely be on the Government to put good arguments for not making both changes and for not following the rational route taken by New Zealand, but we have not heard any such arguments from them.
      Mr. Tyrie: Not one.
      Mr. Flight: Not one, as my hon. Friend says. We fully support the new clause, which has cross-party support and wide support outside the House. I suggest that it has wide support in the nation. The Government are misleading themselves if they believe that the considerable increase in the massaging and misrepresentation of figures has been accepted by the voters. I repeat, for the third time,

      265
      that people are fed up with data on which they cannot rely. In a democracy, they expect accurate data and good figures. We urge the House to support the new clause.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 152, Noes 311.

      Division No. 91]

      [10.58 pm

      AYES

      Ainsworth, Peter (E Surrey)

      Heald, Oliver

      Amess, David

      Heath, David (Somerton & Frome)

      Arbuthnot, Rt Hon James

      Heathcoat-Amory, Rt Hon David

      Ashdown, Rt Hon Paddy

      Hogg, Rt Hon Douglas

      Atkinson, David (Bour'mth E)

      Horam, John

      Atkinson, Peter (Hexham)

      Howard, Rt Hon Michael

      Baker, Norman

      Howarth, Gerald (Aldershot)

      Baldry, Tony

      Hunter, Andrew

      Ballard, Jackie

      Jack, Rt Hon Michael

      Bercow, John

      Jackson, Robert (Wantage)

      Beresford, Sir Paul

      Jenkin, Bernard

      Blunt, Crispin

      Keetch, Paul

      Body, Sir Richard

      Key, Robert

      Boswell, Tim

      King, Rt Hon Tom (Bridgwater)

      Bottomley, Peter (Worthing W)

      Kirkbride, Miss Julie

      Bottomley, Rt Hon Mrs Virginia

      Kirkwood, Archy

      Brady, Graham

      Lait, Mrs Jacqui

      Brake, Tom

      Lansley, Andrew

      Brand, Dr Peter

      Leigh, Edward

      Brazier, Julian

      Letwin, Oliver

      Breed, Colin

      Lewis, Dr Julian (New Forest E)

      Brooke, Rt Hon Peter

      Lidington, David

      Browning, Mrs Angela

      Lilley, Rt Hon Peter

      Bruce, Ian (S Dorset)

      Lloyd, Rt Hon Sir Peter (Fareham)

      Burnett, John

      Loughton, Tim

      Burns, Simon

      Lyell, Rt Hon Sir Nicholas

      Campbell, Rt Hon Menzies (NE Fife)

      MacKay, Rt Hon Andrew

      McLoughlin, Patrick

      Chapman, Sir Sydney (Chipping Barnet)

      Malins, Humfrey

      Maples, John

      Chope, Christopher

      Maude, Rt Hon Francis

      Clappison, James

      Mawhinney, Rt Hon Sir Brian

      Clarke, Rt Hon Kenneth (Rushcliffe)

      May, Mrs Theresa

      Michie, Mrs Ray (Argyll & Bute)

      Collins, Tim

      Moore, Michael

      Cotter, Brian

      Moss, Malcolm

      Cran, James

      Nicholls, Patrick

      Curry, Rt Hon David

      Norman, Archie

      Davey, Edward (Kingston)

      Oaten, Mark

      Davies, Quentin (Grantham)

      O'Brien, Stephen (Eddisbury)

      Davis, Rt Hon David (Haltemprice)

      Ottaway, Richard

      Dorrell, Rt Hon Stephen

      Page, Richard

      Duncan, Alan

      Paice, James

      Evans, Nigel

      Pickles, Eric

      Fabricant, Michael

      Portillo, Rt Hon Michael

      Fallon, Michael

      Prior, David

      Feam, Ronnie

      Redwood, Rt Hon John

      Flight, Howard

      Rendel, David

      Forth, Rt Hon Eric

      Robathan, Andrew

      Foster, Don (Bath)

      Robertson, Laurence

      Fox, Dr Liam

      Roe, Mrs Marion (Broxbourne)

      Fraser, Christopher

      Ruffley, David

      Gale, Roger

      Russell, Bob (Colchester)

      George, Andrew (St Ives)

      St Aubyn, Nick

      Gibb, Nick

      Sanders, Adrian

      Gillan, Mrs Cheryl

      Sayeed, Jonathan

      Gray, James

      Shephard, Rt Hon Mrs Gillian

      Green, Damian

      Simpson, Keith (Mid-Norfolk)

      Greenway, John

      Smith, Sir Robert (W Ab'd'ns)

      Grieve, Dominic

      Soames, Nicholas

      Gummer, Rt Hon John

      Spelman, Mrs Caroline

      Hamilton, Rt Hon Sir Archie

      Spring, Richard

      Hammond, Philip

      Stanley, Rt Hon Sir John

      Hawkins, Nick

      Streeter, Gary

      Hayes, John

      Swayne, Desmond

      266

      Syms, Robert

      Wells, Bowen

      Tapsell, Sir Peter

      Whitney, Sir Raymond

      Taylor, John M (Solihull)

      Whittingdale, John

      Taylor Matthew (Truro)

      Widdecombe, Rt Hon Miss Ann

      Taylor, Sir Teddy

      Willetts, David

      Tonge,Dr Jenny

      Willis, Phil

      Townend, John

      Wilshire, David

      Tredinnick, David

      Winterton, Mrs Ann (Congleton)

      Trend, Michael

      Winterton, Nicholas (Macclesfield)

      Yeo, Tim

      Tyler, Paul

      Young, Rt Hon Sir George

      Tyrie, Andrew

      Wardle, Charles

      Tellers for the Ayes:

      Waterson, Nigel

      Mrs. Eleanor Laing and

      Webb, Steve

      Mr. Peter Luff.

      NOES

      Abbott, Ms Diane

      Cook, Frank (Stockton N)

      Ainger, Nick

      Corbett, Robin

      Ainsworth, Robert (Cov'try NE)

      Corbyn, Jeremy

      Alexander, Douglas

      Corston, Jean

      Allen, Graham

      Cousins, Jim

      Armstrong, Rt Hon Ms Hilary

      Cox, Tom

      Atherton, Ms Candy

      Cranston, Ross

      Atkins, Charlotte

      Crausby, David

      Austin, John

      Cryer, Mrs Ann (Keighley)

      Barnes, Harry

      Cryer, John (Hornchurch)

      Barron, Kevin

      Cummings, John

      Bayley, Hugh

      Cunningham, Jim (Cov"try S)

      Beard, Nigel

      Dalyell, Tarn

      Beckett, Rt Hon Mrs Margaret

      Darling, Rt Hon Alistair

      Benn, Hilary (Leeds C)

      Darvill, Keith

      Bennett, Andrew F

      Davey, Valerie (Bristol W)

      Benton, Joe

      Davidson, Ian

      Bermingham, Gerald

      Davies, Rt Hon Denzil (Llanelli)

      Berry, Roger

      Dawson, Hilton

      Best, Harold

      Dean, Mrs Janet

      Betts, Clive

      Denham, John

      Blackman, Liz

      Dismore, Andrew

      Blears, Ms Hazel

      Dobbin, Jim

      Blizzard, Bob

      Donohoe, Brian H

      Boateng, Rt Hon Paul

      Doran, Frank

      Borrow, David

      Drew, David

      Bradley, Keith (Withington)

      Dunwoody, Mrs Gwyneth

      Bradley, Peter (The Wrekin)

      Eagle, Angela (Wallasey)

      Brinton, Mrs Helen

      Eagle, Maria (L'pool Garston)

      Brown, Russell (Dumfries)

      Edwards, Huw

      Browne, Desmond

      Efford, Clive

      Buck, Ms Karen

      Ellman, Mrs Louise

      Burden, Richard

      Ennis, Jeff

      Burgon, Colin

      Ewing, Mrs Margaret

      Butler, Mrs Christine

      Field, Rt Hon Frank

      Caborn, Rt Hon Richard

      Fisher, Mark

      Campbell, Ronnie (Blyth V)

      Fitzpatrick, Jim

      Campbell-Savours, Dale

      Flint, Caroline

      Cann, Jamie

      Flynn, Paul

      Caplin, Ivor

      Follett, Barbara

      Caton, Martin

      Foster, Rt Hon Derek

      Cawsey, Ian

      Foster, Michael Jabez (Hastings)

      Chapman, Ben (Wirral S)

      Foster, Michael J (Worcester)

      Chaytor, David

      Foulkes, George

      Clapham, Michael

      Fyfe, Maria

      Clark, Rt Hon Dr David (S Shields)

      Gapes, Mike

      Clark, Dr Lynda (Edinburgh Pentlands)

      Gardiner, Barry

      George, Bruce (Walsall S)

      Clark, Paul (Gillingham)

      Gerrard, Neil

      Clarke, Rt Hon Tom (Coatbridge)

      Gibson, Dr Ian

      Clarke, Tony (Northampton S)

      Gilroy, Mrs Linda

      Clelland, David

      Godman, Dr Norman A

      Clwyd, Ann

      Godsiff, Roger

      Coaker, Vernon

      Goggins, Paul

      Coffey, Ms Ann

      Golding, Mrs Llin

      Cohen, Harry

      Gordon, Mrs Eileen

      Coleman, Iain

      Griffiths, Jane (Reading E)

      Colman, Tony

      Griffiths, Win (Bridgend)

      Connarty, Michael

      Grogan, John

      267

      Hain, Peter

      Mahon, Mrs Alice

      Hall, Mike (Weaver Vale)

      Marsden, Gordon (Blackpool S)

      Hamilton, Fabian (Leeds NE)

      Marshall, David (Shettleston)

      Hanson, David

      Marshall, Jim (Leicester S)

      Heal, Mrs Sylvia

      Martlew, Eric

      Healey, John

      Maxton, John

      Henderson, Doug (Newcastle N)

      Meacher, Rt Hon Michael

      Henderson, Ivan (Harwich)

      Meale, Alan

      Hepburn, Stephen

      Merron, Gillian

      Heppell, John

      Michie, Bill (Shef'ld Heeley)

      Hesford, Stephen

      Miller, Andrew

      Hewitt, Ms Patricia

      Moonie, Dr Lewis

      Hill, Keith

      Moran, Ms Margaret

      Hinchliffe, David

      Morgan, Ms Julie (Cardiff N)

      Hoey, Kate

      Morley, Elliot

      Hoon, Rt Hon Geoffrey

      Morris, Rt Hon Ms Estelle (B'ham Yardley)

      Hope, Phil

      Hopkins, Kelvin

      Mountford, Kali

      Howells, Dr Kim

      Mowlam, Rt Hon Marjorie

      Hoyle, Lindsay

      Mudie, George

      Hughes, Ms Beverley (Stretford)

      Mullin, Chris

      Humble, Mrs Joan

      Murphy, Denis (Wansbeck)

      Hurst, Alan

      Murphy, Rt Hon Paul (Torfaen)

      Hutton, John

      Naysmith, Dr Doug

      Iddon, Dr Brian

      O'Brien, Bill (Normanton)

      Illsley, Eric

      O'Brien, Mike (N Warks)

      Jackson, Ms Glenda (Hampstead)

      O'Hara, Eddie

      Jackson, Helen (Hillsborough)

      Olner, Bill

      Jamieson, David

      O'Neill, Martin

      Jenkins, Brian

      Organ, Mrs Diana

      Johnson, Alan (Hull W & Hessle)

      Palmer, Dr Nick

      Johnson, Miss Melanie (Welwyn Hatfield)

      Pearson, Ian

      Pendry, Tom

      Jones, Rt Hon Barry (Alyn)

      Perham, Ms Linda

      Jones, Helen (Warrington N)

      Pickthall, Colin

      Jones, Ms Jenny (Wolverh'ton SW)

      Pike, Peter L

      Plaskitt, James

      Jones, Jon Owen (Cardiff C)

      Pond, Chris

      Jones, Dr Lynne (Selly Oak)

      Pope, Greg

      Jones, Martyn (Clwyd S)

      Pound, Stephen

      Jowell, Rt Hon Ms Tessa

      Prentice, Ms Bridget (Lewisham E)

      Keeble, Ms Sally

      Prentice, Gordon (Pendle)

      Keen, Alan (Feltham & Heston)

      Primarolo, Dawn

      Kemp, Fraser

      Prosser, Gwyn

      Kennedy, Jane (Wavertree)

      Purchase, Ken

      Khabra, Piara S

      Quin, Rt Hon Ms Joyce

      Kidney, David

      Quinn, Lawrie

      Kilfoyle, Peter

      Rammell, Bill

      King, Andy (Rugby & Kenilworth)

      Rapson, Syd

      King, Ms Oona (Bethnal Green)

      Reed, Andrew (Loughborough)

      Kumar, Dr Ashok

      Roche, Mrs Barbara

      Ladyman, Dr Stephen

      Rogers, Allan

      Laxton, Bob

      Rooker, Rt Hon Jeff

      Lepper, David

      Rooney, Terry

      Leslie, Christopher

      Ross, Ernie (Dundee W)

      Levitt, Tom

      Rowlands, Ted

      Lewis, Ivan (Bury S)

      Ruane, Chris

      Lewis, Terry (Worsley)

      Russell, Ms Christine (Chester)

      Lloyd, Tony (Manchester C)

      Ryan, Ms Joan

      Llwyd, Elfyn

      Savidge, Malcolm

      Love, Andrew

      Sawford, Phil

      McAvoy, Thomas

      Sedgemore, Brian

      McCafferty, Ms Chris

      Sheerman, Barry

      McCartney, Rt Hon Ian (Makerfield)

      Short, Rt Hon Clare

      Simpson, Alan (Nottingham S)

      McDonagh, Siobhain

      Singh, Marsha

      Macdonald, Calum

      Skinner, Dennis

      McDonnell, John

      Smith, Rt Hon Andrew (Oxford E)

      McFall, John

      Smith, Angela (Basildon)

      McGuire, Mrs Anne

      Smith, Miss Geraldine (Morecambe & Lunesdale)

      Mackinlay, Andrew

      McNulty, Tony

      Smith, Jacqui (Redditch)

      MacShane, Denis

      Smith, Llew (Blaenau Gwent)

      Mactaggart, Fiona

      Snape, Peter

      McWalter, Tony

      Southworth, Ms Helen

      McWilliam, John

      Spellar, John

      268

      Squire, Ms Rachel

      Turner, Dr Desmond (Kemptown)

      Starkey, Dr Phyllis

      Turner, Dr George (NW Norfolk)

      Steinberg, Gerry

      Turner, Neil (Wigan)

      Stevenson, George

      Twigg, Derek (Halton)

      Stewart, David (Inverness E)

      Twigg, Stephen (Enfield)

      Stewart, Ian (Eccles)

      Tynan, Bill

      Stinchcombe, Paul

      Vis, Dr Rudi

      Stoate, Dr Howard

      Walley, Ms Joan

      Strang, Rt Hon Dr Gavin

      Ward, Ms Claire

      Stringer, Graham

      Watts, David

      Stuart, Ms Gisela

      Whitehead, Dr Alan

      Sutcliffe, Gerry

      Williams, Rt Hon Alan (Swansea W)

      Taylor, Rt Hon Mrs Ann (Dewsbury)

      Williams, Alan W (E Carmarthen)

      Taylor, Ms Dari (Stockton S)

      Williams, Mrs Betty (Conwy)

      Taylor, David (NW Leics)

      Winnick, David

      Temple-Morris, Peter

      Winterton, Ms Rosie (Doncaster C)

      Thomas, Gareth (Clwyd W)

      Woodward, Shaun

      Worthington, Tony

      Thomas, Gareth R (Harrow W)

      Wray, James

      Timms, Stephen

      Wright, Anthony D (Gt Yarmouth)

      Tipping, Paddy

      Wright, Dr Tony (Cannock)

      Todd, Mark

      Wyatt, Derek

      Touhig, Don

      Trickett, Jon

      Tellers for the Noes:

      Truswell, Paul

      Mr. Jim Dowd and

      Turner, Dennis (Wolverh'ton SE)

      Mr. Kevin Hughes.

      Question accordingly negatived.

    New Clause 2

      PUBLIC SERVICE AGENCIES' ACCOUNTS: SCRUTINY
      '.—(1) This section applies to any public service agency of the sort described in subsection (11), unless otherwise provided—

      (a) by any order made under subsection (8), or

      (b) in any enactment passed after this section comes into force.

      (2) On the prescribed date for each public service agency to which this section applies subsections (3) to (6) shall apply to that agency.
      (3) Every public service agency shall prepare accounts in respect of each financial year and shall send them to the Comptroller and Auditor General.
      (4) The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself

      (a) that the accounts present a true and fair view, and

      (b) that any public money provided to the agency has been expended for the purposes intended by the body by which the money was paid.

      (5) Where the Comptroller and Auditor General has conducted an examination of accounts under subsection (4) he shall—

      (a) certify them and issue a report,

      (b) send the certified accounts and the report to the Treasury, and

      (c) if he is not satisfied of the matters set out in subsection (4)(a) and (b), he shall report to the House of Commons.

      (6) The Treasury shall lay accounts and reports received under subsection (5)(b) before the House of Commons.
      (7) Subsections (3) to (6) do not apply to any body to the extent (but only to the extent) that any of its accounts are or become subject to audit—

      (i) by the Auditor General for Scotland, or

      (ii) by the Auditor General for Wales.

      (8) The appropriate Minister may by order designate a public service agency as one in relation to which this section does not apply for so long as the designation remains in force.
      (9) An order under subsection (8) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of the House of Commons.
      (10) "Appropriate Minister" means, as regards any public service agency to which a designation relates ("the designated agency"), a minister in the department responsible for that agency.
      (11) "Public service agency" means a body—

      (a) which is not a government department or comprised within a government department,

      (b) which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government, and

      (c) as respects which an accounting officer has been designated,

      but does not include a public service agency which is a company registered under the Companies Act 1985.
      (12) In this section "prescribed date" means, as regards each public service agency, the first day of the first full financial year of that agency commencing after the expiry of the term of appointment of the person who is the auditor of the agency when this section comes into force!.—[Mr. David Davis.]
      Brought up, and read the First time.
      Mr. David Davis: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 32 and 33.
      Mr. Davis: New clause 2 deals with the audit of executive non-departmental public bodies. I am sorry to inflict such an ungainly phrase on the House, but it is a term of art in government; it means quangos. It has no statutory definition, and that is why the term does not appear in the new clause. Its practical definition is contained in the annual Cabinet Office publication, "Public Bodies"—
      Mr. Deputy Speaker: Order. Would hon. Members who do not intend to participate in or listen to the debate please leave the Chamber and allow us to hear the hon. Gentleman who is addressing the House?
      Mr. Davis: Thank you, Mr. Deputy Speaker. The practical definition in "Public Bodies" is:
      The set of bodies which exercise public functions of a governmental nature which might otherwise fall to be exercised by Government.
      They are more familiarly known as quangos. The new clause uses the definition in "Public Bodies".
      Audit arrangements for executive non-departmental public bodies are arbitrary and illogical. A substantial minority are audited by auditors other than the Comptroller and Auditor General. The decision about who will audit each newly established body is made by the individual sponsoring Department when the body is established. Consequently, there is a lack of consistency in the information that is provided to Parliament, and unnecessary waste and duplication of audit effort.
      That contrasts with what happens when the Government of the day choose to reorganise or create a new Department. The Exchequer and Audit Departments Act 1866 currently provides automatically for the Comptroller and Auditor General to audit the new Department. The Bill would maintain that principle.
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      11.15 pm
      The new clause is the first step in obtaining for public bodies the same systematic audit coverage as has been in place for Departments for over 130 years. I say that it is the first step, because it does not deal with those executive non-departmental public bodies established as companies. The Companies Acts prevent the Comptroller and Auditor General from auditing a company, even where it has been established by central Government and is responsible for the stewardship of public funds. I have been advised that it would be outside the scope of the Bill to seek to amend the Companies Acts, but I shall be pursuing that matter in the context of the Government's review of companies legislation.
      Leaving aside the issue of companies, I would point out that the new clause would provide a single accountability structure, appointing the Comptroller and Auditor General as auditor of all executive non-departmental public bodies already in existence and of any new bodies of this nature created in the future.
      I should make it clear that I am talking about non-devolved bodies. I do not seek to reverse the clear—
      Mr. Bermingham: May I ask the right hon. Gentleman, through you, Mr. Deputy Speaker, a simple question? He is an experienced Member of this House, as indeed I am. Does he need to read his speech?
      Mr. Davis: In fact, on this occasion I need to stay close to the notes, and there is a good reason for that. These amendments have been drafted by the National Audit Office, and it is important that the issues that I put before the House reflect accurately both the report that the Public Accounts Committee put to the House and the drafting. For that reason, I am staying close to the notes, just as the Minister will stay close to the notes. That is the reason, and I make no apology for it. I would not seek to comment on the motivation behind the hon. Gentleman's intervention.
      I do not seek to reverse the clear decision of Parliament in placing accountability of certain bodies within the audit committees of the Scottish Parliament and the National Assembly for Wales. The new clause specifically excludes those bodies.
      At this point, I should like to take the opportunity to congratulate the Government on their record to date in appointing the Comptroller and Auditor General to audit nearly all the non-executive departmental bodies that they have created—19 out of the 21 so far, I think. They have a good record, and I hope that it will continue.
      The new clause would make that pattern systematic, rather than the subject of myriad individual decisions, and would deal with the legacy of existing anomalies. I have developed a new clause that I tabled in Committee specifically to address concerns that the Government expressed there. The Chief Secretary told the Public Accounts Committee that the Government would need a period of consultation before changing statutory arrangements that affected other bodies. I have allowed for that by deleting from the proposal that I tabled in Committee the provision that would have brought the new clause into effect immediately the Bill took effect. As a result, the Treasury can delay the implementation of the new clause to a time of its own choosing. That reflects the discussions that the Chief Secretary had with the

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      Committee, because he was concerned to be able to consult and seek the opinions of Departments up and down Whitehall and of the other bodies involved.
      Such a statutory approach is not only right in principle but essential in practice. The Chief Secretary gave the Committee a commitment to explore the possibility of appointing the Comptroller and Auditor General as auditor when appointments came up for renewal. Such appointment would be impossible in all but a handful of cases, because statutory provisions restrict the Comptroller and Auditor General from doing just that.
      The Government now appear to have acknowledged the problem. They have tabled an amendment which allows the Treasury, if it chooses at some future date, to remove the statutory bars and provide for the Comptroller and Auditor General to be appointed as auditor. The decisions would still be in the hands of Government. My amendment seeks to establish the general principle that all such bodies, both those already established and those to be established in the future, should be audited by the Parliament's own auditor, and that these decisions should not be at the whim of Government—whether the present Government or any future Government.
      My new clause also allows the Government a right of veto in regard to anyone whom they identify as not appropriate for audit by the Comptroller and Auditor General. I cannot imagine what such a body would be, but the reassurance is there for the Government. Hon. Members may ask what is the point of the new clause if it allows such a veto. The point is that it would establish in statute the principle that the CAG should be the auditor, except when the Government can show that he should not be. It reverses the burden of proof. That is why 1 prefer my new clause to the Government's proposal.
      We had a useful debate in Committee until, I believe, 9.45 pm on the occasion of the final sitting. Detailed amendments covering a representative selection of individual bodies, tabled by the right hon. Member for Swansea, West (Mr. Williams) on behalf of the PAC, gave the Economic Secretary an opportunity to explain the Government's concerns by reference to specific cases. That helped to clarify my understanding, and showed me how to draft a new clause dealing with reservations that had hitherto been difficult to pin down.
      In explaining why the new clause is important, I want to alert hon. Members to the large amounts of money involved, the illogicality of the present position, and the problems that have arisen in bodies not subject to audit by the CAG. I do not want to repeat what has already been said; rather, I want to develop it. I intend to summarise some facts that show why there is a point at issue, and then deal with what I now understand more fully to be the Government's concerns.
      Let me deal first with the question of money. The Housing Corporation—one of the bodies about which I am talking—receives nearly £1 billion of public money every year, while English Heritage and the Environment Agency receive about £100 million each. Those are just three of the biggest spenders outside the CAG's remit; many others escape his audit. The total comes to some £3 billion a year.
      Secondly, the illogicality involved means that some bodies escape. The CAG audits the Countryside Agency and English Nature, but not the Environment Agency.
      272
      He audits the British Council and the Arts Council, but not English Heritage. As we have seen, some of the exceptions are big spenders.
      Thirdly, in Committee I gave examples of bodies outside the remit of the CAG, to which he was alerted by leads from whistleblowers and others. For example, events leading to the resignation of the chief executive of English Heritage following conflicts of interest were brought to Parliament's attention by the CAG. Serious failures in management by the then National Rivers Authority, including a badly managed relocation project that cost the taxpayer millions, were also thus brought to Parliament's attention. The Merseyside development corporation lost £700,000 on the grand regatta Columbus and the fanfare for a new world concert. The chief executive of the Student Loans Company—not, unfortunately, covered by my new clause, because it is a company—was cleared of malpractice by internal and departmental investigations, but was sacked following a subsequent investigation by the CAG.
      Those matters were not discovered by the private and other auditors that covered the bodies concerned; they were revealed by whistleblowers and others, followed up by the CAG and, as a result, brought to the attention of Parliament. I hope that my observations convince hon. Members that the fact that some non-departmental public bodies escape audit by the CAG gives cause for serious concern.
      Let me now deal with the Government's arguments about why the current uneven situation should continue to exist, and their concern, as expressed, about changing it. I shall begin by analysing explanations given in debate about specific bodies, before turning to more general concerns that have been raised.
      Mr. Letwin: Does my right hon. Friend agree that the Government cannot have much confidence in the arguments that they have advanced? If they did, they would accept his reversal of the burden of proof, and would be willing to demonstrate, case by case, why particular bodies should not be audited by the CAG.
      Mr. Davis: My hon. Friend is right. That was the logic behind the analysis. What I had in mind was that the Government would come to the House with an affirmative resolution procedure to demonstrate whatever good reason there was. That struck me as a perfectly good filter.
      In Committee, the Economic Secretary referred to 22 specific bodies. She identified three categories into which they fell: those which no logical reason prevents the CAG from auditing; those that he "probably should not audit"—her words—because they are levy funded; and those that he should not audit because they are subject to competitive pressures.
      I thank the Economic Secretary for her frankness in identifying the first category and for agreeing that, in some cases at least, there is no logical reason why the CAG does not audit certain bodies. I counted eight entries in that category, more than a third of the sample, including two large bodies that I have already mentioned: English Heritage and the Environment Agency.
      Of those two, the Minister said:
      I cannot say why the Comptroller and Auditor General does not audit those NDPBs … We accept that there is no apparent rationale to some of the anomalies.

      273
      The other bodies in the category were the Football Licensing Authority, the Gas Consumers Council, the British Hallmarking Council, the Museum of London, the Oil and Pipelines Agency and Food from Britain. It is clear that progress must be made to bring at least those eight executive non-departmental public bodies under the CAG's remit.
      I turn to the second category: levy-funded bodies, which had nine entries, according to my count. Six related to agriculture and fisheries: the Meat and Livestock Commission, the Sea Fish Industry Authority, the British Potato Council, the Horticultural Development Council, the Milk Development Council and the Home-Grown Cereals Authority. The other three were the Construction Industry Training Board, the Engineering Construction Industry Training Board and the Policyholders Protection Board.
      On that category, the Minister was equivocal. She said:
      We can debate whether it would be right to appoint the Comptroller and Auditor General as auditor of such bodies.—[Official Report, Standing Committee A, 20 January 2000; c. 288.]
      The hon. Member for Newbury (Mr. Rendel), who is my colleague on the PAC, took up the offer of debate. I can do no better than to quote him:
      A case has already been made for saying that although some bodies may he funded by levy, it is nevertheless money from the public and it is Parliament's job to decide on the amount. It is a good reason for supposing that it is also Parliament's job to ensure that that money is being properly used; how do we know at what level the levy should be set in the following year if we are not sure that the levy set in the previous year was properly used'?—[Official Report, Standing Committee A, 20 January 2000; c. 309.]
      That is an insuperable argument. Those who pay statutory levies have no choice about whether and how much to pay. In those cases, levies are raised not in a commercial environment, subject to competitive pressures, but under the authority of Parliament. 'The CAG audits Departments' expenditure of money that is raised under Parliament's authority through the taxation system. It is clearly appropriate for him to audit the expenditure of money raised under Parliament's authority through levy.
      In any event, the CAG already audits several levy-funded bodies—the Data Protection Registrar, the Land Registry, the Pensions Compensation Board and the Trinity House Lighthouse Board—as well as the gas levy account and the industrial organisation levy account.
      Mr. Edward Davey: Does the right hon. Gentleman understand the term "levy" to cover the television licence fee? According to his argument, should the BBC fall under the NAO's jurisdiction?
      Mr. Davis: The hon. Gentleman is ingenious in returning to the point that was ruled out of order. I recognise that in those terms. There are special considerations about maintaining the BBC's independence. The NAO has been effective at maintaining the independence of, for example, universities and academic freedom, where precisely the same pressures are involved, but he is right.
      Mr. Letwin: Does my right hon. Friend agree that the independence that is treasured is independence of the Executive and that the CAG is not an arm of the Executive and does not compromise independence?
      Mr. Davis: That is right. That is one of the reasons. The CAG is in a peculiar position. He is incapable of
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      being dismissed by the Executive because he is appointed, effectively, by the PAC Chairman, in conjunction with the Prime Minister. He is funded separately. All the protections that he has mean that he cannot be influenced by the Executive. As such, he is appropriate to do the job that the hon. Member for Kingston and Surbiton (Mr. Davey) suggested.
      11.30 pm
      The House may have noted that many of the bodies that I mentioned were Ministry of Agriculture bodies. Recently, we had in front of the PAC Richard Packer, who was having his valedictory meeting with us. We asked him whether he thought that the National Audit Office should audit all of those agricultural bodies. He not only thought that there was no argument whatever against doing so, but was entirely in favour of them being audited.
      I started my comments on this category by saying that the Economic Secretary was equivocal about whether the Comptroller and Auditor General should audit levy-funded bodies. I hope that she, or at least the Financial Secretary, has now heard enough evidence to conclude that, without doubt, the Comptroller and Auditor General should audit them. Those further nine executive non-departmental bodies must be brought under the Comptroller and Auditor General's remit.
      The Minister's third category comprised bodies that operate in a competitive or commercial environment. She identified five bodies in the category: Remploy, the Student Loans Company, the Housing Corporation, housing action trusts and English Partnerships. The first two were not the subject of tabled amendments, because they are companies and, therefore, are excluded. However, it was helpful for the Minister to mention them, as it enabled us to debate more thoroughly the Government's concerns about the third category.
      The Minister stated that the first two bodies operate "in a competitive environment". My hon. Friend the Member for West Dorset (Mr. Letwin) challenged the idea that those two bodies were subject to competitive pressures in the sense that most of us understand them. The Student Loans Company has the characteristics of a monopoly, being organised in such a way that it is the only body in England that is able to offer subsidised loans to students. Remploy would not be sustained by public money if its market niche was well occupied by competitors. Therefore, it, too, must be close to being a monopoly.
      The arguments about the absence of true competitive pressure apply also to the other bodies that the Minister placed in the third category. To be fair to her, she did not claim competition in relation to them, referring to the Housing Corporation simply as "a commercially focused organisation" and to English Partnerships as operating "in a commercial environment".
      Those bodies are not normal commercial organisations that are subject to regulation by the demands of a competitive market, and the Minister, to be fair to her, did not claim that they were.
      Mr. Letwin: Is not my right hon. Friend slightly understating the case on the Housing Corporation? Is it

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      not true that no aspect of its activities bears the remotest resemblance to anything commercial, as it is essentially a regulatory body for housing associations?
      Mr. Davis: It is more than regulatory, as it handles quite a lot of funds, too, but I am trying not to overstate the case. To make the point rather more directly, all those bodies are public bodies delivering against a serious public social policy objective and using public funds to do so.
      Why is it not only appropriate but essential for the Comptroller and Auditor General to audit those bodies?
      Mr. Wardle: I have been listening carefully to my right hon. Friend's comments. He has been talking very persuasively about extending the CAG's audit responsibilities, but, these days, does not the CAG also have a wider responsibility in value for money assessments? Is not that role of growing importance in ensuring accountability of taxpayers' money?
      Mr. Davis: My hon. Friend, who is a colleague on the Public Accounts Committee, is exactly right. To put it crudely, the audit function very often serves as an intelligence-gathering function in much of the value for money work that is done, and also carries with it a function that commercial auditors often do not test: the function of regularity, which is concerned with the proper expenditure of public money. The function deals not only with whether the sums add up and money is not stolen, but with whether the money is spent on the right things.
      That brings me to why it is essential for the Comptroller and Auditor General to audit those bodies. If a body is funded by money provided by Parliament to deliver on behalf of a sponsoring Department public policies approved by Parliament, the question of regularity comes to the fore. If the money has been used other than to pursue the policy objectives laid down for it, its use is irregular. Regularity is an issue on which the CAG frequently reports to Parliament, but it is a concern with which commercial auditors are less familiar.
      Mr. Dale Campbell-Savours: The right hon. Gentleman is dealing with a serious new clause at 11.35 pm. It should have been properly debated earlier. We have spent six hours playing around in the Chamber on nonsense amendments that did not mean anything. Is it not incredible that Parliament has been abused in this way—
      Mr. Deputy Speaker: Order. The hon. Gentleman is an experienced Member of Parliament. He knows that we do not play around with amendments that mean nothing.
      Mr. Davis: I have a great deal of respect for the hon. Gentleman. I am glad that he recognises that the new clause deals with a serious matter. Unfortunately, I do not choose the time at which my amendments are called. I hope that all hon. Members recognise how serious the issue is. I agree with at least that point that the hon. Gentleman made.
      The CAG reports regularly to Parliament on regularity, but commercial auditors are less familiar with the issue. In some cases, they are entirely unfamiliar with it.
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      We have some examples of that. The examples that I quoted earlier of the serious failures in bodies not audited by the CAG included the Housing Corporation and the Student Loans Company. It is clear that those bodies need to be subject to his audit.
      The Minister suggested that the Comptroller and Auditor General might not audit bodies operating in a commercial environment
      as well as auditors who deal regularly with commercial organisations.—[Official Report, Standing Committee A, 20 January 2000; c. 289.]
      Leaving aside the fact that the bodies in question do not operate in a commercial environment in the way in which one would normally interpret the expression, the contention that the CAG is not competent to audit them has no substance in fact. As the hon. Member for Newbury put it:
      there is little argument to suggest that some special expertise is hidden away in the private sector that is not available to the Comptroller and Auditor General.—[Official Report, Standing Committee A, 20 January 2000; c. 310.]
      There are three reasons for that. First, the Comptroller and Auditor General is free to use private sector auditors with specialist expertise if necessary, and he does. Secondly, his staff have undergone the same training process and earned the same qualifications as those in the private sector. Indeed, some of the senior staff are drawn from partners in the major firms. Thirdly, the evidence that we have seen in the PAC shows that private sector auditors are not invulnerable. In some cases, fraud or impropriety have come to light only when the Comptroller and Auditor General has become involved. The examples that I gave earlier show that. I hope that the Minister accepts that the bodies placed in the third quasi-commercial category must be audited by the CAG and that he is perfectly capable of doing that job.
      There are good reasons why the Comptroller and Auditor General should audit bodies that fall within each of the categories. I should like to deal briefly, given the time, with four further matters that the Minister raised in Committee. She said:
      We do not have a one-size-fits-all policy—[Official Report, Standing Committee A, 20 January 2000; c. 288.]
      and later added, confusingly:
      The Government do not view it as sensible to tackle the issue piecemeal.—[Official Report, Standing Committee A, 20 January 2000; c. 300.]
      I think that I understand what the Minister meant and I have developed my new clause in a way that I believe is consistent with her wishes. It is manifestly not piecemeal. It defines a consistent structure under which the CAG would audit every executive non-departmental public body, just as he audits every Department. In recognition of the Minister's concerns, I have included a veto clause that would allow the Government, by order, to specify any body to which they believed that the standard arrangement should not apply. That allows for the possibility of appointing an auditor other than the CAG if the Government identify that such an alternative would be appropriate. The veto addresses the one-size-fits-all issue.
      Secondly, the Minister may have given the impression that she considered that an appropriate alternative to appointing the CAG by statute might be for him to bid for audits put out to tender. That would not be ideal. The CAG's audit should not be allowed only where the price

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      is right or at the whim of the Departments and bodies that should be subject to scrutiny. The CAG must audit on behalf of Parliament by statutory right.
      Thirdly, the Minister pointed out in the context of one body that
      there is already an auditor, who has been appointed for five years.— [Official Report, Standing Committee A, 20 January 2000; c. 299.]
      I accept that that circumstance probably applies in respect of a number of other bodies, although with differing numbers of years of appointment remaining. I developed the new clause to allow appointed auditors currently serving to complete their full terms, so no damages or costs would be incurred in that respect, and the CAG could take over after that. I hope that the Minister accepts that there is no longer an issue here in respect of my revised new clause.
      Mr. Jonathan Sayeed: My right hon. Friend will be aware that one of the dodges used by companies that perpetrate fraud is to change their auditors quite frequently. Is it not important, therefore, that there is consistency of audit? The CAG would provide that consistency.
      Mr. Davis: My hon. Friend is entirely right. However, I do not think that it has been a problem in the public sector. More of a problem has been the varying standard of audit and sometimes too cheap an audit, as occurred in respect of further education colleges where there was significant serial weakness of auditing, which allowed certain problems to arise. I am sure that Treasury Ministers are aware of that, as the Public Accounts Committee reported on the sector. I take my hon. Friend's point that that is a potential risk, but not one that is very material in the public sector.
      Mr. Tam Dalyell: As one who has served under three Chairmen of the Public Accounts Committee, may I ask the right hon. Gentleman whether, as a fair-minded man, he thinks that at 11.40 pm any of us should be asked to take in his speech, which instinct tells us is extremely consequential and important? Would it not be better that we should at least be allowed to see it in print before making any contributions?
      Mr. Davis: I thank the hon. Gentleman for his implicit compliment, but I have to tell him that I have no such opportunity. The Government must choose the timetable on this matter. It is only for me to present the amendments and I am seeking to make the best argument. However, the Bill was debated at length in Committee and many of my points, although not all of them, have been touched on. The debates are available in the Committee Hansard.
      Mr. Rendel: The right hon. Gentleman may wish to point out that there are now more Labour Members present in the Chamber than there were for the earlier debates. Perhaps this is a rather better time for the debate.
      Mr. Davis: The hon. Gentleman is right, but I shall not pursue his point as I am almost at the end of my speech and I do not want to be accused of filibustering.
      Finally, the Minister said:
      if the Comptroller and Auditor General is concerned about what is happening in an NDPB, he can investigate and make a report."—[Official Report, Standing Committee A, 20 January 2000; c. 289.]
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      He does indeed have access to all executive NDPBs by virtue of administrative agreement struck only after years of pressure from the Public Accounts Committee. However, access is a poor substitute for audit, for reasons that I touched on in answer to my hon. Friend some moments ago.
      The Minister's point also begs the following question: how does the CAG know whether to be concerned if he is not the auditor? It is a matter of information flow and intelligence. Where he is not the auditor he relies on tip-offs from whistleblowers and others and that is an intrinsically haphazard method of gathering information. Surely we cannot rely for the probity of our civil service and our public service on the luck of having a whistleblower in the appropriate organisation.
      The alternative is to increase the CAG's regular presence, but that is an avoidable duplication of audit, which the Minister quite properly dislikes. The reliable and best-value solution is to appoint the CAG to audit all executive NDPBs.
      I conclude by expressing the hope that my explanations and clarifications, and my development of the new clause from the version tabled in Committee, will cause the Government to agree that it should be incorporated in the Bill. I should be very pleased if the Government offered to discuss my proposals further, with a view to tabling a further version in the House of Lords. However, I hope that I have dealt with all the issues that arose in Committee systematically, and that I have eradicated all of them.
      11.45 pm
      Mr. Letwin: Before I try to amplify some of the points made by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), I shall respond to the point made by the hon. Member for Linlithgow (Mr. Dalyell). If he thinks that our debates about setting independent standards for the public accounts were footling, his understanding of the relationship between Parliament and the Executive is more lacking than I had thought. It is a matter of the utmost importance. [Interruption.]
      Mr. Deputy Speaker: Order. Regardless of the time, the debate will not be helped by sedentary interventions from hon. Members.
      Mr. Letwin: In our prolonged Committee discussion of the matter incorporated in new clause 2, the Financial Secretary and the Economic Secretary objected to the previous versions of the new clause. Their objections included the proposition that the remit of the Comptroller and Auditor General could not be extended to a wide range of non-departmental public bodies because those bodies were governed by statutes that barred the CAG.
      It is with some surprise, therefore, that we find that the Government have come forward with their own amendment allowing them to circumvent a problem that they claimed in Committee to be insuperable. The amendment would permit the operation of what is in effect a Henry VIII clause by order. There is nothing wrong with that mechanism—there never was, apart from some constitutional implications. However, there was certainly something wrong with the Government's argument that the statutory consideration rendered it impossible to extend the remit.

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      That much was clear—to Conservative and Liberal Democrat Members, and to members of the Public Accounts Committee, at least. We were passing a piece of primary legislation that would undo previous legislation. Our view was that that could be better done by positive enactment, but we joined my right hon. Friend the Member for Haltemprice and Howden in welcoming the Government's conversion to the evident truth that the CAG's remit could be extended.
      That is important. In Committee, the problem was that the Government's objections were based on arguments rather than real reasons. They have now admitted that those arguments were specious, so I hope that Ministers will tell the House the real reason why the Government persist in their objections to the gist of new clause 2. The problem cannot be technical, as I am sure that Conservative and Liberal Democrat Members would all accept that the new clause could be revised and tabled in an amended version, without technical deficiency, in another place.
      What is the difference between the Government's amendment and my right hon. Friend's new clause? As my right hon. Friend identified, it is a difference in the position of the burden of proof. The Government's amendment allows the Government to decide to introduce the Comptroller and Auditor General. The new clause would allow the Government to come forward with reasons why, in a particular case, the Comptroller and Auditor General should not be introduced. The presumption in the new clause is that the Comptroller and Auditor General will have general oversight. We must therefore ask what is the real reason for the Government's belief that it is advantageous for the burden of proof to rest on Parliament. Why do the Government believe that Parliament ought to show the Government the need to extend the remit of the CAG case by case? Why is it not clear to the Government that there is a presumption, a prima facie case, for having the CAG oversee the whole of government, non-departmental public bodies and the rest? Why are the Government resisting the reversal of the burden of proof?
      In Committee, hon. Members from all parties, including members of the Public Accounts Committee, were involved in the common endeavour of identifying the advantages—I think that they came into clearer focus in my mind—of having the CAG as an auditor. We identified in particular the great advantage that the CAG is the platonic ideal of an auditor. He does not suffer from the problem that all auditors in the private sector suffer from necessarily, because they are employed by the people whose accounts they are auditing. While many auditors in the private sector struggle heroically with that problem and overcome it, offering honest and sometimes damning verdicts on their own clients, it is asking a lot of them to rat on the company that employs them. It is remarkable, in fact, that so often the system works. It is an inevitable feature of private sector auditing. One cannot think of anyone who would employ the auditors rather than the directors, but it is the directors that the auditors are ultimately auditing.
      The CAG has the inestimable advantage of not being in that position. My right hon. Friend exposed, in very great detail, the huge array of measures that the previous Government had the wisdom to implement which protect
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      the CAG from any accusation that he is an employee of the Executive that he is auditing. Nor is he employed by the particular Department or non-departmental public body that he is auditing in a particular case, by the Treasury or by the Government—he is employed by Parliament. He is employed by Parliament in a real sense because the parliamentary body, the Public Accounts Committee, which has put forward the amendment is, in effect, his employer. The CAG is in the unique position, not available in the private sector, of carrying out the auditing without there being the slightest conflict of interest.
      Mr. Wardle: I hesitate to correct my hon. Friend, so knowledgeable is he. But surely in the private sector the shareholders appoint the auditor. Are not the shareholders in exactly the same position as Parliament? Is it not Parliament that is calling for the CAG to play that role so far as public sector enterprises are concerned?
      Mr. Letwin: My hon. Friend amusingly describes me as the expert, whereas, through his long service on the PAC and in other respects, he is the expert. Technically, he is right—the shareholders appoint the auditors. However, he will know as well as I do that de facto in the private sector, the directors act for the shareholders. [Interruption.] As my hon. Friend says from a sedentary position, they stand in the position of the Executive or the Government. The difference is that in the public sector we have the great luck—not available in the private sector—that the shareholders meet constantly in Parliament. They are thus genuinely able to act—through the PAC—in a capacity that is not available to shareholders in a normal private company. Of course, those shareholders have the right to approve or disapprove the auditor, but they will almost always act on the recommendation of the directors.
      However, in the case of the PAC and Parliament, the Comptroller and Auditor General is genuinely distanced from the Executive. I believe that my right hon. Friend—or whoever holds his office as Chairman of the PAC—and the Prime Minister share the appointment. It is unique that the Executive should consciously have given a veto power to an agent of Parliament—by convention, an Opposition Member.
      We have a perfect system for avoiding conflict of interest in audit. I return to the question: why, in the light of that, should the burden of proof lie with those who want to extend the remit of the CAG to additional agencies?
      Mr. John Hayes: Before my hon. Friend moves away from the relationship between the CAG and the House, as opposed to the relationship between that person and the Government, may I refer him to the Exchequer and Audit Departments Act 1866, which established that relationship? It states that every relevant account shall be examined by the Comptroller and Auditor General on behalf of the House of Commons.
      It is clear that the relationship was direct, as my hon. Friend points out, and that we must not breach it by extending the ability of the Government to interfere in it and sully it.
      Mr. Letwin: I entirely agree with my hon. Friend. He is right to take us back to Gladstone. Part of the essence

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      of the Gladstonian reforms, which have so entranced the hon. Member for Kingston and Surbiton (Mr. Davey) and others, was that they created an indestructible relationship between Parliament, conceived as something apart from the Executive, and the CAG. He is correct to point out that there is a severe danger that the Government's amendment—reversing the burden of proof and making it the case that the Executive have to be persuaded of the need to extend the CAG's remit—might paradoxically introduce the precedent that the Executive should determine the remit.
      If that were to be read as the precedent, it is possible that the Government amendment—as opposed to the new clause proposed by my right hon. Friend—would be deleterious. I do not think that is the Government's intention. They have tried to make a move towards the PAC and both the Opposition parties, but, as my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) acutely points out, they may have succeeded in making matters slightly worse.
      However, why should the Government prefer their amendment? What is the real reason that they do not want Parliament to have the presumption that the CAG has a universal remit in the public sector? After all, the CAG does not have the problem that he is barred by statute, because the Government have accepted that they can alter that at the whim of an order. Furthermore, we established in Committee—I have tried to re-expose the matter during the debate—that the CAG has a unique position as a perfect audit system, without the inherent conflicts of interest in such systems.
      The argument is stronger than that, as my right hon. Friend the Member for Haltemprice and Howden pointed out. I emphasise his comments. There is a real reason why the House of Commons, as the guardian of taxpayers' money, should want as a presumption, or even as an absolute rule—if I have a quibble with my right hon. Friend's amendment, it is that he has gone too far in the Government's direction—that the CAG should be the auditor of each public sector body. Why? Because of my right hon. Friend's point about regularity.
      It is not merely that private sector auditors, if they are employed directly by the institutions being audited, do not have familiarity with the concept of regularity. Their whole culture is necessarily different. They are not concerned with questioning whether money has been applied to a particular use allocated by some shareholders. To take the point made by my hon. Friend the Member for Bexhill and Battle (Mr. Wardle). In a private sector company, shareholders never try to tell directors how to allocate their money. They tell directors to maximise profit. Auditors seek to discover whether the profits reported by directors have been reported on a true and fair basis. They are very good at that and, sometimes, they are brilliant. However, they do not attend to the concept of regularity. If someone talks to the best private sector auditors and asks them to check up on regularity, they would, by and large, look at him as if he had asked them to go on a fishing expedition in Norway. They have not the slightest idea where that person expects them to go or what they should do when they get there.
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      The person and the body who know about regularity are the Comptroller and Auditor General and the National
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      Audit Office. When they employ private sector auditors—we pointed out in Committee that they often do—they give the auditors a specific remit to investigate not just the propriety of the accounts, but their regularity. Therefore, we have another reason for the presumption that the CAG should have a universal remit. Again I ask the question: why do the Government want to reverse the burden of proof? Why do they not want to accept the most basic presumption that in all but the most exceptional cases the CAG should have a universal remit?
      My right hon. Friend the Member for Haltemprice and Howden went through and demolished a series of arguments that were made in Committee. I do not want to bore the House by reiterating them in detail, but he demolished the arguments on levies, on competition and on commercialism. Without wishing to cast aspersions on his speech, those arguments were already demolished in Committee. He had already torn them limb from limb and anything that remained that remotely resembled a body was torn apart by the right hon. Member for Swansea, West (Mr. Williams), who is also a member of the Public Accounts Committee. If any shreds of the body remained, the hon. Member for Newbury (Mr. Rendel)—the Liberal Democrats' representative on the PAC—finished the game off.
      There is not even the beginning of an argument to suppose that we should not have the CAG as the presumed auditor of the public sector. Why are we having this debate? Why did the Government not accede immediately to the perfectly sensible—perhaps even too reasonable—new clause tabled by my right hon. Friend the Member for Haltemprice and Howden?
      I understand why the Government resisted the strong arguments that many of us made, and that will be made in the other place, for an independent body to set the standards for accounts. I accept that new clause 1 dealt with a centrepiece of government—the ability or inability of the Treasury to present things in a way that is convenient to Ministers of the day. I do not applaud that; in fact, I decry it. I understand that view, but I genuinely do not understand why the Government should resist this new clause. I cannot see why, in the short, medium or long terms, Ministers or their officials have any interest in excluding the CAG. In fact, the Government do not think that they have an interest in excluding the CAG. If they thought that they had that interest, they would not have tabled their own amendment.
      I fear that we must be dealing with the Government's pride. They do not want to be seen to be conceding to my right hon. Friend's new clause. They want to be seen doing something of their own making that is a bit different. When the Financial Secretary speaks, he may persuade me and the House that I am wrong, and I am more than willing to change my analysis if it does not fit the facts. However, if he has no good arguments and we are dealing with pride, I should have thought that there must be some means by which the Government's face can be saved. Somebody who is sufficiently close to the Government to make them comfortable could table in the other place a new clause that has exactly the same effect.
      Conservative Members would have no objection to such a manoeuvre; we do not want to rub the Government's nose in it or cause unnecessary embarrassment. At the end of the Bill's progress, we want a result that will go along with what I am certain will be the institution of an independent body to set standards.

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      Together with that reform and the rest of the resource accounting process, it will offer the prospect of a robust, sustainable, transparent and decent set of accounts—and an accounting system that will last as long as the Gladstonian system.
      Mr. Sayeed: Perhaps I can suggest a face-saving formula that the Government may care to adopt. I have read six press releases from the Government in the past week about value for money. Commercial auditors are good at auditing but not at determining value for money. The CAG is well practised at doing so over many years. Perhaps the Government would adopt my right hon. Friend's new clause on the basis that it will save taxpayers' money and make it go further.
      Mr. Letwin: My hon. Friend is absolutely right. Private sector auditors are not particularly experienced in value-for-money audits. They do not need to be because in the competitive private sector, value for money is forced on companies by the marketplace. The auditor merely needs to check that shareholders are given an accurate representation of the company's responses to market pressures and challenges.
      The people experienced in value-for-money audit are the Audit Commission, which deals with it in local government, and the National Audit Office and CAG, who deal with it in central Government. When private sector auditors have become familiar with the concept and have applied it, that is because they have been employed by those bodies to act on their behalf sometimes, but not immensely regularly.
      The problem with the public sector is that it has neither a marketplace nor the pressures that force value for money. As the relative inefficiencies of public sectors worldwide have shown, auditors are an inefficient and incomplete replacement for the marketplace. Nevertheless, they are the best we have. Whatever ought to be done by the public sector needs to be done at best value. The only people who will make best value—or a failure to achieve it—come to light are auditors. The CAG is the best body in central Government, so my hon. Friend's argument is robust.
      I accept the further implication that the Government could build on that thesis a face-saving device. They could argue that taking everything together and having considered my right hon. Friend's amendment, together with any technical changes they may wish to introduce, the proposal presents such an opportunity for value for money that it makes sense to adopt it. If the Government want to adopt that rhetoric or any other rhetoric or device—here or in the other place—to achieve that result, we will gladly conspire in it.
      I doubt that anyone is listening. Notwithstanding the remarks made about the nation by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), I doubt that anyone in the nation has the slightest idea that we are doing this or ever will. The Government can rest easy that this is a pleasant and secretive process, well publicised in Hansard, and that nobody will embarrass them for acceding to so reasonable a request from my right hon. Friend.
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      There is at stake here something far beyond party politicking and embarrassing governments.
      Mr. Brady: Does my hon. Friend agree that if the public were aware that the Government had acceded to a reasonable new clause, they would be impressed by the Government's good sense and honesty in accepting greater openness in public accounting?
      Mr. Letwin: My hon. Friend is right. To add to the Christmas stocking that we can offer Ministers, my right hon. Friend the Member for Haltemprice and Howden and other members of the PAC will congratulate the Government in the media without accusing them of having dragged their feet. It is no part of our purpose to make trouble. We want to achieve the right result. We need to do so because we all have an interest in the result being right. We all have an interest in having a set of accounts that have been audited in the best way possible and presented most responsibly to the House of Commons and the Department. That will be achieved by extending the remit of the CAG universally in government, which is the point at which all the anomalies will cease to exist and the clarity will set in.
      As long as the accounting standards against which the CAG audits have been independently set, we shall have true, fair and regular accounts that genuinely represent the position as best human beings can represent it. That is the goal and I hope that the Financial Secretary, however he wants to do it, will tell us that he has been persuaded at last that he needs to come round and agree to my right hon. Friend's eminently sensible proposition.
      Mr. Nick St. Aubyn: I hope that I may be the living proof that the hon. Member for Workington (Mr. Campbell-Savours) was wrong to suggest that this is the wrong hour at which to debate this important issue. Had the new clause been considered earlier, I might not have been present.
      At this important hour in our proceedings, I was drawn to the Chamber—I notice that several of my hon. Friends have also been so drawn—and the hon. Gentleman would do well to scurry round the various corners of this place, find perhaps hundreds of his colleagues who are lurking in the recesses of Parliament and encourage them to come here to listen to the vital words of wisdom on the new clause. I am much persuaded by my hon. Friends that we have come to the kernel of the argument. I might admit that I have followed the case from a distance but with great keenness because, as a member of the Education and Employment Committee, I have been aware of the arguments about resource accounting from the moment at which this Parliament was elected.
      Mr. Campbell-Savours: This is not the new clause.
      Mr. St. Aubyn: Indeed, but I shall come on to why it is not and why resource accounting is so important. It affects education as much as anything else.
      In Committee, my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), who moved the new clause, said:
      The Chief Secretary to the Treasury said to the Public Accounts Committee that he was willing to examine the question of amending the legislation to enable the Comptroller and Auditor General to audit those limited companies within the Government's purview.—[Official Report, Standing Committee A, 20 January 2000; c. 301.]

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      It is a matter of regret to me—and, I suspect, to many others who will consider this—that the Student Loans Company and the accounting for student loans are not within the purview of the new clause. Were I tempted to vote against it, I should do so because it is not all-encompassing and does not include the provision of student loans. I shall explain in due course why they are so important, but we must acknowledge that after passing the Bill it would be open to the Government to decide that it would be to their convenience that student loans, instead of being governed by a loan company, should be returned to the Department's remit. Nothing in the Bill would stop them doing so and, without the new clause, there would be nothing to deter them from doing so.
      Let me give an example of the morass into which we are likely to lead ourselves if the Bill is passed unamended and explain why that is so significant. The system of student loans was developed under the previous Government, but, in fairness, that was done on a very small scale. When this Government came to power, the value of the student loan book was probably not more than a couple of billion pounds, but under the new student loans system, which they introduced against our advice and that of the Dearing commission, it is increasing by nearly £2 billion a year.
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      My point is that one could choose, under one's accounting principles, to account for that extra £2 billion a year entirely as expenditure, partly as expenditure and partly as an addition to assets, or entirely as an addition to assets. In other words, a cumulative figure of £2 billion a year of putative Government expenditure, and certainly of cash outlay, may at the Government's whim be accounted for as expenditure or as part of capital. The scale of that means that even by the end of the Parliament, when the new scheme is barely up and running, the amount of the new student loan book will be nearly £7 billion.
      Mr. Deputy Speaker (Mr. Michael J. Martin): Order. The hon. Gentleman is speaking in great detail about the student loan scheme. He may mention that the scheme could be better scrutinised if the new clause were adopted or rejected, and he has made the point that the scheme could be scrutinised by the auditors if the new clause were passed, but I cannot allow him to talk about the scheme at such length and in such detail.
      Mr. St. Aubyn: I very grateful for your advice, Mr. Deputy Speaker, and I will take it to heart.
      Mr. Deputy Speaker: Order. It was not so much advice as an instruction.
      Mr. St. Aubyn: Indeed. You will appreciate more than anyone, Mr. Deputy Speaker, that in a Government Budget of over £300 billion a year, £6 billion is 2 per cent. of expenditure and a significant figure. Hon. Members are making the point that sums of that magnitude should be subject to external scrutiny. The Government should not be able to magic such sums out of thin air, perhaps in the run-up to a general election, and say that it is extra money that they have discovered through their ingenuity—or rather their creative accounting—and which they may spend in areas that are helpful to them in that election.
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      We seek to resist that insidious process, but there is another issue. It is a fact of life that when people can hide their problems, they tend to ignore them. The great virtue of the admittedly old-fashioned system of cash accounting is that no one could hide the fact of where cash was coming from or going to. Under resource accounting, without independent judgment on the fairness of the accounting methods being used, it will be possible to hide problems.
      Without wishing to test your patience too far, Mr. Deputy Speaker, I will simply say that the example of the student loan book is a good one because the Government have developed a thoroughly bad system for that, and they should reform it. If they could not hide those problems under the guise of resource accounting, they would be forced to address the anomalies, the inefficiencies and the cost to students, which will result from their carrying on such a poor, Mickey Mouse system for funding students, which is unlike that adopted by any other country in the advanced world.
      As a long-standing member of the Education and Employment Committee, I am now familiar with that system, and if what I have said is true of that, how true must it be of other areas of Government expenditure, about which I am the first to admit that I have very little knowledge? I know, however, from my business experience and my time as a banker and a student of the principles of accounting, that false accounting can go on for several years before it is discovered. False accounting can certainly tide a Government over a critical election period, and it could change the way in which we are governed.
      That is why I believe that my hon. Friends are absolutely right, even at this late hour, to raise this arcane issue. It may not attract a leader column in The Sun tomorrow, but sadly, in irresponsible hands—I am afraid that sometimes the Government have proved themselves to be irresponsible—it could have as much influence on an election result as a leader in the national press, if not a great deal more influence.
      As I said, I am struck by the fact that the purview of the new clause is limited. I hope that before the end of the debate, someone will explain to me and other hon. Members why it is so limited.
      The case of Remploy was mentioned earlier. I am familiar with that company, having been a customer many years ago. It supplied me with excellent products for incorporation in a product that I was selling on the market. Given the subsidies and the special circumstances of Remploy, I am aware that it needs careful accounting and scrutiny to ensure that its accounts are fully in order.
      I have no quarrel with the framework proposed by my hon. Friends and have heard nothing from the Government to suggest that it is defective. I therefore add my voice to those who ask why the Government are being so unreasonable. This is not the first time, even this week, that we have witnessed pigheadedness, if they will forgive me for the phrase, in the response from those on the Government Benches to suggestions from the Opposition.
      We are not always trying to be partisan. Earlier in the week, I put forward a proposal backed by the teaching unions—not a group that usually supports the Conservative party—but the Government would not give the proposal a minute of the House's time, which we are using up tonight on the new clause. If they wished,

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      Ministers could intervene to explain that while their purpose is honourable, they cannot accept amendments that were tabled in good faith and that are fully supported by those outside the House who understand the issue.
      Mr. Rendel: In speaking to the amendment, I am tempted to go back through a number of the arguments made in Committee, but you will be pleased, Mr. Deputy Speaker, to hear that I shall try my best to resist the temptation, partly because the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, has already repeated some of my arguments on that occasion, very flatteringly quoting from my remarks.
      It seemed to me on that occasion that the argument was won for greater powers for the National Audit Office and the Comptroller and Auditor General, except in one particular. One argument produced by the Government struck me as being a strong one to which attention had to be paid.
      For a number of bodies, an auditor had already been appointed and a contract had been set up for a significant period—five years, perhaps. To break that contract might involve considerable expense for Government or a duplication of resources, which was a silly way to proceed. I took that argument on board and I did not immediately see what the reply to it was.
      However, the new clause tabled by three of us who are members of the PAC answers that point. The new clause gives the Government the right to choose not to go ahead straight away with appointing the Comptroller and Auditor General as the auditor for all those bodies, but to move to that system when the current contracts come to their natural end. That demolishes the last argument that the Government had for carrying on, at least temporarily, with the current way in which the bodies are audited.
      It seems to me that the Government have given no good reason yet—and the issues were debated for a long time in Committee—for not accepting the new clause. The Government's amendments are not nearly strong enough to answer the points that were made in Committee and on Second Reading.
      As has frequently been said, the National Audit Office was established as Parliament's watchdog. One of the delights of taking part in the proceedings from the Liberal Democrat Benches is that so many complimentary comments have been made about one of our predecessors, William Ewart Gladstone, and his work on behalf of Parliament almost a century and a half ago. We are proud of his work and pleased that it has been so widely acknowledged.
      Gladstone established the important principle that the National Audit Office and the Comptroller and Auditor General should be responsible to Parliament, and that Parliament should have an external aid to keep a check on the Executive. People often say how great it is that we live in a democracy. I reply that it is not a strong form of democracy because we are ruled constantly by a minority. However, one of the strengths of our democracy is that Parliament has the opportunity to have some control over the Executive. That opportunity is not shared by many societies in our world. It is good news for us that we live in such a society.
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      The strength of the system is that Parliament has an external aid to enable it to keep good control over the Executive. That principle held for more than 100 years before it was gradually diminished. Sadly, it lost some ground as Parliament established bodies that were not under the control or audit authority of the Comptroller and Auditor General. That is a pity.
      The Bill gives us an opportunity to repair the damage and to return to the audit authority of the Comptroller and Auditor General all those bodies whose affairs he had lost the right to audit and report on to Parliament. The current opportunity may have come to us by chance because the Government did not originally intend the Bill to amend the fault that had arisen. Nevertheless, that opportunity should have been grasped, and I hope that it will be grasped tonight.
      The important principle that we are considering was reasserted in the Public Accounts Committee's latest report. Some of its words are worth repeating. It states:
      the Committee believes that Parliamentary accountability will be enhanced if the Comptroller and Auditor General is able to audit on behalf of Parliament all public bodies carrying out central Government functions, and has statutory access to bodies and contractors delivering services on behalf of Government departments … We believe in the principle that the Comptroller and Auditor General should have full access to all Government expenditure.
      I hope that I do not reveal any state secrets when I say that those phrases were discussed at some length when we discussed that report in the Public Accounts Committee. It is clear that the Committee wished to reiterate clearly in its unanimous report that it believes in the principle that we are discussing. It is important and strengthens Parliament enormously against the Executive.
      If the new clause is resisted by the Government tonight hon. Members on all sides should not see it as a battle between Government and Opposition, because it is not. If the Government resist it, the battle will be between the Executive and Parliament, a battle that Parliament has to win.
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      Mr. Alan Williams: The new clause is in effect in the name of the Public Accounts Committee, and it is just that; it is not one side of the House against the other.
      We are not talking about accounts. We are talking about a process—a process of control, a process of accountability. We live in an illusory democracy, and democracy is only as effective as the House is. The Executive have to be subject to continuous scrutiny. This is the only place where it can occur. Many people think that we achieve it through our great debates, Question Times and so on. That is nonsense. Anyone who thinks that oratorical wizardry will sway a Government is living in the world of fiction. Mr. Speaker Weatherill made the point that he could remember in his 10 years as Speaker just three speeches that swayed a debate. They may have swayed a debate, but I doubt whether they swayed a Government.
      As for parliamentary questions, anyone who has been a Minister knows very well that they are largely ritualistic. By the time one has dealt with half the planted questions from one's own side and the three other supplementary questions from the other side, that particular subject is over and done with for the next month, and one can go away and forget the House of Commons again.

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      In so far as there is continuous accountability or accountability anywhere in this democratic system, it is in the Select Committees. I give credit to Opposition Members and to Lord St. John of Fawsley, who introduced the departmental Select Committees, which were, in the democratic sense, one of the great innovations of the last century.
      One of the most fundamental rights of Parliament, established as far back as 1866, is the right to monitor the money. The money is where the power is. If one monitors the money, one discovers whether there is waste, misuse or corruption. The importance of this control was reflected in the fact that, more than a century ago, the precursor of the NAO and the Public Accounts Committee was set up, at a time of corruption and waste, to play this role on behalf of the public and Parliament.
      Underlining the difference involved in monetary control is the fact that we have set up a unique institution, the NAO. It has become unique over time, because in recent years it has been given the absolute independence from Government that it now has, so that it is not subject to any pressure or appointment by Government. We have this organisation with 750 staff and a budget of £55 million a year. That is different from any of the other bodies. Why? It is because controlling and monitoring the money is so fundamental to monitoring the Executive.
      I wish to tell Ministers that I am pleased. I thought that we had wasted our time in Committee, in that we had so little response. Today there has been a bit of a response, and I am grateful for that. Their amendment is a step in our direction and at least justifies the efforts that we made in our meetings. Its weakness is that it still leaves the rights of Parliament's watchdog dependent on the whim of the Executive. The extension of any of the powers to the NDPBs, about which our Committee's Chairman spoke, is utterly dependent on the arbitrary whim of one Department of Government.
      We are told that we should rely on the good will of the Treasury. We have been through these arguments before, and I am sure that officials will welcome the fact that I will not go through them all again. However, I will remind the House of something, and draw it to the attention of some hon. Members who may not be aware of it.
      One of the reasons that we are debating this issue at this silly time—it should have been sorted out by now—is that more than seven months ago a catch-all amendment was submitted to the Treasury by the NAO, on its behalf and that of the PAC, and for seven months the Treasury did not respond. It then produced a Bill that should have had a pre-legislative stage in the PAC but never did. The Bill was produced out of a hat, and the amendment was not there. All that we were given instead of an amendment—after several Committee sittings and a lot of moaning—was one apology for the fact that we had never had an answer. The good will of the Treasury is therefore not something that the PAC entirely takes for granted.
      When we wanted to ensure that Camelot was paying the correct amount to Parliament, and we were depending on the support of the Treasury—which one would have thought would be on our side in that respect—it took us five years to establish that right for the PAC.
      In Committee, when we presented a version of the catch-all amendment that had originally been submitted seven months earlier, the Minister said, "We are all in favour of this; we want to do the right thing; but each
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      proposal must be dealt with on its merits." So, obliging as I am, I tabled 19 amendments just to test the market—market testing being "in", although it may have been more "in" during the past 15 years than it is now. Anyway, I tested the market, and the market was found wanting. Having tested the depth of the Government's commitment to judging proposals on their individual merits, I was told by the Minister, "Yes, but we must not deal with them piecemeal."
      I concluded that perhaps the Government were opposed to doing anything at all, and that is why I am still worried about leaving ultimate control in their hands. They—not as individuals, but as Ministers and officials—are the Executive; we are the House of Commons. We should not have to go to them and beg to be allowed one more crumb on our national audit table as one more quango is thrown to us. They should have to come to us—to Parliament—to justify, on any occasion, a deviation from our right to monitor and audit the finances of the whole of Government. If Ministers want to curtail the power of Parliament in any way, they should not throw us crumbs; they should move a motion for an order at the Dispatch Box and justify their wishes in debate.
      Let me say sincerely to Ministers that I welcome their attempt to join us on our route. Just one more step, and we shall have unanimity—so will they, even at this late stage, reconsider the PAC amendments?
      Mr. Hayes: I want to discuss three issues: discretion, trust and missed opportunity.
      We should see the debate in two contexts. The first is the obvious one of the Government's somewhat tarnished reputation with figures. Few would now doubt that their reputation in that regard has been damaged by hospital waiting lists, police numbers and a number of other issues. I say nothing about the integrity of the Financial Secretary—he is a man of the greatest integrity—but that is bound to be the context in which people outside this place will see the debate and, indeed, the Bill.
      The second context is the history of these matters. I spoke earlier about the Exchequer and Audit Departments Act 1866, and that brings me to the first of my three key points—discretion. There is no doubt that, although the 1866 Act did not explicitly define the CAG's role in the terms that my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the PAC, has used, giving the CAG a power of general competence, that was the intention of those who introduced the Bill. I do not want to be too kind to Gladstone. I am not a great fan of his, but every swallow has its summer, or is it that one swallow doth not a summer make? I am not quite sure about that, but certainly, it was one aspect of Gladstonian influence that was desirable.
      The architects of that Act doubtless saw the CAG's brief as a broad one. That is clearly reflected not only in the debate at that time, but in the Act itself. It states:
      the Comptroller and Auditor General shall have free Access, at all convenient Times, to the Books of Account and other Documents relating to the Accounts of such Departments, and may require the several Departments concerned to furnish him, from Time to Time, or at regular Periods, with Accounts of the Cash Transactions of such Departments respectively …
      Therefore, those who introduced the Act and the Act itself assumed that the discretion would be wide.

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      People who have considered these matters carefully will immediately think of the changes that were made to the original Act by the Exchequer and Audit Departments Act 1921. Although the 1921 Act in some ways limited what the CAG did, it did so on the basis of giving him extra discretion. The irony is that, although that Act narrowed the CAG's activities, making it explicit that he should not have to examine every detail in every case in every Department to come to conclusions about the overall probity of Government activities, it extended his discretion to make such judgments, following the recommendations of the PAC of the day.
      The point is made clearly in the Second Reading debate in 1921. Members talked about the Public Accounts Committee considering the matter and the pronouncement of the Committee in the report that had been issued to the House and was appended to the Bill. They said that the Bill as laid before the House followed the recommendations of the Committee. There is no question but that the report from the PAC which explicitly recommended extending the CAG's discretion was "bought" by the then Government and formed the basis of the Bill, which in itself was a significant addition to the history of these matters in that it built on the Gladstonian foundations of the 1866 Act.
      We spoke earlier about the balance of proof. I should like to speak about the balance of discretion. Does discretion lie with the Executive, or with that independent person who is explicitly given the role of holding the Government to account—or at least of holding the Government's financial probity to account in the way that the right hon. Member for Swansea, West (Mr. Williams) suggested? This lies at the heart of our consideration of the new clause and the Bill. The Government are in the business of changing that balance, to the detriment of Parliament and against the spirit that pervades much of the earlier legislation.
      The second issue that I want to discuss is trust. I do not go so far as Chesterton, who said:
      it seems easier to die in battle than to tell the truth in politics.
      I would hardly admit to that.
      However, there is a good deal of sense in the comments of my right hon. Friend the Member for Haltemprice and Howden, who—in Standing Committee—said with incredulity that the basis of the Government's argument could be summed up in two words: "Trust us." Ministers expect us to trust them to do the right thing in all circumstances. My right hon. Friend went on to say—very much in the spirit of the comments of the right hon. Member for Swansea, West—that Parliaments cannot trust Governments.
      12.45 am
      My point is nothing to do with party, but has to do with the relationship between Parliament and Government. It is simply not acceptable for the Government to say, "Trust us, you can be assured that we will always act with appropriateness and integrity." The structures that we create must allow for the fact that Governments occasionally do not act either appropriately or with integrity. As I said, that is no reflection on the Financial Secretary, or even on the Economic Secretary—although
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      I do not know much about her. Perhaps she went to Cheltenham Ladies college, which would prejudice her to those of us who have made our own way in the world. However, I do not wish to be unkind or discourteous. Nevertheless, I might say something similar about the hon. Member for Newbury (Mr. Rendel)—but perhaps I might not.
      The issue of trust is fundamental. It has been already been highlighted by the right hon. Member for Swansea, West and lies at the very heart of our consideration of this part of the Bill. I simply do not trust any Government sufficiently to allow them to extend their discretion at the expense both of Parliament and of the independent scrutiny that I have described.
      Mr. St. Aubyn: On the issue of trust, has my hon. Friend studied the recent speech of the Archbishop of Canterbury, who said that our understanding of politics and of public life should be rooted in our grasp of the weakness of the human condition, implying that one really should not trust too much anyone in public life? Does not that go to the heart of the point that my hon. Friend is making?
      Mr. Hayes: I shall make only two comments in reply to that. First, I do not intend to stretch your indulgence, Mr. Deputy Speaker, beyond its extremely generous limits by responding to a theological point. Secondly, I remind my hon. Friend that Chesterton also said:
      he who has the impatience to interrupt the words of another seldom has the patience rationally to select his own.
      The third issue on which I should like to alight is that of missed opportunity, which was referred to earlier by the hon. Member for Newbury. He said that, for all the good things that are embodied in the 1866 Act, the 1921 Act and the Finance Act 1975, those Acts could not reasonably have anticipated the growth in the extent of Government. The 1866 Act, which was passed long before the advent of quangos, of course makes no reference to the type of bodies that are now well outside the competence of the Comptroller and Auditor General, but that, none the less, are very substantial bodies in relation to the amount of public money that they spend.
      We may be more critical of the 1975 Act and of more recent legislation. At that stage, we could have anticipated that the problem of bodies that were not Government Departments, but which absorbed a great deal of Government money and did important things on behalf of the Government, Parliament and people, should have been drawn into the orbit of the Comptroller and Auditor General. We should therefore be more critical of modern legislators than we can reasonably be of politicians in 1866 or 1921.
      Surely we must be most critical of the Government of the day. The Bill was a golden opportunity to extend the scope of the Comptroller and Auditor General's scrutiny. Three arguments have been advanced against doing so. The first is that many of the bodies are too small to be worthy of the Comptroller and Auditor General's attention. That suggestion was made by the Economic Secretary when she was speaking on the subject in Standing Committee.
      The second argument is that the Comptroller and Auditor General would require some specialist understanding or knowledge, because some of the

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      activities dealt with by the bodies that we are discussing are commercial or specialist in nature. That is a specious argument, given that the Comptroller and Auditor General has particular powers to take on any additional commercial skills and resources that he might need to deal with such bodies. The third argument, which is self-fulfilling, is that some bodies are statutorily excluded from the Comptroller and Auditor General's competence by the terms under which they were established or by subsequent legislation.
      None of those arguments is persuasive or forceful. The Bill was a golden opportunity to strengthen rather than weaken the power of independent scrutiny by changing the balance of discretion and to extend its scope. Both the depth and the breadth of the Comptroller and Auditor General's remit could have been addressed, but the Government have chosen to address neither.
      That takes me back to the first point that I made. There is an issue of image. If the Government wish to be regarded as fair, reasonable and honourable, they must be seen to be all those things. If they wish to publish information that is not just useful to the House and to the wider public but scrupulously fair, they must go the extra mile by putting in place arrangements that prove them to be of the greatest integrity and the utmost honesty. In contrast, the image that will be broadcast from the House as a result of the Government's failure to take advantage of this opportunity will worsen the tarnished reputation that they have developed in a very short time for fiddling figures.
      Mr. Campbell-Savours: I shall intervene briefly. I spoke on Second Reading and, if this debate were taking place at a reasonable hour, I would have delivered the speech that I spent some time working out, which I have now had to discard. [HON. MEMBERS: "Why?"] The answer is simple: I have no desire at 12.52 am to keep 300 Members of Parliament here. I think that what is going on this evening is an abuse.
      Mr. St. Aubyn rose—
      Mr. Campbell-Savours: I have no intention of giving way.
      National Audit Office officials, who have spent a lot of time working on the issue, should know what has happened this evening. A series of amendments—amendments that we are not discussing now—were debated at great length. They were debated at such length because the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) was having a dinner—
      Mr. Deputy Speaker: Order. I cannot allow the hon. Gentleman to go over a previous group of amendments. The reason why earlier amendments were debated has nothing to do with us at the moment. We must deal with the group before us.
      Mr. Campbell-Savours: I shall not refer to those amendments, Mr. Deputy Speaker—simply to the reason why we are debating the new clause at this late hour. An
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      arrangement was made that Conservative Members would debate the previous group until 11 pm, when there would be a Division.
      Mr. Hayes: On a point of order, Mr. Deputy Speaker.
      Mr. Campbell-Savours: It is an abuse—
      Mr. Deputy Speaker: Order. There is a point of order before us.
      Mr. Hayes: I seek your guidance, Mr. Deputy Speaker. The hon. Member for Workington (Mr. Campbell-Savours) is talking about arrangements that were made for Members to debate matters until 11 pm. No arrangements were made with me. I am sure that I speak for my hon. Friends. What is the hon. Gentleman referring to?
      Mr. Campbell-Savours rose—
      Mr. Deputy Speaker: Order. I called the hon. Member for Workington (Mr. Campbell-Savours) to speak to the new clause before us. He must not refer to any arrangements that were made, because that has nothing to do with the Chair or with the business before us.
      Mr. Campbell-Savours: On the new clause that we are now considering, Mr. Deputy Speaker, National Audit Office officials should know that many of my hon. Friends who wished to speak have been prevented from doing so by Conservative Members' conduct tonight. That is all I have to say.
      Mr. David Heath: I share the hon. Gentleman's disappointment that we should be debating an extremely serious issue at this hour in the morning. Having said that, I feel that the new clause deals with a matter of principle that is worthy of a substantial debate irrespective of the hour, because there are issues that need to be addressed. Having listened to the speeches of the three members of the Public Accounts Committee who have spoken, I think that the arguments that they have adduced are almost unanswerable.
      I hasten to add that I am not an accountant; indeed, I suspect that I am almost the antithesis of an accountant. However, I have some experience of public audit, having been an audit commissioner before being elected to the House. I take an old-fashioned and perhaps simple view of the proper control of public funds. Where Parliament has granted moneys from the public purse for public purposes, that should be subject to checks for probity and regularity to ensure that there is accountability to the House and not simply to the Executive. There should be no gap between the province of the National Audit Office and that of the Audit Commission or the territorial bodies that carry out identical functions in respect of various parts of the United Kingdom. If there are gaps in the present arrangements—and my strong suspicion is that there are—they should be filled. The new clause goes a long way towards that.
      I have been pursuing this matter ever since I was elected to the House. As hon. Members can see in the Official Report, I have put a series of questions to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I am sorry that he cannot be here this evening because of his recent

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      illness and I very much hope that he will soon be restored to health. I am advised by the right hon. Member for Haltemprice and Howden (Mr. Davis) that he has received a letter from him saying that he wishes to be back even sooner than the doctors, the Whips or Madam Speaker wish him to be.
      I put a series of questions to the right hon. Member for Ashton-under-Lyne about the resources that might be necessary to enable the National Audit Office to plug some of the gaps in the arrangements for non-departmental public bodies and about the extent to which he has been able to promote a dialogue with the Chancellor of the Exchequer or other Treasury Ministers on the subject. In a way, there has been a conspiracy between us, as I know perfectly well that the view that the right hon. Gentleman has expressed in private and in public is very much along the same lines as mine, which is that we should find a mechanism to bring some of those bodies within the province of the National Audit Office.
      I do not particularly like quangos. I have long argued that they proliferated under the previous Government and that it would have been a good thing had the present Government reversed the trend. Sadly, I do not believe that sufficient progress has been made in that direction. I do not like quangos because of the democratic deficit. That is a serious matter, but in some circumstances I can live with it: we can perhaps deal with the deficit in accountability through Ministers who are accountable to the House. However, I will not put up with a deficit in probity or regularity, and that danger exists under the present arrangements, particularly in respect of NDPBs that deal with substantial amounts of public money. The non-municipal public housing sector has already been mentioned. It seems essential that the Housing Corporation, which performs an
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      audit function yet is not directly open to scrutiny by the Comptroller and Auditor General, should be brought within the province of the National Audit Office.
      1 am
      I have some concerns about the wording of the new clause. I am concerned about the definitions; I always worry about the definitions of non-departmental public bodies and the extent to which it is possible to devise new government structures that still manage to fall outside any definition that is provided. I am indebted to Lord Falconer, who suggested in another place that there was no difference in terms of definition between an NDPB and a taskforce and that it was simply a matter of the temporary nature or otherwise of the body that had been formed. If that is the case, there is a potential problem with taskforces that perform an executive function. I hope that they will be covered by the fact that they are absorbed within the departmental accounts, but it is a potential problem that may need to be better defined under proposed subsection (11). Proposed subsection (8) is over-helpful to the Government in accommodating their objections before they have even been raised in the debate.
      This is a very important new clause for Parliament. As the hon. Member for Guildford (Mr. St. Aubyn) said, if the Government choose not to accept the new clause, it is not a case of their resisting the Opposition, because the new clause does not come from the Opposition Benches: it was drafted by those right hon. and hon. Members on both sides of the Chamber who are most intimately acquainted with the need for proper scrutiny—those who serve on the Public Accounts Committee. They have put their finger on a very important issue and it is right that the House should debate it. The Government would be wrong to display obstinacy. They have already yielded the principle in amendments that they have tabled. It is only the matter of form that they are resisting. I believe that the form of our proposal is much more acceptable for Parliament than the alternative, and that the Government would be well advised to accept it.
      Mr. Stephen O'Brien: Having been only seven months in the House, I am perhaps closest to those outside who have expectations of accountability. It is not a claim that I would seek to advance, but others might suggest it.
      In looking at the provisions, I have been particularly concerned about the separation of powers, which, as a principle, should run through this, of all pieces of legislation, between Parliament and the Executive. I have looked in vain and with great disappointment for that principle to be applied with consistency and clarity. It has therefore been of the utmost seriousness for me, fresh from the outside world, to find that hon. Members from all parties represented on the most important of Committees—the Public Accounts Committee—have tabled a new clause to address the perception of accountability, the trust that is implicit in the requirement that the Government be transparent in their stewardship of public money and, above all, the confidence of the public that that is being done with the greatest integrity.
      I have looked at the PAC's recommendations and have listened with great care to all the members of that Committee who have spoken this evening, in particular my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the PAC. It seems that the Bill misses the opportunity to remedy the steady erosion of the central role of the Comptroller and Auditor General that has taken place as a result of the introduction of new public spending institutions.
      Many examples of that have already been cited this evening, so I shall not try your patience, Mr. Deputy Speaker, by going into as much detail as I had originally intended. There is no provision to give the National Audit Office full access for the examination of new service providers. The number of such providers is increasing—as is the amount of public money involved. They include private contractors who handle Government pay and the management of some prisons. They even handle one of the Government's own flagships—for which the Government want complete accountability and transparency—the new deal training opportunities, even though some of us might regard those opportunities as a smokescreen.
      Under the Bill, the detailed auditing of such providers would be off-limits. They should have been included. What are the Government afraid of? Subject to the Minister's comments, which we shall welcome, what makes the Government resist the approach taken by my right hon. Friend, the Chairman of the Public Accounts Committee? He wants to reverse the burden of proof required by the Bill, and to make it a presumption that all such bodies should be open to audit. There should be a requirement that they are audited, rather than that the Treasury determines which ones should be included.
      Ever since the Government came into office, they have advanced the principle of inclusivity. That sits ill with the measure, because it does not promote inclusivity. However, new clause 2 would be in line with that principle.
      Quangos are another example. The Housing Corporation has been mentioned. It is critical that there is trust in such bodies. People outside this place perceive organisations such as the Housing Corporation to be instruments of Government, so they expect the same
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      standards of transparency and accountability to be applied to them as to Departments. However, the Housing Corporation is not included.
      The situation of limited companies set up by the Government has been extensively and eruditely explained by my hon. Friend the Member for Guildford (Mr. St. Aubyn)—a fellow member of the Select Committee on Education and Employment. My right hon. Friend the Member for Haltemprice and Howden also referred to the matter. Tomorrow, my hon. Friend the Member for Guildford may be somewhat surprised by a reference in the leader column of The Sun to his impressive contribution to the debate. However, I shall not dwell on that matter, Mr. Deputy Speaker, because, even as a recently elected Member, I would strain your patience too far.
      As I pick up some of the threads made in contributions this evening—not least that of the hon. Member for Somerton and Frome (Mr. Heath)—I find that I am speaking to a former university colleague, the Financial Secretary to the Treasury. Indeed, he and I shared not only a university but a college. I know him to be a man of great intelligence, and a reasonable man of great integrity. It would not be in his character to resist an eminently reasonable proposition, objectively put. The proposal is not partisan, because of its provenance in the PAC.
      Perhaps I am wrong about the Government's resistance to the proposal. Perhaps they will accede to a reasoned and informative debate and will be pleased to accept our fine parliamentary tradition of trying to improve Government proposals. Like many other hon. Members, I have experience of international manufacturing industry in a private enterprise, albeit a public company in the FTSE 100. For many years, I have had responsibility for compiling annual reports and I look behind the Government's proposals to try to understand what motivates them not to want to extend the audit to so many governmental organisations.
      Mr. St. Aubyn: I have listened to my hon. Friend with interest, because I have great respect for his experience of handling the accounts of public companies. Has he considered the words of George Bernard Shaw? He said:
      There is nothing so bad or so good that you will not find Englishmen doing it; but you will never find an Englishman in the wrong.
      Does that not encapsulate why we need the new clause and why the Government are not prepared to admit that they need to accept it?
      Mr. O'Brien: My hon. Friend makes an extremely important point through his literary allusion. Of course, when George Bernard Shaw was given a book, he said that he would lose no time in reading it. I shall lose no time taking that intervention any further; it was so ably put.
      Anything that is audited in annual reports receives proper and objective treatments that are certified. Accountants, in the case of public companies, and auditors must present their reports fully and make them public. The Government's policies have often been misplaced. The Government have sought to do down our enterprises and public companies by treating all those who may be in the top teams of such companies as fat cats.

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      Therefore, they would be the first to expect full transparency and accountability, and for a full audit of all aspects of an enterprise to be covered in an annual report.
      I hope that I am wrong—I do not think that it is in the Financial Secretary's character to defend something on the ground of pride alone—but I wonder whether the Government are anxious to prejudge the contents of annual reports. Perhaps the raft of organisations that have been identified so ably by so many Members are a little less predictable and would fall a little less out of the Government's direct control, even though they involve the expenditure of taxpayers' money. Therefore, there is the risk that an annual report might not say what the Government predicted or wanted it to say. That may be the true reason for the Government's objection to allowing all organisations to be audited and for them wanting, as my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) pointed out, a veto or the discretion not to allow an audit to be applied. I look forward to the Financial Secretary's reply in the hope that the doubts that I share with the House are proved wrong.
      Mr. Michael Fabricant: I was not going to speak in the debate, but I have listened to the arguments made in the Chamber and beyond the Bar. I am disturbed by several incidents that have been mentioned in the debate. I suspect that we need new clause 2 because there is a feeling in the nation that the Government have contempt for Parliament. Did we not witness that earlier when an hon. Member—I shall not name him—said that he had prepared a detailed argument as to why the new clause should be adopted, but then added that he would not read it? He would not read it because there are 300 or more Labour Members who want to go to sleep. All the arguments that he had prepared to make the Bill better were not expressed. The hon. Gentleman has now left the Chamber, which is why the arguments need to be emphasised and re-emphasised.
      1.15 am
      My hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) described in considerable detail the history of the Bill, starting with the 1866 Act under William Ewart Gladstone. I argue that its true genesis is November 1993, when my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), then Chancellor of the Exchequer, announced a White Paper on the introduction of this form of accounting. He said:
      This will put departments on to a similar accounting basis not only to commercial organisations but to many other parts of the public sector.—[Official Report, 30 November 1993; Vol. 233, c. 931.]
      Surely that is the point of new clause 2. Subsection (4) states:
      The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself—

      (a) that the accounts present a true and fair view, and

      (b) that any public money provided to the agency has been expended for the purposes intended by the body by which the money was paid.

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      As my hon. Friend the Member for Eddisbury (Mr. O'Brien) eloquently said, that is a mirror of what happens in commercial organisations when they are audited by chartered and certified accountants. It is important to audit not only the funds flow but—as my hon. Friend the Member for Guildford (Mr. St. Aubyn) pointed out—the difference between expenditure on capital amounts and revenue amounts, because investments in capital amounts accrue value and are not amortised. If one confuses the two, it is all too easy to confuse the general public in persuading them that the state of the economy is better or worse than it is.
      Many of my hon. Friends and Government Members have said that it is a question of trust and accountability. Why have auditors in the commercial sector? They are there to safeguard shareholders and the broader public interest, to ensure that taxes are paid to the benefit of society. It is right that the Executive should accept auditing of all its aspects. It is extraordinary that the Executive should be able to say, "We shall choose what will be audited and what will not." That is like a large public corporation or conglomerate—I will not name an example but one can use one's imagination—saying "We will not have our ice cream side audited, but we don't mind having our soap powder side audited.
      Mr. Brady: Sunshine Desserts.
      Mr. Fabricant: My hon. Friend said something from a sedentary position that was not too far from the truth, but which I hope will not be recorded in Hansard.
      Mr. Stephen O'Brien: The equivalent is even more serious—where a company would resist allowing any kind of audit treatment of a joint venture or some form of minority participation. That is clearly laid down under "general accounting principles"—a phrase that, interestingly, appears in the Explanatory Notes and the Bill, and is therefore directly to be applied. My hon. Friend's point is well made.
      Mr. Fabricant: My hon. Friend makes a marvellous point. It is particularly apposite, given that the Government talk about private-public partnerships and building on the private finance initiative, which was introduced by the previous, Conservative Government. Is not that a joint venture and does it not therefore warrant independent audit? However, the Government say, "No, we will not allow an independent auditor to investigate for the benefit of the state and society as a whole."
      We are going through a period in which there is mistrust of the Government's motives. We hear about financial initiatives that are merely launches of relaunches of previous launches involving fresh money that turns out not to be fresh. [Interruption.] We read about that not only in The Times, but in The Guardian, which is read by the hon. Member for Brent, North (Mr. Gardiner). We realise that there is disquiet in society as a whole. The Government could easily allay that by saying, "We will allow independent auditors into all aspects of government. They can report to the Public Accounts Committee and lay reports before Parliament." The Treasury could also lay before Parliament information that would make all audit reports open and file it in the Library of the House of Commons. [Interruption.] The hon. Gentleman laughs,

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      but his seat is marginal. Would not it be to his benefit and that of society as a whole for the Government to be seen as open and honest? Is not it dishonest for any Government to introduce an incomplete Bill that does not consider the universal practice of auditing, but says that audits will not be permitted in certain barred areas?
      The Executive should not be allowed to choose which areas may be audited and which may not. If I may coin a phrase, this should be the people's audit. Is not any audit the people's audit? The people's audit concerns the welfare of the people as a whole. Are they not the people's Government? Perhaps no longer.
      Mr. Hayes: To firm up some of my hon. Friend's slightly vague remarks, may I refer him to the Second Reading debate on the Exchequer and Audit Departments Act 1921? This was stated explicitly:
      The general trend of the changes proposed—
      to the 1866 Act—
      is to give greater discretion to the Comptroller and Auditor General as to the extent of his audit, and to make his measures more elastic.—[Official Report, 5 August 1921; Vol. 145, c. 1883–84.]
      Is not my hon. Friend saying that this should be an opportunity to extend the scope—the elasticity—of the CAG's remit, not to give more power to the Government to decide precisely where, how and when he goes and how that information is published?
      Mr. Fabricant: My hon. Friend, with his customary charm and politeness, makes a powerful point. The discretion should lie in the hands of the auditor, not those of the Government.
      Mr. Barry Gardiner: Will the hon. Gentleman give way?
      Mr. Fabricant: Oh, the hon. Gentleman awakes. I am delighted to give way.
      Mr. Gardiner: I have been in the Chamber for considerably longer than the hon. Gentleman. If he can recall the remarks he has just made, can he justify them against the new clause in favour of which he purports to be arguing? It allows the Executive precisely that power of veto, which he has spoken against.
      Mr. Fabricant: Not at all. If the hon. Gentleman reads the new clause, he will see that that is up to the CAG. Although he is in the Chamber, I can assume only that he has allowed his attention to lapse.
      Mr. Gardiner rose—
      Mr. Fabricant: I shall not give way again; the hon. Gentleman is wasting my time and that of the House. He sits there either not listening or giggling. Either way, he is not concentrating. This is a complicated Bill, and the hon. Gentleman should listen, and then his interventions would be pertinent rather than irrelevant.
      Mr. Gardiner: The hon. Gentleman should read the new clause.
      Mr. Fabricant: The hon. Gentleman tells me, from a sedentary position, to read the new clause. I am
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      doing so—[Interruption.] I will not accept sedentary interventions. The new clause makes it clear that the CAG will examine accounts, and the Government will not tell the CAG which accounts to examine.
      As my hon. Friend the Member for South Holland and The Deepings said, the discretion should lie with the CAG, precisely as it does with an auditor who investigates any commercial operation and has independence in doing so. The point of new clause 2 is to give the CAG independence. He will have no independence if the Government tell him that there are areas that he may investigate and areas that he may not investigate.
      Mr. Brady: It is a point of fact, which should be put on the record, that the hon. Member for Brent, North (Mr. Gardiner) is entirely mistaken, as the Minister can lay an order to exclude a given public body with the approval of Parliament. We have been debating precisely the point that those powers should reside with Parliament and the CAG as an agent of Parliament, rather than with the Executive.
      Mr. Fabricant: My hon. Friend is absolutely right. It is up to Parliament and the Public Accounts Committee to determine, through the CAG, those areas that ought to be audited. It would be wrong for the Executive to determine that because the CAG would not be independent. I hope that the Minister can satisfy me that if I am wrong, the Public Accounts Committee and hon. Members on both sides of the House who have been arguing for new clause 2 are also wrong. However, I do not think that I am wrong. Surely the whole point of an auditor is that he should be independent. I hope that the Minister will address that point in his reply.
      Mr. Brady: It is a privilege to participate in what has been an excellent debate, albeit at this late hour. I echo the remarks of my hon. Friend the Member for Lichfield (Mr. Fabricant), because I was looking forward to one more in a series of excellent and incisive speeches when the hon. Member for Workington (Mr. Campbell-Savours) trailed the fact that he had prepared a speech and given great thought to it. I am sure that it would have been a speech of great consequence. We have had several excellent contributions to the debate.
      Mr. St. Aubyn: Does not my hon. Friend think that it is a bit rich for the hon. Member for Workington to criticise—
      Mr. Deputy Speaker: Order. We shall forget about the hon. Member for Workington and get on with the new clause.
      Mr. Brady: I had forgotten about him already, Mr. Deputy Speaker.
      We have heard from many right hon. and hon. Members on both sides of the House how important the provisions are. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, said that in discussing the amendment we are dealing with matters of public expenditure amounting to some £3 billion a year. My hon. Friend the Member for Guildford (Mr. St. Aubyn) suggested that the figure might be greater if we included companies in the new clause as well as non-departmental public bodies.

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      Even though we have not included companies, we are dealing with a large sum of public expenditure, and it is a serious matter that is appropriate for debate by the House, whatever the hour. I wonder whether Liberal Democrat Members agree that it would have been a great tragedy if Gladstone had decided in 1866 that, because it had got rather late in the day, he would not bother introducing the vital legislation that allows Parliament to hold the Executive to account and which introduced the proper audit and control of public expenditure that we have today.
      It is essential that we extend the powers of proper audit and scrutiny of expenditure throughout the public sector. As my right hon. Friend the Member for Haltemprice and Howden suggested, that should be done in a way that takes proper allocation of the burden of proof and puts the onus on the Government to prove the case that something should not be subject to public audit as suggested by the new clause.
      1.30 am
      The hon. Member for Brent, North (Mr. Gardiner) was wrong to suggest that the new clause gives Ministers unfettered discretion. It does not. It gives some powers to Ministers, subject to approval by Parliament, which is entirely right.
      We have heard important contributions. I do not want to speak for long in this short debate, but I want to comment on the remarks of the right hon. Member for Swansea, West (Mr. Williams) who, I thought, made the most telling contribution, albeit a brief one. It was a devastating account of the way in which the Treasury has dealt with the progress of the Bill. It did not accept at an early stage, as it could have done, important recommendations from Members of all parties with proper independent backing. That was a great tragedy.
      The right hon. Member called for one more step from the Government. He argued that the Government had conceded the point in their amendment, but that they fell short of what they could achieve if they bowed to the wishes of the Public Accounts Committee by accepting new clause 2. I entirely agree with what the right hon. Gentleman said.
      The Government should come to Parliament to explain why we should not have the right to scrutinise public expenditure in particular areas. It is fundamental to the rights and privileges of the House, and to the duty that we owe to the British people, that we should have the power to scrutinise and audit public expenditure.
      Mr. St. Aubyn: I have been listening carefully to my hon. Friend, and I agree with what he says about those fundamental rights. Is not the problem the fact that the
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      Treasury, having discovered the dark arts of stealth taxes, is now practising to perfection the art of stealth accounting?
      Mr. Brady: My hon. Friend puts it well. [Interruption.] Does the hon. Member for Hove (Mr. Caplin) wish to intervene?
      Mr. Ivor Caplin: I certainly do not.
      Mr. Brady: I am sorry, Mr. Deputy Speaker. I thought that the hon. Gentleman was seeking to intervene, but he was not.
      My hon. Friend the Member for Guildford makes an important point. The Government are clearly seeking to avoid proper scrutiny of public expenditure and of the way in which public funds—taxpayers' money—are pushed out through the public sector in various guises. Like my hon. Friend the Member for West Dorset (Mr. Letwin), one must ask why. Why do the Government refuse to accept an eminently sensible new clause, which has support on both sides of the House and from distinguished members of the Public Accounts Committee?
      The Government have accepted the new clause in principle in their amendment, yet, for their own reasons, which the Minister will no doubt try to explain, they seek to avoid the discipline that new clause 2 would impose on them. There would be a presumption that there was a right to proper public audit unless the Government could demonstrate a compelling reason why that should not be the case.
      I shall not detain the House, but, in the light of the remarks of the right hon. Member for Swansea, West, and given that we are debating the most fundamental role of Parliament and the most fundamental duty that we must discharge by calling the Government to account, it is supremely ironic that if the motion is pressed to a Division, the Government will whip Labour Members to support their stance, and to oppose a new clause that would extend the right of Parliament to scrutinise what the Executive does. That is at least an irony and possibly a perversion of the purpose of Parliament. That is unfortunate.
      The Government have an opportunity to show that they have nothing to hide and that they wish to be open and allow proper scrutiny of all aspects of public expenditure and the public sector. They have an opportunity to demonstrate that, contrary to recent criticism, they are not arrogant. They have an opportunity to show that they are not interested in grubby fixes or withholding information and to move towards proper openness and accountability. They have an opportunity to strengthen the role of Parliament and to show, as good Governments have done in the past, that the Executive can recognise that their activities should properly be limited.
      The Minister should accept that tonight. I hope that he will bow to the arguments of senior colleagues on both sides of the House. I cannot understand how the Government can devise a cogent, reasonable argument for not accepting the new clause.
      Mr. Owen Paterson: I had not intended to speak in the debate, but I have been stung by the attitude of Labour Members. As a Shropshire Member

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      of Parliament, I am deeply conscious that the first Parliament was called at Acton Burnell and then in Shrewsbury to hold the King to account for the moneys that he levied on the people. The Minister laughs, but we are sent here and paid by the general public to hold the Executive to account. One of the biggest surprises to me as a new Member of Parliament was that we do not sit terribly long hours. We frequently go home at 10 o'clock.
      It was outrageous that the hon. Member for Workington (Mr. Campbell-Savours) had prepared a speech on new clause 2—
      Mr. Deputy Speaker: Order. The hon. Gentleman should confine his comments to the new clause.
      Mr. Paterson: The hon. Member for Workington had prepared on new clause 2 and did not make it out of pique. Nothing could have been more interesting than his comments on new clause 2, which goes to the heart of our role as Members of Parliament who hold the Government to account on the way in which they spend moneys that do not belong to them in their temporary executive role, but to the people.
      After listening to the debate, I feel naive. I honestly believed that the Comptroller and Auditor General audited all Departments, as established in the 1866 Act. I had not realised until I heard my hon. Friends' speeches that there were extraordinary gaps in auditing public expenditure and holding the Executive to account. It is astonishing that 200 bodies, which deliver public services and are funded by Departments from money that Parliament provides, are not fully audited by the Comptroller and Auditor General.
      Mr. Fabricant: It is even more surprising that it is not up to the Comptroller and Auditor General whether he audits those 200 companies. The Government tell him that he cannot audit those companies and organisations.
      Mr. Paterson: With his usual prescience, my hon. Friend has made my next point. According to the Public Accounts Committee's fourth report, my hon. Friend is right. Eighty bodies spent £3 billion, but their auditors are appointed by Ministers and they report to Ministers. That is extraordinary. I almost feel guilty that, as a Member of Parliament, I did not know about that.
      Mr. Brian White: Does the hon. Gentleman accept that the previous Conservative Government established bodies without accountability and that this Government ensured that 19 out of the 21 bodies that might not have been audited by the Comptroller and Auditor General are so audited?
      Mr. Paterson: I find that a bizarre intervention. Numerous Opposition Members have made it clear that they are not happy with the status quo. I am making it clear that I am not happy with the status quo, that I am astonished by the status quo, and I entirely endorse the hon. Gentleman's comments that a new regime should be introduced. Surely the Bill gives the very opportunity. This is the time and place to debate it. This is a clause that he should support, because it would bring in every body:
      Every public service agency shall prepare accounts in respect of each financial year and shall send them to the Comptroller and Auditor General.
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      That is in new clause 2(3). How can the hon. Gentleman not support that? He apparently is not happy with the regime left by the previous Government. It is quite clear that several of us are astonished by the lacunae. So why does he not support it?
      Mr. Fabricant: My hon. Friend will recognise that it is a tradition in this House that the Chairman of the Public Accounts Committee is always drawn from the Opposition party. He will also be aware that the Public Accounts Committee is an all-party Committee. Is it not extraordinary in the history of the House that the Committee is putting forward a new clause which is being opposed by the Executive? Is not this a major constitutional conflict between Parliament and the Executive?
      Mr. Paterson: That point is forcefully put and quite correct. I am reading evidence from reports from an all-party Committee which is led by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) specifically to hold the Government's expenditure to account. We have the new clause proposed by three leading Members of the House, and the Government oppose it. They will have to come up with some very good reasons.
      How can it be that the Housing Corporation, spending £1 billion pounds a year, and the Environment Agency, spending £150 million, are outside the remit of the Comptroller and Auditor General?
      Mr. Hayes: I do not want to put my hon. Friend off, but I would like him to return to the issue of the relationship between the Bill and the recommendations of the Public Accounts Committee. I spoke earlier of the 1921 Bill, which was based on the recommendations of that Committee. I do not want to go as far as the hyperbole of my hon. Friend the Member for Lichfield (Mr. Fabricant), but it is true that this Bill is quite different from those of 1866, 1921 or 1975, in that it does not simply ignore the recommendations of the Public Accounts Committee; it frustrates them.
      Mr. Paterson: That is an excellent point. With similar foresight to that of my hon. Friend the Member for Lichfield, my hon. Friend has also moved on to the next point that I was about to make.
      In its fourth report, the Public Accounts Committee said quite clearly, in recommendation (vi), in paragraph 7:
      We urge the Government to extend this [audit] to all existing executive non-departmental public bodies.
      It could not be a clearer recommendation from an all-party Committee, which goes on to say, in recommendation (vii):
      We consider that it is questionable, in principle, whether those whose accountability is being examined should appoint the external auditor of non-departmental public bodies. We recommend that the Bill should address this issue by specifying that all such bodies established in the future will be audited on behalf of Parliament by the Comptroller and Auditor General. Also the Bill should amend existing legislation to appoint the Comptroller and Auditor General as auditor to those bodies for which he is not already statutorily appointed.
      It could not be clearer.
      Mr. Ian Bruce: Has my hon. Friend been following the Committee stage of the Utilities Bill,

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      on which I am sitting? It is surprising to me that Ministers very often do not know what bodies are spending. I wonder whether my hon. Friend is being a bit unkind to the Government, because this would allow Ministers to know what the civil servants are hiding from them in many cases. He is on an extremely good point—that we should make sure that these reports are produced to Parliament, and then Ministers will have to read them and know what is being spent on their behalf.
      Mr. Paterson: That is also an excellent point. It gets right back to the 13th century, when the role of Parliament was to try to get a grip on royal patronage. If the bodies in question are not audited properly, and effectively are allowed to appoint their own auditors, there will be a cosy inner circle, which inevitably leads to the evils of patronage outside Parliament's control. That is a real danger.
      My hon. Friend is absolutely right to mention the gaps and anomalies. There are some extraordinary facts and figures in the Public Accounts Committee's ninth report. I must admit that I would not have read them if it had not been for this debate, which shows the value of these lengthy sittings. On housing associations, the report says:
      Despite many years of negotiation since 1991 with the Department and the Housing Corporation, the Comptroller and Auditor General can still only examine housing associations that volunteer to submit to his scrutiny although these are unlikely to be the bodies where problems arise.
      That is bizarre, in view of the amounts involved.
      1.45 am
      As for Camelot, four years apparently elapsed before the CAG was able
      to provide assurance to the Committee that public funds raised through the national lottery were being handled properly and correctly passed on to Government by Camelot. Its auditors refused to pass on the information he needed.
      That, too, is an extraordinary lacuna in public accounts.
      Mr. Fabricant: Does my hon. Friend suppose that, under these rules, Bob Maxwell would allow auditors to audit him, or does he think that Maxwell might decide that, in this instance, the pensions scheme ought not to be audited? [HON. MEMBERS: "He is dead."] I know that.
      Mr. Paterson: I think we all know that. I think we should try to confine our discussions to public bodies spending public funds.
      Mr. Fabricant: Or dead bodies.
      Mr. Paterson: No, not dead bodies. We are talking about public bodies spending other people's funds that are not properly accounted for. That is a perfectly fair point.
      Let me give another couple of examples—briefly, because time is moving on. Apparently, it took several years of negotiation for the CAG to be allowed access to
      308
      training and enterprise councils, and the report clearly states that there was poor financial management in some of those bodies.
      Mr. Stephen O'Brien: One of the most extraordinary omissions is that of the Environment Agency, which spends about £150 million a year. In this day and age, when there is such public concern about the environment—when, rightly, all Members of Parliament are keen to give due consideration to all environmental issues—the actions of the agency, involving the use of public money, are of prime importance. If new clause 2 were accepted, the agency would, by presumption, be included.
      Mr. Paterson: That is very well put.
      One would think that prisons would have been properly audited by the Government, but the CAG had to negotiate access to prisons run by private contractors. Surely there is a prima facie case for believing that new clause 2 would end that anomaly.
      I am delighted that the hon. Member for Workington has returned to the Chamber. Perhaps we shall have an opportunity to hear his penetrating comments on the new clause. As far as I am concerned, however, this is fundamental. We are sent here by the public to control public expenditure—to see how taxes levied from the benighted citizenry are spent, and spent properly. [Interruption.] Members laugh. I find that extraordinary, for I can think of no more important role for an MP. That is why we are here, and that is why every one of us should support new clause 2.
      The Financial Secretary to the Treasury (Mr. Stephen Timms): I shall speak to amendments Nos. 32 and 33.
      As my hon. Friend the Member for Workington (Mr. Campbell-Savours) has said, it is regrettable that such a serious debate has been left until so late as a result of time-wasting earlier.
      Mr. Fabricant: On a point of order, Mr. Deputy Speaker. If there had been time-wasting, would the Chair not have called the House to order? In that case, there cannot have been time-wasting.
      Mr. Deputy Speaker (Mr. Michael Lord): I think that all such matters can be safely left to the Chair.
      Mr. Timms: These are important matters, which warranted more serious consideration.
      In his evidence to the Committee on 12 January, my right hon. Friend the Chief Secretary said that he recognised the force of the argument for extending audit by the NAO, at least in some cases. As the Committee has recognised, he noted that the Government had appointed the Comptroller and Auditor General to audit every non-departmental public body that we had set up since May 1997. We might argue about whether one or two institutions count as NDPBs, but that is the position. The right hon. Member for Haltemprice and Howden (Mr. Davis), who chairs the Committee, has made the point that that is in stark contrast with the record of the previous Government.

      309
      The Chief Secretary acknowledged that the present arrangements for the audit of executive NDPBs were something of a hotch-potch and not easy to justify. The Economic Secretary made the same point in Standing Committee. There seems to be no clear reason for the CAG being auditor of some bodies and not of others in the same sector.
      I had hoped that we might have some justification from Conservative Members for the practice of the previous Government, who put most of those arrangements in place. Former Ministers in the previous Government have contributed to the debate. I had hoped that they might shed some light on the rationale behind what the previous Government did: whether it was a Thatcherite aberration, which all right-minded people now abhor, or whether there was a more substantial basis for their decisions.
      Many Conservatives Members have spoken in the debate. Not one has sought to defend the previous Government's decisions. The hon. Member for Lichfield (Mr. Fabricant)—who was here until a moment ago—as perhaps a defender of the true faith, might have explained, or given some justification for their actions. None was forthcoming.
      Mr. Brady: Will the Minister give way?
      Mr. Timms: No, I will not.
      No attempt was made to justify what the previous Government did. In fact, it was quite the opposite. All the Conservative Members piled in to condemn what was their regular practice. It is interesting how hard it is to find anyone to defend that practice.
      Mr. Brady: Will the Minister give way?
      Mr. Timms: I will and then I will move on rapidly.
      Mr. Brady: In a spirit of generosity, perhaps the Minister will care to note that not a single Labour Back Bencher has defended the Government's refusal to accept the eminently sensible new clause?
      Mr. Timms: We are moving on to resolve these issues, as the House should have done earlier in the day.
      The Chief Secretary said that he believed that some reform could be accomplished administratively. For example, where current statute for a particular NDPB provides for the Minister to appoint the auditors, the Minister could appoint the CAG at the next opportunity. That is possible as things stand. At the same time, he did not rule out amendments, where they would be sensible, but said that he wanted to reflect further as part of the dialogue that he had invited the Committee to join him in.
      Mr. Paterson: Will the Minister give way?
      Mr. Timms: No, I will not.
      It is clear from both the evidence that the Chief Secretary gave the PAC and the Economic Secretary's words in Standing Committee that any approach must provide for circumstances that make it sensible to appoint an auditor other than the CAG. In our view, a blanket one-size-fits-all approach is not right.
      310
      In Government amendment No. 33, subsections (6) and (7) provide an order-making power to enable the Treasury to appoint the CAG to audit an NDPB that he does not audit at present, even if he is barred by statute from auditing the NDPB concerned. That is a big step in the direction that PAC members have been urging us to take.
      The order-making power will allow amendment of the statute setting up the NDPB by, for example, removing the requirement that the auditor has to be a Companies Act auditor, thus freeing the way for the CAG to be appointed. The amendment would not apply in respect of NDPBs that are companies. That issue needs to be addressed separately, as the right hon. Member for Haltemprice and Howden said in his very good speech. The Treasury would be able to propose such an order only after consulting the CAG. The order would need to be approved by affirmative resolution in both Houses of Parliament.
      The Government's amendment goes hand in hand with the proposal by the Chief Secretary to set up a study of all aspects of central Government audit. That was announced in his answer to a parliamentary question on Monday. He has also invited the Chairman of the Public Accounts Committee to join the steering group, and I very much hope that the right hon. Member for Haltemprice and Howden will feel able to accept that invitation.
      The study would cover not only issues of concern to the PAC—such as the audit of NDPBs, rights of access and validation of performance information—but issues such as how central Government audit should participate in modernising government, and particularly the issue of how audit impacts on risk taking and innovation, which is a topic that has occasionally cropped up in our debates on the Bill. The study would also have to examine other important issues, such as the quality of audit, links with other auditors, duplication of the work of inspectors and regulators, and experience overseas.
      The amendment will leave open the possibility of appointing at some stage in the future the CAG as the auditor of an NDPB, which he is currently prevented from auditing by statute, if it is agreed on the basis of a recommendation in the study that the CAG should be so appointed.
      Mr. Rendel: Will the Minister confirm that the Comptroller and Auditor General is there to audit on behalf of Parliament and not on behalf of the Government? Is the study a study into what audit should be done on behalf of Government or on behalf of Parliament?
      Mr. Timms: The position is absolutely clear: the audit is on behalf of Parliament. Our amendments make that very clear, and I am grateful to the hon. Gentleman for giving me the opportunity to put that on the record.
      Mr. David Davis: I welcome the study. Although the Minister will understand that we would prefer the approach of putting the provision into statute now, and that I am a little disappointed that the amendment does not apply also to the other two spheres—performance validation and access—I welcome the study and am minded to take part in it. I shall have to talk to the Chief Secretary about several matters, such as remit, membership and the types of issues that have just

      311
      been raised, but I shall do all that as quickly as possible. I hope that we shall be able to resolve a way forward on the matter.
      Mr. Timms: I am grateful to the right hon. Gentleman, and am glad that I took his intervention. It has taken us significantly forward.
      The amendment meets a concern expressed in Committee that, unless action were taken in the Bill, it might not be possible for many years to introduce any changes to the audit of NDPBs, even if the dialogue proposed by the Chief Secretary recommended that that change would be sensible. The key action that we are taking in the amendment is to remove the statutory obstacle to what the PAC Chairman and other Committee members, including my right hon. Friend the Member for Swansea, West (Mr. Williams), are seeking to achieve. I was grateful to my right hon. Friend for acknowledging that point in his speech.
      New subsection (3) in the amendment makes it clear that examinations conducted by the CAG under clauses 5, 7 and 11 are conducted on behalf of the House of Commons. I reiterated that point in replying to the hon. Member for Newbury (Mr. Rendel) a moment ago. In Committee, we debated a similar amendment tabled by the right hon. Member for Haltemprice and Howden, and we undertook further to consider the point. The amendment is the result of those considerations, after further discussions between the Treasury and National Audit Office officials.
      We think that it is sensible to include the amendment now, as the CAG does not conduct some of his audits, mainly of international bodies, on behalf of the House. We therefore have to make it clear that all his audits under the Bill are indeed on behalf of the House.
      New subsections (4) and (5) give the CAG the same rights of access when he acts as the auditor of other bodies, mainly NDPBs, as he has under clause 8(1) when he audits Departments. That replaces section 9(2) of the Exchequer and Audit Departments Act 1921, about which we have heard a certain amount in the debate.
      2 am
      On the new clause tabled by members of the PAC, I said earlier that any approach must provide for circumstances that would make it sensible to appoint an auditor other than the Comptroller and Auditor General. In our view, a blanket, one-size-fits-all approach is not the right way to proceed.
      The right hon. Member for Haltemprice and Howden proposed a blanket approach with his new clause 2 in Committee, but, after lengthy exchanges, he withdrew it and promised to bring forward an amended version on Report. The new clause that we now have would provide for the CAG to be the auditor at the expiry of the term of the existing auditor of all NDPBs except those designated by the relevant Minister. Ministerial designations would be subject to the approval of the House by affirmative resolution.
      Our view is that the revised new clause would go too far in the direction of making the CAG automatically the auditor of all NDPBs. Before reaching a conclusion we
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      need to have regard to a range of issues, not least the particular concerns of the Departments responsible to Parliament for overseeing the bodies in question. Some Departments take the view that the competitive tension secured by the periodic tendering of audit appointments brings a better service. Some believe that the NAO may not have the specialist expertise necessary to handle a particular audit. All those issues need to be considered carefully before decisions are made about a number of the NDPBs that we have been talking about.
      Let us not forget, too, that, under the Government amendment, Treasury designations will reflect the concerns not only of Departments, but of the CAG, as the Treasury is expressly required to consult him before proposing a designation to Parliament.
      All the issues need to be addressed as a whole.
      Mr. David Davis rose—
      Mr. Timms: I ought to conclude now, but I shall take a final intervention from the right hon. Gentleman.
      Mr. Davis: I thank the hon. Gentleman for his patience. The reason for putting in a timetable was to enable those consultations to take place. If it was decided at the end of the period that the situation was inappropriate, for whatever reason, it would be possible for the Minister to come back to the House and, by affirmative resolution, exempt the body in question from the CAG's audit. That was the purpose of the structure of the new clause.
      Mr. Timms: Our amendment deals with that. I accept that the right hon. Gentleman has done some work since he drew up his original proposals, as have we.
      The study that my right hon. Friend the Chief Secretary has proposed is very important. I am pleased that the right hon. Gentleman is minded to take part in it. Once that study has been completed, we can consider what further changes might be appropriate.
      I urge the House to accept the Government amendments and to reject the new clause.
      Mr. Davis: I shall press the new clause to a Division.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 27, Noes 253.

      Division No.92]

      [2.4 am

      AYES

      Atkinson, Peter (Hexham)

      O'Brien, Stephen (Eddisbury)

      Brady, Graham

      Öpik, Lembit

      Bruce, Malcolm (Gordon)

      Rendel, David

      Davey, Edward (Kingston)

      Russell, Bob (Colchester)

      Davis, Rt Hon David (Haltemprice)

      St Aubyn, Nick

      Fabricant, Michael

      Flight, Howard

      Sanders, Adrian

      Foster, Don (Bath)

      Stanley, Rt Hon Sir John

      Gray, James

      Swayne, Desmond

      Hayes, John

      Tyler, Paul

      Heath, David (Somerton & Frome)

      Wardle, Charles

      Howarth, Gerald (Aldershot)

      Webb, Steve

      Laing, Mrs Eleanor

      Letwin, Oliver

      Tellers for the Ayes:

      Lewis, Dr Julian (New Forest E)

      Sir Robert Smith and

      McLoughlin, Patrick

      Mr. Owen Paterson.

      313

      NOES

      Abbott, Ms Diane

      Flint, Caroline

      Ainger, Nick

      Flynn, Paul

      Ainsworth, Robert (Cov'try NE)

      Follett, Barbara

      Allen, Graham

      Foster, Michael J (Worcester)

      Atherton, Ms Candy

      Fyfe, Maria

      Atkins, Charlotte

      Gardiner, Barry

      Austin, John

      George, Bruce (Walsall S)

      Barnes, Harry

      Gerrard, Neil

      Barron, Kevin

      Gibson, Dr Ian

      Bayley, Hugh

      Gilroy, Mrs Linda

      Benn, Hilary (Leeds C)

      Godman, Dr Norman A

      Bennett, Andrew F

      Godsiff, Roger

      Benton, Joe

      Goggins, Paul

      Berry, Roger

      Golding, Mrs Llin

      Best, Harold

      Gordon, Mrs Eileen

      Betts, Clive

      Griffiths, Jane (Reading E)

      Blackman, Liz

      Griffiths, Nigel (Edinburgh S)

      Blears, Ms Hazel

      Griffiths, Win (Bridgend)

      Blizzard, Bob

      Grogan, John

      Borrow, David

      Hain, Peter

      Bradley, Keith (Withington)

      Hamilton, Fabian (Leeds NE)

      Brown, Russell (Dumfries)

      Hanson, David

      Browne, Desmond

      Heal, Mrs Sylvia

      Burden, Richard

      Healey, John

      Burgon, Colin

      Henderson, Doug (Newcastle N)

      Butler, Mrs Christine

      Henderson, Ivan (Harwich)

      Campbell, Ronnie (Blyth V)

      Hepburn, Stephen

      Campbell-Savours, Dale

      Heppell, John

      Caplin, Ivor

      Hesford, Stephen

      Caton, Martin

      Hoey, Kate

      Cawsey, Ian

      Hope, Phil

      Chapman, Ben (Wirral S)

      Hopkins, Kelvin

      Chaytor, David

      Hoyle, Lindsay

      Clapham, Michael

      Hughes, Ms Beverley (Stretford)

      Clark, Rt Hon Dr David (S Shields)

      Hughes, Kevin (Doncaster N)

      Clark, Dr Lynda (Edinburgh Pentlands)

      Humble, Mrs Joan

      Hurst, Alan

      Clark, Paul (Gillingham)

      Iddon, Dr Brian

      Clarke, Rt Hon Tom (Coatbridge)

      Illsley, Eric

      Clarke, Tony (Northampton S)

      Jackson, Ms Glenda (Hampstead)

      Clelland, David

      Jackson, Helen (Hillsborough)

      Coaker, Vernon

      Jenkins, Brian

      Coffey, Ms Ann

      Johnson, Alan (Hull W & Hessle)

      Cohen, Harry

      Johnson, Miss Melanie (Welwyn Hatfield)

      Coleman, Iain

      Colman, Tony

      Jones, Rt Hon Barry (Alyn)

      Connarty, Michael

      Jones, Helen (Warrington N)

      Cook, Frank (Stockton N)

      Jones, Ms Jenny (Wolverh'ton SW)

      Corbyn, Jeremy

      Corston, Jean

      Jones, Jon Owen (Cardiff C)

      Cousins, Jim

      Jones, Dr Lynne (Selly Oak)

      Cox, Tom

      Jones, Martyn (Clwyd S)

      Crausby, David

      Keeble, Ms Sally

      Cryer, Mrs Ann (Keighley)

      Keen, Alan (Feltham & Heston)

      Cryer, John (Hornchurch)

      Kemp, Fraser

      Cunningham, Jim (Cov'try S)

      Khabra, Piara S

      Dalyell, Tam

      Kidney, David

      Darvill, Keith

      Kilfoyle, Peter

      Davey, Valerie (Bristol W)

      King, Andy (Rugby & Kenilworth)

      Davidson, Ian

      King, Ms Oona (Bethnal Green)

      Davies, Rt Hon Denzil (Llanelli)

      Kumar, Dr Ashok

      Dawson, Hilton

      Ladyman, Dr Stephen

      Dean, Mrs Janet

      Laxton, Bob

      Dobbin, Jim

      Lepper, David

      Donohoe, Brian H

      Leslie, Christopher

      Doran, Frank

      Levitt, Tom

      Dowd, Jim

      Lewis, Ivan (Bury S)

      Drew, David

      Lloyd, Tony (Manchester C)

      Eagle, Angela (Wallasey)

      Love, Andrew

      Edwards, Huw

      McAvoy, Thomas

      Efford, Clive

      McCafferty, Ms Chris

      Ennis, Jeff

      McDonagh, Siobhain

      Field, Rt Hon Frank

      Macdonald, Calum

      Fisher, Mark

      McDonnell, John

      Fitzpatrick, Jim

      McFall, John

      314

      McGuire, Mrs Anne

      Smith, Angela (Basildon)

      Mackinlay, Andrew

      Smith, Miss Geraldine (Morecambe & Lunesdale)

      McNulty, Tony

      MacShane, Denis

      Smith, Jacqui (Redditch)

      Mactaggart, Fiona

      Smith, Llew (Blaenau Gwent)

      McWalter, Tony

      Southworth, Ms Helen

      Marsden, Gordon (Blackpool S)

      Spellar, John

      Marshall, David (Shettleston)

      Squire, Ms Rachel

      Marshall, Jim (Leicester S)

      Starkey, Dr Phyllis

      Martlew, Eric

      Stevenson, George

      Meale, Alan

      Stewart, David (Inverness E)

      Merron, Gillian

      Stewart, Ian (Eccles)

      Miller, Andrew

      Stinchcombe, Paul

      Moran, Ms Margaret

      Stoate, Dr Howard

      Morgan, Ms Julie (Cardiff N)

      Strang, Rt Hon Dr Gavin

      Mountford, Kali

      Stringer, Graham

      Mudie, George

      Stuart, Ms Gisela

      Mullin, Chris

      Sutcliffe, Gerry

      Murphy, Rt Hon Paul (Torfaen)

      Taylor, Rt Hon Mrs Ann (Dewsbury)

      Naysmith, Dr Doug

      O'Brien, Bill (Normanton)

      Taylor, Ms Dari (Stockton S)

      O'Brien, Mike (N Warks)

      Taylor, David (NW Leics)

      O'Hara, Eddie

      Temple-Morris, Peter

      Olner, Bill

      Thomas, Gareth (Clwyd W)

      O'Neill, Martin

      Thomas, Gareth R (Harrow W)

      Organ, Mrs Diana

      Timms, Stephen

      Palmer, Dr Nick

      Tipping, Paddy

      Pearson, Ian

      Todd, Mark

      Pendry, Tom

      Touhig, Don

      Perham, Ms Linda

      Trickett, Jon

      Pickthall, Colin

      Truswell, Paul

      Pike, Peter L

      Turner, Dennis (Wolverh'ton SE)

      Plaskitt, James

      Turner, Dr Desmond (Kemptown)

      Pond, Chris

      Turner, Dr George (NW Norfolk)

      Pope, Greg

      Turner, Neil (Wigan)

      Prentice, Gordon (Pendle)

      Twigg, Derek (Halton)

      Primarolo, Dawn

      Twigg, Stephen (Enfield)

      Prosser, Gwyn

      Tynan, Bill

      Purchase, Ken

      Vis, Dr Rudi

      Quin, Rt Hon Ms Joyce

      Walley, Ms Joan

      Quinn, Lawrie

      Ward, Ms Claire

      Rammell, Bill

      Watts, David

      Rapson, Syd

      Whitehead, Dr Alan

      Roche, Mrs Barbara

      Williams, Alan W (E Carmarthen)

      Rooker, Rt Hon Jeff

      Williams, Mrs Betty (Conwy)

      Rooney, Terry

      Winnick, David

      Ruane, Chris

      Wise, Audrey

      Ryan, Ms Joan

      Woodward, Shaun

      Savidge, Malcolm

      Woolas, Phil

      Sawford, Phil

      Worthington, Tony

      Sedgemore, Brian

      Wray, James

      Sheerman, Barry

      Wright, Anthony D (Gt Yarmouth)

      Simpson, Alan (Nottingham S)

      Singh, Marsha

      Tellers for the Noes:

      Skinner, Dennis

      Mr. David Jamieson and

      Smith, Rt Hon Andrew (Oxford E)

      Mr. Mike Hall.

      Question accordingly negatived.
      Mr. Denis MacShane: On a point of order, Mr. Deputy Speaker. Can you give us some guidance as to what will happen if, as a result of tonight's debate, we lose tomorrow's business? That has already happened once before in this Session. Perhaps we could do without Prime Minister's Question Time, but more important, at 3.30 pm tomorrow, there is to be a debate on the report of the Select Committee on Standards and Privileges on the hon. Member for Billericay

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      (Mrs. Gorman). She is accused of lying and of deceiving the House. [HON. MEMBERS: "Ah!"] We can see—[Interruption.]
      Mr. Deputy Speaker: Order.
      Mr. MacShane rose—
      Mr. Deputy Speaker: Order. The hon. Gentleman must take his seat when I am on my feet. He asks a hypothetical question; it is not a matter for the Chair at this time. [Interruption.]
      Mr. MacShane rose—
      Mr. Deputy Speaker: Order. The hon. Gentleman will remain in his seat.
      Mr. Andrew Miller: On a point of order, Mr. Deputy Speaker. Would it be in order for anyone who has any association with any of the companies referred to in the report that is scheduled for debate tomorrow—
      Mr. Deputy Speaker: Order. That is not a matter for the Chair, or for debate at this time. The hon. Gentleman should know better.
      Mr. Ivan Lewis: On a point of order, Mr. Deputy Speaker. The integrity, probity and good conduct of Members are important, and, as a relatively new Member of the House, I seek your advice as to whether it is important for us to be kept up through the night, with the possibility of delaying—
      Mr. Deputy Speaker: Order. The hon. Gentleman may be a new Member, but the first thing that he needs to learn is that when I am on my feet, he must sit down. I have already dealt with that point of order.

    New Clause 3

      COMPTROLLER AND AUDITOR GENERAL: ACCESS TO INFORMATION
      '.(1) This section applies in connection with the examination by the Comptroller and Auditor General of the accounts of any government department or other body under or by virtue of—

      (a) any enactment, including this Act, or

      (b) in the case of a body other than a government department, any arrangement which provides for the accounts of that body to be subject to examination by the Comptroller and Auditor General.

      (2) Subsection (3) applies only to the following records, that is to say—

      (a) records which are in the custody or under the control of the department or body to which the examination relates, or to which that department or body has or can obtain access;

      (b) records of a receiving body to which any paying body has or can obtain access.

      (3) In connection with such an examination as is mentioned in subsection (1), the Comptroller and Auditor General shall, subject to subsections (2), (4) and (5), have a right of access at all reasonable times to any record relating to—
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      (a) the accounts of the department or body to which the examination relates,

      (b) any money originating in the Consolidated Fund,

      (c) any liability or contingent liability that will or may be met out of monies originating in the Consolidated Fund, or

      (d) tax credit under the Tax Credits Act 1999.

      (4) The right of access conferred by subsection (3) shall not be exercisable in relation to any record relating to accounts which—

      (a) are subject to audit by the Auditor General for Scotland or the Auditor General for Wales, and

      (b) are not also subject to audit by the Comptroller and Auditor General.

      (5) In such cases and to such extent as the Treasury may by order designate, the right of access conferred by subsection (3) shall not be exercisable in relation to any record which is not held by or under the control of the body to which the examination in question relates.
      (6) An order under subsection (5) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of the House of Commons.
      (7) A person who holds or has control of any record to which the Comptroller and Auditor General has a right of access under subsection (3) shall give the Comptroller and Auditor General any assistance, information or explanation which he requires in relation to the matters recorded in it.
      (8) In this section "paying body" means any body which pays to a receiving body money originating in the Consolidated Fund, and a "receiving body" means any body which receives from a paying body money originating in the Consolidated Fund, but does not include in either case a body the accounts of which are subject to audit under section 2 of the Audit Commission Act 1988 or section 97 of the Local Government (Scotland) Act 1973 unless it is a body specified in section 98(I) of the National Health Service Act 1977.'.—[Mr. David Davis.]
      Brought up, and read the First time.
      2.15 am
      Mr. David Davis: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government amendment No. 21.
      Amendment No. 17, in clause 11, page 6, line 19, leave out from "(5)" to "shall" and insert—
      'The Treasury, a body which is designated for the purposes of section 10 and a person who acts as auditor for the purposes of section 10(2)(c) or (7)(c),'.
      Government amendment No. 25.
      Mr. Davis: The amendment tabled in the names of the right hon. Member for Swansea, West (Mr. Williams), the hon. Member for Newbury (Mr. Rendel) and myself is about protecting the rights of Parliaments and, thereby, taxpayers to have independent information about the way in which public money is spent. I have raised the matter before during discussions on the measure, and have listened closely to the Government's concerns.
      I have reworked the new clause to address those concerns and to ensure that there are none of the undesirable or unintended consequences identified by Ministers in Committee. I travelled that extra mile willingly because I want to find a formula that is in the interests of Parliament, the Government and the taxpayer.

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      A fundamental point, which has not been well understood, is that the new clause does not provide a right for the CAG to roam at will. It is not a right for him to follow public money wherever it goes—desirable as that might be. It simply provides that, where the Government or funding bodies secure for themselves, through statute, contract or other means, access to a recipient of public money, the CAG's independent right of access will follow automatically.
      The revised provision is even more limited than the version that I tabled in Committee. It includes restrictions on access in order to address specific concerns raised by the Government. It includes an additional subsection to make it perfectly clear that devolved matters are excluded. It even allows the Government a right of veto by order. That gives them a mechanism to deal with any case they identify—although I cannot imagine any—in which the CAG should have less access than the Government, or where his access should be subject to some proviso. I am in earnest about the new clause and want to find a way of framing it that will leave the Government content. In addition to the provisions that I have included specifically to help them, the interaction of my new clause with the commencement provisions in clause 27 would provide further flexibility.
      The core difference between my access proposals and those of the Government lies in subsection (2) of my new clause. Access applies first to documents controlled by a Department; secondly, when a Department itself has access; and thirdly, when funding bodies further down the spending chain have access. Clause 27 will allow the Treasury to bring the Bill's provisions into force piecemeal. It could choose to bring in initially only the first part of my access provision, which is in line with its own, activating the rest after further consultation. The Financial Secretary raised the prospect of consultation, and I hope that that will take place and will be constructive.
      The Government provision, which I shall discuss shortly, will close the possibility of addressing weaknesses in the Comptroller and Auditor General's access right until the next time that legislation on these matters is before the House. That may be many decades in the future. My provision would create the framework for the weaknesses to be addressed without further primary legislation.
      We had a useful debate in Committee about what is now clause 8 and the Comptroller and Auditor General's right of access to information. It ran over two sittings and lasted for more than four hours, so hon. Members will be relieved to learn that I do not intend to repeat it here. I want to move the debate on, setting out specific concerns that the Government raised in Committee and demonstrating that my new clause would give no grounds for any of those concerns.
      I shall start by briefly summarising events in Committee before I progress. I explained in Committee that the access clause is unsatisfactory for three reasons. First, it will make Departments the gateway through which the Comptroller and Auditor General must gain access to information whereas the original Exchequer and Audit Departments Act 1866 invested the powers of access directly in him. Secondly, it will repeal, without equivalent provision, a section in the Exchequer and Audit
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      Departments Act 1921 that is the only statutory basis for the Comptroller and Auditor General's rights to information on the many other accounts that he audits.
      I am pleased that the Government have addressed those points in amendments to clauses 8 and 22, but they have failed yet to address the third and most important point that I raised in Committee. The clause will fail to update the Comptroller and Auditor General's access. It will leave him to face public audit in the 21st century with access rights developed to meet the needs of public administration in the middle of the 19th century. That is the fundamental flaw that my new clause is designed to correct.
      I want to remind the House why we need the Comptroller and Auditor General to have access rights that extend outside Departments. My examples are those that I described in Committee, but I shall only summarise them here. Many functions of Government are now delivered outside the traditional public sector. Two main categories are particularly important. First, private sector companies deliver contracted-out activities—for example, PFI contractors to whom Departments are already committed to pay more than £70 billion in the next 25 years. Secondly, bodies in the independent and voluntary sectors provide public services funded by Government. For example, housing associations deliver on behalf of the Housing Corporation social housing programmes that are worth more than £1 billion each year.
      Parliament has the right to expect the same standards of probity and regularity in the use of public funds however they are spent. Departments are still responsible for the way that the money is spent and they rightly insist on automatic access for their staff. The Comptroller and Auditor General can examine Departments' own checks on service deliverers, but that may not provide him with adequate evidence to reach an independent view. His professional view is that he needs access to audit Departments. Departments often agree, but the solution is piecemeal. The CAG must ensure that Departments secure access by contractual means. That is administratively burdensome; it diminishes the CAG's independence by making him dependent on Departments; and, where access is resisted, it impedes scrutiny by the PAC on behalf of the House.
      I summarised in Committee some of the most notable examples of frustration experienced by the CAG and the PAC, caused by depending on arrangements granted at the behest of Departments and the Treasury. It took five years of negotiation before the CAG obtained access to the Housing Corporation and other executive non-departmental public bodies. The CAG was unable to provide the PAC with an assurance that Camelot had correctly handed over national proceeds from the lottery for four years because the company and its auditors refused to provide the evidence.
      It took several years of negotiation before Government provided the CAG with access to training and enterprise councils, and Government refused the CAG access to private train operators despite the fact that the PAC considers that necessary to verify on behalf of Parliament that public subsidies have been earned. The Government fail to provide the CAG with powers to visit farmers, to check their claims—even though staff of the European Court of Auditors can visit UK farmers to check on EU money.

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      The CAG can examine only those registered social landlords—housing associations, in modern parlance—that volunteer access. In one case where an hon. Member brought irregularities to the attention of the CAG, it took six months for access to be arranged. The case is not the subject of a criminal investigation. That is an example of a lack of statutory access rights impeding the CAG's ability to respond to hon. Members who have concerns about the use of public funds in their constituencies.
      There are related concerns about whistleblowers. Recent legislation named the CAG as a person to whom whistleblowers may disclose information and remain protected, yet the CAG does not have powers to examine allegations made against private contractors accused of misappropriating public funds—a case of fragmented rather than joined-up government.
      Those examples show that the CAG needs access rights that extend beyond Departments and that it is not enough to rely on administrative means. I refer hon. Members who want more detail to the reports of the sixth and seventh sittings of the Standing Committee.
      The relatively minor change to access rights that the Government appear to have conceded as part of their agreement to remove Departments as the gateway through which the CAG must gain access returns to the previous legislation, which vested powers of access directly in the CAG. Government amendment No. 21 refers to documents controlled by Government Departments or pursuant to arrangements made by a Government Department for compiling or handling its records. I would appreciate the Minister's clarification. Is that intended to provide access to any contractor undertaking finance-related services on behalf of Departments, such as EDS which works for the Inland Revenue, and Chessington Computer Centre, which processes many billions of pounds of Government payroll?
      The amendment falls far short of the current administrative arrangements for CAG access that currently operate with the Government's blessing. The Government's general guidance on contracting states that access shall be provided where a contractor processes or handles records relating to the operational activities of the authority. Further Government guidance, specifically on PFI, states that contracts should ensure that the CAG is entitled to examine the contractor's records. How far does the amendment go? It certainly fails to reflect their own acknowledgement of the extent to which contractors deliver services and public programmes and to whom the CAG will require access. Nor does it acknowledge the need for the CAG to have access to a range of bodies in the voluntary, independent and public sectors. In such cases, the CAG will have to continue to negotiate his way in with the relevant body to obtain access, so it therefore falls far short of the recommendation in the ninth report of the Public Accounts Committee.
      2.30 am
      I want to progress the debate by considering the Government's concerns about granting the CAG the type of access rights that we seek through the new clause. I have studied the Committee Hansard as before, and it reveals five issues that are of serious concern to the Government. First, they are anxious that the new clause
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      would allow the CAG a right of access to anywhere that public money was spent, down to the last paper clip, and that anybody entering a contractual relationship with the Government would be subject to that inspection. Quite simply, that would not be the effect of the new clause. It would grant the CAG access only where the Government or funding bodies considered that they themselves needed access. In those terms, we might call it a piggyback provision.
      The logic of that approach is that the CAG would need access for the same reason that the Government need it—that is, when the only way to ascertain that a service is being delivered is to examine it at the service deliverer's site. Thus, contracts under the new deal give the Employment Service access to bodies that provide training and employment opportunities funded by the initiative. The Employment Service quite properly needs access to ensure that claims are bona fide. The CAG also needs access to satisfy himself on behalf of Parliament that payments under the new deal are regularly made for services that have been delivered. The Government accept that the CAG needs access and secured that through administrative means. That is welcome and essential, but, as I said when we debated a previous amendment, the administrative approach is inherently deficient. I shall return to that.
      In contrast with the new deal example, I doubt whether the Employment Service has secured rights of access to its stationery supplier. It can monitor the quality and price of supplies without going into the supplier's manufacturing process, can test the price in an open market and, most important, can see that it is getting what it pays for as the goods are delivered to its premises. For exactly the same reasons, the CAG does not need access there. The new clause would not give him such access and the provision, therefore, is in no way an unfettered right to roam.
      Secondly, the Government are concerned about the potential constraining effect on others of widening the CAG's access. They consider that wider access in general may stifle innovation and risk taking, and that access specifically in respect of tax credit payments made by employers on behalf of the Government may be a burden on business. The Minister said in his comment on the review that those matters would be taken up.
      On the PFI and in the context of the "Modernising Government" agenda, the CAG has already said publicly that he supports
      well thought through risk taking and experimentation,
      the emphasis being on well thought through. The Government have welcomed that comment and have stated that they recognise that
      people will no longer be able to use audit as an excuse for not delivering more co-ordinated and efficient services.
      A statutory right of access for the CAG will not impact on risk taking in any case. The CAG already has full access to Departments, which might be risk averse. The purpose of the new clause is to extend his access beyond Whitehall to, for example, the private sector bodies delivering public services. Such bodies have innovation and risk taking at their core and will not be inhibited by the CAG, but public sector standards and expectations may be less familiar to them, and there may be a correspondingly greater need for the CAG to have access.

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      The proof is provided by experience. The CAG has negotiated access to the private sector in many cases, and the arrangements have worked well. The very changes encouraged under the "Modernising Government" agenda show the need for more flexible arrangements for the CAG. Cross-departmental initiatives and public-private partnerships require civil servants to work outside the traditional rigidities of Departments, and defining the CAG's access in terms of those Departments is out of kilter with such modernisation.
      Mr. Rendel: Does the right hon. Gentleman know, or has he heard from any Government source, of any occasion when the Government have felt that the CAG's access has proved in any way oppressive?
      Mr. Davis: That is an extraordinarily interesting question because we often hear the general argument that such access suppresses risk taking but we have never been given an example, so the answer is no. If there has been such an occurrence, I would be interested to hear about it. Perhaps the review will pick up some of those points.
      On tax credits, access is necessary because they replace benefits that are currently delivered through Government agencies that are already subject to the CAG's inspection. Those credits are, in effect, payments from the state. In recognition of the concern about the burden on business, I have made the new clause clearer, to show that it allows access only for examining tax credits, which involve payments, and does not apply to the tax system as a whole because that is largely about receipts rather than payments.
      I can assure, and reassure, the Government that the CAG's access would impose no burden beyond that already inherent in the tax credits system. The CAG has informed me that his staff would conduct examinations of tax credits by accompanying Inland Revenue staff on the visits that they make to check compliance, so the new clause will not, in any event, add any new burden.
      The CAG estimates that, unless specific weaknesses become apparent and require further work, his staff would need to attend 0.5 per cent. of the Inland Revenue's visits. Based on the Revenue's latest figures, that would mean attendance by the CAG's staff at about 200 out of just under 40,000 visits. Access for the CAG would mean no additional visits to employers, but simply one or two extra people on a tiny proportion of visits that would take place in any case, so the additional burden argument does not stand up.
      Thirdly, the Government have said that the existing arrangements to provide access work well and are preferable to a statutory provision. However, the Chief Secretary, in giving evidence to the Committee, recognised that the arrangements that stem from that approach are
      a bit of a hotch-potch.
      They have often required lengthy and costly negotiations, illustrated by the examples that I cited earlier.
      The existing arrangements raise the further constitutional issue that the Government, and in practice the civil service, decide what Parliament may scrutinise. A statutory approach would bring administrative savings in negotiating access, avoid accidental omissions and ensure that Departments do not dictate the extent of parliamentary scrutiny. My reassurance to the
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      Government in this matter, as with the previous point, is that wider access is not new—it is already in place in many parts of the public sector. We merely want the mechanism for securing wider access to be more consistent and robust. As an additional benefit, the statutory approach will be cheaper to operate.
      Fourthly, the Government are concerned about duplication of audit. That stems from a misunderstanding about audit. There will never be more than one auditor who audits the accounts, and the CAG will not conduct a duplicate audit of the accounts of bodies in question. To continue with an earlier example, the CAG would examine the records of the new deal provider organisations, not to audit their accounts but to audit those of the Employment Service and ensure that the training and employment opportunities for which the service has paid have been delivered.
      The Government are keen for the CAG to place reliance on work that other auditors have undertaken in auditing the accounts of bodies in which he has an interest. Sometimes that is appropriate and it is for the CAG to judge when it is. Unless specifically contracted to do so, other auditors will not examine whether funds provided to the body have been used as Parliament intended, because their responsibility is to the body itself, not to Parliament. Two cases illustrate the different remit and the role of auditors working on behalf of the bodies that they audit, rather than on behalf of Parliament, as in the case of the CAG.
      Halton college claimed £6.4 million from the Further Education Funding Council, with no support from college records. That happened over several years, despite the fact that the college's auditors had been required to certify funding claims. The funding council subsequently reviewed the quality of work undertaken by private firms auditing colleges, and identified concerns in 11 of the 26 cases reviewed.
      In the second case, Gwent tertiary college was taken to the brink of collapse by incurring a deficit of £6.8 million through significant weaknesses in the controls of claims for European funding. The college's auditors had repeatedly certified that all grants and income had been used for the purpose for which they were received, but had not taken any detailed testing of expenditure to primary records to support their audit opinion. Neither of the matters is new to the Minister, as both have been related in Public Accounts Committee reports, which the Treasury has received.
      There is no risk of audit duplication. We are discussing different and complementary functions on the part of the auditors.
      Fifthly, the Government said that the Bill is about resource accounts, not about audit. However, analysis of the Bill shows that it covers far more than is necessary to bring in resource accounts and resource-based supply, and that audit is indeed at its core. The Bill repeals 16 sections covering audit in the Exchequer and Audit Department Acts 1866 and 1921. Seven of its 28 clauses deal with audit. It is hard to imagine a Bill that is more about audit. The opinion that the Bill is only about resource accounts and resource-based supply and not about audit is simply not supported by the facts.
      Mr. Timms: I am grateful to the right hon. Gentleman for giving way. Before he concludes, I wanted to ask him

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      about a point that he made earlier in his speech. He said that the new clause would not give the NAO further access than the Government have, but, as I understand subsection (8), it sets up an endless chain of paying bodies and receiving bodies, which could allow the NAO to go further than the Government can go. Where in the new clause does the right hon. Gentleman believe there is a restraint on that?
      Mr. Davis: I shall make two points to the Minister. As with the previous new clause, if he says that the problem is simply one of drafting, I am happy to accept his undertaking that he will come back to it in the Lords and correct it accordingly. However, I was referring to subsection (2), which lays down the categories that were intended. As the Minister will imagine, we took parliamentary counsel's advice on the matter. If he is correct in his description, I am happy for the new clause to be corrected at a later stage.
      In conclusion, the resistance to the new clause is misplaced on all counts. I have tried hard, as has the National Audit Office's counsel on my behalf, to find a form of words that removes unintended consequences. It is simply a matter of accountability to the taxpayer for the way in which public money is spent.
      We all want public services to evolve in the modern world. As I said in the Committee—the Minister smiled at the time—I am that strange thing, a right-wing Tory who believes in public services. We all want them to evolve. We want the taxpayer to get a good deal, and we want to be able to prove it. We do that by setting in statute the principle that Parliament and the taxpayer's auditor has the access necessary to do its job.
      Amendment No. 17 deals with whole of Government accounts and access in that respect. I shall not go into great detail. The arguments are similar to those that I made to the Minister in Committee. It is the Comptroller and Auditor General's opinion that, under the accounting standards under which he is required to work, he has access to the subordinate accounts and the right to intervene or to require intervention from the subordinate auditors of the components of whole of Government accounts. If he is not able to have that access, he may have to qualify whole of Government accounts on those grounds. That is in nobody's interest. The new clause is designed not as a right to roam but for a specific purpose. If the Economic Secretary has a problem with it but says that the Treasury will table an amendment on the issue in another place, I will be happy to accept that.
      The new clause aims to provide a good quality audit on behalf of Parliament and the public. That will benefit Government.
      2.45 am
      Mr. Flight: I support my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), especially on new clause 3. We are considering complex and difficult territory, which will become more difficult still. Government amendment No. 21 does not tackle the problems with sufficient subtlety.
      If we take as a starting point the obvious desire to protect and modernise Parliament's monitoring of the way in which public money is spent, we must face the fact that
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      auditing by the Comptroller and Auditor General will be inappropriate in many cases. Private finance initiative organisation means that public money will increasingly be spent on a subcontractor basis. Simply requiring audit or full access to follow all public money is not practical.
      I repeat that it is clear from experience that it is unsatisfactory for Departments to act as gatekeepers to control the Comptroller and Auditor General's ability to monitor public money and unearth nasties. In many cases, too much time has been spent and too much difficulty encountered in gaining the necessary access.
      The delicate question is where the line will be drawn. The Comptroller and Auditor General needs to be empowered with statutory rights in a way that is sufficiently flexible to permit some evolution. My right hon. Friend the Member for Haltemprice and Howden argued that access is not appropriate when we are simply considering the Government's buying of supplies. Doubtless the new Government procurement office is intended to deal in a commercial fashion with value for money in buying supplies.
      It is difficult to decide where to draw the line. For example, some services are contracted out to the private sector. If I were running a business and providing to other parts of the private sector services similar to those that I provided to Government, I might believe that it was inappropriate for the Comptroller and Auditor General to redo the work that my auditor had undertaken. If I had done a deal with the Government to provide a service at a specific price, why should the matter go further, as long as I delivered the service? That gives rise to a question about checking whether the service has been provided. However, drawing the line about what merits access will prove increasingly difficult.
      My right hon. Friend the Member for Haltemprice and Howden suggested the guideline that right of access is clearly required when the Government reserve any rights of investigation. A right of access is clearly required when funds are collected and paid in a form that is analogous to the arrangements for the lottery. There is clearly a right of access where there is any form of public subsidy.
      Despite being capitalist in the way in which I think, I understand that the more that is devolved and subcontracted to the private sector, the more scope there is in some senses for corruption, and that one must therefore err on the side of permitting more rather than less access. The whole debate—going back to the central PFI subcontracting issue—about access and PFI provisioning is not complete and will require a good bit more consideration.
      Let me return to the very beginning. We are talking about public money. Ideally, Parliament, through the CAG, should be doing the monitoring and should have the necessary rights of access to follow up all such expenditure. At present, there are many areas, as we all know, where there is nowhere near sufficient access and where even the obtaining of access has taken far too long.
      As methods of delivering public services change, the needs involved in handling such matters will change. It seems to me that the new clause goes a long way towards providing the necessary flexibility for the future, as well as the correct basis of a statutory right, and that it will permit, in the public interest, the weighting to be on the right side in terms of not impeding the Comptroller and Auditor General as present arrangements tend to do.

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      My understanding of the Government's alternative proposal, in amendment no. 21, is that it is much more limited and retains Government Departments as the gatekeeper: it would present great difficulties in the chain of potential subcontracting of the provision of services out of the public purse, whether involving PFI contracts or others.
      I am not a lawyer technically qualified to know whether the drafting of the new clause fully ties up the considerable complications, but it has taken account of a great deal more than Government amendment No. 21, and deserves support in principle, if not in its present form. It represents rather more than Government amendment No. 21 embodies.
      Mr. Edward Davey: The House must choose tonight between new clause 3 and Government amendment No. 21, which seems to deal with only one of the original weaknesses in the Bill: the fact that clause 8 would have given access to the Comptroller and Auditor General only through the Departments acting as gatekeepers.
      The Government heard our complaints in the Committee and have responded. We welcome the fact that amendment No. 21 shows that they listened and responded appropriately. However, the amendment does not deal with the second issue, which the new clause picks up—the need to extend the statutory right of access for the National Audit Office not only to departmental accounts and documents related to them but to other bodies which one would expect the National Audit Office to be able to audit. Therefore, the new clause is clearly preferable, and we shall support it.
      I do not, however, believe that the new clause is perfect. The Minister pointed out in an exchange with the right hon. Member for Haltemprice and Howden (Mr. Davis) that it might not restrict access sufficiently, and that it might open up a situation in which the National Audit Office could follow the supply of services from the private sector to the public sector far too far, so that it would have to go into far too much detail.
      My problem with new clause 3 is slightly different, however. Again, it relates to subsection (8), in which the draftsmen have tried to introduce the concept of a "paying body" whose money originates from the Consolidated Fund. When I first read the new clause, I thought that a fairly ingenious device, but, on reflection, I see that it means that some bodies to which hon. Members have said they would like the NAO to have access rights would not be covered. That applies in particular to public bodies that obtain their revenue from levies, which were mentioned earlier. They would not be covered because the levies do not count against the Consolidated Fund. Bodies that are effectively public corporations, such as the BBC, would not be covered either.
      While, as the Minister said, one aspect of the new clause may need to be restricted, another aspect probably does not go far enough. There is room for improvement; but, given that new clause 3 is the best that we have at the moment, I give it my preference.
      Mr. David Davis: I think that we are getting too tangled up in the wording of subsection (8). I talked it over with the draftsmen in the first instance, and it appears
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      that the form of words is not unique to the new clause; but I am not too fussed about that. Let me ask the hon. Gentleman's opinion about something else.
      The last group of proposals that we discussed included a permissive clause tabled by the Government—commendably, I think—to allow the Treasury to intervene to provide access where it is not currently available. Does the hon. Gentleman agree that it would be sensible for the Government to table a similar permissive clause—not drafted in the same way, but intended to cover the problems that we are discussing—to give some power to the review to which the Minister has referred? One of the concerns that the Minister creditably mentioned was that there would not be another primary-legislation opportunity in the foreseeable future.
      Mr. Davey: That is a good point. If a permissive clause is the only way in which we can secure the changes that we seek on a piecemeal basis through the review, we need such a measure. I hope that the Government will listen to our suggestions, and table such a clause in another place. As I am sure the right hon. Gentleman agrees, however, that is a secondary solution; what we really want is a provision in the Bill that would deal with the issues universally.
      The right hon. Gentleman brings me to my next point, which concerns the review that has been referred to—in fairly loose terms so far: we have read press reports, and engaged in conversations outside the Chamber. Perhaps the Minister or the Chief Secretary will be able to tell us a little more, because I think the review is relevant to a number of the groups of new clauses and amendments that we are discussing.
      Will the review just involve the right hon. Gentleman and some of his colleagues from the PAC, or will it seek to secure a wider consensus in this place? As the right hon. Gentleman rightly said in his exchange with the Minister, it is important for the review to be led by Parliament. It is about the accountability of public bodies to Parliament, and Parliament should therefore be represented in it, in as many ways as are appropriate. The PAC will obviously have a role in that regard, but I should have thought that representatives from the main parties should at least be consulted, and possibly invited on to any review panel that the Government may consider establishing. Then hon. Members on both sides of the House would have an input into the review.
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      As the right hon. Gentleman said, what is the remit of the review? Will it cover the things in the Bill and some of the wider issues that we have read about in today's Financial Times—problems of accountability if there are cross-departmental reviews and budgets in future? Will it cover other matters such as supply and procedure for estimates in this place, which we touched on earlier?
      All those matters are germane to the issue of parliamentary accountability on the budget. As we know so little about the review, all I can do at this juncture is to urge the Minister to discuss its remit with all parties to ensure that Parliament has an input at the first stage. The hon. Member for Stoke-on-Trent, South (Mr. Stevenson), a Labour Member, agreed that we needed to reform the

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      procedures for supply, so, again, we can get cross-party consensus on a fairly radical approach to improving financial accountability.
      In dealing with some of the problems that the Minister raised in Committee concerning the extension of CAG's institutional jurisdiction, the right hon. Gentleman talked about one of the favoured Government solutions to the problem: using administrative means to extend the CAG's access rights where appropriate. However, study of the administrative methods that the Government employ in respect of the auditing of various bodies suggests that the administrative regime goes against the NAO becoming an auditor.
      I refer, for example, to the Treasury's central unit on procurement, which issues guidance on model form contracts. Apparently, a standard term in the contract says that the incorporation of a clause on access rights for the NAO is explicitly at the discretion of the parent purchaser. Therefore, the administrative regime on which the Economic Secretary puts such reliance works against a solution to the problem.
      Mr. David Davis: I am speaking from memory here. As the hon. Gentleman will remember, I had dozens of examples in Committee, but, if I remember correctly, access to the training and enterprise councils was held up not by the Department, but by Treasury intervention preventing access.
      Mr. Davey: The right hon. Gentleman may be right. I do not know the details, but it follows from what I have said that the administrative regime—whether from the Treasury, or the Treasury's central unit on procurement—is not pushing on the issue in the way in which the Government sometimes suggest it is.
      I hope that the Government will look to other independent bodies and commentators for their views on that crucial matter and for solutions. In Committee, I had occasion to quote, sometimes extensively, from the latest academic work on the issue, entitled "Audit, Accountability and Government" by Fidelma White and Kathryn Hollingsworth. It is great seller—at least it should be.
      Chapter 4, entitled "The jurisdictions of the C&AG", reviews all the various areas that we discussed in Committee. Having looked at how the NAO is able to audit public money that is spent through private contractors and local spending bodies such as voluntary agencies, it concludes that there is a need for statutory legislation to ensure that there are automatic access rights. I quote from page 89 of the book:
      the C&AG could be given guaranteed rights of access to the records of all local spending bodies and private contractors providing public services and functions. Until such legislation is forthcoming, the C&AG will remain the poor relative of other public sector auditors, such as the Audit Commission and the European Court of Auditors.
      The quotation reiterates many of the points made by the right hon. Member for Haltemprice and Howden, and emphasises the fact that it really is time that reform on access was made. We have waited far too long for it.
      We have been told that the Government have quite a good record on access. When the Economic and Chief Secretaries appeared before the Public Accounts
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      Committee, they said that they were minded to move further in that direction. They probably do not want to hear this repeated, but we want to encourage them to have the strength of their convictions and quickly to follow them through. This matter has waited far too long to be tackled.
      The Bill is the first legislation for many decades to deal at all comprehensively with the access issue. The Government should seize this opportunity to ensure that Parliament's auditors, who are accountable to Parliament, have the access rights that they need and should have.
      Mr. Fabricant: In the debate on the previous new clause and amendments, we heard that the Comptroller and Auditor General was not allowed to investigate whole swathes of the economy. Now, we hear that there are other spheres in which the CAG is allowed to investigate, but to which he has no access. That is not auditing, it is impotency.
      The hon. Member for Kingston and Surbiton (Mr. Davey) said that, in many cases, the CAG is able to gain access only at the discretion of the body that is to be audited. Such an arrangement cannot be right. In extreme circumstances, in cases in which there might be a misappropriation of funds, such discretion would not be exercised in favour of allowing access. Therefore, we are talking not only about impotency, but about responsibility without authority. Such an arrangement also cannot be right.
      It is quite extraordinary that officers of the European Court of Auditors are able to go tramping over British farms, whereas the CAG cannot send his officers on to British farms should it be appropriate to do so. Clearly, when it comes to the CAG, there is no independence.
      Government amendment No. 21 does not go far enough. New subsection (2) states that new subsection (1) applies only
      in relation to documents which are held or controlled—
      (a) by a government department, or
      (b) in pursuance of arrangements made by a government department for the compiling or handling of any of its financial records.
      That considerably restricts the CAG's activities.
      We have heard of cases in which the CAG was seeking information—from Camelot, for example—but it took four years to obtain that information. The issue of whether Camelot has been making excessive profits is, rightly or wrongly, contentious. Nevertheless, it would have served the interests of Parliament—and certainly the interests of the people, whom Parliament serves—for the CAG to gain access to the relevant figures. Provision on access must be tightened up. It certainly should not be loosened or slackened, but that is what is happening.
      As my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) said, there is a difference between the actions of a commercial auditor—a chartered accountant, certified accountant or any auditor certified by the Department of Trade and Industry—and those of the CAG. The CAG has the additional duty of investigating and determining whether funds are being spent in the spirit intended by Parliament. The Companies Acts do not impose such a duty on commercial auditors, but the CAG must perform that duty. He can do so only if he has access. That access must be quick, because in extremis, where there might be fraud or misappropriation

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      of funds, there is a possibility that delay might enable the organisation being audited to conceal information that the CAG needed to see.
      Customs and Excise has great powers to investigate certain issues, particularly inputs and outputs for VAT calculations. It is very strange that such powers are not available to the CAG, who is empowered by Parliament on behalf of the people to see whether funds are applied in the way in which Parliament intended.
      I welcome Government amendment No. 21 to some extent, but it does not go far enough. New clause 3, tabled by my right hon. Friend the Member for Haltemprice and Howden and the Public Accounts Committee, is comprehensive. It would not damage the organisations that might be subjected to audit.
      Unlike my hon. Friend the Member for Eddisbury (Mr. O'Brien), who has only just entered Parliament, I was in business back in the 1980s. My company has been subjected to audit and even dawn raids by Customs and Excise to look at my VAT inputs and outputs. I claimed VAT back because my company was mainly an exporter. Disruptive though such audits can be, if a company keeps its books in a professional manner, it is not a difficult process to undergo. When I started the company in the 1980s, the records were kept manually. These days, almost all companies, from FTSE 100 companies to small sweet shops, keep their accounts on computer. It is not right to say that such audits can be difficult and that the Government are trying to protect companies from them.
      I was shocked to hear—perhaps my right hon. Friend the Member for Haltemprice and Howden will correct me if I am wrong—that the BBC is also protected from such audit. That is a problem. The BBC has its own auditors, but whether the corporation is operating in what is called a fair trade environment is a contentious issue. I do not want to go too far off the point, because you would rightly call me to order if I did, Mr. Deputy Speaker, but it is worth explaining. I said that it was in the spirit of Parliament's legislation that the CAG has to investigate.
      The BBC gets most of its income from the licence fee, but a relatively small amount comes from the operation of BBC World, which is its commercial arm, selling radio and television programmes overseas, producing publications and entering into joint ventures with commercial operations. It competes with other organisations that are funded not by a licence fee, but by shareholders and trade in a normal environment.
      Parliament has rightly said that the BBC should not have a commercial advantage. None of its operations should be funded, directly or indirectly, by money from the licence fee. Nevertheless, we all understand that the BBC has a large structure. After all, it is a £2 billion organisation and it is sometimes difficult to separate the overheads that are paid for by the licence fee from the overheads that should be funded by its commercial arm.
      3.15 am
      Strictly speaking, it is not the duty of the BBC's auditors to look into that particular aspect of the BBC's operations, although they do so. I am quite sure that if the Chairman of the Select Committee on Culture, Media and Sport, the right hon. Member for Manchester, Gorton (Mr. Kaufman), were here now, he would say that one of the
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      first duties of the CAG should be to ensure that the spirit of Parliament is carried out with regard to the BBC to ensure that there is fair trading and that none of the BBC's commercial operations are funded, directly or indirectly, by the licence payer. It is yet another area where the BBC is being protected—another area to which the CAG does not have access. Indeed, I believe that not only does he not have access, but he is not even empowered to investigate those operations.
      As I said at the beginning of my speech, the CAG is made impotent by the fact that he cannot gain access without permission, of his own volition and quickly. Consequently, I fear that this has become an impotent Bill.
      Mr. Stephen O'Brien: Every Bill contains signs as to its true intent. Access has to be one test of any Bill dealing with auditing. In a public company, if one were considering entering into a contract, particularly an equity arrangement for a joint venture, one of the first things one would do is insist in the contract terms on a right of audit and a right of access to the records that enabled an audit to be carried out.
      Many of the issues that lay behind the previous group of amendments also relate to this group, particularly in relation to matters over which there is no immediate presumption that the Comptroller and Auditor General will have a right of audit and the bodies involved in public expenditure will have a right to enter and inspect.
      Therefore, there are huge missed opportunities in the Bill. For example, there is no provision for the Comptroller and Auditor General to have the necessary statutory access to examine the large sums of public money spent by new service providers, including private contractors and voluntary bodies, such as the private contractors who handle the £4 billion of central Government pay, manage six prisons, including Doncaster and the Wolds, and spend £5.2 billion of public money providing new deal training opportunities. I cited those examples in relation to the previous group of amendments and they are equally applicable to the provisions relating to access. Voluntary sector registered social landlords receive £1 billion annually to provide local services on behalf of central Government.
      There is also no provision for the CAG to have access to the body to be established to carry on public-private partnership business, which is very much the equivalent of what I was alluding to earlier. A public company could never get away with the shareholders criticising the board of directors, which in business terms, as we have heard during this somewhat prolonged debate, is the equivalent to the Executive in Parliament.
      Mr. Hayes: My hon. Friend is presumably making the point that as government and the relationship across Departments become increasingly complex, and as the relationship between private and public bodies becomes a more common feature of the exercise of political power, so that they are more likely to act in unison to deliver a

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      particular aspect of public policy, a more sophisticated solution for auditing their affairs needs to be introduced to match those changes.
      Mr. O'Brien: I thank my hon. Friend for that fine intervention.
      Mr. Caplin: It was long enough to be a speech.
      Mr. O'Brien: Given the quality of Conservative Members' interventions, they could often be taken for speeches. In my brief time as a Member of this House, that is not a criticism that could be made of Labour Members.
      As government becomes increasingly complex, a more subtle solution is required. I shall leave an attempted, partial solution to some of the issues raised until later in my short contribution on this group of amendments. I want to move from a point about new clause 3 to the inadequacies on amendment No. 21, which alludes partially to what my hon. Friend spoke about.
      As I was saying before my hon. Friend's intervention, there is no provision for the CAG to have access to any body to be established to carry on public-private partnership business, despite the fact that it will receive substantial public sector funds—£200 million in the first year in the form of cash and guarantees. Audit is required whenever cash is involved; it advises on even larger amounts of public expenditure. That is a further example of the erosion of the CAG's scrutiny, as he currently has access to the Treasury's private finance initiative taskforce, which the new body will replace. That is a surprising example of the Government appearing to resile from access and accountability, let alone seeking, through the Bill, to underpin or improve what already exists. The failure to provide access puts the CAG's programme of work on the PFI at risk. I hope that when the Ministers finish their discussion, they will take that point on board.
      Neither is there provision for the CAG to have access to bodies whose accounts will be consolidated into whole of Government accounts. Instead, there is the inadequate alternative of access to the auditors of such bodies, which is entirely out of step with equivalent arrangements for company consolidated accounts—with which, I freely confess, I am far more familiar than I am with whole of Government accounts—where auditors have access to all companies in a consolidation.
      I have listened to the contributions on amendment No. 21 and have tried to understand why it has been drafted in the way that it has and the change that it encompasses. Although I give credit to the Government for having listened and for tabling the amendment, it makes a slightly finer point than the broad purpose that was intended. I shall leave it to other hon. Members to decide whether it goes far enough. However, given that, under the amendment, the Government—the Treasury—are judge and jury in their own case of accountability to the public for the public's money, I seek clarification of the phrase:
      Subsection (1) applies only in relation to documents which are held or controlled—
      that phrase appears with some regularity—
      by a government department, or…
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      The provision then refers to other matters.
      Those of us who have not had experience of Government could well imagine that the words
      held or controlled…by a government department
      might imply that, in this increasingly complex world of public-private partnerships, information that could be relevant to a Department and which it would be important for auditors to see, because of the exercise, within parliamentary sanction, of proper judgment of expenditure, was not held or controlled by that Department. That relates to the complexity to which my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) referred.
      I am not just making a semantic argument. That is how the words appear and we are here to scrutinise the Bill and the amendments proposed to it by the Government. If my suspicion is correct and the amendment relates only to documents that are
      held or controlled…by a government department,
      what if the Government decided to avoid the danger—in a controversial matter—of an audit trail with which they did not feel comfortable? What if they decided never to allow a Department to have a particular document, but held it in the Treasury? The Treasury could decide to keep the document so that it was never held or controlled by the Department. It would thus not be accessible in the audit trail.
      That point needs to be addressed, so it is not heartening that Ministers have been conferring with one another during the whole of my speech. Perhaps they can listen and talk at the same time. I have made an important point, on which I would like to receive an answer.
      Mr. Fabricant: Has my hon. Friend noticed that, even when the CAG does have access, it should be only at "reasonable times"? My hon. Friend has only recently come from business, so he will know that when the officers of the Customs and Excise VAT department want to carry out a detailed audit, they arrive at the most unreasonable times to make sure that the figures are right.
      Mr. O'Brien: I am grateful for my hon. Friend's intervention, although I do not necessarily accept that we would want to be unreasonable. Access at reasonable times is reasonable. However, I note the contrast between that provision and what the Government did recently when they implemented European legislation in relation to the new competition regulations. Those give the power for dawn raids and other inspections at times that could never be considered reasonable. Surprise is the whole point. These days, effective audit means that there must be an element of surprise. That is to prevent documents being shredded—to prevent discs being wiped and the destruction of mother boards in computer hard drives.
      There are no grounds for suspicion that such activity would take place in Departments. I should be alarmed if that were the case. The whole point of the Bill is that we should give the public trust and confidence that the stewardship of their money is at all times thoroughly accountable and that, above all, those who are responsible for that accountability will have free and full access without impediment.
      3.30 am
      Mr. Paterson: My hon. Friend has touched on a larger issue. The problem with the Bill is that large elements of the public accounts are not covered by it. However, what he has picked up is that there are ways and means of hiding information from the Comptroller and Auditor General even in those areas that are specified as being within the Bill's remit.
      Mr. O'Brien: To return to rather primitive mathematics, we could paint a series of Venn diagrams in which there are a number of overlapping circles. We might have an audit right in certain respects and a right of access in other respects, but we would be very lucky if the two rights happened to meet. We have tried to identify where some of them do not meet.
      However, more importantly, amendment No. 21 contains the phrase
      documents which are held or controlled…by a government department.
      There is a possibility that the Treasury might decide to keep all documents relating to expenditure by a Government Department in the Treasury itself and would be the judge and jury in the process. Given that we must consider all sorts of possibilities, under amendment No. 21, the Comptroller and Auditor General would not have the access to the information that he needs in those circumstances.
      Mr. Fabricant: Does my hon. Friend agree that his point about Government Departments is especially damaging given that there is a trend in government generally to contract out to private corporations or agencies, such as the Benefits Agency, that would not be regarded directly as Government Departments under the terms of the Bill?
      Mr. O'Brien: My hon. Friend makes a good point. In vain, I sought clarification in the definitions contained in the Bill. It may be a sign of my own shortcomings, but I was unable to find such clarification. I very much hope that we shall receive clarification and that may mean that the Government's amendment requires emendation.
      I thought that we were making significant progress on the last group of amendments. I had high hopes that the Government would accept new clause 2 given the reasoned, non-partisan and uncontroversial basis on which it was introduced. That acceptance was not forthcoming, which was a surprise and disappointment. Therefore, I am less optimistic that the Government will be prepared to accept new clause 3 and that is why I focused on amendment No. 21. That will be one of the realities with which we may have to deal. My hon. Friend makes a valid point. I am glad that he intervened when he did, because I was about to conclude my remarks.
      Mr. Hayes: I will not attempt to emulate the erudition of my hon. Friend the Member for Eddisbury (Mr. O'Brien) or the verbosity of my hon. Friend the Member for Lichfield (Mr. Fabricant). However, I wish to shed a little light on the matter.
      The Bill will give the Comptroller and Auditor General a new duty to report on whole of Government accounts, so clearly his role must be credible. To be credible, he must have access to good-quality, accurate and thorough information. That is consistent with the description of him
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      in the debates in 1921 that were referred to earlier. I am mindful of the contribution made by the right hon. Member for Swansea, West (Mr. Williams), because in 1921 a Member, simply referred to as Mr. A. Williams, described the Comptroller and Auditor General as
      the watch-dog of the House of Commons in all these matters of economy and regularity.—[Official Report, 11 August 1921; Vol. 146, c. 820.]
      If he is to be a watchdog in that spirit, the information he collects must be thorough and accurate. That seems to accord with the Government's definition of what is good and right. A White Paper published in July 1998 said that Departments should be capable of withstanding audit and that, to justify an unqualified opinion, they would need to be free of material error as defined by the standards of the auditing profession.
      The Bill's first fundamental inconsistency is with private practice and existing statute. Generally accepted accounting practice among auditors provides substantial powers to auditors of consolidated accounts. The Companies Act 1985 states that where a company has a subsidiary undertaking that is a body corporate incorporated in Great Britain, its auditors
      shall give to the auditors of any parent company such information and explanation as they may reasonably require for the purposes of their duties as auditors of the company.
      The Bill is inconsistent not only with private practice, private auditors and statute but with the only comparable example of a consolidated audit in the public sector. With the National Health Service, there are already statutory powers for the CAG to collect not only data about bodies for which he has direct responsibility, but relevant information from a range of bodies that he does not directly audit—health authorities and trusts. The CAG's responsibility in that respect is supported by substantial powers that are not repeated in the Bill for the rest of government—which is a much bigger affair than the NHS.
      The debate is not, therefore, just about the Bill's failure to extend the CAG's powers in respect of quangos and other outside bodies but about inconsistency with existing practice in the private and public sectors.
      The Minister may say that the CAG might rely on information supplied by the primary auditors of those bodies consolidated in the accounts. He can rely on that information only if it is collected. The Bill gives no authority to the CAG to insist that information is collected by primary auditors on aspects of Government affairs for which he does not have responsibility. There is a real chance that the CAG will be obliged, in the absence of that information, to give a qualified opinion on the conduct of Government affairs, Government probity and the accuracy of Government accounts.
      Mr. Paterson: The CAG audits the general accounts of the NHS but not the individual accounts of trusts and authorities, which have their own auditors. Is that relevant to my hon. Friend's point?
      Mr. Hayes: The hour is late, but my hon. Friend is clearly not paying sufficient attention to the detail of my remarks. Perhaps that is because of my lack of clarity rather than his lack of diligence. Although the CAG does not audit the trusts and authorities that make up the NHS, he has a responsibility—a statutory power—for collecting information from those auditors, which allows him to take

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      a view about the consolidated NHS accounts. That is not replicated in the Bill in respect of other Departments. Essentially, I said that the precedent established by practice in the NHS is not being used in the Bill as a foundation for good practice.
      Mr. Geoffrey Clifton-Brown: I am pleased that my hon. Friend has given way because, as a former member of the Public Accounts Committee, I am very aware that the CAG is unable to carry out value for money reports when he does not have proper access for auditing Departments. Is my hon. Friend aware that for every £1 spent those reports recover £8 of public money?
      Mr. Hayes: I am, and that reinforces the importance of my point. The sums involved are substantial and my hon. Friend encourages me to return to the 1921 Act, which will cause some excitement.
      Mr. Stephen O'Brien: It is a relief to us all.
      Mr. Hayes: There is more excitement than relief for Members across the Chamber. When the 1921 Act was introduced to the House, it was noted that the need to reform the 1866 Act was born of the fact that Government expenditure had increased about twentyfold. Heaven knows how today's expenditure compares with that of 1921, but, in my judgment, the multiplication of Government spending necessitates precisely the diligence implied by my hon. Friend the Member for Cotswold (Mr. Clifton-Brown). Given that enormous increase in the nature and breadth of public expenditure, not to extend the scope of the CAG's discretion would be extremely remiss.
      Before I digressed, I was saying that the CAG works closely with the Audit Commission in auditing the summarised NHS accounts and has powers to collect summarised accounts from the auditors who work in the individual trusts and authorities, to whom my hon. Friend the Member for North Shropshire (Mr. Paterson) referred. However, he can do that only because he has been given statutory powers by the House. I find it extraordinary that the Government have set aside that example and have not extended the scope for the CAG in other areas of Government affairs.
      I said earlier that the CAG was described as a watchdog in 1921, but I shall return briefly to the 1866 Act, which I happen to have to hand. The failure that I have described is not in character and does not follow the spirit of Gladstone's Act, which makes it clear that
      the Comptroller and Auditor General shall have free Access, at all convenient Times, to the Books of Account and other Documents relating to the Accounts of such Departments, and may require the several Departments concerned to furnish him, from Time to Time, or at regular Periods, with Accounts of the Cash Transactions.
      The spirit of that Act was one of free access—
      Mr. Fabricant: Open government.
      3.45 am
      Mr. Hayes: I was going to say freedom of information, but, in Blairite Britain, those are dirty words. However, that Act certainly aimed, in the interests of probity, to open up the affairs of Government to the CAG as the watchdog of the House.
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      We have strayed a little from our earlier discussions about the nature of the relationship between the CAG and the House, as opposed to the nature of the relationship between him and the Government, but it is absolutely clear that, on the particular issue of access, the CAG is very much the representative of the House. He is given free access, as he should be, to the affairs of Departments and outside bodies.
      Mr. Paterson: On open government, my hon. Friend could have quoted a great name in the other place, the Lord Chancellor himself, who, when discussing the CAG's appointment to audit the new Legal Services Commission, said:
      The Government are committed to increasing transparency and openness to Parliament. For that reason, we believe that the auditor of public bodies should be the Comptroller and Auditor General.
      Mr. Hayes: My wife did a course on interior design, and she is about to do a degree in that subject.
      The failure to give the CAG appropriate access certainly contradicts the spirit of the Gladstonian tradition, which is at the heart of our discussions. The Government's willingness to extend the CAG's power, at least in principle, to report on whole of Government accounts necessitates an entirely different approach to access. It is disappointing that the Government have been at best timid, and at worst something unparliamentary.
      As my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, said when the matter was discussed in the Standing Committee, this is not an academic matter. The Treasury will inevitably take a rosy view of the state of its own project. The Treasury and the Government will also take a rosy view of the scope of the CAG's powers in respect of access to information.
      I am not by nature cynical or suspicious, but I am suspicious about the concentration of political power, and the further the exercise of political power is from the people, who are represented by the House, the more suspicious I become. The Bill makes me very suspicious indeed.
      Mr. Rendel: I want to make a few remarks about amendment No. 17, whole of Government accounts, and what access the CAG needs to perform his duties successfully. Most hon. Members who have talked about amendment No. 17 have concentrated on the fact that if the CAG does not have full access to all the accounts that make up whole of Government accounts, he may have to qualify WAG, which will embarrass the Government.
      I want to concentrate on a slightly different aspect of that question. As somebody who did much work in internal audit in Esso, I am aware that an auditor who discovers by looking at high-level accounts that there may be a problem will often be able to discover precisely how that problem arises only by considering in much greater detail the accounts much further down the tree.
      It was perhaps instructive that at a meeting not so long ago, the Public Accounts Committee considered a case of fraud in the high commission in Calcutta. From looking at fairly high-level accounts, it was obvious, at least with hindsight, that money was going missing. Some £80,000 went missing over three or four years.

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      What was not obvious was how the money was going missing. That did not become apparent until the people looking into the matter looked at the lowest level, by inspecting till slips that had been fraudulently altered on the front counter at the high commission. That illustrates the fact that one may have to look a long way down the tree to work out the basis of a problem that has been detected in an account.
      If the Comptroller and Auditor General is to examine whole of Government accounts successfully in future, as the Government rightly intend, it is important—not just because he may have to qualify the accounts, but for the purpose of investigating any problems that he may find—that he has access right the way down the tree.
      I shall add a further point, by way of a challenge to the Minister who responds to the debate. On the previous group of amendments, I pointed out an interesting sentence in our most recent report, which reads:
      We believe in the principle that the Comptroller and Auditor General should have full access to all Government expenditure.
      The agreed PAC report states that important principle, which is perhaps even more relevant to this group of amendments. Will the Minister tell us whether the Government also accept that principle?
      Mr. Syms: I shall make a brief contribution, as I am sure that we are all anxious to make progress. The debate has raised concerns about how the system will operate. As we know, the Bill places on the Comptroller and Auditor General a new duty to audit and report to Parliament on whole of Government accounts. It is vital that he has full access to records.
      As the hon. Member for Newbury (Mr. Rendel) and others said, it is extremely important that the new system sets out with confidence and transparency and that there is a culture of proper audit of whole of Government accounts. I have been in business, and I recognise that auditing is not a one-off job. Often, a business man has an on-going relationship with the auditor who inspects the company. Sometimes, information systems are set up and the business is run in accordance with the way in which the auditors intend to perform their task.
      If, through new clause 3, we give the CAG the fullest powers to examine whole of Government accounts, we will set up the right culture for the new accounting system. We have heard that many areas will not be covered, and that in some areas the CAG will have to take evidence and audit outside bodies. Unless the fullest power is available to him to double-check where necessary and to go back over the audit trail, I am worried that mistakes will be made because we have not placed our full confidence in the CAG, who, after all, is working on behalf of Parliament.
      We hear a great deal about modernisation. A decent audit of whole of Government accounts would be a valuable step in that direction, which hon. Members in all parts of the House would support. As my hon. Friend the Member for Cotswold (Mr. Clifton"Brown) pointed out, that would represent value for money in these times of limited resources.
      New clause 3 is a good clause. I believe that it is worthy of support and a step in the right direction. I hope that the Government will accept it. I am sure that their silence
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      means that they do not disagree with our arguments. If they did, they would doubtless try to contribute to the debate.
      In the private sector, the powers of auditors of consolidated accounts are governed by statute. Section 389A(1) of the Companies Act 1985 provides for auditors to have access to the bodies in the consolidation. Unless there is full access to all the companies, bank accounts and information that pertain to consolidated accounts, a true and whole picture cannot be obtained. Ninety per cent. or 95 per cent. is not enough; full access is required.
      Generally accepted accounting practice recognises that, in some circumstances, the auditors of consolidated accounts will need access to undertake their tests in the consolidated bodies. New clause 3 provides for that. Accounting standard 510 states that the principal auditors of a consolidated account may decide that supplementary tests of the records or the financial statements of the component parts are necessary. Depending on the circumstances, such tests may be performed by the principal auditors or other auditors.
      It is important for the CAG to have full access. He does not necessarily have to audit all the accounts himself, but if the bodies who may undertake the audit know that the Government auditor can gain full access to information and double-check that they are doing their job properly, it will ensure that their work is up to standard. If we do not do that, many bodies, which perhaps pay their staff large salaries, may not have the incentive to do the job as well as they would perform it if they believed that the Government expected accountability for spending Government money.
      Mr. Fabricant: Does my hon. Friend agree that it is intolerable that the Comptroller and Auditor General could not gain access to the Camelot accounts or to the organisation for four years?
      Mr. Syms: I am not sure whether that is intolerable, but it is worth considering. Doubtless there will be many anomalies.
      New clause 3 should be supported. It has been tabled by well-respected hon. Members across the political divide. It clearly establishes a regime, which would be more transparent and would mean that the new accounting system began with the right culture, which is vital. Granting the widest possible access to information and organisations to the auditor who is responsible to the Public Accounts Committee and to the House would mean that we could all be proud of the manner of the new system's start.
      Mr. Paterson: It is a great pleasure to follow the sensible contribution of my hon. Friend the Member for Poole (Mr. Syms). I shall not detain the House for too long, but I want to follow up my earlier comments on another group of amendments. Our fundamental duty as Members of Parliament is to hold the Government to account for the way in which they raise money from the public by enforced confiscation through taxation, and to ensure that that money is spent correctly.
      The Comptroller and Auditor General's job is meaningless if he does not have strong powers of access in law. He had those powers under the 1866 Act. My hon.

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      Friend the Member for Cotswold (Mr. Clifton-Brown) made a telling contribution. He said that £1 invested in the sphere of Government activity that we are considering recoups £8. Gladstone would have approved of that wholeheartedly. According to the biography by Philip Magnus, Gladstone took such a detailed interest in public expenditure that he complained when his servants used new luggage labels. He went into such detail to save public money. He so respected taxpayers that he believed that not one penny should be wasted.
      Since that time, government has sadly grown like Topsy. The current framework is totally inadequate, as my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) said—
      Mr. Deputy Speaker: Order. The hon. Gentleman is making general points. He must confine his remarks to the amendment that we are considering, especially as many of his hon. Friends have made contributions on the new clause. He should get straight to the point.
      4 am
      Mr. Paterson: I am most grateful to you, Mr. Deputy Speaker, for keeping me on the straight and narrow. I will return to the question of access, which is the heart of the new clause.
      I repeat that the CAG cannot do his job unless he has strong powers of access written into the Bill. I shall not repeat the exact examples that have been given, because I do not want you to be cross with me again, Mr. Deputy Speaker. But we have heard about housing associations, my hon. Friend the Member for Lichfield (Mr. Fabricant) mentioned the case of Camelot, and earlier we talked about the training and enterprise councils in prisons, where access—which I repeat is the heart of new clause 3—was restricted. In one particularly bad case quoted by my right hon. Friend the Member for Haltemprice and Howden, it was restricted for up to five years. I think that it was a case brought by a Member of this House. It took five years for that case to be investigated.
      If the new clause goes through, the CAG will have legal powers to get real access. All that that does is to follow the advice in the ninth report of the Public Accounts Committee, which said that the powers of access must be direct. The Committee made the very good point, in paragraph 29, that currently the CAG
      has to negotiate the terms of access on an individual basis with the bodies and their sponsoring departments. This is administratively burdensome and diminishes his independence.
      The Committee noted that other public auditors have very strong independent legal rights. It says in paragraph 31:
      Auditors working for the Audit Commission in England and Wales and the Accounts Commission for Scotland have a right of access to every document which they consider necessary relating to a body they audit.
      Even the European Court of Auditors
      has powers of access to both private and public sector bodies within Great Britain in receipt of European funds.
      So it seems anomalous that the auditor for England and Wales does not have these powers in law.
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      It is sad that Labour Members are laughing, because this is a report by an all-party Committee, and the clause is promoted by Members from the three main parties represented in the House. All that it does is to follow up the conclusion, in paragraph 38, that
      it is unacceptable that the Comptroller and Auditor General must negotiate with the relevant body to obtain access to the new types of service deliverer.
      The Committee made it quite clear when it said, in conclusion (xi), contained in paragraph 6:
      In order to examine the accountability of departments, he needs matching statutory rights of access so he can give Parliament independent assurance that public funds have been spent properly.
      Mr. Syms: Is there not a danger that the audit may well have to be qualified if there is not proper access for the Comptroller and Auditor General?
      Mr. Paterson: That is certainly true. That is why we need stronger powers written into the Bill. That is the nub of the matter.
      Amendment No. 21 is quite inadequate. I do not need to go into the detail that my hon. Friend the Member for Lichfield did. Of the two, there is no question which is better. New clause 3 follows the recommendations of the Public Accounts Committee. I am trying to outline for the benefit of Ministers, in case they have not had time to read the report properly, that the recommendations were extremely clear and they have not taken them up.
      My right hon. Friend the Member for Haltemprice and Howden said that Ministers were using the excuse that the Bill does not concern audit. The Public Accounts Committee made the very clear point, in paragraph 41, that
      At least a third of the Bill covers audit scrutiny and other parts cover new initiatives such as Partnerships UK and Whole of Government Accounts.
      It clearly considered that the Bill could and should be used to modernise the CAG's audit and access arrangements. Its conclusion is stated in paragraph 42:
      The Committee stands by the principle that robust powers of access should be written into law.
      On that basis, the Government will have to come up with a very good reason for not supporting the new clause.
      Mr. Fabricant: Does my hon. Friend agree that it is an insult to the House that the European Court of Auditors can have access, should the European Parliament wish it, whereas if the British Parliament should wish the CAG to have access to agencies or non-governmental bodies he would be unable to get it?
      Mr. Paterson: My hon. Friend is right: the current proposal is ludicrous. The PAC points out that local authorities are under stronger powers of audit than central Government, and he made the valid point that the European auditors also have stronger powers.
      Now is the time to change, and this is the first piece of legislation since 1921 that has given any Government a real opportunity to make this major change. As I have

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      said, the PAC makes absolutely clear, in black and white, the principle that robust powers should be written into law.
      Miss Melanie Johnson: I am sorry to have disturbed the hon. Member for Arundel and South Downs (Mr. Flight) from his slumbers.
      Let me run through the main points as quickly as I can. I shall not attempt to respond to a number of the contributions that have been made. It would probably have distressed Gladstone to hear some of what has been said here at 4 am; moreover, only two members of the PAC are present, and the last vote was won by 257 to 27. That does us no good in the House.
      Mr. James Gray: Will the Minister give way?
      Miss Johnson: No, I will not. The hon. Gentleman has been present for some time, but has made no contribution to this part of the debate.
      Mr. Gray: I want to do so now.
      Miss Johnson: But I am denying the hon. Gentleman the opportunity.
      Amendment No. 21 is framed to give the CAG a right of access rather than imposing a duty on Departments to provide access, as the current clause does. In Committee, a number of Members expressed concern that the "duty to provide access" formulation would in some way constrain the CAG, and perhaps even reduce the access that he currently has. The Government did not agree with that argument then, and do not now.
      The "rights of access" and "duty to provide access" formulations are, in legal terms, two sides of the same coin.
      However, I promised in Committee to consider the matter further. Having done so, we have decided to revert to the original "right of access" formulation, on the ground that it is what hon. Members preferred. It would also bring the Bill into line with other statutes concerning audit access. I hope that that reassures hon. Members that the CAG will enjoy the same access under resource accounting as he does under the current system, and proves that the Government never had any intention of compromising the CAG's ability to do his work.
      The Government recognise that access to contractors who are handling a Department's financial records is essential if the CAG is to be able to audit its accounts properly. Currently, such access is secured through the contract terms, and that has proved satisfactory; but the Government agree that putting such access on a statutory basis will give additional reassurance both to Parliament and the CAG that in such circumstances access will always be available.
      Let me now deal with amendment No. 25. As we made clear at length in Committee, the CAG does not audit or, indeed, have direct access to all the bodies that are likely to be included in whole of Government accounts. The main types of body falling into that category are those in Scotland and Northern Ireland, and the local authorities in England and Wales. Strong audit frameworks are either in place or being put in place in all those areas. That picture contrasts with the inadequate or non-existent
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      audit arrangements that private-sector group auditors sometimes encounter in individual subsidiary companies, and which the reserve powers of access in the Companies Act were intended to address. Accordingly, we see no need to cut across the post-devolution and local government audit frameworks by giving the CAG the same reserve powers of access as Companies Act group auditors.
      The Government believe that new clause 4, tabled by the right hon. Member for Haltemprice and Howden (Mr. Davis), should be rejected. It would give the NAO "matching" rights of access—that is, the same rights of access to the records of a body receiving public money as are enjoyed by a body paying public money. I see the right hon. Gentleman nodding. From what he was saying, I thought that there was perhaps some disagreement about the effect of the new clause, but we believe that it would give the CAG quite far-reaching access. An order-making power enables the Treasury to deny the NAO access to certain records that would otherwise be open to its scrutiny.
      At a technical level, two points are worth noting. First, the proposal to give the NAO "matching" rights of access goes significantly further than simply giving the NAO the same rights of access as Departments. There should be no confusion about that. It gives the NAO the same rights to the records of a body receiving public money as those enjoyed by a body paying public money.
      Therefore, in a case that has exercised several hon. Members in the debate and earlier, if the Department of the Environment, Transport and the Regions paid money to the Housing Corporation, which paid money to registered social landlords, who paid money to others, such as construction firms and, possibly, sub-contractors, the NAO would have access to all the bodies in the chain—providing that each body in the chain has its own rights of access to the next body in the chain—even though the NAO audited only one body in the chain: the Department. That represents a major increase in statutory rights of access.
      Secondly, the new clause gives the NAO access to the books and records of private sector firms on the same basis as that enjoyed by the Inland Revenue for the purposes of examining whether tax credits have been properly calculated. The right hon. Gentleman went into how he saw that working in some detail. In Committee, several Members expressed concern about that. I, too, am unhappy about it. We still believe that it provides the NAO with powers to investigate the tax affairs of individual firms. We do not think that that is appropriate.
      The new clause needs to be viewed alongside the Government amendment to clause 8. The question for the House is whether it would be right to enhance significantly the CAG's statutory rights of access on the basis set out in the new clause, or whether we should choose instead the formulation in our amendment, which seeks broadly to preserve the NAO's rights of access as set out in the Exchequer and Audit Departments Act 1866, which has been referred to extensively.
      It would not be right to enhance significantly the CAG's statutory rights of access. The Government accept that the NAO sometimes needs access to books and records of Government contractors to complete the audit of the Department concerned, but we believe that, where it is required, access can be secured satisfactorily by

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      clauses in contracts. Government guidance already provides that contracts with suppliers should include provisions allowing NAO access to the books and records of contractors where that is necessary for the audit of the Department concerned.
      Several hon. Members have mentioned the Camelot issue. I do not propose to go through that or other issues at great length at 4.13 am, but the criticisms have been wildly misplaced. Four years are under issue. About two and a half were under the previous Government. It is purely for that Government and their Ministers to comment on that period, not the present Government. When we came to power, we took steps as quickly as we could to ensure that access was available through the first legislation that made it possible.
      Mr. David Davis: I do not want to detain the Minister for long. When I was nodding earlier, I was indicating that I was not nodding off, rather than encouraging her. At this time in the morning, that is an important communication to make sometimes.
      The general issues that she is going through are all technical issues that are in dispute between us. The dispute is about whether her interpretation is correct. Frankly, if that, rather than the matter of principle, were the issue, as I said earlier, I would be happy to hear her say that she would bring the measure back corrected later on. The intention is not to allow the CAG to pursue money wherever it goes. It is to give him powers that match those that exist, where that is necessary.
      The Minister mentioned the lottery. As she knows, throughout the debate and Committee stage, I have never sought to attribute blame on a political basis one way or the other. Frankly, that does not stand up. The Government were able to do something about the matter because they had available to them a piece of primary legislation, but that is the problem. If we are depending on a passing piece of primary legislation on which to latch a right or condition, it would not be a satisfactory arrangement to ensure Parliament's fundamental rights of access.
      4.15 am
      Miss Johnson: I am grateful to the right hon. Gentleman for his remarks. However, we disagree with him not only on the force of new clause 3, but on how extensive the arrangements for access should be. It is not only a matter of legal or other interpretations of the new clause.
      I accept that the Public Accounts Committee has identified various cases in which it claimed that there are gaps or anomalies in the CAG's statutory rights of access. The Committee and hon. Members speaking in today's debate have given as examples bodies such as training and enterprise councils, registered social landlords, the Chessington Computer Centre, privately run and managed prisons, and contractors in the new deal initiative. However, arrangements have been for NAO access in all those cases. Usually, the arrangements involve clauses in contracts. I have already mentioned access to registered social landlords, who are also subject to an agreement with the Department of the Environment, Transport and the Regions.
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      I realise that some people are keen that the NAO should have access particularly to the books and records of private finance contractors. The NAO has, of course, already reported on a considerable number of private finance schemes. Therefore, in practice, there does not seem to be a problem with access. Moreover, last July, the Treasury issued guidance on the standardisation of private finance contracts that makes it clear that contract clauses should be included in PFI contracts to allow appropriate NAO access.
      Nevertheless, I should like to give four reasons why, if we allowed NAO access through contracts, we would not be prepared to give the NAO a statutory right of access.
      First, we have to recognise that giving the NAO a statutory right of access to recipients of public money would impose a regulatory burden on the firms concerned, which they would rather not have. Both the British Chambers of Commerce and the Federation of Small Businesses have said that enhancing NAO access in the manner proposed by the Public Accounts Committee would only increase the burden of red tape on small and medium-sized enterprises.
      Secondly, giving the NAO a right of access could lead to increasing layers of audit. The right hon. Gentleman perhaps felt that he had dispelled that concern, but a residue of it remains. Contractors could be subject to layers of audits and visits by inspectors.
      Thirdly, there is a concern that giving the NAO statutory rights of access could encourage them to duplicate the work of regulators. One reason why giving the NAO access to registered social landlords was so long a bone of contention is that there was a worry that the NAO would use such access to duplicate the work of the Housing Corporation, which has been given by Parliament the job of regulating that sector of the economy.
      Fourthly, there are similar concerns about whether the NAO might use a statutory right of access to duplicate the work of competition authorities. Clearly, the NAO should not do work that is properly the responsibility, for example, of the Office of Fair Trading.
      Mr. David Davis: There are two points. First, one of the problems at the Housing Corporation was the weaknesses in its own financial control systems. The second and general point is that, at this time of the morning, I shall not press either new clause 3 or amendment No. 17 to a vote, because I should like to make some progress and do want to waste 15 minutes. However, I do not accept the Minister's arguments. We still disagree on those matters, as she will appreciate.
      Miss Johnson: I am grateful to the right hon. Gentleman for making those points, and appreciate that he still does not agree on those points. Our point is that the access issue should not be addressed in isolation. My right hon. Friend the Chief Secretary has said, as we discussed earlier in the debate, that he would like to undertake a study of those issues. I very much hope that the right hon. Gentleman will accept my right hon. Friend's invitation to join the steering group for the study.
      For all those reasons, I invite hon. Members to reject new clause 3 and to accept the Government amendment.
      Question put and negatived.

    New Clause 4

      PERFORMANCE STATEMENTS
      '.—(1) This section applies to any government department which is required to prepare resource accounts under section 5, unless otherwise provided by an order made under subsection (6).
      (2) A department to which this section applies in any financial year shall prepare a performance statement in respect of that year analysing the performance of the department in using the resources to which the accounts relate in achieving its objectives for that financial year.
      (3) A department shall send its performance statement to the Comptroller and Auditor General with the resource accounts sent to him under section 5, or at such other time as the Comptroller and Auditor General may specify in respect of that statement.
      (4) The Comptroller and Auditor General may examine any performance statement which he receives from a department under subsection (2) and may report on it to the House of Commons.
      (5) Subsection (4) shall not entitle the Comptroller and Auditor General to question the merits of the policy objectives of a department to which the performance statement relates.
      (6) The Treasury may by order designate a department as one to which this section does not apply or as regards which the operation of this section is modified to the extent specified in the order, and such order may be expressed to apply to all financial years or to any specified financial year.
      (7) An order under subsection (6) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of the House of Commons.'.—[Mr. David Davis.]
      Brought up, and read the First time.
      Mr. David Davis: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 18 to 20 and 35.
      Mr. Davis: Hon. Members will be happy to know that this will be my last outing, other than a brief comment on Third Reading.
      The new clause is about performance reporting—a matter on which the Bill is silent, but which was supposed to be the most revolutionary element of resource accounting as originally envisaged. The clause is developed from amendments that I tabled in Committee on behalf of the Public Accounts Committee. It would require Departments to prepare performance reports, which would have to be independently validated. It would give the Government flexibility in determining the content of reports and allow for further developments in validation techniques. As hon. Members noted in Committee, it is a remarkably mild provision.
      We should be clear about what performance reporting and independent validation will mean in practice. The recent report of the Public Accounts Committee on the Bill said:
      The Government have set the Department of Social Security a target to reduce by 30 per cent. benefit losses from fraud and errors in income support and jobseeker's allowance by March 2007, with at least a 10 per cent. reduction by March 2002. In this case the Government have set the target. The Department and Benefits Agency will collect the relevant information and report on the extent to which they have achieved their target. The role of independent validation would be to check the Department's systems for collecting information, the veracity of the conclusions they have drawn and whether the outcome had been represented fairly, and to report the findings to Parliament.
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      During the passage of the Bill, the Government have set out their objections to the proposals. As before, I shall address each of them. I shall start with the area of common ground. The Chief Secretary told the Committee that he thought that performance reports should be credible, should enjoy widespread legitimacy and should be as objective as possible. I agree with him on all those points. It has long been established that the way to ensure credibility, legitimacy and objectivity in financial accounts is to have them independently audited. The same principle applies to performance reports. An independent report on performance will instil public confidence in the measures and provide Parliament with the assurance that it needs as it considers the Government's spending plans.
      Mr. Letwin: Does my right hon. Friend agree that, given the analogy that he has been drawing, he ought also to insist on the independence of standard setting for performance measures, just as he, I and others have for the standard setting for accounting?
      Mr. Davis: My hon. Friend is correct. He may remember that I was provoked to rise to my feet against my prior judgment to make that point when we were considering his amendment on standard setting.
      Drawing a parallel with the Comptroller and Auditor General's financial audit, I remind the House that the importance of his role is the positive assurance that he provides. Of course, he draws our attention to errors, but for most of Government his opinion is positive, providing vital reassurance each year that taxpayers' funds have been spent properly. That is why I intervened on the hon. Member for Kingston and Surbiton (Mr. Davey), to make the point about the overwhelming honesty of British public service. We take that for granted, but we should not because it is not the case world wide.
      The routine, year-on-year nature of the CAG's work is important. It is an important validation and encouragement of that honesty. The same is true for performance information. Routine validation would be far less contentious than the exception reporting that can happen at the moment. There are already 2,500 performance measures planned. Given that volume, each will be of less significance. Exception reports would attract more attention and would be more likely to focus on aspects where there were real concerns about performance. Routine validation will result in routine reporting.
      The Government have suggested that the CAG might not be the most appropriate person to validate performance measures. They have observed that the statistics commission that they plan to establish might have a role. They intend the commission to contribute to the integrity of the published data that fall within its purview by ensuring that they are collected in accordance with clear standards and subject to valid statistical techniques. The commission can play an important role in enhancing the quality of Departments' performance reports if they feature data prepared under its authority.
      The commission cannot fulfil the role of validating performance reports independently because, fundamentally, it is a creature of the Government whose performance is being reported. It is part of the Government's quality assurance system; it is not an independent body working on behalf of Parliament and reporting to it. In so far as the statistics commission will lay down standards for the collection of

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      Government statistics and periodically review how well Departments are effecting those standards, it can provide an important source of assurance for the person responsible for independent validation, but it cannot fulfil that role.
      4.30 am
      Furthermore, as I understand it, the commission will not cover all data appearing in performance reports. Information will be drawn from a wide range of systems, not all of them statistical. Indeed, I understand that it is for Departments themselves to decide what information is or is not to be classified as national statistics. So the proposals, important as they are, will not apply to all performance data.
      We then turn to the question of who can validate performance information independently on behalf of Parliament. First, I find it hard to imagine circumstances in which there might be a person better suited than the CAG to provide Parliament with an independent view on performance, so my new clause specifies him. However, the Government have expressed the view that the CAG may not always be the right person. The new clause, therefore, enables the Government, by order, to modify the arrangements for performance reporting in any particular cases, including, for example, specifying a different authority to undertake validation.
      Secondly, the Government thought that the CAG might have to go into local government in order to validate central Government performance measures, but in the new world of joined-up working the public auditors are already gearing up to work closely together, to take assurance from each others' work and to minimise the audit burden. They will adopt the same model for performance reporting. Indeed, the CAG already relies on the work of the Audit Commission and its appointed auditors, for example in signing off claims by local government bodies for grants paid by central Government bodies. He would similarly place reliance on the Audit Commission and its appointed auditors in validating performance information emanating from local government.
      Thirdly, the Minister was concerned that the CAG would have to make judgments involving him in questioning policy matters, but that would not be the case. The policy element of performance measures would be the decision about which targets would be set. Those would always be matters for the Government. The CAG would not question them, just as in his value for money work he focuses on the implementation of policy and, by law, does not question the merits of policy objectives.
      The CAG's role would be to check that the systems used to collect the data were robust and that the results had been represented fairly. He would then be in a position to assure Parliament about the integrity of performance information. He has already reported without difficulty on the performance measures of some Government Departments such as the Benefits Agency.
      However, since the risk of bringing the CAG too close to policy is a real concern to the Government, I have removed all possibility of such a risk in framing the new clause. It now explicitly prohibits the CAG from questioning the merits of policy objectives. That is exactly the same statutory prohibition that applies to his value for money work set out in the National Audit Act 1983 and
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      which has proved effective. In effect, it is a belt and braces provision as it is a second statement of the same provision. If the Government are worried about it, it is in the new clause.
      Fourthly, the Minister noted:
      No standards for validation have yet been established, and there are still many questions as to what form it should take.
      That puzzles me because the Government have embarked on initiatives such as the local government best value initiative, which imposes statutory duties on local government auditors without any standards being in place.
      Aside from that inconsistency, the fact that standards are fluid is no reason to delay establishing a statutory framework for validation. Auditing standards for financial accounts are being developed and amended constantly to reflect advances in the profession, yet the statutory framework remains unaffected because it is just that—a framework. Similarly, a statutory framework for performance measure validation does not depend on standards being set in concrete. However, I have worded the new clause carefully in order to allow the evolutionary development of standards and methodologies. It simply says that the CAG may examine performance statements and report on them. That will allow him to develop his approach progressively, in consultation with the Treasury and the Public Accounts Committee. The Government also have a safeguard that under the commencement order they can bring the clause as a whole into force again at a time of their own choosing.
      Furthermore, to draw any inference that we are in completely unexplored territory would be misleading. The CAG has reported several times on performance measures; the Audit Commission examines performance indicators in local government; and there has been statutory validation of performance indicators in Australia and New Zealand for some years. Therefore, the issue of standards is not a real obstacle.
      I shall quote the Economic Secretary's exact words regarding the Government's final concern, rather than imposing an incorrect interpretation on them. The hon. Lady said in Committee:
      There are also questions relating to the meaning of validation for measures based on data from private sector companies and international bodies, and whether bodies that might conduct validation have the necessary skills and resources to do so.—[Official Report, Standing Committee A, 13 January 2000; c. 101.]
      I think that she was alluding to the trend to progress from output measures to outcome measures in assessing performance. Outputs are the immediate results of a Department's activity, usually within the Department's control. Outcomes are about the ultimate results that a Department's activities are designed to secure. Their measures tend to be beyond the Department's boundaries.
      There are complex issues for those developing such measures, but they are not reasons to avoid validation. Indeed, the very complexities are reasons for validation to be built in from the outset. If the Government are asking the public to take confidence from these measures, they must be capable of validation.
      The Bill should put performance reports on a statutory basis and provide for the CAG to validate them. I will be very happy to discuss my proposals further with the Government before the Bill goes to the Lords, if that would be helpful.

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      I wish to reiterate an important point that I made earlier. I have been struck—as, I know, were Ministers in the previous Government—by the absence of a decent management information system in most Departments and the inability of the Minister, senior managers, permanent secretaries and accounting officers to know how well their Departments are working. A great benefit that will come from resource accounting will be the habitual measurement of the outputs and outcomes. That is a revolution in action in the next decade or so which will, I believe, deliver markedly better public services to our citizens and taxpayers. That is a prize well worth having.
      One of the most corrosive risks to afflict that prize would be a belief among the public or among the people trying to deliver services—those hard-working public servants who get very little credit in the tabloid newspapers from week to week—that the figures that they were dealing with were in some sense not validated, not impartial, or were, in some sense, propaganda. If that belief becomes common, it will corrode the basis of what I believe offers a hope of improving public services in the next decade or two more than any revolution since the effective creation of the public sector after the second world war. it is for that reason that I have made this point today and would like to discuss it again with the Chief Secretary. As I said at the beginning of my speech, I am one of those strange creatures—a right-wing Tory who believes in public services.
      Mr. Letwin: We are dealing here with one of the most important issues in the Bill. As my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) pointed out, it was dealt with at length in Committee. New clause 4 is substantially modified in comparison with my right hon. Friend's earlier efforts and those of his colleagues on the Public Accounts Committee, in order to accommodate a number of points that were made.
      We may, to our ineffable delight, hear from the Economic Secretary in a few minutes that the Government will accept the new clause or something like it. If so, I hope that she will pass over in silence the remarks that I am about to make on her previous arguments on the matter, that she will let bygones be bygones and celebrate the day.
      Lest the Economic Secretary should be tempted to argue against new clause 4, despite the substantial changes made by my right hon. Friend, I want to go through the pattern of argument that she used in Committee. Since then, we have had the opportunity to reflect that that argument is incoherent to the point where the Economic Secretary herself may feel that she does not want to continue it.
      When my right hon. Friend first proposed the admirable idea of trying to use the Bill as a way of instituting transparent outcome measures, or performance standards, his ambitions were already modest—as were those of his colleagues on the PAC. Indeed, they were too modest. My right hon. Friend omitted to include in his Committee amendments, and also in new clause 4, any reference to the defining of standards that intermediate between policy objectives, which are the proper concern of the Government and the electors, and enforcement and validation, which he has tried to strengthen, in new clause 4 and previous amendments, through the CAG.
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      However, betwixt policy, which is the Government's prerogative, and validation, which falls to the CAG in any rational system, lies the question of the definition of standards. The Government might have a particular policy—for example, to re-employ all unemployed people aged between 18 and 21 would be a rational policy objective; indeed, it may be similar to part of the new deal. It would then fall to someone to decide the measure for whether the Government had achieved that policy.
      I regret that in my right hon. Friend's earlier efforts and in new clause 4 there is no such intermediation of an independent body—which could of course be the very body that was rejected in our previous discussions of new clause 1. There is no intermediation of any body that could ensure that the standards which measure performance are sufficiently robust for them to be validated by the CAG. That is a lacuna.
      The reason that we have not tabled further new clauses or amendments is because we want to cross the first bridge first. Unless the Government are willing to accept the principle of validation, there is not much point in trying to insert independent standards. To take the analogy of the national accounts—the whole of Government accounts and the resource accounts for each Department—if the Government had taken the position that no one should audit them, we should hardly have bothered to propose an independent body to set up the standards against which the audit should occur.
      It is because we have been able to assume that an auditor—whether the CAG or private auditors—will validate in all cases that we have been able to argue for the next step, which is to try to secure an independent definition. Alas, unless new clause 4 or something similar is accepted, we shall not be able to have the argument that we want—as I am sure, do our noble Friends in another place—about independent standard setting.
      Having explained my right hon. Friend's lacuna, which no doubt occurred because he too wanted to establish a bridgehead, I shall explain the Economic Secretary's valiant attempt—no doubt at the behest of her Department—to defend the proposition that the PAC's assertion that there should be some form of validation of the performance measures was inappropriate.
      The Economic Secretary asked:
      How straightforward a matter is that?
      She was referring to the checking of systems for collecting information—the veracity of conclusions and whether the outcome was fairly represented.
      As my right hon. Friend mentioned, the Economic Secretary then said:
      The CAG would need to be able to go into local authority, and even private sector, nurseries and form a judgment about how many nursery places each could reasonably be expected to provide. I do not believe that nurseries would welcome such intrusions.
      The killer blow to the entire project of having performance standards validated in this country so that we have outcome measures included as part of resource accounts, as has been done for years in New Zealand, was that she did not believe that nurseries would welcome the intrusions. She added:
      That highlights the difficulties that would take the Comptroller and Auditor General away from auditing and matters of fact into a political arena which he has always rightly avoided.

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      My right hon. Friend has pointed out that the new clause specifically tries to exempt the CAG from any accusation that he is involved in politics. It was pointed out at length in Committee that the CAG, the Audit Commission and anyone else who does anything that could remotely be described as value for money auditing clearly has to make subjective judgments about value for money. Inevitably, those judgments are to a degree representable by people so inclined as political judgments. Therefore, we cannot envisage ever wholly removing such people from the political arena. On the contrary, we must hope that their immersion in the political arena does not in any way vitiate their complete impartiality.
      Under Administrations of both colours, it has been the record that the CAG and the Audit Commission—notwithstanding their deep involvement in value for money audits, and hence their subjective judgments—have constantly been regarded as entirely impartial by all parties inside and outside the House. Therefore, I do not accept for a moment the direction of thought that suggests that there is a problem of politicising the CAG. However, where there is such a problem, my right hon. Friend has taken specific steps to deal with it in the new clause. We need not attach much importance to the assertion that the problem with nurseries and their lack of welcome for the intrusions is a problem of the CAG's descent into the political arena.
      What is the real problem with the intrusion? I take it as a matter of fact that the Economic Secretary did not mean that nursery teachers would be a little upset when they saw the CAG arriving. It is possible that that is what she had in mind, but I doubt whether she seriously entertained that proposition.
      We do not have to look far to see the problem with the way in which the Economic Secretary and her Department thought about the matter. On the same day and in the next column, she went on to provide one of the classic expositions of the bureaucratic mind in Parliament. She said:
      Quality assurance checks are already in place.
      Let us note that her first defence for the lack of need to allow the CAG in was that somebody else was already doing the job. All was well; the checks were already in place. She added:
      Information from many measures is needed by local line management to make day-to-day decisions and set priorities. It is often—
      note the tone of reasonableness—
      in the interests of people near the coal-face to ensure that the data that they return to the centre is of high quality. Departments have analytical services and internal auditors who make systematic checks of data quality and advise on methodology and technical matters.
      That is practically the sort of thing that one would expect to see in a brochure for the internal audit service.
      Let us reflect on those comments and on what they mean for the nurseries that would not welcome intrusions. If internal auditors make systematic checks of data quality, presumably—to quote the Economic Secretary—they
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      would need to be able to go into local authority, and even private sector, nurseries and form a judgment about how many nursery places each could reasonably be expected to provide.—[Official Report, Standing Committee A, 18 January 2000; c. 147–48.]
      I cannot see how internal auditors could make the systematic checks that the Economic Secretary thinks the CAG would have to make and be as systematic as he would have to be without having to do exactly the same things that she thinks he would have to do. Her proposition is remarkable—it is that nurseries welcome intrusions from internal auditors, who already exist, but would not welcome intrusions from the CAG.
      4.45 am
      It is almost inconceivable that the Economic Secretary remembered her remarks at column 147 when she said what she did at column 148. I suspect that those two passages were written by separate officials—one of whom was given the difficult task of explaining why the CAG should not be let in, and one of whom, in a separate Department, was told to describe all the wonderful arrangements already in place that made it needless for the CAG to have access. We have an assembly of arguments thrown together blindfold, rather like a chap who gets up in the morning after a rough night—as many of us will have had—does his buttons up wrong and looks rather odd as a result. Those remarks are certainly not an example of the Minister's thinking, which is much too acute for anything of that kind.
      We have the same problem here that has repeatedly confronted us in our debates on the Bill. We have the arguments but not the reasons. We do not know from detailed discussion in Committee why the Economic Secretary and the Government are resisting the eminently reasonable, rephrased and accommodating new clause proposed by my right hon. Friend and other members of the PAC.
      We have to speculate on why the Government are trying to prevent their performance measurements being independently validated by anyone. The Government would not have a reason if their internal audit procedures were perfect and transparent. They could simply relabel internal auditors "CAG" and all would be well. The reason can only be that the collective Whitehall mentality resists the idea of somebody else measuring its performance—the reason my right hon. Friend is so keen that somebody else should measure performance.
      We have reached the same point as when debating new clause 1 and the CAG's having access and audit rights in relation to accounting itself. Accounting and performance are two sides of the same coin. It is of no interest to man or beast how much Government spend unless we also know what Government do with the money that they spend. If we could be certain that Government spend £370 billion but we had no idea whether all that money was wasted, we would get absolutely nowhere. The purpose of resource accounts is to perform half the task that we need to impose upon ourselves in Parliament and Government to have a functioning democracy; the other half is to understand the way that the money is used and how effectively.
      All the same arguments for independence of definition and validation on the one side have to apply to independence of definition and validation on the other side. The weight of history from 1866 onwards persuades

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      Treasury Ministers and officials, and Ministers and officials in other Departments, of the necessity at least for independent validation if not definition of accounting standards. Because until recently no one concerned themselves with performance measures, they are able to maintain a stone age, pre-1866 attitude towards those measures. They continue to persuade themselves that there is merit in pretending that people will take seriously annual or any other reports that are not independently validated. No one inside or outside Whitehall or in our democracy as a whole will take them seriously. That is sad because, to do them credit, the present Government—like many others—have done many things very well.
      Governments do a lot of things well and have much to gain from knowing what they do well and persuading others that they have done them well without people turning round to say, "You have cooked the figures." However, like all Governments, this Government have done some things very badly and also have something to gain from knowing what those things are.
      Mr. Clifton-Brown: Does my hon. Friend agree that there is often a shortcoming with internal auditors because all that they are required to do is give a true and fair view of the situation? They are not required to account for value for money, let alone performance indicators, so Parliament and the general public would benefit enormously if the CAG had the powers proposed in the new clause.
      Mr. Letwin: My hon. Friend is absolutely right; that is the point. The very people who employ and unemploy the internal auditors will never give them the task, much less the opportunity, of unearthing real problems of performance management. On the contrary, they will always give the instruction, "Please do not cause too much embarrassment on this front. It is bad enough that you have to tell us the truth about our accounting. We may be able to fuzz up the definitions if those nasty people in Parliament force us to have independent definitions on the accounting side, but you have to tell us the truth. However, be sure that you do not collect too much of this performance stuff. At least we can make sure that only the bits that suit us ever get out."
      The problem is that that is counter-productive for Governments of any party because a Government cannot expect to put right those things that they would like to put right—against their own policies—if they do not know that they are getting them wrong because their systems have been so designed that nobody knows that they are getting them wrong. That is the situation we face. It is so acute that it has led, by a strange process of intellectual osmosis, to two incoherent arguments being adduced in consecutive columns of Hansard by the Economic Secretary to defend a proposition that can be defended only incoherently because it is an incoherent proposition.
      The time has come for Ministers to ditch this stuff. The Economic Secretary should take from her folder whatever has been written of a similar sort for her to say tonight, put it to one side, think of herself in the light that she is in as a Minister of the Crown trying to defend the Government's integrity and their relationship to our Parliament, and come out and say what is true: although the new clause's drafting may or may not be perfect, we all have a common interest in accepting the burden within.
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      If she does that, she will earn the plaudits of those of us who are unfortunate enough to be here at 4.52 in the morning.
      Much more importantly, the Economic Secretary may save the Government, of whom she is a prime representative, from great defects and failures, even in the next little while. She would gain also the plaudits of her ministerial colleagues. As we approach the witching hour, I have every confidence that she will indeed do just that and make our lives much more pleasant.
      Mr. Edward Davey: Members on both sides of the House will admire the hon. Member for West Dorset (Mr. Letwin) for managing to crack a few jokes at this time in the morning. However, although he has kept a few of us amused, he was too hard on the Government. I share many of his concerns, but we have been considering new ways of using performance indicators, targets and measures of success in British government for over a decade under what is often called new public sector management. The Conservative Government tried to develop those measures through initiatives such as the citizens charter, but I must remind the hon. Gentleman that they did so haphazardly, and did not subject any of the charter measures to external validation or independent scrutiny. His own party is culpable in that regard.
      Mr. Letwin indicated assent.
      Mr. Davey: I am grateful for the hon. Gentleman's assent. We need to say, in a spirit of cross-party consensus, that the measures have been developed piecemeal in different Departments and agencies and in local government, and are a mishmash. What we therefore need is coherence in the setting of criteria, and a framework to achieve a logical, rational system. Validation will be a key component of that, but the Government need to do much more to ensure that we have a sensible system for measuring the success of their activities.
      As I am sure the hon. Member for West Dorset is aware, the Government have been active in that field, with the publication of public service agreements and the output and performance analysis, both of which are integral to resource accounting and budgeting. They have produced a plethora of targets—indeed, I am sure that the hon. Gentleman shares my experience of reading Government documents and quickly becoming bewildered by the huge number of targets and measures that Departments are supposed to meet.
      Crucially with respect to the Bill, Departments often have to meet those targets to get their budgets. It is the link between the performance measures and the budgets that makes the issue so crucial, because if the budgets are to be audited properly and accounted for, and there are performance measures on which those budgets depend, the performance measures ought logically to be audited too.
      The Government need to stand back a little. I hope that in the review, which the Chief Secretary has talked about with the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, the Government will make it one of their objectives to get a handle on this growing monster in Whitehall so that we can achieve greater coherence.

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      I am sure that the hon. Member for West Dorset is aware that bizarre targets and performance measures are being set. They might seem to make sense in the Department in which they are drafted, but when they come to the House in a public document, they seem to be completely unwieldy and do not relate to our constituents' priorities.
      I shall give one example of a target set for the Forestry Commission, which is obliged, inter alia, to
      improve the benefits provided by Forest Holidays through a public/private partnership to refurbish the four existing cabin sites by 31 March 2000 and build two new sites by 31 March 2002.
      That is an interesting target for a body to meet, but it would not correspond with criteria and a coherent framework for output measures. That is the key point that the Government have to grasp.
      The Government need to achieve coherence in their approach. I do not underestimate the size of that task—it is daunting—but they need to do it none the less. If they can achieve that, validation will be the corollary. I made these points in Committee. That task sits neatly with the Government's programme for modernising public services; indeed, it is totally in line with what the Government tell us they want to do.
      I share the hon. Gentleman's puzzlement about why the Government seem reluctant to pursue that issue. It may, as the right hon. Member for Haltemprice and Howden said, be a matter of timing—but, if it is, let the Government say so. They should say that they will consider the issue and firmly commit themselves to introducing external validation for the measures in two or three years' time.
      As I understand the right hon. Gentleman's new clause and the way in which he is allowing validation to be rolled out, the proposal would allow the Government to take up external validation as they get a better handle on output measures.
      The Government should welcome our comments, which are intended to help them to meet their aims. Some commentators suggest that the Government's reluctance stems from concern about the press that they might get if they had a set of targets that were externally and independently validated and did not meet them. It is said by others—not by me, of course—that if such a situation arose, the Government could be blown off target. The hon. Member for West Dorset said that a dislike of independent audit of performance was almost inherent in the civil service culture. Perhaps one could say the same of Ministers.
      Mr. Letwin: As usual, the hon. Gentleman is expounding his arguments with great clarity. Does he agree that everybody, not just Whitehall or Ministers, is in that position, and that if utilities could set their own targets instead of having them set by regulators, they would probably find it more convenient?
      Mr. Davey: Indeed. That is why shareholders in private sector companies have demanded that the performance reviews and the customer service analysis which many modern private sector companies undertake are independently audited. Best practice in the private sector
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      is what we are asking the Government to take on in respect of public service agreements and performance measures.
      In debates such as this, a parallel is often drawn between the Government's proposals and the experience of other countries that have gone down the same road. My favourite is New Zealand. When New Zealand introduced outcomes and output measures alongside the introduction of accruals accounting, it ensured that an independent neutral body oversaw the setting of those measures. The task was given to the state services commission.
      Once again, the Government are borrowing partially from the lessons of New Zealand and Australia, but they are not taking the full text. It is unfortunate to see the Government taking the aspect that suits them while leaving those that would probably suit outside commentators and the Opposition. Their pick-and-mix approach to reforms elsewhere is not good enough. It goes against all the rhetoric of modernisation, which is to be regretted.
      I hope that, in the other place, the Government will realise that it is in their own interests to set down a strategy for ensuring that performance measures are credible in the eyes of the public. When the public hear the Prime Minister speaking at Question Time about whether the Government have met the class size reduction and hospital waiting list targets and all the others, they are increasingly beginning to question the statistics.
      That devalues politics and the vocabulary of politics. It means that the Government are less able to get their message across. If the public were told that the figures quoted by the Prime Minister had been independently validated, and we could get away from a sterile statistics debate, and if the Government had all the successes that the Prime Minister claims, they would be able to prove it. They would be able to do so if they accepted the new clause.
      Mr. Clifton-Brown: I am pleased to make my first speech on the Report stage of the Bill—indeed, my only speech on the Bill—at this time of night. As a former member of the Public Accounts Committee, I was privileged to serve under my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). He is an excellent Chairman. The House greatly benefits from his chairmanship.
      The world-renowned National Audit Office is scrutinised and supported by the Public Accounts Committee, which is fully accountable to the House. It is therefore unfortunate that the Government rail against increased powers for the Comptroller and Auditor General to audit aspects of Government supply and expenditure.
      5 am
      I have listened to some of the debate. The Economic Secretary claimed that new clause 3 duplicated the efforts of the Government's internal audit service by granting the Comptroller and Auditor General access to all Departments. New clause 4 provides for additional tasks to those that the Government's internal audit service undertakes.
      My hon. Friend the Member for West Dorset (Mr. Letwin) said that the Economic Secretary had advanced the arguments but not the reasons. I say that she advanced the means—taxpayers' money—but not the

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      ways in which to carry out proper scrutiny. New clause 4 is eminently sensible. It is moderate, and carefully considered and drafted. I cannot understand why the Government are so suspicious of the Comptroller and Auditor General and the National Audit Office. They should be able not only to audit Departments, non-departmental public bodies and other public expenditure but to engage in a value for money exercise. As I said in an intervention on my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes), for every £1 spent on the value for money exercise, £8 of public money is saved.
      If the Economic Secretary listened instead of talking, she might learn something. She does not seem to want to save public money; she is leaving the Chamber. That shows the Government's contempt for saving public money. The Economic Secretary leaves the Chamber during non-political, non-partisan remarks.
      It is worth considering the renown of the National Audit Office, which is clearly demonstrated by the fact that it audits the United Nations accounts. The National Audit Office is renowned throughout the world, and it draws on professional expertise from throughout the world. It is respected in all the accounting convention conferences and is therefore able to set a benchmark on a range of international comparators for the ability of each Department to perform. It can measure the output of every Department far better than any Government internal audit service. [Interruption.] I am glad that the Economic Secretary finds that so funny. Perhaps she will consider the new clause carefully. If not, perhaps she will give good reasons.
      The more the Government laugh, the more the public understand that they do not care about taxpayers' money. That becomes clearer by the day. It will be even clearer as the Government become more unpopular in the opinion polls. The Government's current behaviour shows that they do not give a damn about the fact that the National Audit Office is renowned world wide. I should have thought that they would want such an audit service, which has enormous democratic legitimacy. The Government should consider extending that worthwhile service.
      I understand that it is awkward for Ministers to be subjected to an internal review, and to have matters pointed out to them week after week when individual Departments, non-departmental public bodies and next steps agencies fail to live up to the highest worldwide standards.
      If the Government thought about it carefully, they should welcome that, because Ministers do not have time to go around and look at every nook and cranny where taxpayers' money is being spent. I should have thought that they would welcome somebody looking carefully with an independent eye at the whole situation and assessing it on the basis of international comparators—saying, "You could do a little better in this respect. Money is being wasted here. It is being duplicated there. It is not being contracted out properly here. We could have a better PFI arrangement here."
      This is a very sensible new clause to add to a Bill that I welcome enormously. When I was on the Public Accounts Committee, the whole aspect of resource accounting seemed to me to add great clarity to the way in which the House can appropriate public money and scrutinise how it is spent. This is a worthwhile Bill, and the new clause
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      would add to it, which is exactly what Parliament should be all about. It should be improving an already worthwhile Bill.
      The Public Accounts Committee is accountable to the House. It has huge powers to require witnesses to come to its hearings and question them in a way that no other financial Committee of the House can. It produces very worthwhile reports which the House can scrutinise and be absolutely certain that public money is being properly safeguarded and, if the new clause is adopted, properly used and properly enhanced.
      In an ever more complicated world, that power, that duty, is ever more important. As we get more and more convoluted—we have non-departmental bodies themselves incorporating independent companies to carry out their work, so we are getting further and further away from the individual Department—there is more scope for fraud and misappropriation of public money, and the work done by the National Audit Office, as an independent office, becomes ever more important. That is why the new clause is so important.
      There is a safeguard in the new clause, because the Treasury has the power by order to vary the Departments and bodies to which the National Audit Office can apply the performance indicators. Moreover, it would not come into operation until the statutory instrument was laid before the House.
      In conclusion—[HUN. MEMBERS: "Ah."] Labour Members say "Ah", but I can tell them that I am quite capable of speaking for another hour on this topic. What do they want me to do? Do they wish me to keep speaking? Then we might find ever more nooks and crannies that we could investigate where performance indicators might be applied. I can reel off a whole list off the top of my head. We used to examine them week in, week out in the Public Accounts Committee. I have a good memory. I can remember where the nooks and crannies are. I hope that the Minister will not require me, perhaps on the next group of amendments, to speak at even greater length, and that she will accept the new clause.
      Mr. Swayne: I assure you, Mr. Deputy Speaker, that at this stage I have no intention, or indeed ability, to speak for another hour. I rise for my second intervention with the intention of speaking for a significantly shorter time than on the earlier occasion. New clause 1 was much more widely drawn than new clause 4.
      What I have found surprising, and touching in a way, is how both the Conservative Front-Bench spokesman, my hon. Friend the Member for West Dorset (Mr. Letwin), and the Liberal Front-Bench spokesman, the hon. Member for Kingston and Surbiton (Mr. Davey)—
      Mr. Letwin: I am grateful to my hon. Friend for giving way. At this hour of the morning, I cannot resist telling him that if he has gone all touchy-feely, my faith in human nature will finally dissolve.
      5.15 am
      Mr. Swayne: My hon. Friend may find, as I proceed, that it is not quite as touchy-feely as he imagines.

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      What I found touching was the fact that both my hon. Friend and the hon. Member for Kingston and Surbiton expected the Minister to accept the new clause, in a reasonable way. I cannot imagine anything that the Minister would do with less alacrity. What I see is the proper tension—the natural tension—between those who seek to hold the Executive to account and the interest of the Executive in defending their preserve.
      We who seek to hold the Executive to account consider the new clause to be entirely reasonable, but, were I in the Minister's position, I would consider it to be irksome and unpleasant. Surely the Minister, wishing to defend the interests of the Executive, will resist the new clause, because, while it may impose an entirely reasonable condition on the Executive, the condition is not one that the Executive would welcome.
      Subsection (2) of the new clause states:
      A department to which this section applies in any financial year shall prepare a performance statement in respect of that year analysing the performance of the department in using the resources to which the accounts relate in achieving its objectives for that financial year.
      That is a very demanding requirement to place on a Department—a requirement for it to account for the resources that it has used in achieving its objectives. That would be a substantial piece of work for any Department to have to supply in any year. I would quite understand if Departments—protected as they are, in this instance, by the Minister—sought to resist the imposition of the requirement.
      Moreover, subsection (4) states that the CAG may examine the document when he receives it,
      and may report on it to the House of Commons.
      We, of course, will impose an additional layer of expectations and scrutiny on the Department concerned.
      The Minister may think that Departments are, to an extent, protected by subsection (5), which states that the CAG will not
      question the merits of the policy objectives of a department to which the performance statement relates.
      But we will! When the CAG reports to the House, we will question those objectives and whether they were appropriate—and the process of making the report, subjecting it to the CAG and presenting it to the House will lay bare to the House the appropriateness or otherwise of the objectives.
      Although my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) has sought to protect Departments from any scrutiny of the appropriateness of their objectives, the political reality is that the objectives, and the appropriateness of the policy, will be scrutinised as a consequence of the whole process. That, of course, is entirely what we who seek to hold the Executive to account would wish. We see a natural and proper tension between our objectives—the objectives of the Conservative party
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      in seeking to hold the Government to account, and the objectives of the Executive in seeking greater convenience in their way of life.
      Mr. Letwin: I rarely disagree with my hon. Friend, and I certainly agree with him that the tension he describes is natural; but why does he think it proper?
      Mr. Swayne: Perhaps at this early hour I have been rather looser in my use of language than I would otherwise have been. I suppose that it is proper in the sense that it is to be expected and natural that officials or Ministers who are discharging their responsibilities will seek to avoid new, novel and onerous requirements on them and on their Department. I used the term "proper" in the sense that it is understandable, rather than in the sense of probity. I apologise for that lapse in my use of language.
      What is entirely proper is the motive behind the new clause. I have said that I understand the Minister seeking to resist the onerous requirements, but those requirements are what the Bill is all about. There is little point in having such a Bill unless we place such requirements on Departments. It is summed up in the first sentence of recommendation (xxiii) of the ninth PAC report, which says:
      We are disappointed to see broken the link between resources used and performance achieved, as originally intended under resource accounting.
      What will be the point of having resource accounting if that link is broken and such scrutiny is not applied to Departments? It seems to defeat the purpose. The Bill is not much of a Bill without the new clause, which seeks to restore that link.
      Which Department would wish to place itself under such scrutiny? The logical conclusion is that the way in which the Department achieves value for money, or fails to achieve it, will be the basis on which Parliament—which funds it—will apply constraints and conditions to any future funding. That is an entirely understandable point of view for us, but an unwelcome point of view for those who discharge those responsibilities.
      As was clear in the debates in Committee, which were quoted by my hon. Friend the Member for West Dorset, the Minister's principal argument against the new clause is that it would be administratively inconvenient. Of course it would. Her argument was that nursery schools would not welcome the attention of the CAG. She is right. I thought that my hon. Friend was somewhat unfair to her in being surprised at such a state of affairs. Of course it is inconvenient. Anyone who has been subjected to an audit of any sort finds that it is thoroughly, fiendishly and excruciatingly inconvenient.
      That inconvenience is born of the current accounting practice, which is merely to establish a fair view of the financial reports. Ensuring that value for money has been achieved is a much more discerning audit. The order of inconvenience is multiplied as a consequence of the introduction of resource accounting, but either we accept that resource accounting is a proper way in which to understand the undertakings and expenditure of a Department and the way in which it discharges its responsibilities, or we do not.
      Mr. Clifton—Brown: I am following my hon. Friend's argument carefully. He referred to nursery schools, but,

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      when the Office for Standards in Education came into being, did not schools object to external examination? Might it not be the same with the performance measurements? There might be an objection in principle at first, but, once the results were delivered, people might welcome what they achieved.
      Mr. Swayne: My hon. Friend is entirely right. The whole purpose of introducing resource accounting is to enable us better to understand those operations, so that we might better establish the best ways of achieving value for money. As my hon. Friend the Member for West Dorset said, the Government have much to gain by showing us so transparently what they have done well, and what they have learned—as revealed in the process of scrutiny—from that which they have done badly.
      If I were in the position of a Department's senior civil servants, who quite rightly look to Ministers to protect their interests, I would be very disinclined to embrace resource accounting with open arms because of the commitment levels that would be imposed on me. I therefore conclude as I began, by saying that there is a perfectly understandable tension between Opposition Members who support new clause 4 and Labour Members who seek to resist it. Nevertheless, the arguments advanced against new clause 4 are arguments against the Bill itself. The Bill is of little value without the new clause.
      Mr. Fabricant: Let us remind ourselves again what resource accounting is all about. [HoN. MEMBERS: "Oh, please."[Let us do that. The point of resource accounting is to emulate what goes on in the real world, not in the Treasury's pretend and fantasy world. Resource accounts include three statements, emulating the type of statements that are issued by chartered accountants in performing a company's statutory audit. There is the operating cost statement, which is equivalent to the profit and loss account, the balance sheet and the cash flow statement.
      Mr. Letwin: I simply wonder whether—now that my hon. Friend seems to have woken up Labour Members, which is much to be welcomed—he will join me in hoping that they might actually contribute to the debate, so that we might hear whether, as we suspect, they entirely agree with our arguments?
      Mr. Fabricant: My hon. Friend is always optimistic in such matters. The only contributions that we have so far had from Labour Members are snoring, baying, laughter and walk-outs by Ministers and walk-ins by Ministers. There has been great drama, but no interventions. Nevertheless, I hope that something like that might happen.
      Three analyses are produced in resource accounting: the equivalent of the profit and loss account, the balance sheet and the cash flow statement. [Interruption.] Someone has woken up, which is very reassuring.
      In the real world, the value of a company's stocks and shares is another measurement of its performance. If the company is not performing well, its share value will decline. If it is performing well, its share value will increase. A target is set externally for the company. Even Labour Members—who operate with their BT shares,
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      which they bought because of a privatisation by a Conservative Government in the 1980s—should be able to appreciate that fact.
      Labour Members, however, do not appreciate that it is necessary to establish targets. Companies set themselves internal targets against which they can measure themselves. However, it is doubly important that the Government should set themselves targets, as Departments and Government agencies cannot be valued in the market. There is no share value in the Government that could increase or decrease as appropriate.
      Mr. Clifton"Brown: Before my hon. Friend moves off the principles of resource accounting as they relate to new clause 4, will he comment on the introduction in appropriation accounts of a proper statement of assets for each Department, and on how, in new clause 4, such a statement of assets could be usefully applied in relation to the performance or use of those assets?
      5.30 am
      Mr. Fabricant: My hon. Friend raises an interesting point. The previous Government initiated the production of what was colloquially called the Domesday book. That was strengthened by this Government. "The National Asset Register"—I have a copy here—lists all the assets owned by the Government. However, it is no good just owning assets. It is more important to determine whether they are giving a return on the national investment. As an aside, it is interesting that the Department for Culture, Media and Sport, which nominally owns assets such as Trafalgar square, had great difficulty in determining a rate of return on them.
      Mr. Syms: And Nelson.
      Mr. Fabricant: And indeed on Nelson's column and Nelson himself.
      There has to be a measure of performance. I find it strange that Conservative Members have been surprised that the Government do not welcome the new clause. To me the reason is obvious. The Government are king of one thing only—spin. People are beginning to see through that.
      Mr. Deputy Speaker (Mr. Michael J. Martin): The one thing that I am beginning to see is that the hon. Gentleman is straying from the new clause. He must get back to it. I cannot tolerate him talking about the Government's record on spin, because it has nothing to do with the amendment.
      Mr. Fabricant: Thank you, Mr. Deputy Speaker. I shall move away from spin and back to performance, which is the opposite of spin.
      Mr. Letwin: I would not want something that was not strictly accurate to go into Hansard. My hon. Friend correctly mentioned that the Department for Culture, Media and Sport holds historic assets. It is specifically stated on page 314 of the so-called Domesday book that no valuation for heritage assets has been included in the accounts. It turned out to be too difficult.
      Mr. Fabricant: One might think that that is because the Department for Culture, Media and Sport, and

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      particularly the Secretary of State, know full well that if any performance measurement were made, he would be shown to be wanting.
      Mr. Clifton"Brown: Does my hon. Friend have an idea of what written down value the dome might have?
      Mr. Fabricant: That would be straying from the strict principle of the clause. I suspect that at the moment the dome has a negative value. Given the number of people who are visiting it, I have no doubt that if it were on the commercial market it would be heavily discounted.
      Mr. Swayne: May I disagree with my hon. Friend that the issue departs from the principle of the new clause? It is central to the new clause that, rather than taking a cash accounting view of whether the money can be accounted for and whether the petty cash has been nicked, we should move to considering what the objective was and how wisely the funds have been spent in achieving it. Those are more pressing—and therefore inconvenient and unwelcome—questions for any Department to have to answer.
      Mr. Fabricant: As ever, my hon. Friend is precise. The House of Commons Library report on the Bill refers not to a performance statement, but to
      key performance data by objective.
      That is important, because it is at the heart of the new clause that the Government have to set objectives, but, at the same time, a measurement must be made—it would be called a variance analysis in cost and management accounting—of the achievement of the Government. I hate to repeat the word, but that is why the system is such an enemy of spin. When there is transparency it is impossible to spin.
      Mr. Letwin: Again in the cause of making sure that Hansard records only accurate statements, I wonder whether my hon. Friend has noticed that on page 340 of "The National Asset Register" it is made clear that the New Millennium Experience Company and all its doings are excluded from the register and that the total value of the Millennium Commission is £291,000.
      Mr. Fabricant: That is fascinating, given that the new supremo was earning £30,000 a year as a rollercoaster repair man before he took his new £100,000 job with its £100,000 bonus. However, I shall not continue down that line as I fear that I would be straying just a teeny-weeny bit from the main point of the new clause.
      There has to be transparency and open government. The Government say that they want to be transparent and open. More importantly, they want to be the people's Government, but the people have to be able to measure whether the Government—and, in this instance, Government Departments and their agencies—are performing. In order to do that, objectives have to be set and measurements have to be made against them.
      My hon. Friend the Member for Cotswold (Mr. Clifton"Brown) raised the subject of the national asset register. I remind the House that a few hours ago we were discussing the problem of determining which items are revenue expenditure and which are capital
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      expenditure. It is quite extraordinary that in 1866, when William Ewart Gladstone established the first legislation on the subject, everything was measured in the form of cash flow, but of course assets have value. They appreciate, but we also expect a return on them. That is why it is so important to set performance measures. It is not difficult.
      As my hon. Friends have said, such provisions are in place in New Zealand and Australia. About 40 out of the 50 United States of America have them, as does the Federal Government of the United States for most Government departments and agencies operating out of or as part of the Washington establishment. If it can be done in Australia and New Zealand and in the United States, why can it not be done here? The simple answer is that it can be done, but the Government do not want it because they do not want people to see how they are performing, or, more to the point, how they are failing to perform.
      Let me be parochial for a moment and let us suppose that performance targets were set on policing in Staffordshire. We are witnessing 250 fewer police officers in Staffordshire, which is a cut of around 10 per cent. The Government talk about 5,000 more police officers. Is that a target or an objective? If it is, have they met it? What is the variance analysis? Two hospitals in Lichfield are under threat. How does that compare with the Government's performance targets? They say that they want people to be able to get to hospital more quickly than ever before, but waiting lists are longer than ever before. Are there targets for local justice? The magistrates court which has been in Lichfield for more than 600 years is closing. We were told that things could only get better, but, over two and a half years, according to some performance targets, things have got worse very quickly.
      How does one set performance targets for the BBC? That is an interesting subject that we have discussed before. How should the BBC be measured? It is funded by the licence payer, independent of Government. The funds come out of the public purse and indirectly from the taxpayer; nevertheless, they are collected on behalf of the BBC by a Government agency, the Licence Agency. Should the BBC be measured in terms of the quality of its programmes? How does one put a figure on that? Should it be measured in terms of the number of people who view BBC television programmes or listen to BBC radio? Should it be a quantitative amount—
      Mr. Deputy Speaker: Order. The hon. Gentleman has talked about performance statements and targets, but he cannot roam around talking about those matters and exclude the CAG. He must tie his remarks in with the CAG or his comments mean nothing in relation to new clause 4.
      Mr. Fabricant: I am very grateful, Mr. Deputy Speaker. I think that I have given plenty of examples and I appreciate your making that very clear point to me.
      The Comptroller and Auditor General—I say that because of the suggestion that I did not know what CAG stood for—
      Mr. Swayne: The new clause, quite properly, excludes the Comptroller and Auditor General from any decision in respect of performance targets because that is a matter of policy. Does my hon. Friend share the view that there

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      is a weakness in the new clause in that it fails to examine in any depth how performance is to be measured? What is the measure to be?
      Mr. Fabricant: My hon. Friend raises a fascinating point. I tried to give the example of the difficulty of measuring the qualitative output of the BBC. Does one go for popular programming, which might not be of a high standard, or for work of a higher standard that reaches a smaller audience? However, I do not think that it is a question of how performance might be measured. There is no difficulty in measuring it. My point is that performance targets are used all the time in industry and commerce, and resource accounting attempts to emulate that. It is in use in the government of the United States and Canada as well as in New Zealand and Australia.
      Mr. Letwin: Does my hon. Friend agree that the new clause admits the possibility of the Government deciding that the proper measure of the performance of the Ministry of Agriculture, Fisheries and Food is how many long-haired rabbits there are in East Anglia? We simply want to know that if the Government claim that there are 10, there are 10, rather than one or 1 million.
      Mr. Fabricant: It goes further than that, because there must also be an aim. Every Department, agency and business has an aim. I was dining earlier with a director of the John Lewis Partnership. He has just moved from being the managing director of John Lewis Bluewater which has monthly targets which have just been exceeded by about 30 per cent.—if I am not giving away internal information.
      Mr. Swayne: Are those targets monitored on a resource-accounting basis or on a mere cash-accounting basis? That is the key question.
      Mr. Fabricant: My hon. Friend asks a very interesting question. [HON. MEMBERS: "Answer."' They press me to answer, Mr. Deputy Speaker.
      Mr. Deputy Speaker: The hon. Gentleman knows that the organisation that he talks about has nothing to do with public assets.
      Mr. Fabricant: I shall not, then, give the answer. It is on a cash basis, although I cannot possibly say that.
      Resource accounting attempts to emulate the auditing process and the results of an audit from a commercial organisation. Of course the two are not identical. One cannot compare the operations of the Treasury or the Home Office with the John Lewis Partnership. Nevertheless, for the first time, we are moving away from simply considering cash flows, saying instead that there are assets which need a return and have to be measured.
      That is why I disagree slightly with my hon. Friend the Member for West Dorset (Mr. Letwin). It is a question not just of measuring, but of measuring the variance between that which is and that which was projected.
      As we heard in an earlier intervention, it is not up to the Comptroller and Auditor General to set the targets. That is right. What is also right is that the CAG should look at what has been achieved, as part of his audit, together with the targets and ask why there is a variance, if one has occurred.
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      I suppose the Government will object to new clause 4. I hope there will be a Division. I suspect that Labour Members will go in sheeplike drives through the No Lobby. Every Labour Member who votes no will be saying, "We do not want to see performance targets published. We do not want the CAG to assess what is the variance between that which has been projected and that which has been achieved." They will signal to their electorate, "We do not want clarity; we do not want open government—we merely want spin from Millbank."
      5.45 am
      Mr. Clifton-Brown: If the Government reject the new clause, they will signal to the public that they do not want clarity. Does my hon. Friend think that a future Conservative Government would introduce an enlightened new clause such as this one?
      Mr. Fabricant: I sincerely hope so.
      Mr. Letwin: I can give my hon. Friends an absolute guarantee that if a Conservative Government are elected at the next general election, one of our first actions will be to ensure not only that there are proper, independently set standards for these matters, but that there is full validation by the CAG throughout Government.
      Mr. Fabricant: That is a great reassurance—not for me, but for the people of the United Kingdom. It means that a future Conservative Government will be obsessed with achievement and not with spin and hype. Spin and hype can be hidden only by lack of clarity, data and transparency. That is what objection to new clause 4 would achieve.
      This provision is the acid test.
      Mr. Chris Pond: Here is the punch line.
      Mr. Fabricant: As the hon. Gentleman says, it is the punch line: can this Government achieve? Can they deliver? Are they proud to show that they can deliver and achieve, or will they be opaque and conceal their lack of achievement by objecting to openness and new clause 4? In the minutes to come, I hope that they will choose open government.
      Mr. Rendel: I have only two points to make on the new clause, to which I am proud to have my name, and those of PAC colleagues, attached.
      First, it is ironic that in a Bill that is mainly concerned with updating how the Government hold their accounts to a method of accounting that has long been used in local government and business, the Government should nevertheless fail to update how performance reporting is monitored to a method that is already used—at the Government's demand—in local government. It seems that they are all too disinclined to follow the old saying, "What's sauce for the goose is sauce for the gander."
      As so often, the Government are imposing measures on local government that they are not prepared to follow themselves. They would be well advised to follow the line that they have taken with local government and ensure independent monitoring of the performance reporting that they are introducing.

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      Secondly, if proper and objective monitoring of performance reporting is introduced, it can lead to only two results. Many people have said that both would be of value to the Government. If the monitoring proves that some aspect of the reporting is not being properly carried out, that can only be of value to the Government. If it shows that the reporting is being properly carried out, the Government would welcome that, because they would be proud of it.
      Although the argument has been well made that to point out that performance reporting is not being carried out can be of value to the Government because they can make changes, I understand that they might be worried that that might lead to some embarrassment. That is the only possible rationale for their objecting to the new clause. If the Government object to the new clause because they expect to be found out and think that external monitoring of their performance reporting will prove that it has not been properly carried out, that shows an incredible lack of confidence in their ability properly to introduce performance reporting. I am sorry to see that lack of confidence, and showing it is a matter of embarrassment for the Government. They should be shamed into accepting the new clause.
      Mr. Syms: I shall briefly support the new clause. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) rightly said that the real prize of resource accounting was to measure performance and that the Bill was silent about that. His new clause is good and progressive. The Government should consider it seriously.
      All of us in political life believe that it is important to measure output. I am sure that it is sometimes difficult to measure how productive we are as elected Members, but it is important to measure the output of government.
      Mr. Swayne: My hon. Friend refers to output, but how would he measure it? I think that he would agree that length would not be an appropriate measure. That is perhaps a weakness of the new clause in that it does not discuss what the measure should be.
      Mr. Syms: The new clause is drafted in such a way as to make policy decisions a matter for politicians and the Government and that is quite right. However, validation, measurement and ensuring the admissibility, relevance and reliability of performance data are important, too.
      Prime Minister's Question Time was mentioned earlier. The Prime Minister throws statistics about and it was suggested that they give him great support. I do not think that that is so, but there is another more serious point. We have not mentioned Select Committees. In the heat of the Chamber, each side throws its preferred statistics at the other and, no doubt, in the whole range of government, we can find things that work well and things that go wrong.
      However, we want to ensure that the Select Committee system works properly and the new clause, which would give the Comptroller and Auditor General a greater role in validating the information that is produced, could enable them to do a much better job. In the longer term, that would make a more profound difference to the way
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      in which government operates than has the yah-boo traditional politics that we have in the Chamber. That is the key point that I wish to make.
      All Governments dislike interference. I have no doubt that if we were in office, we would be a little sniffy about having outside bodies coming in.
      Mr. Clifton-Brown: My hon. Friend touched on the important subject of Select Committees. The Public Accounts Committee can point out where public funds are being misappropriated and, under the new clause, that process would be that much more effective. Departmental Select Committees can follow up on the shortcomings in a way that the PAC cannot possibly do because it examines the whole gamut of government expenditure. His remarks are frightfully important.
      Mr. Syms: It is also important that Select Committees have good information, and we all know that they are under-resourced. However, the movement to resource accounting and the proposal in the new clause to allow the CAG to become involved in the proper measurement of the Government's targets and objectives might enable us to have more objective debates in the quieter Committees upstairs. In them, it is possible to press Ministers on their priorities. That is better than the yah-boo politics in which we all sometimes engage in the Chamber.
      There is a real problem with the statistics commission, which will be a creation of government and whose members will be appointed by Ministers. It is important to validate what we do. Measurement and objectivity in relation to the outputs of government would dramatically improve political debate.
      My hon. Friend the Member for New Forest, West (Mr. Swayne) asked whether it was proper to involve the CAG. I believe that it is. To all of us who aspire to honest and honourable government, validated measurement is important. My right hon. Friend the Member for Haltemprice and Howden mentioned how honest our government system is. We must be grateful for that. We should not be complacent but try to improve debate. The Bill gives us the opportunity to improve the quality of information provided to Select Committees. Not to endorse new clause 4 would be a tremendous mistake. Ministers should think carefully before they dismiss that opportunity.
      Miss Melanie Johnson: I quite enjoyed the turn by the hon. Member for New Forest, West (Mr. Swayne). I thought that it was a bid to become a member of the Public Accounts Committee. I was not sure how to interpret the large grin on the face of its Chairman as that contribution developed.
      This is one of those occasions when one looks around the Chamber, notices that it is nigh on 6 am and says to oneself, "Would the public think we were doing a good job? What would be the output and outcome measures for our performance?" Were the public watching, although I hope that many of them are asleep—
      Mr. Fabricant: The hon. Lady was.
      Miss Johnson: I have not been asleep at any point. I have been here since 3.30 yesterday afternoon, unlike the hon. Gentleman.

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      Probably no member of the public would think that the House has been doing a very good job. Perhaps that is something on which we should reflect.
      I was impressed by the idealism of the hon. Member for Kingston and Surbiton (Mr. Davey) in his desire to arrive at consensus at about 5 am. I have not noticed any consensus; nor is it likely at 5 am.
      We tabled amendment No. 18 following discussions in Committee and it would require the financial statements to present a true and fair view. The Companies Act requires that the profit and loss account and the balance sheet present a true and fair view. The amendment goes further, extending that provision to the whole of the resource accounts. The need for accounts to present a true and fair view is an overriding requirement in companies legislation and the Government are content for that to apply to resource accounts.
      Amendment No. 19 fulfils an undertaking that I made in Committee to bring forward an amendment that would re-enact, in modernised form, the requirements of section 26 of the Exchequer and Audit Departments Act 1866. The amendment will enable Parliament to see clearly where differences have arisen between planned and actual expenditure. It was always the Government's intention to continue to require, under resource accounting, notes explaining variances between the estimate and actual outturn. We did not originally believe that it was necessary to keep that on a statutory basis, but we have listened to the concerns expressed by the Chairman of the Public Accounts Committee—the right hon. Member for Haltemprice and Howden (Mr. Davis)—and others and the amendment will reinstate the statutory basis of that important parliamentary control.
      6 am
      On amendment No. 20, clause 7 as originally drafted left the form of the CAG's audit opinion entirely to his discretion. That would have enabled him to report on the regularity of the accounts prepared under the clause when he thought that necessary, but the Government have no objection to making it a statutory requirement for him to report on the regularity of those accounts if that is what he wants. We have, therefore, tabled the amendment, as we agreed to do in Committee.
      The Government oppose new clause 4. We have already committed ourselves to reporting annually to Parliament and the public on outturn against performance targets. That will be done through departmental reports, beginning this spring, and the Government's annual report, which will be published in the summer. There is no need to make that a statutory requirement and doing so would lead to inflexibility. For example, the public service agreements relate to three years, mirroring spending plans, so performance assessments tied narrowly to a particular financial year may not be as useful as giving Parliament the very latest outturn. The Government recognise that if PSAs are to affect accountability and raise public service performance, which is what they are aimed at, the information that supports them must be credible.
      Mr. Letwin: I am grateful to the hon. Lady for giving way because I had not realised that she has been supplied
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      with a text even more amusing than previous ones. Is she seriously maintaining that it would be misleading for Parliament to see the simple figures for one year?
      Miss Johnson: I did not say that, any more than I said the things that the hon. Gentleman quoted from Committee proceedings in isolation. I said that in some cases tying an issue to a particular financial year may not be as useful as giving Parliament the very latest outturn. Different assessments of what is the useful information need to be made at different times. That is an advantage of moving to PSAs. They will affect accountability and raise public service performance as a result.
      Hon. Members have commented on the work of the new independent statistics commission, which we think is important in this regard, and the future of performance information generally. It would be premature to introduce any statutory requirement at this time as both are undergoing considerable development as we speak. Work needs to be done to achieve coherence, which was referred to by the hon. Member for Kingston and Surbiton. [Interruption.] I nearly disturbed him.
      The right hon. Member for Haltemprice and Howden commented wisely across the piece on the value of outputs and outcomes and the credibility and integrity of the figures. I could not agree more that they are very important. I also agree that a revolution is taking place in respect of what we can do and how we can manage the public sector and our public services for the greater good of the public, whom we in the House serve. I strongly support placing greater emphasis on evidence-based policy making, as do the Government in all their activities, but the new clause is not the way forward at this point. However, we agree with the import of the changes and the direction in which they ought to take us. We have in hand a number of measures that we believe will take the project forward substantially.
      Mr. David Davis: I thank the Minister for the various Government amendments that have been tabled in response to questions raised in Committee. They are helpful and constructive.
      I shall not waste another 15 minutes by pressing new clause 4 to a vote. That is not because I am persuaded by the Minister's arguments; indeed, I hope that in my meetings with the Chief Secretary we will have a more constructive exchange.
      Miss Melanie Johnson: The hon. Member for Lichfield (Mr. Fabricant) is very keen to have a vote on the new clause.
      Mr. Davis: He will have to object to my seeking permission to withdraw the motion in a moment, then. I am conscious of the fact that the Economic Secretary has a Select Committee meeting at 9.45 am, so I want to delay her no longer than is absolutely necessary.
      I am glad to hear the Economic Secretary talk about the importance of evidence-based policy development. That is the single most important element of the development of resource accounting, all technical aspects and costs apart. That is why the new clause represents the largest missed opportunity in the Bill. That is sad, because this is not a matter of partisan politics; it is a matter of the delivery of public services, which is of common interest to hon.

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      Members on both sides of the House. Although I am not persuaded by the hon. Lady's arguments, I do not want to waste time having a futile vote, and I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    Clause 3

      CONSOLIDATED AND NATIONAL LOANS FUNDS: PAYMENTS OUT
      Mr. Timms: I beg to move amendment No. 36, in page 2, leave out lines 15 to 24 and insert—

      '(1) Subsection (2) applies to a requisition or order under—

      (a) section 13 or 15 of the Exchequer and Audit Departments Act 1866 (payments out of the Consolidated Fund), or

      (b) section 1(3) of the National Loans Act 1968 (payments out of the National Loans Fund).

      (2) A requisition or order to which this subsection applies—

      (a) may be produced, authenticated and transmitted in any manner which the Treasury, with the approval of the Comptroller and Auditor General, decide to adopt, but

      (b) shall be accompanied by evidence of the approval of two officers of the Treasury appointed for that purpose.

      (3) A request or order under section 20 of the Exchequer and Audit Departments Act 1866 (government stock and annuities) may be produced, authenticated and transmitted in any manner which the Treasury decide to adopt.'.

      The amendment provides for Consolidated Fund and national loans fund credit requisitions and payment orders to be approved by two officers of the Treasury from a panel of authorised signatories. It builds on amendments tabled in Committee by the right hon. Member for Haltemprice and Howden (Mr. Davis) and my right hon. Friend the Member for Swansea, West (Mr. Williams), which we accepted in principle. This amendment takes them forward.
      The amendments tabled in Committee would have required that Consolidated Fund credit requisitions be approved by a duly authorised officer of the Treasury. Current practice is for such requisitions to be approved by two such officers, rather than one. That applies also to national loans fund requisitions and to payment instructions for both funds. We think that the Bill should make that current practice a statutory requirement, and our amendment achieves that.
      The amendment also restructures much of clause 3 to make it clear that the form of requests under section 20 of the Exchequer and Audit Departments Act 1866, unlike those relating to payments from the Consolidated Fund and the national loans fund, do not need to be approved by the CAG.
      I hope that the amendment will be welcomed by the whole House.
      Mr. Letwin: I will perhaps surprise the Minister by telling him that I welcome the amendment. I have been unable to find anything in it to complain about, so I shall shut up and continue to welcome it in silence.
      Mr. David Davis: As I was one of the Members who raised the matter, I shall say briefly that I welcome the amendment, which seems entirely constructive and proper.
      Amendment agreed to.

    Clause 5

      RESOURCE ACCOUNTS: PREPARATION
      Amendments made: No. 18, in page 3, line 2, after "accounts", insert—
      '(a) present a true and fair view,
      (b)".
      No. 19, in page 3, line 4, at end insert—
      ", and
      (c) accord with guidance issued by the Treasury about the inclusion of an explanation of the difference between an item appearing in a department's estimate and a corresponding item appearing in or reflected in the department's resource accounts.'.—[Mr. Timms.]

    Clause 7

      OTHER DEPARTMENTAL ACCOUNTS
      Amendment made: No. 20, in page 4, line 24, at end insert—
      '() The Comptroller and Auditor General shall carry out his examination of accounts under subsection (3)(b) with a view to satisfying himself—

      (a) that money provided by Parliament has been expended for the purposes intended by Parliament,

      (b) that resources authorised by Parliament to be used have been used for the purposes in relation to which the use was authorised, and

      (c) that the department's financial transactions are in accordance with any relevant authority.'.—[Mr. Timms.]

    Clause 8

      COMPTROLLER AND AUDITOR GENERAL: ACCESS TO INFORMATION
      Amendment made: No. 21, in page 4, leave out lines 32 to 38 and insert—
      '(1) For the purposes of an examination by the Comptroller and Auditor General of a government department's accounts—

      (a) he shall have a right of access at all reasonable times to any of the documents relating to the department's accounts, and

      (b) a person who holds or has control of any of those documents shall give the Comptroller and Auditor General any assistance, information or explanation which he requires in relation to any of those documents.

      (2) Subsection (1) applies only in relation to documents which are held or controlled—

      (a) by a government department, or

      (b) in pursuance of arrangements made by a government department for the compiling or handling of any of its financial records.'.—[Mr. Timms.]

    Clause 9

      PREPARATION
      Mr. Timms: I beg to move amendment No. 22, in page 5, line 5, at end insert—
      '() Accounts prepared under this section may include information referring wholly or partly to activities which—

      (a) are not activities of bodies falling within subsection (1), but

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      (b) appear to the Treasury to be activities of a public nature.'.

      Mr. Deputy Speaker (Mr. Michael Lord): With this, it will be convenient to discuss the following: Government amendment No. 23.
      Amendment No. 6, in clause 10, page 5, line 19, leave out subsection (2)(d) and insert—
      '(d) publish the information.'.
      Amendment No. 7, in page 5, line 26, leave out subsection (3)(c) and insert—
      "(c) publish the information.'.
      Government amendments Nos. 24 and 34.
      Mr. Timms: In the newly harmonious environment that we are enjoying, I can say that clause 9 governs the scope and content of whole of Government accounts. At the moment, the clause defines the scope of the accounts in terms of the bodies to be included. Accordingly, all items included in each body's own accounts would be included within whole of Government accounts.
      There are, however, a number of areas of the Government's finances which are dealt with through separate funds, such as the national insurance fund and the social fund. Although specific Departments have responsibility for administering those funds, they are legally separate and so are accounted for separately. We would want to include such funds within whole of Government accounts. Unfortunately, they would not qualify as "bodies" under clause 9(1), and so at present could not be included within whole of Government accounts. The amendment addresses that issue.
      Amendment No. 23 is purely technical. Amendment No. 24 introduces an important performance incentive into the consolidation process, allowing an individual official within each designated body to be given responsibility for preparing that body's consolidation pack, arranging for it to be audited and submitting it as directed.
      On amendment No. 34, clause 27(3) is a transitional provision to allow the Treasury to collect consolidation information on a pilot basis from public sector bodies which will ultimately be within the scope of full public sector whole of Government accounts, but are outside the scope of the initial audited accounts for central Government.
      The amendment extends the provision to allow the Treasury to require another Department to pilot the necessary consolidation procedures for public corporations or local authorities, to prepare for the extension of the scope of whole of Government accounts from central Government to the entire public sector.
      I hope that the House will not accept amendments Nos. 6 and 7, as they would severely impair the efficiency of the consolidation process put in place by clause 10. They would remove the Treasury's right to require electronic data submission and to set deadlines for that, which would be a retrograde step.
      Amendment No. 6 would also impose a requirement to publish consolidation pack information for a particular year, which would essentially duplicate information that the body is already required to publish in its annual accounts. That would result in unnecessary duplication
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      and expense. I hope that the House will reject those amendments if the Opposition choose to press them to a Division.
      Mr. Letwin: I do not agree with much that the Financial Secretary has just said, but I would not want our exchange to be considered disharmonious. Despite the fact that we have had some arguments, our proceedings over a prolonged period have on the whole been harmonious. I do not intend to disrupt that trend.
      I have no deep principled objection to amendment No. 22, or at least, I do not think that I have, but I have a difficulty: I do not understand it. Although I listened attentively to the Financial Secretary's remarks, they did not explain it either.
      The problem is caused by subsection (b), which refers to activities which
      appear to the Treasury to be activities of a public nature.
      That takes us to the heart of the problem that we were discussing in the context of new clause 1. What is an activity of a public nature? What are the criteria against which the Treasury will judge whether the activity is of a public nature? Why are we dealing not with whether it is an activity of a public nature, but with whether it appears to the Treasury to be an activity of a public nature?
      I admit that, throughout the Bill, as we have remarked on various occasions, more or less everything is left to the discretion of the Treasury. The amendment could simply reflect the exuberance of the draftsman. He got so used to describing everything as a matter of discretion that even reality began to be a matter of discretion, and we move from reality to appearance. That is a possible explanation, but, if it is not an exuberance of drafting, we want to know why the distinction is drawn between activities of a public nature and those which appear to the Treasury in that light.
      The more important question is the first part. What are activities of a public nature? If the Financial Secretary had not also been present for many hours in these proceedings and in the earlier Standing Committee, he might be tempted to say that it was obvious to the meanest intellect what an activity of a public nature was.
      However, we have discovered that the company set up by the Bill to engage in unknown activities at an unknown cost and to participate on an unknown basis in unknown numbers of PPP projects does not appear to the Treasury to be an activity of a public nature, despite the fact that it will have £400 million of public funds, plus something unknown under subsection (1)(a). If it were an activity of a public nature, presumably it would be caught. We were told earlier that it would not be caught; it will be outwith the scrutiny of the CAG because it is a company.
      6.15 am
      The Government have specifically excluded various matters from the purview of the CAG by not accepting the reversal of the burden of proof, which my right hon. Friend the Member for Haltemprice and Howden proposed in a new clause. If I remember correctly, those matters were excluded because they did not appear to the Treasury to be of a sufficiently public nature. We were told that while some activities might receive public funding, they were somehow outside the public sector and that made them appear to the Treasury as activities that

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      were not of a public nature. I am in a state of confusion and muddle about what constitutes an activity of a public nature. I suspect that the Financial Secretary is in the same state.
      Part of the reason for the confusion is that the phrase "activities of a public nature" is as vague a phrase as the parliamentary draftsmen could have devised under perplexing circumstances. "Public sector activities" is the usual phrase, but the amendment avoids that. We are therefore considering a much wider concept.
      Let us consider the student loans company. Does its work constitute "activities of a public nature"? It clearly uses public money, but it is not a public sector entity. Is it intended to be covered by the definition? I do not know, and I wonder whether the Financial Secretary knows. If he does, it would be useful if he could tell us. If he does not, perhaps he could reconsider the phrase. While he does that, he should consider other similar matters that we raised in Committee and try to tidy up the Bill so that we know what the extremely confusing measure covers.
      Mr. Keith Bradley (Treasurer of Her Majesty's Household): Thank you.
      Mr. Letwin: The Deputy Chief Whip says thank you from a sedentary position. However, I fear that he may not thank me because I must progress to amendments Nos. 6 and 7, which we tabled. The Financial Secretary made a reasoned case for not accepting the gist of those amendments, which deal with publishing the information. He said that it would cost too much. That reminds us of Ministers' frequent resort to the doctrine that they cannot answer a parliamentary question because it would cost too much to find the information. It is remarkable that the Financial Secretary should use that argument in this context.
      We are considering a case whereby the Treasury has prepared a set of accounts, which constitute whole of Government accounts. They are the crowning achievement of the resource accounting process. Clause 9 covers that and clause 10 refers to it. Clause 10 states:
      Where the Treasury intend the accounts under section 9 … to relate … to a particular body, the Treasury may … designate that body.
      When a body is designated, the information is to be delivered to the Treasury. That is a remarkable matter to put in statute. If we are simply considering an administrative internal action of the Treasury vis-a-vis other Departments, why have Ministers troubled the House with a request for a statute basis? The Treasury has discretion to insist on anything being delivered to it at any time of day or night.
      A statute is reasonable only if the information is available to the public and especially to Parliament. That will happen if the information is required to be published. Amendments Nos. 6 and 7 would require that. The Financial Secretary will have to provide a better argument than claiming that a small cost will be associated with depositing the relevant item in the Library. I have not analysed how much it would cost to get a piece of paper photocopied in the Treasury, brought across by a messenger and deposited in the Library. However, I doubt whether it would make a major dent in the fiscal balance
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      of our prudent Chancellor. I imagine that it would cost around £2. The cost argument is a non-starter. We are considering the serious matter of parliamentary accountability.
      Dr. Julian Lewis: Can my hon. Friend conceive of a way in which the information could be provided to the Treasury as set out in the subsections that the amendments would delete, but could not immediately be copied—in whatever form the Treasury stipulated—and handed over for public purposes to the House of Commons? How can the Government make such a distinction? It is hard to conceive of a way in which the existing clause could not be adapted to fit the amendments.
      Mr. Letwin: While I entirely agree with the gist of what my hon. Friend says, I suppose that the idea is that, dulled by late nights and the insensibility of poor memory, we shall have forgotten by the time these things are being done that they are being done and will not ask for the information in parliamentary questions; or, if we ask, we shall be told, according to the Financial Secretary's arguments, that it is a bit expensive to produce, so we shall never get it.
      What we are facing, therefore, is a Treasury that would like to be well informed about all of the Government's activities, but would like to make sure that we are not. That is not a satisfactory position. It is not even a defensible one. I am astonished that the Financial Secretary has sought to defend it. I had genuinely thought that we were dealing here with a drafting omission. I beg the Financial Secretary to look at this again, and ask himself whether as a matter of fact publishing the information is not in this case the absolutely evident requirement under any rational interpretation of the purposes of the Bill.
      Mr. Timms: The hon. Gentleman asked me what amendment No. 22 meant. The key is that clause 9(1) refers to
      a group of bodies … which appears to the Treasury … to exercise functions of a public nature.
      The point about appearing to the Treasury to exercise functions of a public nature is already in the Bill. What the amendment does is to extend that to include the words:
      information referring wholly or partly to activities which.
      What that allows us to do—which the hon. Gentleman would wish as much as I do, I think—is to include things like the social fund and the national insurance fund, which are not bodies—the existing term used in the clause—but which are covered by
      information referring wholly or partly to activities which
      are of a public nature. That is the extension that the amendment makes. I am not surprised that it is not immediately self-evident.

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      I assure the hon. Gentleman that nobody on the Government Benches is dulled. He said a few moments ago that we might be dulled, but that is certainly not the case.
      Mr. Letwin: The hon. Gentleman's exegesis of amendment No. 22 is very helpful. Could he just add whether it would also enable the Treasury to include things like trading funds within the scope of the Bill?
      Mr. Timms: I think that some trading funds would already be included under the existing wording.
      Amendments Nos. 6 and 7 are to clause 10, whose aim is to allow us to get designated bodies to prepare and have audited consolidation packs-in the same way as subsidiaries of a commercial group prepare them. Those packs facilitate the consolidation process by gathering together accounts information in a standardised format.
      Amendment No. 6, in respect of the consolidation pack for the whole year, would impose an additional requirement on bodies within the scope of whole of Government accounts to publish information that would essentially duplicate the contents of the annual accounts that they already have to publish. It would add an additional and unnecessary requirement that people do again something that they already do.
      The two amendments together would also undermine the proposed consolidation process by removing the Treasury's rights to require the electronic submission of data and to set a deadline for those data to be submitted. Clearly, we want as much of the process as possible to be electronic. The amendments would damage the ability to achieve that.
      Amendment agreed to.

    Clause 10

      OBTAINING INFORMATION
      Amendments made: No. 23, in page 5, line 11, after "body" insert—
      "which falls within section 9(1)'.
      No. 24, in page 5, line 28, at end insert—
      "() A designated body shall comply with any direction of the Treasury as to the person or kind of person to be given responsibility for ensuring compliance with subsections (2) and (3).'.—[Mr. Timms.]

    Clause 11
      SCRUTINY
      Amendment made: No. 25, in page 6, line 19, after "10(2)(c)", insert "or (7)(c)".—[Mr. Timms.]
    Clause 14

      SUMMARISED ACCOUNTS
      Mr. Timms: I beg to move amendment No. 26, in page 8, line 30, at end insert—
      "() Before making an order under subsection (1) the Treasury shall consult the Comptroller and Auditor General.'.
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      The amendment would require the Treasury to consult the CAG before making an order under clause 14, which allows the Treasury to disapply the requirement for particular bodies to be included in the NHS summarised accounts.
      In Committee, the Chairman of the PAC asked us to consider making the requirements of the clause subject at least to consultation with the CAG. We entirely recognise the interest that the CAG would have in any proposal not to apply the requirements of summarised accounts to some NHS bodies, and we tabled the amendment to provide for consultation with him before any such order is made under clause 14. I hope that the House will welcome it.
      Mr. LetwinI am glad to say that the spirit of harmony has reasserted itself. I can see no objection to the amendment, which indeed constitutes a response to complaints made in Committee. I only hope that, following reflection, similar responses will be made to some of the other matters that we have raised.
      Mr. David Davis: I thank the Minister for the amendment, which meets the requirement that I stipulated in Committee, and is entirely satisfactory.
      Amendment agreed to.

    Clause 16

      EXPENDITURE AND ASSISTANCE
      Amendments made: No. 27, in page 8, line 44, leave out "and".
      No. 28, in page 9, leave out lines 1 to 13 and insert—
      "(b) may incur expenditure for the purposes of investing in the body (whether by acquiring assets, securities or rights or otherwise), and
      (c) may provide loans and guarantees and make other kinds of financial provision to or in respect of the body.
      (2) The powers under subsection (1)(b) and (c)—

      (a) may not be exercised in respect of more than one body, and

      (b) may be exercised only in connection with public-private partnership business carried on or to be carried on by the body.'.—[Mr. Timms.]

    Clause 17

      SECTION 16: INTERPRETATION
      Amendments made: No. 29, in page 9, line 34, leave out "public money or".
      No. 30, in page 9, line 34, leave out "(except in section 16(3)(b))".
      No. 31, in page 9, line 35, leave out "public money or".—[Mr. Timms.]

    Clause 22

      EXAMINATIONS BY COMPTROLLER AND AUDITOR GENERAL
      Amendments made: No. 32, in page 10, line 38, leave out "This section has" and insert—
      "Subsections (2) and (3) have'.
      No. 33, in page 10, line 42, at end insert—
      "(3) An examination of accounts carried out by the Comptroller and Auditor General shall be carried out on behalf of the House of Commons.
      (4) Subsection (5) applies where the Comptroller and Auditor General examines and certifies accounts of a body by virtue of an enactment or agreement.
      (5) Section 8(1) shall apply for the purposes of the examination of the body's accounts as it applies for the purposes of the examination of a department's accounts.
      (6) The Treasury may by order provide for the accounts of a body to be audited by the Comptroller and Auditor General.
      (7) An order under subsection (6)—

      (a) may be made in relation to a body only if it appears to the Treasury that the body exercises functions of a public nature or is entirely or substantially funded from public money,

      (b) may make such supplementary or consequential provision (including provision amending an enactment) as the Treasury think expedient,

      (c) shall not be made unless the Treasury have consulted the Comptroller and Auditor General, and

      (d) shall not be made unless a draft of the order has been laid before, and approved by resolution of, each House of Parliament.'.—[Mr. Timms.]

    Clause 27
      COMMENCEMENT
      Amendment made: No. 34, in page 11, line 27, leave out "(4)" and insert "(8)".—[Mr. Timms.]
    Schedule 1
      MINOR AND CONSEQUENTIAL AMENDMENTS
      Amendment made: No. 35, in page 15, line 18, at end insert—

      Food Standards Act 1999 (c. 28)
      .—(1) Schedule 4 to the Food Standards Act 1999 (Food Standards Agency: accounts) shall be amended as follows.
      (2) In paragraph 2(1)—

      (a) for "appropriation accounts" substitute "resource accounts", and

      (b) for "the Exchequer and Audit Departments Act 1866" substitute "the Government Resources and Accounts Act 2000".

      (3) In paragraph 5—

      (a) in sub—paragraph (1) (and in the heading to the paragraph) for "section 5 of the Exchequer and Audit Departments Act 1921" substitute "section 7 of the Government Resources and Accounts Act 2000", and

      (b) in sub—paragraph (3) for "section 5" substitute "section 7".'.—[Mr. Timms.]

      Bill, as amended, to be reported.
      Order for Third Reading read.
      6.27 am
      The Chief Secretary to the Treasury (Mr. Andrew Smith): I beg to move, That the Bill be now read the Third time.
      Let me begin by saying a special thank you to the staff of the House who have been kept here all night. We are very grateful for their service. I also thank parliamentary counsel and all the officials who have worked on the Bill, especially those who have been condemned to sit through some pretty tedious proceedings. I thank all who served
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      on the Standing Committee—and, indeed, the Public Accounts Committee—for their careful consideration, and I say a particular thank you to my hon. Friends the Financial Secretary and the Economic Secretary for their heroic work on this important Bill.
      Lest we forget—as we may have during a good deal of the debate—the Bill concerns resource accounting. It revolutionises the basis on which Government keep their accounts: the move to an accruals basis is a great step forward. However, most of our deliberations today, and indeed in Committee, have concerned the question of audit. I think that I should briefly run through all the areas in which we have made changes in response to points made in Committee, and by the PAC.
      The access clause in the Bill will give the National Audit Office access as of right. We are requiring resource accounts to show a true and fair view. We are requiring a note on the accounts showing the differences between amounts in estimates and outturn. We have introduced a financial limit on Partnerships UK. We have made it clear that the Comptroller and Auditor General does his audits on behalf of the House of Commons. We are giving the CAG a statutory right of access when he is auditing non-departmental public bodies, and providing the means for audit by the CAG to be extended to non-departmental but public bodies which he is currently barred by statute from auditing. Those are not small changes. They are a genuine effort to deal with the concerns that have been expressed in the House and by the PAC in particular.
      What is more, as my hon. Friends have pointed out, I have proposed the review of central Government audit procedures, with the terms of reference set out in my parliamentary answer yesterday. That offers a greater opportunity for Government and Parliament to work together to ensure that we improve on the hotch-potch of arrangements that the Government inherited from the previous Administration.
      I cannot resist saying that it was very rich of Conservative Members to spend so much time on the Bill; much of it was total time wasting. During the bit that was not time wasting, they attacked procedures that were put in place by their Government. Since we came to office, we have been following procedures that honour the accountability that we all owe the House. It comes ill from Conservative Members to plead in aid integrity, accountability and scrutiny by the House, and, by their behaviour, subvert the House's principles and reputation.
      At any rate, we have reached Third Reading. As I say, I have proposed the review, which offers a collaborative way of moving forward on the outstanding issues of concern that have been aired here and in the PAC.
      Mr. David Davis: Will the right hon. Gentleman give way?
      Mr. Smith: Before I give way to the right hon. Gentleman, I greatly welcome his acceptance to serve on the steering committee of the body that will direct the review.
      Mr. Davis: I am minded to do that, but obviously we have to have a discussion first about some of the details; the right hon. Gentleman understands that. I warned earlier that I would raise one question with him on the

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      review because of some misreporting in today's Financial Times. Will he confirm that the review's aim is not to amalgamate the NAO with the Audit Commission?
      Mr. Smith: That is not the aim. I am pleased to give that assurance, although, as the right hon. Gentleman pointed out in the debate on new clause 4, the ways in which the NAO and Audit Commission collaborate are properly a subject for consideration, as they have been in the debates. It is bound to be touched on in the review.
      I underline the fact that it is a good Bill. It brings in resource accounting, which offers a great step forward both in the ability of the Government to conduct their business in the service of the public and in the ability of the House to scrutinise Government. It creates Partnerships UK, which will greatly improve services to the public and give rise to innovative ways in which the private and public sectors can work together to the benefit of us all.
      Perhaps most important, unlike those Conservative Members who were wasting time, the Bill extends Parliament's ability to scrutinise Government spending and performance in ways that the public outside would expect and welcome. I am pleased to commend the Bill to the House.
      6.34 am
      Mr. Letwin: In order not to be churlish, I suppose that I should start by thanking the Chief Secretary to the Treasury for his thanks to those who were on the Committee. I echo his kind words to the staff, to the other people who have been kept up all night and to his officials, who have shown forbearance and worked hard in producing the Bill. I go one step further and welcome, as we have from the start, with our colleagues in the PAC and the Liberal Democrats, the principles that underlie the Bill. I will not indulge in similar point scoring—
      Mr. Andrew Smith: The hon. Gentleman has no points.
      Mr. Letwin: If the Chief Secretary tempts me, I shall, but I will try to avoid the temptation.
      As the Chief Secretary knows, the movement towards resource accounting has been a bipartisan, indeed tripartisan, affair. It began at a time when my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) was Chancellor of the Exchequer, and it has continued apace under the current Government. We all welcome the basic ideas.
      I take those basic ideas to be, first and most importantly, the production for the Government of a straightforward consolidated profit and loss, income and expenditure statement; a balance sheet, critically; and a cash flow statement. They offer the opportunity for Parliament and informed commentators, and perhaps even eventually for a wider part of the electorate, to understand—for the first time, in a form that is comprehensible to the ordinary person, including the ordinary Member of Parliament—roughly what is gained and what is spent by Government. That is an unambiguously good thing, and we are all in favour of it.
      Secondly, one of the cardinal features of resource accounting is that it seeks to establish an asset base and to examine how well that asset base is being used. That,
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      of course, is highly allied to the matter of performance measurements, to which I want to return. However, the principle that the Government should try to identify the assets that they are using on behalf of the taxpayer—and to which the taxpayer has inevitably contributed, either immediately or in a delayed fashion through borrowing—is unambiguously a good thing. It is good that the Government should know how the assets that they control on behalf of the taxpayer are being used, and whether those assets are being well used.
      Finally, I take it that the point of resource accounting is that, allied to the measure of how the money is spent and what money is taken, there should be a measure of whether the money that is spent is achieving the things that it is intended to achieve. That is also a step forward, because—until very recently, but increasingly—it has not on the whole, oddly enough, been the practice for Governments to concern themselves with the simple question of whether the money that is being taken and spent is being spent in any way usefully when compared with the Government's policies.
      We all accept those principles. So far, we are in utter harmony. I regret to say, however, that the harmony ends there. This is not only in principle a good Bill, it is also in practice a tissue of missed opportunities—which I do not think are politically inspired. I do not think that they have anything to do with the politics of the current Government or of any other Government. I freely admit—this is why I say that I shall not trade insults with the Chief Secretary—that the previous Government, and Governments before that, for years and years, have been culpable in just the same way.
      It is tempting for the Executive to try, in a shortsighted fashion, to protect themselves from proper scrutiny. It is tempting for them to try, in a shortsighted fashion, to redefine matters so that they can present them in ways that sound attractive. As I, the hon. Member for Kingston and Surbiton (Mr. Davey) and many Public Accounts Committee members have tried to expose, it is a temptation that, in the long run, benefits the Government no more than it benefits Parliament or the people. In the short term, however, it seems to provide benefits. That disease afflicted not only the previous Government, but other Governments past. It also afflicts the current Government.
      The result of succumbing to the temptation is that, in six or seven fundamental respects, the Bill—because the Government have not accepted amendments and new clauses that they should have accepted—is woefully deficient. There will come a time, I hope not far off, when that deficiency will be sufficiently examined by people in another place who are independent of the Executive, so that the Government have to face the prospect either of accepting the amendments and new clauses—or something very much like them—that they have refused in this place, or of eventually using the Parliament Acts to overrule them.
      I reiterate that I do not believe that it can be in the interests of the Government, let alone the rest of us, that they should use the awesome power of their majority in the House and of the Parliament Acts to try to enforce systems that narrow-mindedly and shortsightedly protect the Executive from proper scrutiny. That is a most remarkable abuse of a parliamentary majority, and I hope that the Government, when it comes to it, will not do it.

      383
      I say that it is an abuse of a parliamentary majority because it is proper that a parliamentary majority should be used to push through a Government's programme when their political opponents disagree with them. That is why a Government are elected, and we have no quarrel with that. We may disagree with the substance, but, as a matter of process, it is entirely proper that a Government should use their overwhelming majority, if they have one, to force through policy measures in which they believe.
      In this case, however, we are talking not about the new Labour Government doing something in which they believe and using their majority to achieve it, but about the Executive using the power of the Whips to make Parliament do something that is the interests of Parliament and of the people who elected it. That is an abuse of Executive power and I shall go on saying so no matter how much merriment it causes on the Treasury Bench. More importantly, my words will be echoed in another place and there will be a fight—oddly enough, a fight between the Executive, represented in this place, and the electorate and Parliament, represented in an unelected place. If the Chief Secretary cannot see that that is an irony, he is a lesser man than I think he is.
      The Bill is lamentably deficient in six or seven respects and constitutes a tissue of missed opportunities. The first such respect is the simplest and the most important. It is an astonishing departure from rationality that a Bill that purports to be—and on the whole intends to be—a framework for normal and proper public sector resource accounts should enable the Treasury to set definitions and standards on a political whim. Ministers have entirely failed at all stages of the Bill to make a powerful or even remotely plausible argument that that is the proper way to proceed. That is why that aspect of the Bill has failed to attract support not only from the official Opposition, as one might expect, but from the Liberal Democrats, from the PAC and, I suspect—and in one or two cases I know—from Labour Members.
      Ministers have been unable to bring forward arguments against the proposition that an independent body should set the definitions. That is not because Ministers lack ingenuity, but because there is no such argument and there can never be one.
      The second lamentable deficiency in the Bill relates to enforcement. The PAC, supported by the Conservatives and the Liberal Democrats, has made repeated attempts to insert provisions for the Comptroller and Auditor General to have a universal scope of audit across the public sector and the quasi-public sector, with the sole and perhaps unfortunate exception of companies. We must give the Government credit for having made some movement. They have tried to accommodate the force of our arguments, but, for some reason that remains mysterious, they have not wholly accommodated them and we are left with a position in which the much trumpeted studies that the Chief Secretary is going to conduct and in which my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) may well participate could result in nothing changing and the CAG remaining unable to audit a large stretch of the public and quasi-public sectors. That is clearly unsatisfactory. There is no good argument for it
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      and none has been put forward. The reason, again,0 is not a lack of ingenuity, but that no good argument can be put forward.
      The third serious deficiency relates to the access of the CAG. I shall not unnecessarily bore the House by repeating the same points, because they apply in exactly the same way as they do to audit.
      The fourth issue is the terrible problem that the performance measurements, which could have been added usefully as part of the resource accounting process, will be added uselessly, because the Treasury will be judge and jury. It is right and proper that the Treasury should be allowed to determine the policies, but it is wrong that it should be allowed to determine the measures of the success of policy. Most importantly, it is unambiguously wrong that it will be able to decide whether the performance measures have been met. It is a pity that, in this short-sighted attempt to protect the Executive against proper scrutiny, a system is being set up that will make it difficult to cure the problem in subsequent legislation. It will be cured in the long run. As the hon. Member for Kingston and Surbiton constantly points out, we have a sterling example in New Zealand, which shows that when people start down this line of thought, they eventually get to the end of it and insist not just on independently verified definitions for accounts, but on independently verified and validated performance measures. We shall get there in the end, but it is a pity that the opportunity in the Bill is being missed.
      Finally, we have the problem that, although the Bill is about resource accounting, another item has been insinuated into it. According to one's taste, it is either distasteful or harmless and, although it bears no particular relation to the Bill, it has driven much of our consideration. I suspect that the Government's helter-skelter attitude to much of the drafting has been driven exclusively by clauses 16 and 17. I do not know the reason for inserting those clauses into the Bill—except, perhaps, a polite sense of irony on the part of the draftsman, who wanted to prove the difficulty of the definitional point by including a body that incorporates practically all the problems to which the rest of the Bill gives rise. Other than that, I can see no particular reason for including the body in the Bill. However, having put it in the Bill, it would have been better to limit it properly.
      It is much to the credit of Treasury Ministers that they have made some major concessions and imposed some limits. It is a pity that some of the limits do not seem to apply fully and some of the statutory protections that were asked for have been turned into administrative assurances.
      We shall have to wait and see. The proof of the pudding will soon be apparent. We shall see whether this body turns into another National Enterprise Board and ends up with huge guarantees, loans and investments, but carries out what are known in the jargon as the downstream activities of the PPP, in which case it will come a cropper and pick losers as every other such body always has, or whether it will be a genuine facilitator and an extension of the Treasury task force, in which case it will cost much less than £400 million in the long run and perhaps do some good. We shall see. The Bill is inadequate in the constraints that it imposes. It may or may not be inadequate in the outcome.

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      Having said all that, there is something going on here which is not a matter of party politics, but is associated with a view of Government that Governments ought not to have. I admit that other Governments—including Conservative ones—have frequently adopted the same view, but that makes it no better. It is not a sufficient retort for the Chief Secretary to say that others have suffered from the same disease. For a person who is engaged in burglary to say that his action is entirely legitimated by the fact that the policeman is an ex-burglar is not a sufficient argument. We have been to jail. We have been well and truly thrown out by the electorate, and the Chief Secretary and his colleagues are now the Executive. Their job is to try to make sure that the great bureaucracy of which they are in charge does not allow or force them to indulge in manoeuvres that protect the Executive from proper scrutiny. That is what is going on throughout the Bill.
      The Bill has been carefully constructed, in all sorts of ways that I have enumerated and to the maximum extent possible that is compatible with the term "resource accounting", to avoid the true transparency that that concept is meant to produce and has brought about in other countries. That is a dreadful attitude to bring to such a measure.
      I understand, in part at least, what will have given rise to that. I mentioned in Committee—as did others—the siren voices that Ministers will have heard, but their duty is not to listen to those voices. They have listened to them and, as a result, we have a Bill that could have been very good, but, in many respects, is very bad. I hope and trust that, in another place where the Executive does not have the power that it has here, the Bill will be much improved. Once it is much improved I hope that we shall be able to support it wholeheartedly, but, in the meanwhile, it gets at most one cheer, and that only half-heartedly.
      6.49 am
      Mr. David Davis: May I start by joining the Chief Secretary and my hon. Friend in thanking the staff of the House, the Clerks of the Committee, all the members who served on the Committee, the Public Accounts Committee, which laboured mightily over its views on this and, most importantly in my view, the staff of the National Audit Office? The Comptroller and Auditor General's staff worked very hard to brief on the Bill and to produce amendments, some of which the Government have accepted either in detail or in spirit. Even where they have not been accepted, the amendments have been valuable in illuminating aspects of the Bill.
      For all my criticism of it, the Bill has merit. If we divide on Third Reading, I will vote in favour of the Bill. I hope that those on the Treasury Bench will forgive me if I spend a little time talking about its demerits. First, however, I should like to put to one side a component of the Bill that also has merit—the aspect that relates to Partnership UK. The drawback of the involvement of Partnership UK in the Bill is that it set a pace that was perhaps faster than would have been comfortable. Had we had more time to consider some of the elements of the Bill that have caused controversy between us, we might have been able to resolve some of the questions before the Bill reached its final stage. Partnership UK had that effect. I understand the reason for the pace; I understand the merit of having Partnership UK has an instrument of Government policy. We all agree on the virtues of the
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      private finance initiative. However, it has sat awkwardly in the Bill and could easily have been the subject of separate legislation. That might have been a better approach, but that is what we had, and we had a deal from that point of view.
      The purpose of the Bill is desirable. The original intent of resource accounting was the better management of Government resources for public service. Nobody can dispute that. The two major elements of that—better measurement and control of the resources, in either costs or capital—have been debated ad nauseam. The missing component of the Bill is the better measurement of performance. We have just had a short but constructive debate on that.
      The missing component, for me, is the weakest aspect of the Bill. It is the largest flaw. Even the Economic Secretary agreed that that was the major component of the motor for reform in the next couple of decades. We must all bear that in mind as we work through subsequent discussions.
      My arguments throughout the Bill's proceedings have been about preserving the rights of Parliament via the Comptroller and Auditor General. Audit, access—for purposes of value for money, propriety and regularity—and validation performance measures are the three areas for argument. Throughout the Bill's progress, we have heard a wide range of reasons against them. I hope that the Minister accepts that I have sought each day to identify those reasons. That may have led to tedious repetition in the debates overnight, but I tried each time to identify the reasons and address them in the amendments before us. We were not successful in getting them accepted, but it was more of a refusal than a rebuttal in most cases. Those arguments may prove more persuasive when the Chief Secretary and I have discussions later on.
      I do not blame the Ministers for this. It is more a problem between Westminster and Whitehall than a problem between parties. Whitehall does not like scrutiny, because it is painful. It is not unusual in that dislike. Most organisations that suffer scrutiny find it difficult from time to time. Also, Whitehall does not understand well the rights of Parliament. That is something to which I have returned time and again in our long discussions on the Bill.
      Two components make the Bill less good than it should be. One is the weakness in the component that will be the motor of the delivery of that massive reform in public service, and the other is honest data. I am talking about Parliament's certainty about honest data, not just the certainty enjoyed by the Government or the Treasury, which has its own view. Honest data—truth—is the diet of a healthy democracy. That has been a missed opportunity when it comes to the Bill.
      During our interesting proceedings, the Chief Secretary offered a review. As I said, I am minded to take part in that. I want to discuss with him the remit, the timetable, the staffing, and so on. I am sure that we shall reach a useful conclusion. I welcome that warmly.
      However, there is a weakness in that plan: in carrying out the review, we may lose the opportunity to introduce primary legislation. The Banquo's ghost in this matter has been the fact that such an opportunity occurs only every few decades. There have not been many opportunities since 1866. For that reason alone, I should have preferred

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      even permissive amendments to be accepted in this place or in the Lords, to ensure that we had the opportunity to deal with such items as parliamentary right of scrutiny, access and validation.
      If, as I suspect will happen in three or six months' time, the Chief Secretary and I come to complete agreement on the proper way for the future of resource accounting and all the associated elements, the conclusion will be impossible to deliver, because there will be no primary legislation on which to hook it. I hope that we do not arrive at that conclusion. I hope that the Chief Secretary will give that matter some thought before the Bill goes to the other place.
      However, if there is a Division on Third Reading, I shall vote for the Bill. Even with its weaknesses, the Bill is still a move forward in the management of good government.
      6.56 am
      Mr. Edward Davey: I echo the thanks given by the Chief Secretary and by the hon. Member for West Dorset (Mr. Letwin) to the staff of the Palace, because we have kept the staff up all night.
      I also thank the staff of the National Audit Office and the CAG, who graciously gave advice to all members of the PAC—often giving detailed answers to our questions. That helped the deliberations of the Committee. I thank my hon. Friend the Member for Newbury (Mr. Rendel), who has worn two hats during the debates on the Bill—as a Liberal Democrat Member and as a member of the PAC.
      The Bill is historic. It is most important. As the right hon. Member for Haltemprice and Howden (Mr. Davis) said, opportunities to debate the Government accounts and to legislate on them occur infrequently. The last time was in 1921 and the time before that was in 1866. We could go into more history—as I did in Committee, when I talked about various predecessors of the CAG. However, I shall not do that now. I emphasise that this is an historic opportunity, although as the hon. Member for West Dorset pointed out, it has been a missed opportunity.
      The Bill is important for two major reasons. First, it will enable better decisions to come from Whitehall—especially decisions on capital spending. Secondly, it will improve democratic accountability—the way that the House scrutinises the Government's budget.
      On the first point, resource accounting and resource budgeting will remove the bias against capital investment that has existed in the public sector for so long. It has been easy to chop capital budgets; the money is saved during the first year and no one seems to notice for a while. Maintenance and basic investment have always suffered.
      That has been true for decades. There have been occasional blips when the issue could no longer be avoided. However, in general, public sector investment has been sub-optimal for many decades because the public finance framework has had an in-built bias against capital expenditure. The Bill will help to remove that.
      It is slightly ironic that, at the same time that we are removing that bias and creating a level playing field for public sector managers to consider capital investment, we are creating a new body—Partnerships UK—and telling
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      the private sector that it can undertake an increasing amount of the public sector's capital investment programme. I am not against the establishment of PUK, but, as I pointed out earlier, I hope that, as there is a decent financial framework in which the public sector can consider capital investment decisions, public sector managers will be given the chance to carry out duties that, in many respects, they have managed well despite having one arm tied behind their back.
      I wish to focus on the second major advantage that I see resulting from resource accounting and budgeting—improved accountability. For more than 80 years, this place has failed the people of Britain by failing to hold the Executive to account for their Departments' budgets, It has failed for three major reasons. First, we have not had the information to be able to debate properly what is going in Whitehall, the spending decisions that have been taken and how taxpayers' money is used. Secondly, even if we had had the information, we do not have the resources, even with departmental Select Committees, to analyse that information properly. We do not have the training—I know that I do not have it—to analyse the information that we have under the cash accounting system and I doubt whether we could analyse it under the new resource accounting system. Thirdly, even if we had the information and understood it, this place does not have the procedures to amend the spending decisions that have been made or to persuade the Government to change their proposals.
      I pointed out on Second Reading that the last time the House rejected a spending proposal of the Government of the day was in 1919. It was an estimate on the royal palaces vote and the House rejected the Government's spending proposal for a bathroom for the then Lord Chancellor. We remember the hue and cry that occurred when the current Lord Chancellor wanted extra money for wallpaper for his apartments. However, despite that hue and cry, the House failed lamentably to do anything. That is just one example of how the Executive have all the power over the Budget. It is time that the imbalance was redressed.
      I am not arguing that we should take away the Crown financial initiative. Clearly, the Executive have to be the main initiator of spending decisions. However, if this place cannot amend those decisions, does not have the information and the resources to enable it to do that and interpret the information, Ministers will never have properly to defend their budgets. They are able to make spending decisions in the full knowledge that they will probably have left their Department by the time that the scrutiny that works in the House—the Public Accounts Committee—gets to them. They are rarely held to account for the way in which they run their departmental budgets. If we could change that, we would end up with much better decisions resulting from the financial process in Whitehall.
      The Chief Secretary rightly said that the Government have listened to many of the complaints made in Committee and have tabled amendments. We welcome that. The Bill is certainly a lot better on Third Reading than it was on Second Reading. However, I share many of the concerns of the hon. Member for West Dorset about definitions of accounting standards and how they should operate, performance measures and National Audit Office powers. I hope that the other place will address the issues and that Ministers will take the time to reflect and see whether they can offer a little bit more. If they cannot

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      give too much in the other place, I hope that the review process that the Chief Secretary has set up will result in changes.
      Possibly, Ministers could introduce a Bill to the House in a year or two. That could address thoroughly all the points that we were not able to deal with in this Bill's passage through the House.
      Mr. David Davis: The Chief Secretary should give that promise.
      Mr. Davey: The right hon. Gentleman suggests that the Chief Secretary should give that promise. That is wishful thinking. However, if he were prepared to do so, we would welcome that.
      It is great that we are going to have a new system of accounts that will be used for making key decisions, particularly when the comprehensive spending review is announced later this year. Ministers must not let the process finish there but should share its development and future with Parliament. The Government ought to consider training sessions for hon. Members so that we will understand the new estimates. Members of various committees have been deluged with long papers from different Departments and agencies, but hands-on training would be helpful.
      The Minister should be looking also at providing extra resources for departments and Select Committees, so that they can analyse accounts and estimates to allow us to ask the right questions.
      I do not know whether the House will divide on the motion. My hon. Friend the Member for Newbury and I share the view of the right hon. Member for Haltemprice and Howden that, even though the Bill is far from perfect, we should not place any obstacles in the way of implementing resource accounting and budgeting. If the House does divide, we will vote for Third Reading. That does not mean that our colleagues in the other place will not seek to amend radically the Bill that we send them.
      7.6 am
      Mr. Swayne: I will not detain the House long because I had my say earlier in the proceedings.
      The Bill's weakness was summed up admirably by the Financial Secretary when she rejected our proposals for performance accounting in new clause 4. She made a revealing comment—that it might be misleading to release performance accounting figures that were tied to an annual reporting cycle and that it could be more appropriate for the Government to give the House more up-to-date information. Surely that is for the scrutineers to decide. It is for the House to interpret the most appropriate information, not for the Executive to choose and release information to the scrutineers.
      The missed opportunity and weakness of the Bill is that the Executive will choose what it will report and reveal to those who would scrutinise it. The Treasury will have the whip hand in what it reports and standards of reporting. That cannot be good for democracy.
      7.8 am
      Mr. Rendel: I welcome the Bill for the most part. It will undoubtedly improve the way in which government
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      looks after its accounts. It has been fascinating to participate in the Second and Third Reading debates and in Committee. I have learned a lot about the Public Accounts Committee, even though I am a member, and about the powers and rights of the CAG and National Audit Office.
      Sadly, I have also learned how easy it is for any government to fall prey to its mandarins. I suspect that has happened during the passage of the Bill. The measure is much better than when it first came before us, but I feel sad that we have not made further progress in obvious ways towards making better use of Parliament's auditor—the Comptroller and Auditor General.
      I am sad that a basically good Bill has been spoiled in that way and that we failed to seize the opportunities that were open to us. I am sad that the Government failed to accept amendments, particularly those tabled by the Public Accounts Committee, despite being comprehensively beaten in argument—particularly in Committee—and despite every effort being made to allow them to save face. Neither of the two Opposition parties made any effort to make party political capital from the Bill and at every stage we were careful to give the Government every possibility of meeting our requirements for strengthening the hand of the CAG and every opportunity to table their own amendments, which could have done the things that to our mind were obviously ripe for doing. I am very sorry that Ministers did not see fit to seize that opportunity, which they so easily could have done.
      All praise is due to Labour members of the PAC who, almost to a man and woman, have been stalwart defenders of Parliament and the Committee. They rightly chose unanimously to sign the two reports on the Bill that we published, and I give them all credit for that. Doing something that one's party does not want one to do is never easy, but they correctly upheld the rights of Parliament in this matter. I am only sorry that more Members from the governing party did not take the same view in the votes as those members of the PAC.
      As I said during the night, this battle is between the Executive and Parliament, not the Government and the Opposition, and I am sorry that the Executive have come out on top. That represents a failing of the workings of Parliament and I hope that we will not see it again.
      7.12 am
      Mr. Clifton"Brown: I echo the comments of others as the debate has, on the whole, been non-partisan and non-political during the few hours in which I have been in the Chamber tonight. Although most of those present agree that this is a good Bill, opportunities have been wasted and I hope that the Government will at least consider some of those when it reaches the other place. There is no doubt that a move from cash accounting to resource and appropriations accounting represents a step change in the way that public money is accounted for and scrutinised by Parliament. The statement of liabilities—including contingent liabilities—and, in particular, the statement and register of assets will make it much easier to see where public funds are being applied.
      I welcome the register of assets, which took a huge amount of work to compile, although I suspect that it is a long way from perfect. As my hon. Friend the Member

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      for West Dorset (Mr. Letwin) made clear, a large number of assets have no proper value placed on them at all and it is essential that we consider every single asset that the Government utilise to make sure that we cannot utilise it better to achieve a return. That is an example of how resource accounting will help Parliament to uncover the workings—or rather the non-workings—of government.
      We could have improved the system still further. It is a pity that we did not give the Comptroller and Auditor General greater access to any body in which public money is involved and glaring gaps remain even though he has access to about three quarters of all Government non-departmental public bodies and other service sector companies. Paragraph 42 of the fourth report of the Public Accounts Committee makes it clear that there is no reason at all why the CAG should not have at least as much access as the Departments themselves and that a great many resources are wasted in negotiating access. I accept that access is often freely granted, but the time taken in negotiating it is completely wasted.
      I remind the House that it was the Camelot affair that caused the Government to change the law—I praise them for that—to give access to Camelot so that the CAG and the Public Accounts Committee could scrutinise the better workings of the lottery. That is an example of the Government listening to the Public Accounts Commission, the Public Accounts Committee and the CAG, and being prepared to change the law. I cannot understand why they were prepared to change the law in that case, but not in other significant areas of Government spending.
      Those areas include 200 departmental private companies, covering an annual spend of £2 billion. Some £4 billion of public pay processing by the Government is not scrutinised, and £5.2 billion of training opportunities in the new deal initiative are not covered. There is no good logical reason why those areas should not be properly scrutinised by the CAG, the NAO and the Public Accounts Committee. As I have already stated, a big opportunity has been missed.
      Mr. Deputy Speaker (Mr. Michael J. Martin): Order. May I say to the hon. Gentleman that on Third Reading we should be discussing what is in the Bill, and not what has failed to go into it.
      Mr. Clifton-Brown: I am grateful, Mr. Deputy Speaker.
      The Bill alludes to performance targets, and we could have enlarged on those. Perhaps another place will need to consider that issue because, although it is not in the Bill, it may well have been put into the Bill by the time it becomes law, which is why I make a plea to the Government at this late stage.
      As I made clear in my earlier speech, the CAG has already built up great expertise in the value-for-money investigations that he already performs. He produces 160 valuable reports each year, and the Government and everybody else benefit from them hugely because they expose shortcomings. The CAG has already built up a great database of international comparators that could be used by each Department to produce performance indicators, such as output and validation measures.
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      My hon. Friend the Member for West Dorset made it clear that a Conservative Government would introduce those performance indicators. I believe that once the Government have had proper discussions with the Chairman of the Public Accounts Committee—my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis)—and others, they will want to include those indicators in the Bill.
      There is worldwide recognition of the expertise of the CAG and the National Audit Office, and it is folly not to use it. In avenues of Government and in Whitehall there seems to be a suspicion of the NAO, which is totally misplaced and unfounded. If we have a body of expertise within the parliamentary sphere, we should make best use of it.
      If the Government were to introduce those performance indicators, they could draw on the NAO's expertise. After all, one of the most valuable parts of being audited by the CAG is often the discussions that take place during that process. We could learn from that expertise and produce performance indicators. I have no doubt that those indicators would be refined over time so that they became more effective.
      When we were in government, the Department of the Environment used to produce a valuable annual report, showing in tabulated form not only how well the previous year's performance indicators had been met, but the indicators for the next year. For some reason the Department of the Environment decided—perhaps when it became the Department of the Environment, Transport and the Regions—that it did not like to be held accountable in that way and stopped producing the report.
      We, the Government and the public could all benefit from the model. Setting performance indicators would be a further step change in the way in which public money is accounted for and used. I leave the House with those thoughts.
      7.21 am
      Mr. Tim Collins: It is axiomatic that the central purpose of this place is to hold the Executive to account, principally on public expenditure. Therefore, as has been widely said in the debate, the Bill is important. I agree with my hon. Friends that, on balance, it improves matters rather than making them worse.
      However, I wonder whether, even with the Bill, we have set the highest standards that should apply. The standards of accounting in the public sector should be clearly and demonstrably higher than those applying in the private sector. If we deal with private sector companies, we almost always do so by choice, as a voluntary act, whereas when we deal with public expenditure, we deal with moneys that are gathered by compulsion, with the perceived threat that refusal to pay for that public expenditure could lead to prison or to the full sanction of the law, and ultimately force, being deployed.
      I have some concerns that even though the Bill has been improved during its passage through the House, it falls short of the highest standards that we might expect of it.
      I welcome the fact that, in his speech on Third Reading, the Chief Secretary referred to his intention to revolutionise the arrangements that he had inherited and

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      which date back to the time to Gladstone. This Administration, with Lord Jenkins as their ideological mentor, usually favour perpetuating anything to do with the regime of Mr. Gladstone.
      We have seen that across the board the Government are following the Gladstonian example, slashing defence expenditure, undermining the integrity of the United Kingdom, pursuing a botched foreign policy, and radicalising for the sake of it. I welcome anything that results in moving away from Gladstonian principles. [Laughter.]
      I notice that the Liberal Democrats laugh at that. I note that the example given by the hon. Member for Kingston and Surbiton (Mr. Davey) of the last time that the House rebelled against outrageous Government expenditure occurred the last time that we had a Liberal Prime Minister. Perhaps that is a coincidence, perhaps not.
      Mr. Edward Davey: May I point out to the hon. Gentleman that the last two occasions on which the House reformed the public accounts were under a Liberal Prime Minister as well?
      Mr. Collins: That may well be true. The question is what principles underlay the reforms. Perhaps we should not go back into the history of that because, as the hon. Gentleman knows, that Liberal Prime Minister produced another constitutional innovation. When he was replaced by a Conservative Prime Minister, the Conservative Prime Minister had to introduce emergency legislation to prevent the sale of honours, which was the practice of that Liberal Prime Minister.
      I was interested in an earlier remark by the hon. Gentleman. He said that he hoped that one of the changes that would come about as a result of the Bill would be that it would cease to be as easy as it has been to cut public expenditure. He suggested that that was particularly relevant to capital spending, and said that it had been too easy in the past to cut capital expenditure.
      Given the history of the past 80 or 90 years, the progression of public expenditure and the ever-greater share of national income consumed by the public sector, many of us, at least on the Conservative Benches, would question whether it has indeed been too easy to cut public spending.
      If the system moves towards a better basis for deciding on the allocation of resources in the national economy, I hope that that will not be on the presumption that more should be spent, rather than that the amount spent should be spent more efficiently. Ideally, less should be spent and more benefit should be derived from it, which is what the private sector is expected to produce day in, day out.
      My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) made a series of interesting contributions, which fulfilled the PAC's remit. I share his view that the PAC has done its duty to the House and provided excellent recommendations and reports on a non-partisan, cross-party basis. He pointed out that one of the tests of the measure's effectiveness was whether we genuinely moved towards evidence-based policy. It is important to seize the opportunities that the Bill presents. The Chief Secretary is keen on that, and I hope that he will be able to do that, not least in the review that he recently announced.
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      I suspect that the Government will receive a mandate later in our proceedings. They must recognise that it is a mandate for a rolling review process. They will not receive a mandate on the basis that the measure is perfect as it stands. I hope that a rolling review process will be established.
      I am worried that some of the characteristics of the usual process of modernisation are inherent in the Bill. In that, perhaps I am less generous than my hon. Friend the Member for West Dorset (Mr. Letwin). The Government often use the word modernisation; I am sure that they would use it to describe the purpose of the Bill. Modernisation often becomes a cover for a reduction in Government accountability for their actions to the House and the electorate. Several contributions have made clear the way in which the Bill may undermine the Executive's responsibility to the House. The Public Accounts Committee said that it was worried about that.
      I accept that the Bill has changed, and the Chief Secretary pointed out that several concessions had been made. However, the December report of the Public Accounts Committee states that the Committee was worried that the Bill might lead to
      a reduction in the effectiveness of the House's arrangements for controlling public expenditure and for holding government departments accountable for Supply.
      We should be extremely worried about that.
      We should also be worried about another constant feature of the modernisation process: the reduction in the powers of the House. During the debate, we have heard examples of the way in which the powers of the House might, at most, be left as they were, but might also be undermined. The list of concessions that the Chief Secretary invited the House to welcome included a statement in the Bill that the Comptroller and Auditor General acts on behalf of the House. That is not a concession; it ought to be an acknowledgement of principles that were always important. I worry if the Chief Secretary believes that we should be grateful for that.
      The Bill might constitute a further example of the way in which systems that had the merit of tradition and of having been proved in practice are replaced by some form of experimentation. I share the anxieties of the Public Accounts Committee about whether the new system will be ready to operate when the old system is phased out. The worst circumstances for starting resource accounting are those in which Departments are not ready to begin. The number of Departments that were clearly not ready for the new system at the end of last year is worrying. Several of the accounts of Departments that tried to move on to the new system had to be qualified. That does not inspire confidence.
      The final example of modernisation and the way in which it might apply to the Bill is that, all too often, one finds an agenda behind Bills to increase the power at the centre of Government. Many hon. Members have mentioned the balance between the Executive and the legislature. However, within the Executive, we are moving steadily away from the principle of the Prime Minister being primus inter pares towards Downing street being all powerful. The Bill refers constantly to the Treasury, but we all know who the First Lord of the Treasury is.

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      A number of us would be concerned about anything that gives the Treasury, broadly interpreted, immense power to be judge and jury in its own cause and able to decide, for example, whether performance targets have been met, or whether progress is being made towards them. In an era in which there are vast strategic communications units at No. 10 Downing street, an era of spin, we would feel anxiety about whether the legislation properly balances the structures of our government. As I have said, the balance must be within the branches of government as well as between them.
      It is a reasonably safe prediction that before noon the Government will have their way on this legislation. Before that happens, we need to put on record as a House that we welcome the legislation, to the extent that we do, simply on the basis that we believe that anything that produces greater clarification for our constituents must be a good thing; that we all welcome anything that makes the Executive feel in practice, if not in theory, that they need to account for themselves properly to the legislature; and that they are being given a very qualified mandate, partly on the basis of the concessions they have already made and partly on the basis of the review that they have announced.
      But the Government should not believe that the House will be giving them today carte blanche to do whatever they like or in any sense a blank cheque. The passage of the Bill is very much on the basis of legislation that has to be structured in a way that strengthens Parliament and does not undermine it. If that is the effect of the legislation, it will be a very welcome departure from the history of this Administration for most of the last three years, which, sadly, has been to shift very much in the opposite direction with regard to the powers and privileges of this place.
      7.32 am
      Mr. David Prior: I do not have much to add to the comments of my hon. Friend the Member for West Dorset (Mr. Letwin), but I think it is worth mentioning that I am probably one of the very few people in the House, certainly on this side, who have worked for a nationalised industry and have experienced the problems of cash limits and cash accounting at first hand.
      The failure to distinguish between revenue and capital spending has dogged Governments for many years and encouraged them in many wrong decisions. It is extraordinary, though, that in 2000 we should be debating in this Chamber the merits of having profit and loss accounts, balance sheets and a proper cash flow statement for the public accounts.
      I would add in passing that we should never place too much confidence in any accounting system. All that a good accounting system does over a bad accounting system is to reduce the amount of detective work required to establish what is going on.
      I wish to mention just three aspects of the Bill. First, no accounting system, however good, is a replacement for good government. Difficult decisions will have to be made in the future, as they were in the past. The accounting system may be an aid to good government, but it will not make difficult decisions any easier to make,
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      particularly with the pressures that Government have on revenue and current spending over long-term capital spending.
      In an earlier debate, my hon. Friend talked about the water industry and the way in which it was allowed to run down over many years. It ran down not because we did not have an understanding of depreciation, but simply because Governments of both colours felt that pressure on current spending was that much greater than the longer-term requirements of the water industry.
      Secondly, if the accounts are to have the confidence of the public, and of the House, they must be put together in accordance with independent standards. There is genuine concern throughout the House over the role of the Treasury. Although sometimes poachers make good gamekeepers, one cannot be a poacher and a gamekeeper at the same time. The dead hand of the Treasury throughout the Bill is an issue of serious concern.
      My main, and third, concern relates to an issue mentioned by my hon. Friend the Member for West Dorset. The ultimate test of the Bill is whether, in the long run, the House has greater control over the Executive and more power to scrutinise it. It is, I think, no coincidence that the growth of the Executive has been mirrored by the decline of public confidence in the whole parliamentary system. Until we can regain power over the Executive, the democratic traditions of this country will be permanently weakened. The Bill gave us an opportunity to do that, but I am afraid that it was missed. Although I broadly share the view of my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) that there is enough good in the Bill for it to be passed, that opportunity was wasted.
      7.35 am
      Mr. Howard Flight: I think that we have all taken stock of the Bill, and realise that it is about very much more than resource accounting.
      I want to stress three points. First, as has been clearly demonstrated, the Bill is about Parliament's holding the Executive to account in regard to public expenditure. Conservative Members feel that the Government may not have best served their interests by not taking more notice of the PAC's proposals, and that it is a pity that they did not do so. They were, I think, beaten in argument on nearly all the key points—and, as others have pointed out, this is not a party political matter.
      I echo the tribute paid by the hon. Member for Newbury (Mr. Rendel) to the Labour Members on the PAC, who have valiantly supported proposals to uphold the rights of Parliament. This is a battle between the Executive and Parliament, and, after only two and three quarter years in power, the Government seem to us to have fallen into the hands of the mandarins.
      Secondly, the debate has confirmed the need for an independent body to prescribe accounting principles. That is particularly necessary, given the introduction of resource accounting. Indeed, it is questionable whether the move to resource accounting will be correct or sustainable without its inclusion.
      Thirdly—many will have forgotten this; we dealt with it so long ago—the Bill includes provisions for the establishment of Partnerships UK. We feel that there is still an important need—again, this is very much in the

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      Government's interests—to clarify the territory and role of Partnerships UK. Will it merely continue the useful role played by the Treasury team to date, or will it develop a major role as an equity investor with significant potential conflicts of interest?
      The change to resource accounting is welcomed in principle by virtually the whole House. As we are all aware, it has been planned for some five or six years, but there is a long way to go. There are a large number of assets not included in the register of assets, and major areas of expenditure not included and not to be scrutinised. We hope that the negotiations between the Government and the PAC will improve the machinery for proper accountability to Parliament, and that the Government will take on board the need for the CAG to have proper access and to be empowered to audit in appropriate circumstances.
      We will not vote against the Bill, but there remains much to be put right in the other place, where the ultimate test will be whether parliamentary control and scrutiny of the Executive is improved or reduced.
      7.40 am
      Miss Melanie Johnson: At 7.40 in the morning, I will be extremely brief, not least because, as my right hon. Friend the Chief Secretary to the Treasury has pointed out, the Opposition have kept us from our beds for 16 hours during a long debate of dubious quality. Much of it has been of dubious quality, although there were exceptions. [Interruption.] Some Opposition Members who are making noises have not been here all night. Indeed, they have not been here at all, so they had better be quiet. My right hon. Friend has pointed out to me that my remarks are all that stand between Members going home to their beds or to their business for the day, so I will be brief.
      It is a privilege to bring to a close the House's deliberations on the Bill. I pay tribute, as my right hon. Friend has already generously done, to all those who have contributed to the Bill. I join him in his thanks. I would be the first to acknowledge that the scrutiny of the Bill has improved it, although tonight is not a good example. However, in general, the scrutiny has improved it. It was improved in the Standing Committee in particular.
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      The Bill's purpose is important. It is to put on a footing the way in which we use our capital, so that we can see how it is used and can account for it properly, as the private sector has done for probably hundreds of years—certainly for more than 100 years. It is important that we have made the change.
      It is important to bring Partnerships UK into being, which will enable us to modernise our key public services and to ensure that, in the long term, the type of deal-making skills that are available temporarily only in the Treasury task force will be available to the public sector.
      As several hon. Members have mentioned this evening and on earlier occasions—I mention in particular the right hon. Member for Haltemprice and Howden (Mr. Davis) and the hon. Member for Kingston and Surbiton (Mr. Davey)—the Bill is historic and heralds a revolution in many ways. They have both welcomed it in their own way and supported it.
      It is important to note that the right hon. Gentleman, who is Chairman of the PAC, emphasised that he would vote for the Bill, were it to be put to a vote. He believes that it has merit and heralds a revolution. He has said that he is minded to join the committee that the Chief Secretary is setting up to review the audit and accountability issues on a wider basis.
      What is probably most important about the Bill is that it will cause us to look properly again at the way we use public money in relation to public services, and at efficient and effective provision of those public services. It will cause us to look harder at the performance indicators that we use, at the way in which we assess whether we are making good use of that money, and at the way in which we decide what is important in achieving the outcomes that we set ourselves and in building policy making on evidence.
      All those considerations are important. They have merited much of the discussion that we have given them. I am grateful to all Members who have contributed positively to those conclusions.
      I will not detain anyone any further. I have to be elsewhere in a very short time. I commend the Bill to the House.
      Question put and agreed to.
      Bill accordingly read the Third time, and passed.

Scotch Whisky
Motion made, and Question proposed, That this House do now adjourn.—[Mrs. McGuire.]
7.44 am
Mr. Desmond Browne: I am grateful—I think that hon. Members will understand how grateful I am now—for the opportunity to initiate this debate. As I stand here, I am reminded of the often told after-dinner joke about the hon. Member who dreamt that he was delivering a speech to the House and woke up to discover that he was.
I should declare my interest in the subject, as the treasurer of the all-party Scotch whisky group; I have a still greater interest in the debate as the Member of Parliament for Kilmarnock and Loudoun. In 1820, John Walker opened a shop in Kilmarnock, starting a wine and spirits business that laid the foundations for the highly successful brand that bears his name: Johnnie Walker—the best selling blended whisky in the world. The business grew throughout the 19th century, until, in 1909, Tom Browne drew the striding man. Although recently, for marketing reasons, he has changed direction, the Johnnie Walker striding man has bestrode the world since then as the symbol of a truly great global industry.
By 1920, Johnnie Walker was sold in more than 120 countries. In these days of globalisation, what commodity other than Scotch whisky can claim to be in every bar or cafe and in almost every hotel world wide? All of that has been has been achieved by people from a small country perched on the north-west shoulder of Europe, with a population of about 5 million people.
In 1998, the Fraser of Allander Institute estimated that a total of £3.5 billion of Scottish output was generated annually by the Scotch whisky industry. Based on 1997 data, the Scotch whisky industry directly employs 12.000 people in Scotland and supports another 28,500 in the wider community. The fact is that 10.4 per cent. of Scottish agricultural jobs and 4 per cent. of all manufacturing jobs depend on Scotch whisky, and that 5 per cent. of the total Scottish work force—or one job in every 54 in Scotland—depends on the whisky industry. Across the United Kingdom, a total of 60,000 people are dependent on the whisky industry. Moreover, the whisky industry is a Government-friendly one, as about £1 billion in taxes is contributed each year by it to the Exchequer.
In my own constituency of Kilmarnock and Loudoun, the United Distillers and Vintners packaging plant, in Hill Street, Kilmarnock, and the distribution centre, at Hurlford, provide employment to more than 620 people. When I visited the Kilmarnock plant yesterday—with my colleague Margaret Jamieson, who is the Member of the Scottish Parliament representing Kilmarnock and Loudoun—we saw premium Scotch whisky being bottled in bottles of every shape and size, for every corner of the globe. The Kilmarnock plant—those 620 people—will produce 7 million cases of premium Scotch whisky this year alone.
All that has been achieved and sustained despite severe economic pressure and major recent adverse circumstances, such as the abolition of duty free sales for internal European Union traveland the large reduction in exports to Asia, in 1998, following the Asian slump. Although there has been some recovery—in 1999—
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in Asia, there has been a corresponding sharp decrease in export volume to Latin America. Other adverse circumstances include structural discrimination in the tax system and the application of trade barriers in many global markets, including across the European Union.
One of the few compensations that the industry enjoys is European Union export refunds for cereals, but that is now clearly under threat. The export rebate or refund schemes operated by the EU are payable on basic agricultural products such as eggs, rice, milk, sugar and cereals when they are contained in processed products such as whisky and beer, chemicals and pharmaceuticals, and chocolates and biscuits.
The purpose of the refunds is to provide compensation on non-EU sales for the higher cost of using EU-sourced raw materials that is a consequence of the price support mechanism under the common agricultural policy. Although total exports of Scotch whisky represent about £2 billion per annum, 60 per cent. of that total is exported beyond the European Union and attracts the potential of that refund. For the Scotch whisky industry, refunds are essential to assist companies to maintain competitiveness in their critical non-European Union markets, where they compete against directly comparable products such as American whiskey and pale Japanese imitations.
The importance of the assistance was acknowledged at the time of the UK and Irish accession to the EEC in 1972, when it was recognised that it was necessary to ensure supplies of European Community raw materials to the spirits industry at a fair and reasonable price.
That recognition was reflected in protocol 19 of the UK and Irish accession treaties, which requires the Council to decide the necessary measurements to facilitate
the use of community cereals in the manufacture of spirituous beverages obtained from cereals, and in particular of whisky, exported to third countries.
That protocol, which also serves the interests of our farmers, is still relevant today and provides for this country and for the Irish a unique basis for the full maintenance of export refunds for the spirits industry. Importantly, it provides a unique basis for refunds on any of the EU cereals used in whisky production, which includes maize and wheat as well as barley.
Over many years, the European Community has attempted to remove or reduce distillers' rights to obtain refunds. The current attack on the distillers' rights has its roots in the settlement of the Uruguay round of the world trade talks in 1995. There, the EU agreed to expenditure ceilings for export refunds. That agreement, coupled with decisions on the EU budget taken at the Berlin summit in March, generated pressures on the budgeted provision for processed products export refunds late in 1999. The European Commission estimated that demand for refunds was likely to outstrip the agreed budget. For the months of November and December 1999, the Commission proposed flat-rate cuts of 4.5 per cent. to the non-annexe 1 refund rates for dairy products, cereals and sugar.
The UK and other member states criticised that decision. However, despite the lack of support from a single member state, the Commission promulgated and applied the regulations that imposed the flat-rate cut across the non-annexe 1 refund regime.
A flat-rate cut was only a short-term strategy. In November, the Commission issued a communication to the Council of Agriculture Ministers on the longer-term

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strategy. It controversially recommended abolishing or reducing refunds for some products, such as Scotch whisky, without any change in the refunds available to other sectors. The Commission has once again specifically targeted spirits for reduction.
The Agriculture Council is due to consider the proposals in March. That is why the debate is timeous. If the paper is agreed, the detailed rate of reduction in the rebates will probably be set thereafter by working groups. Each member state has a representative in each working group, but decisions are taken on the basis of the qualified majority. If the paper is agreed, it may become impossible to prevent the loss of cereal refunds.
It is important that, in March, the Government do not nod through a general, undetailed proposal without knowing the potential detailed impact on distillers. While the flat-rate 4.5 per cent. across-the-board reduction will probably be removed if the working group follows the proposal set out in the Commission's November communication, cereal refunds for whisky may be singled out for cuts that do not apply to other sectors. That is why the proposals must be challenged at the March Agriculture Council. Any reductions now could be the thin end of the wedge for the industry.
Cereal costs are a significant element of the cost of production of Scotch whisky. The industry estimates that for new make grain whisky, cereal raw material costs, after the export refund is paid, are about 60 to 70 per cent. of primary production costs: for malt whisky, they are about 50 to 55 per cent.
The impact of any reduction in refunds is illustrated by the differences between EU and world maize prices. In April 1999, EU prices were 47 per cent. above world prices, and the premium in November 1999 was 58 per cent. World prices fell by 10 per cent. over the period. However, the net EU price for Scottish distillers, even with their export refunds, rose by 7.2 per cent. A broadly similar picture applies to wheat and barley.
Scotch whisky will suffer an increasing competitive disadvantage if, as the Commission proposes, spirit refunds are reduced further or eliminated altogether, unless efforts are renewed to reform the CAP and reduce EU cereal prices to world levels; or there is a full and unfettered access to world supplies; or an alternative form of compensation is devised for the gap between EU and world raw material prices.
It is unfair and anti-economic to expect the industry to carry the can for the failure of the Community to agree adequate reforms to the CAP in Agenda 2000, which would have reduced the need for export refunds by aligning Community prices more closely with world market prices.
The industry also questions the robustness of the Commission's economic analysis, the choice of product sectors for refund reduction or elimination and the principle of targeting itself.
Reportedly, there is a compensatory measure. The package of measures proposed by the Commission includes a proposal for more flexible increased access to inward processing relief, a relief that enables manufacturers to import basic commodities tariff free for incorporation and re-export in processed form. Distillers with longer memories recall that 1PR and applications made under it were disagreeably complicated and bureaucratic.
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The view of the industry is that IPR does not even begin to represent a solution if the process is not made smooth and easy for processors, and frankly, that is highly unlikely.
IPR as an alternative compensatory mechanism has, however, the significant disadvantage that it will drive manufacturers outside the Community where they can obtain their raw materials at world market prices with obvious consequences for jobs and for the market in agricultural commodities within the EU. That cannot be a long-term solution. The only real solution is to dismantle EU intervention pricing and to allow free market pricing in raw materials such as cereals within the EU, but that can be done only when there is reform of the CAP price structure.
In the meantime, the Commission's proposal to target spirits appears to be contrary to the UK's accession treaty, and discriminatory. As the issue is expected to come before the March Agricultural Council this debate is timely.
I merely ask my hon. Friend to assure the House—and the industry, which will pay attention to this debate—that the strongest possible defence of the industry's vital contribution to the economy will be mounted.
7.58 am
Mr. John McFall: I thank my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) and the Minister for allowing me to participate in the debate. There are two large whisky companies in my constituency—Allied Distillers and J&B. Sadly, J&B is closing down as a result of the merger between Grand Metropolitan and Guinness. There has been a loyal and committed work force there for 30 years, however, and record production is still being hammered out week in, week out, and will continue to be until the closure in a few months' time.
The industry and its work force are also extremely good for the economy. Allied Distillers has consolidated its position in my constituency and looks forward to a good future in Dumbarton. It is also a good future for the country. As my hon. Friend said, there are sales worth £2 billion. For every job that is created in the whisky industry, another three or four are created outside the industry. Some 50,000 to 60,000 jobs in Scotland are being supported by the whisky industry and every worker in the industry contributes £80,000 to the Treasury as a result of the duty that is paid on the product. So it is a precious industry and I ask the Minister to be vigilant about issues that affect it such as export refunds. It is felt that the Scotch whisky industry is being singled out. It cannot afford to be singled out because of the workers and their commitment to the industry and because of the cash flow that it produces for the Government.
I know that the Government have listened carefully in the past few years. I congratulate them on the duty freezes, but, in the long term, there must be a structure on adequate duty levels. I look forward, along with my colleagues and Ministers, to ensuring that in the long term there is a level playing field for the Scotch whisky industry, and that it goes from strength to strength.
8 am
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): May I begin by congratulating my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) on his good fortune in securing this debate? When I first saw that he had done so, I felt sorry that such an important debate was to take place last thing at night, and that it would have been much better to have a daytime debate. However, I did not realise that my wish would be fulfilled in such exhausting circumstances.
I also congratulate my hon. Friend on his choice of subject. As he proved in his speech, this is an important subject. He said, quite rightly, that it is a timely debate, given what is happening in the European Union Agriculture Council and the fact that this item will be discussed at the March meeting.
The points made by my hon. Friend were pertinent and salient. He demonstrated obvious concern for his constituents as well as knowledge of the industry and its importance to Scotland and the United Kingdom as a whole.
I also appreciate the concern of my hon. Friend the Member for Dumbarton (Mr. McFall), who, understandably, spoke with feeling about the industry in his constituency. Other hon. Friends with an interest in the subject are here, even after the all-night debate. My hon. Friends the Members for Dumfries (Mr. Brown), for Cunninghame, South (Mr. Donohoe), for Hamilton, South (Mr. Tynan) and for Stirling (Mrs. McGuire) are all concerned about the whisky industry and its economic importance.
The debate might seem technical if we talk in terms of export refunds for non-annexe 1 products under the common agricultural policy. It can sound like a minor subject, but what is at stake economically is very important. The whisky industry is important to the economy of Scotland and the United Kingdom. It is also important as a direct employer and in providing related jobs.
The industry is also a very valuable export earner for the United Kingdom as a whole. We are talking about exports worth £2 billion annually, of which about £1.2 billion is exported outside the European Union. Those are all reasons why the Government are determined to achieve the best possible outcome for the industry and our other industries that are affected by export refunds.
In many ways, this is not a new issue in European or agricultural politics. When I was a member of the Agriculture Committee in the European Parliament, we were frequently and understandably lobbied by the Scotch whisky industry and others that benefited from and needed export refunds under the common agricultural policy. What my hon. Friend the Member for Kilmarnock and Loudoun has described this morning is the latest twist in a familiar tale. As he pointed out, the whisky export refund is one of a series of export refunds paid under Community rules to compensate exporters for the higher prices of agricultural raw materials supported under the common agricultural policy.
Other industries also receive such export support—other spirit drinks industries, including gin and vodka, but also, importantly, processed food and drink, confectionery, cakes, biscuits and so on, as well as pharmaceuticals. Many interests need to be taken into account.
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My hon. Friend pointed out the reasons for the latest form of pressure on such export refunds. He correctly explained that under World Trade Organisation agreements, the EU is committed and obliged to make progressive reductions. That applies to export refunds both for agricultural raw materials, the annexe 1 products, and for processed agricultural products—the non-annexe 1 products on which the debate has focused.
Specific reductions now need to be found in time for the EU's next budget year, beginning in October. At that time, the budget ceiling for non-annexe 1 products will be 415 million euro; that is almost 200 million euro less than the projected expenditure for the current year. In order to keep this year's expenditure within the budgetary ceiling set by the Berlin European Council in March 1999, since last December a cut of 4.5 per cent. has already been imposed by the Commission on all non-annexe 1 export refunds.
As I am sure my hon. Friend and colleagues are aware, the Council of Ministers was not happy with the Commission's approach. It made clear its view that, in future, any adjustments to export refunds that were necessary to meet WTO and budgetary commitments should be governed by a strategic and targeted approach rather than across-the-board cuts in refunds. The Council pressed for speedy progress of the Commission's communication on that issue in time for Ministers to give it further consideration at the forthcoming Agriculture Council.
The amount of targeting and the number of across-the-board measures remain vexed issues. The problem is not helped by the fact that the Commission's thinking and the full effects of its proposals are not yet clear. My hon. Friend referred to that point. The details of any proposed reductions are not clear. We need a better idea of the detailed impact on distillers. I assure my hon. Friend that we will challenge those proposals at the March Agriculture Council.
The general approach of the Commission's proposed strategy is known. It would be to withdraw eligibility for non-annexe 1 export refunds from a range of products; reduce rates for others; and provide more flexible access to inward processing relief to enable processors to access raw materials at world prices.
The Commission has the competence to act on most of those strategic measures, including the proposal to reduce the export refund on cereal-based spirit drinks—whose main impact would be on the UK in the Scotch whisky industry—although white spirits, such as gin and vodka, and beer would be similarly affected.
The pain of any reductions or eliminations will affect other industries and other countries. For example, in Germany, there is a particular worry about the effect on beer export refunds and on a particular class of yogurt that is exported. In Finland, Denmark, Austria and France, there are a variety of concerns. However, I am well aware of the concern in the whisky industry as to the extent and likely impact of the proposals.
Although it is within the Commission's competence to propose such measures, it is important to remember that it must also meet treaty obligations—one of which is protocol 19 to the UK treaty of accession, as my hon. Friend mentioned. The Government fully agree that the provisions of the protocol must be respected and we shall

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seek to ensure that any action taken to implement the Commission's approach is compatible with the provisions of protocol 19.
Treaties of accession and protocols to treaties of accession are important. They were introduced to try to cover areas in which particular countries who were joining the European Community, now the European Union, could have certain key interests recognised that would otherwise have been in danger of being overlooked, because they were special to a particular country. Therefore, we are very conscious of the importance that the industry attaches not just to the protocol, but to its importance in the overall treaty of UK accession.
I assure my hon. Friend that discussions have taken place at an official level. My Department has been in close contact with the Scotch Whisky Association and with the sectors of the food and drink industry where the measures would have an impact. Further consultations involving Ministers will take place between now and the March Council. My right hon. Friend the Minister of Agriculture, Fisheries and Food has plans to hold such meetings over the next few weeks.
There are also discussions between Ministers in my Department and the Scottish Parliament. For example, I spoke yesterday with the Scottish Minister for Rural Affairs, Ross Finnie, about these and other matters. Indeed, there are regular meetings between my right hon. Friend the Minister of Agriculture, Fisheries and Food and Ministers in the devolved Administrations. We are fully aware of the importance of keeping in touch on these and other issues.
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It is also important—I stress this to my hon. Friend—to get detailed information from the industry. The whisky industry and others need to provide us with all the possible ammunition in terms of fighting this particular European battle. We have a responsibility to consider the effects of the different proposals on all those parts of our industry that are at present entitled to export refunds. Given that we accept that world trade commitments must be honoured and are ultimately an important part of the agonisingly slow common agricultural policy reform process, we need to respect them.
At the same time, however, as UK Ministers we have a responsibility to ensure that our industries are not unfairly treated. To help to do that we need as much detailed information as we can get. In particular, we have asked the whisky industry for detailed analysis that would help us challenge the Commission's view that whisky is insensitive to the rate of refund.
I agree strongly with my hon. Friend's analysis of the real cause of the problem and with his belief that the best long-term solution is fundamentally changing the common agricultural policies and those protectionist aspects that cause our industry such difficulty. The UK is in the vanguard of the reform process. We need to push ahead with our allies—and we do have some allies in that process—to achieve agricultural reform.
I thank my hon. Friend and other colleagues, and I assure the House that the words spoken tonight will be important as a contribution to Government thinking and their defence of this crucial and successful industry.
Question put and agreed to.
Adjourned accordingly at fourteen minutes past Eight o ' clock.