§ 3.6 p.m.
§ Report received.
§ Clause 5 [Resource accounts: preparation]:
§ Baroness Anelay of St Johns moved Amendment No. 1:
§ Page 3, line 17, at end insert—
("( ) For the avoidance of doubt, any money paid by a government department to the New Millennium Experience Company shall be included in that department's accounts prepared under this section subject to the provisions of this Act.").
§ The noble Baroness said: My Lords, the Government will be aware of public concern about the funding of the Millennium Dome. The Dome is run by the New Millennium Experience Company. It became a non-departmental public body in 1997 when its shares were transferred to a government Minister. That is currently the noble and learned Lord, Lord Falconer of Thoroton, who is the sole shareholder of the NMEC. The company also remains a company under the Companies Act.
§ Over the past three years the finances of the Dome have been marked by a lack of transparency. My amendment tries to shine a little light on the 1389 relationship between the Government and the NMEC. A detailed analysis is for another day's debate and I am delighted that my noble friend Lord Lamont has a Dinner Hour debate on Wednesday 12th July on this very subject.
§ My amendment would make sure that every government department that had financial dealings of any kind with the NMEC would have to show those dealings in its accounts. One might ask why I am so cynical that I suspect that the accounts would not be transparent. The answer is that over the past year or so I have watched a drip-feed of money going to the Millennium Dome. Lottery funds are the public's money. Concern has been expressed about the manner and timing of those transfers of money.
Yesterday I looked at the website of the Department for Culture, Media and Sport. That still states that the NMEC,
has an overall cash budget of £758 million to meet the costs of all aspects of the project".
That statement ignores the fact that so many extra amounts of lottery cash have been lent or given to the Dome—I am not sure which in many cases—over and above what was originally intended to be the investment—a good investment—from the lottery.
§ Earlier this year, the new chief executive, M. Gerbeau, denied claims that he was going to ask the Millennium Commission for another bail-out sum of £20 million. That statement was made in the middle of April. However, one month later M. Gerbeau asked the commission for £29 million and, of course, he received the money. When giving evidence to the Select Committee last week, M. Gerbeau admitted that on the very day that the grant of money was made, in practice the Dome was on the verge of bankruptcy.
§ Noble Lords will be aware, following exchanges on a Private Notice Question in this House at the time, that the Millennium Commission made that grant of money only after seeking and obtaining from the Government a letter of direction. The reason for obtaining such a letter of direction was in order that the Millennium Commission could cover its own back because it believed that it was making a grant of funding that would not demonstrate value for money for the public. It is therefore reassuring to know, at least as a result of that event, that those matters will be subject to reference to the National Audit Office.
§ Last week, M. Gerbeau again said that he would not approach the Millennium Commission for further funding. Should we believe his statement? I certainly hope that that is the case, but I should like to ask a question: what will happen if the Dome requires more money to help get it through the operating period covered by the summer and towards the end of the year? I ask that question because M. Gerbeau has given assurances that the Dome will not close down until the end of the year. Where would M. Gerbeau go for additional moneys?
§ These issues provide the basis for my amendment. I should like to establish whether plans are in place for the Dome's finances to be shored up using other 1390 resources that might lie within the control or influence of the Government. Can the Minister give an assurance that, if I were to withdraw my amendment, any money subsequently given, lent or in any way made available to the Dome by any government department for any period will then be recorded on the balance sheets of the government department concerned in a clear and transparent manner? I beg to move.
§ Lord Higgins
My Lords, I support the amendment. My noble friend Lady Anelay of St Johns has set out clearly the issues which concern her. Of course, both my noble friend and the Minister who is to reply have been deeply involved in issues surrounding the Dome for a considerable time.
In subsequent amendments we shall turn to the question of how the finances of non-departmental public bodies should be treated. However, the Dome is a specific case on which I think it is appropriate to focus at this point, not only for the reasons given by my noble friend but also because the question of whether such bodies should be audited by the National Audit Office is extremely important. No doubt the Minister will be able to confirm immediately whether the organisation concerned with the Dome will be audited by the National Audit Office as regards both financial propriety and value for money.
As far as concerns propriety, in the light of the remarks made by my noble friend and of the evidence submitted to the Select Committee to which she referred, it appears that the organisation may be in danger of finding itself trading in a condition of insolvency. Perhaps the Minister can tell the House whether that will be the case. It is important to ensure that the assets and liabilities of the organisation are set out clearly by the government department which has responsibility, at least to a certain extent, for its operation.
As to value for money, it is important to establish whether the National Audit Office will be able to look into the affairs of the Dome with that in mind. Inquiries based on value for money objectives were established some 20 years ago in the National Audit Office. Those inquiries are of great value. It is always a matter of concern if a letter of direction has to be issued to a particular body. If I understand correctly, the letter was issued on the grounds that further investment would not—I repeat, would not—represent value for money.
I hope that the Minister will be able to reassure us on all these points. I think that my noble friend was right to draw the attention of the House to this matter in the context of the Bill as a whole.
§ Baroness Oppenheim-Barnes
My Lords, I, too, support the amendment moved by my noble friend, which I describe as the "throwing good money after bad" amendment. In it my noble friend seeks to ensure that the shambles which has taken place in the past cannot continue without a great deal more accountability than has been seen to be the case so far as concerns the tragedy of the Dome.
1391 On this occasion, can the Minister take the opportunity to dissociate himself and the Government from the statement made yesterday by Mr Ayling who, when looking for another scapegoat, declared that the whole problem lay in the fact that the public had let the Dome down by not visiting it sufficiently?
§ 3.15 p.m.
§ Lord McIntosh of Haringey
My Lords, I admire the ingenuity of the noble Baroness, Lady Anelay, in using this Bill in order to try to introduce a debate on the finances of the Dome. I admire, too, the ingenuity of the noble Lord, Lord Higgins, in using the amendment to anticipate matters which I believe should be more properly debated in later amendments. The House will forgive me if I reply to the amendment rather than to the speeches.
I can assure the noble Baroness, Lady Anelay, that all moneys paid out by a government department will be included in its accounts and subject to audit by the Comptroller and Auditor General.
Because the first accounts under this clause will be for 2001–02 at the earliest, it is likely that most payments concerned with the New Millennium Experience will be accounted for under the current system of cash-based appropriation accounts rather than under the resource-based system introduced by the Bill. To the extent that any payments relating to this matter are relevant to accounts prepared under this clause, then they will be included in those accounts. However, I do not believe that it is necessary or appropriate to refer specifically to this issue on the face of the Bill.
The only remark that I should like to make in addition to that explanation, in response to the questions put to me by the noble Lord, Lord Higgins, concerning the role of the Comptroller and Auditor General—this point might not arise naturally out of our debates on later amendments—is that I understand that the National Audit Office has already announced that it will be carrying out a value for money study into the Dome.
§ Baroness Anelay of St Johns
My Lords, I thank the Minister for his reply, even if he believes that he was replying only to the amendment rather than to the speeches made in support of it. Perhaps I may assure him that, in framing my speech, I did so very much with the public interest in mind, which also forms the basis of my amendment. I am grateful, too, for the support of my noble friends.
However, I am concerned that the Minister states that the Bill already allows for the fact that there will be clarity as regards the accounts for moneys "paid out"—I believe that the Minister used those words. Perhaps I may remind the Minister that I am concerned also with moneys made available to the Dome and then repaid during the year. This matter is one to which I shall return in greater detail on another day. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.1392
§ Lord Higgins moved Amendment No. 2:
§ Page 3, line 19, leave out ("Treasury") and insert ("Financial Reporting Advisory Board").
§ The noble Lord said: My Lords, in moving the amendment I shall speak also to a long series of amendments grouped with it. I hope that noble Lords will allow me to make a few opening remarks because the amendments cover an important part of the Bill.
§ Perhaps I may express my thanks to the noble Lord, Lord McIntosh, for the two letters that he has written to me following our discussions in Grand Committee. Against the background of the provisions set out in the Bill, the Government have announced that the noble Lord, Lord Sharman, is to chair a group which will look into various aspects of the Government's financial affairs. That is very welcome, as was the letter from the noble Lord, Lord McIntosh, in which lie drew attention to a Written Answer he gave a few days ago concerning the membership of the steering group to review the audit and accounting arrangements for central government. I agree with what the noble Lord said in his letter; namely, that the group will comprise a highly distinguished membership. We shall not see the "usual suspects", but rather a number of people who have vast experience in this area and on whose judgment one can reasonably rely.
§ The list, in alphabetical order, begins with the Comptroller and Auditor General and ends with Mr Alan Williams, a member of the Public Accounts Committee in another place. I mention Mr Williams because he was my peer for some 20 years. I assure the House that he is a man of the utmost integrity and reliability. This matter is important, and the Government have done well in their selection, although I understand that there will be additions to the list and that the terms of reference have not yet been considered.
§ The fact that this initiative has been taken should not in any way inhibit your Lordships from expressing views on the various amendments on the Marshalled List. Many of the arguments in favour of them are simply overwhelming. Should further thought be necessary in the light of the study group findings, we can rely on further legislation to put the matter right. In a sense, the Bill is a missed opportunity. There have been only two or three Bills of this kind in the past century. Time having been found for the Bill, to discover that other matters still need to be considered is unfortunate.
§ Another point on which I am not entirely clear relates to the proposals for the new investigation. What is the relationship between the so-called steering group to which I have referred and the group chaired by the noble Lord, Lord Sharman? There is presently some confusion. Will the steering group be concerned simply with such matters as terms of reference, or will it be concerned with the content of what is eventually reported to Parliament?
§ I turn now to the second letter that the Minister was kind enough to write to me, relating specifically to the amendments. There is a problem in that it is difficult to group the amendments in any way other than that 1393 chosen; namely, to include the whole lot, regardless of the content. I see that the Minister agrees. I have made several attempts over the past 48 hours to find a tidier method, but I fear that it is not possible; therefore, my remarks will inevitably be rather discursive. The grouping is unfortunate because the individual amendments cover a considerable number of clauses and extend across the Bill. So, again, the way in which we are discussing these matters is not simple.
§ Problems arise both in regard to the government amendments and my own. Instead of dividing the issue of who should set accountancy standards from the content of the accounts, all the provisions are contained in single amendments, making it impossible to split them; it is equally impossible to group them in any way other than altogether. I fear that my amendments, especially those that are consequential, are not appropriate at certain points in the Bill.
§ Essentially, there are three points to deal with. First, who sets the standards on which government accounts should be based? Secondly, what form should the accounts take? Thirdly, and most importantly, should the standards and bases of the accounts be set by the Treasury or by some independent body? It will probably be most convenient if I speak to the government amendments and my amendments to them, rather than to my own amendments, since much of the ground covered is the same.
My amendments refer to the financial resources advisory committee and suggest that throughout the Bill it should be that body, rather than the Treasury, which should determine the accounting basis to be used by the Government. Much the same ground is covered by the government amendments, in particular Amendments Nos. 7, 21 and 26. Amendment No. 7 covers both points. The first part of the amendment states that the Treasury shall,
have regard to any relevant guidance issued by the Accounting Standards Board Limited or any other body prescribed".
The second part suggests that there should be a statement of financial position, a cash flow statement, and so on. The two aspects are taken together.
§ On the question of who should set the accounts, I suggest in my amendments that it should be the financial resources advisory committee, whereas the Government say that it should be the accounting standards board. I do not necessarily have any problem with that. The Government refer again in Amendment No. 21 to the accountancy standards board. Finally, in Amendment No. 26, they change tack and suggest that a body shall be set up—which I understand is to be the FRAB, although it is not mentioned in terms—to advise on certain aspects of the accounts. As regards the first two amendments, it is appropriate that the body should be the accounting standards board limited; and so far as concerns further advice, in the third amendment it is the FRAB. So there is no great problem with that.
§ I turn to the second aspect of the government amendments; namely, the content of the accounts. The Government suggest that it should include a statement 1394 of financial performance, a statement of financial position, and a cash flow statement. That is a concession on the part of the Government since we discussed the matter in Grand Committee. At that stage, the noble Lord, Lord McIntosh, was inclined to argue that this provision need not appear on the face of the Bill, so the change is to be welcomed. What I am not clear about is to what extent the government proposals are in reality coextensive with the suggestion that I make in the corresponding amendments from this side of the House. For example, does a statement of financial position mean a balance sheet; and, if it does not, why does the provision not say so?
§ This is a matter of particular concern. One of the major changes that will take place as a result of a movement to resource accounting is that for the first time there will be what amounts to a balance sheet for individual government departments and indeed for the whole of government accounts. This is a substantial advance and is to be welcomed. However, as one of my other amendments points out, it is important that there should be a balance sheet and that it should include contingent liabilities as well as other liabilities. The relevance of that is particularly appropriate in the area of social security, for which I have responsibility, especially in regard to pensions in the Department of Social Security accounts. It would be helpful if we could be clear that the Government's amendments on the matter and my own are coextensive.
§ The Minister's letter spells out what he has in mind. I imagine that he will say much the same in response to this debate. But the crucial matter is in the amendments that I have tabled to the government amendments, in particular my Amendment No. 22 to government Amendment No. 21, and my Amendment No. 27 to government Amendment No. 26.
§ The amendments propose that, in taking action under the Bill, the Government should accept whatever is proposed by the Accounting Standards Board and the FRAB. We are very concerned that the Government, in particular the Treasury, should not determine the form of the accounts. I have already quoted the example of the working families' tax credit which is treated as a tax reduction rather than an increase in public expenditure. The Government should not decide the way in which their accounts are presented; otherwise, there is far too much scope for presenting the figures in a way that is not in accordance with the underlying reality.
§ We on this side of the House strongly believe that, if this is the way in which the Government wish to deal with the matter, these two bodies should determine the accounting standards, in particular the adjustments to be made, because government accounts cannot be exactly the same as a company's accounts. At the end of the day, those bodies rather than the Treasury should be the final arbiter of the form and shape of the government accounts. It would be very strange if individual companies in this country could determine for themselves the accounting standards. Unless these amendments are accepted, essentially that is the position in which the Government will find themselves. I beg to move.1395
§ 3.30 p.m.
§ Baroness Sharp of Guildford
My Lords, we very much welcome the amendments tabled by the Government since the debate on this matter in Committee. We believe that the Government have moved a considerable way. As the noble Lord, Lord Higgins, made clear, at root is a real issue of substance; namely, whether the Treasury should itself set the guidelines. We on these Benches believe that the amendments tabled by the Minister now make it clear that, although the Treasury will still issue directives to departments—that is appropriate because it is to departments that directives are issued—they will be subject to standards laid down by the Accounting Standards Board. The Financial Reporting Advisory Board will review those standards and provide advice upon them. In his letter the Minister spelt out precisely the way in which that would be constituted. The deliberations of the board will be reported on and those reports will be made public by being laid before the House of Commons. In all these respects the Government have moved a considerable way in the direction that we indicated in Committee and, in that sense, we are prepared to accept the amendments.
§ Earl Attlee
My Lords, I should like to speak to my Amendment No. 3 in this group. I am not absolutely sure that I understood everything that my noble friend said. However, when considering public policy, of which NATS is a good example, ideas frequently hit the buffers of Treasury rules. Furthermore, noble Lords will recall my recent Unstarred Question regarding MoD policy to make certain TA personnel redundant and the payback period. Even the noble Baroness, Lady Symons, found the Treasury rules somewhat peculiar. In the case that I raised, redundancy payments were termed "transfer payments". Such payments are not relevant to the calculation of a payback period or the economic case for any particular policy. The noble Lord, Lord Richard, who I see in his place, also took part in the debate. While he implied that he did not understand my Question, he also found the Minister's reliance on Treasury rules bizarre. No one suggested that the Minister was wrong.
My amendment is not party political. Ministers of either party frequently find themselves frustrated by Treasury rules. Can the Minister help the House by shedding light on those rules? For example, are they published anywhere; if so, under whose authority? Finally and generally, is there any way in which Ministers, advisers and opposition spokesmen can check their policies in advance against the Treasury rules without first consulting the Treasury?
§ Lord McIntosh of Haringey
My Lords, I am grateful to all noble Lords who have spoken, in particular the noble Lord, Lord Higgins, for his acceptance that in practice it is impossible to divide up the issues that are dealt with by these amendments. I shall introduce the government amendments. I shall go on to say a word about the opposition amendments to 1396 those amendments and then deal with the other opposition amendments which follow from Amendment No. 2.
There are four government amendments in this group. The first three, Amendments Nos. 7, 21 and 29, are in the same form. Amendment No. 7 is perhaps the most important because it relates to resource accounts as we have been debating them in practice. Amendment No. 21 relates to "Whole of government accounts" in Clause 9. The noble Lord, Lord Higgins, has chosen to table amendments to Amendment No. 21 rather than to Amendment No. 7, but I do not think that it matters; the principle is the same in either case. Amendment No. 29 in Schedule 1 relates to "Whole of Government of Wales accounts". However, it has the same wording as Amendments Nos. 7 and 21. Following that, I shall say a word about Amendment No. 26 which introduces the advisory board.
The Bill already provides that resource accounts and whole of government accounts will be prepared in accordance with generally accepted accounting practice and will need to show a true and fair view. The Government believed that these rigorous conditions were sufficient to ensure that the accounts would be produced in accordance with best professional practice and to the highest standard. However, having listened to what was said in Committee, we have tabled amendments—I am grateful to the noble Baroness, Lady Sharp, for her acknowledgement—further to clarify the basis on which these accounts will be prepared.
Government Amendment No. 7 lays down in more detail than we have hitherto provided the financial statements that must be prepared for resource accounts. Rather than do this by reference to current accounting requirements, as proposed by the Opposition in Committee, the amendment relates to the fundamental financial statements as defined by the Accounting Standards Board in its Statement of Principles for Financial Reporting. I confirm to the noble Lord, Lord Higgins, that that includes the preparation and publication of a balance sheet. We hope that it satisfies the concerns in this area which were expressed in Committee while at the same time being sufficiently "future proof" to enable resource accounts to adapt to changes in financial reporting requirements as and when necessary. It would not make sense for us to require primary legislation of this kind every time the ASB changed the description of the accounts or its own name. For example, if that body became the standards board for accounting we would have to introduce a Bill to allow for that.
We must be able to adapt resource accounts to changes in the financial reporting requirements as and when necessary. This amendment makes it clear that the Treasury will have regard to the guidance issued by the Accounting Standards Board, or any of its successors, while ensuring that the resource accounts show a true and fair view and comply with generally accepted accounting practice. Amendments Nos. 21 and 29 apply similar requirements to whole of government accounts. Amendments Nos. 22 and 23 tabled by the Opposition would apply to any of the 1397 three amendments to which I have just spoken. Amendment No. 22 would require us to accept, rather than have regard to, guidance issued by the Accounting Standards Board.
As I said, there will be occasions when, due to the particular nature of central government accounts, we will have to adapt standard practice, and the Government have said so. I believe everybody has agreed in previous debate that that is necessary. So placing a duty to follow the Accounting Standards Board guidance in all cases is not appropriate. It could in certain circumstances conflict with the overriding requirement that accounts show a true and fair view. Normally, of course, following relevant accounting standards is essential to meet the requirements of a true and fair view, but it is an accepted part of accounting practice that if a particular body in complying fully with a standard prevents a true and fair view from being shown, the standard should be departed from in order to ensure that the true and fair view is preserved. That is known as the true and fair override.
Amendment No. 22 would require additional words to be added to the descriptor of Section 256 of the Companies Act.
§ 3.45 p.m.
§ Lord Higgins
I apologise for interrupting the noble Lord, but I am having difficulty in understanding precisely what he is saying.
Presumably, the point about standards changing can be taken into account if the legislation states that the Treasury shall accept whatever changes are proposed. That would be a dynamic approach. Regarding the point about true and fair view, clearly it would be the case that the Accounting Standards Board would also take that into account.
I have some difficulty in understanding why the noble Lord believes that to be too inflexible to be practicable.
§ Lord McIntosh of Haringey
My Lords, it is because the Accounting Standards Board itself uses the word "guidance" for the way in which it expects people to conform to the standard which it applies. I believe the noble Lord, Lord Higgins, with his great experience of government, will recognise that it is normal that regard is had to guidance and that guidance is not accepted as such. I will give an explanation at a later stage as to why acceptance is less appropriate.
Regarding the other part of Amendment No. 23, which relates to Section 256 of the Companies Act, "Accounting Standards" is the formal side-heading of that section of the Companies Act and it would not be appropriate to change it in this House.
A reference has been included to Section 256 of the Companies Act to ensure that if the Accounting Standards Board is replaced in the future by a new accounting standards-setting body then regard would automatically be had to the standards issued by that new body.
1398 I now turn to government Amendment No. 26, which is concerned with the Financial Reporting Advisory Board. The existing provisions of the Bill, further reinforced by the government amendments just referred to, would ensure that resource accounts will be prepared in accordance with best practice and in accordance with the guidance issued by the Accounting Standards Board or its successor.
However, it has always been made clear that there will be occasions where, because of the particular requirements of central government accounts, it will be necessary to adapt standard accounting practice.
The Financial Reporting Advisory Board was set up in 1996 to provide advice on accounting matters generally, but in particular to advise on appropriate accounting treatments in areas where some adaptation of standard practice was required.
It is believed that the current arrangements for the FRAB are working well and that the FRAB is recognised to be independent. Indeed, nobody in this House has suggested anything to the contrary.
An excellent illustration of how the process currently works is the FRAB's newly published report on the 1999/2000 edition of the Resource Accounting Manual. It reports on all the matters considered by the board during the year, together with a commentary on key issues, and the outcome of the board's deliberations. All matters of ongoing concern to the board are also documented.
However, to address the concerns which have been expressed about the way the board works and to reinforce the independence of the process, the Government have brought forward Amendment No. 26 which would place the following duties on the Treasury.
The Treasury, before determining the accounting policies for resource accounts and whole of government accounts, would be required to consult with a group of persons—which is, of course, currently the Financial Reporting Advisory Board—who appear to it appropriate to advise on financial reporting principles and standards.
The Treasury must consult with the Comptroller and Auditor General in determining the composition of the group. Of course that has been done with the FRAB, although in practice the Treasury would also consult with a wider range of other interested parties.
The group would be required to prepare an annual report of its activities, which must be laid before the House of Commons.
The requirements ensure that the Treasury must seek independent expert advice on accounting matters. Furthermore, by requiring the group to report to the House of Commons, the Government will also ensure that where the Treasury does not accept that advice the disagreement would be brought to the attention of Parliament. It is important to ensure that on the face of the Bill, rather than that there should be an acceptance of guidance as proposed in the amendments.
1399 Opposition Amendment No. 27 is an amendment to Amendment No. 26 and would require the Treasury to accept any recommendations made by the group. It is much too prescriptive. It would turn what is an advisory body into the standard-setter. The amendment requires the group to prepare a report which will be laid before the House of Commons, ensuring that disagreement and the reasons for it are in the public domain.
There has been a good deal of give and take between the Treasury and the board, and an example of that can be found in the new report at paragraphs 2.7 and 2.8 regarding the treatment of non-operational heritage assets. The board believes, as a matter of accounting principle, that all these assets should be valued and should appear on departmental balance sheets. But the Treasury, in consultation with the National Audit Office, has argued that the case for doing that is unproven as the cost of obtaining reliable valuations may outweigh the benefits of including such assets on the balance sheet. Imagine if the Victoria and Albert Museum were told to obtain valuations for all of the many thousands of items in its possession. The board therefore accepts that the current treatment of these assets should remain for the present.
The Government believe, as the noble Baroness, Lady Sharp, indicated in Grand Committee, that the Government's amendments cover the essence of the points made in very useful debate, and do not need further amendment.
I turn now to other opposition amendments. The most important of those are Amendments Nos. 5 and 20, which would require balance sheets in both resource accounts and the whole of government accounts. It is to he hoped that the Opposition will accept that Amendments Nos. 7, 21 and 29 go further than these proposals by requiring a statement of financial position, including a balance sheet and a cash flow statement.
Furthermore, the Opposition proposals specify that contingent liability should be included in balance sheets. That, of course, would contravene the ASB's financial reporting standard 12, which makes it clear that contingent liability should not be recognised in the financial statements but should be disclosed in the notes to the account. The Government have adopted the requirements of FRS No. 12 in the Resource Accounting Manual.
Amendment No. 28 attempts to place the Financial Reporting Advisory Board on a statutory basis. It is entirely unclear what the effect of that would be. The clause states nothing about who the members should be; who should appoint the members; how it should go about its work; or to whom it should report. It is believed that the clear duties which the Government have placed on the Treasury in Amendment No. 26, and the transparency of those duties, will ensure that in the accounting policy setting that is in contrast with Amendment No. 28.
The many amendments which replace the Treasury with the FRAB would also give rise to some illogical effects. Amendments Nos. 15 and 16 would make the 1400 FRAB itself responsible for preparing the whole of government accounts and determining which bodies should be included in those accounts, as well as determining the accounting standards to be followed. That is strange since the objection to the Bill is that it allows the Treasury both to set the rules and to prepare the accounts. Again, the amendments have not been offered to Clause 10, so the FRAB would prepare the accounts but it would be for the Treasury to determine what information should be included in the accounts, and it would be for the Treasury to collect the information. That is not logical.
Finally, perhaps I may comment on whether the ASB or the FRAB should set the standards. That is the crux of the matter. The noble Lord, Lord Higgins, said that we have mixed up the two issues. That is not the case. The presumption is that the Accounting Standards Board standards will apply to the Government's accounts unless they do not apply to the public sector as there are good public expenditure control reasons for adopting a different treatment. All matters dealt within the Resource Accounting Manual must be reviewed by the Financial Reporting Advisory Board. Our Amendment No. 26 makes those powers transparent and will require the board to report on the manual's compliance with generally accepted accounting practice and the steps to be taken to address any departures.
That also answers the question posed by the noble Earl, Lord Attlee. What he calls "Treasury rules" are the Resource Accounting Manual. That substantial document is published annually and he is welcome to have a copy in order to study it in advance of his contribution to our debates on the Transport Bill.
I believe that the government amendments address the essential issues debated in Grand Committee. I believe that they are preferable to the Opposition's amendments and I commend them to the House.
§ Lord Higgins
My Lords, I thank the Minister for his helpful reply. As I indicated earlier, his letters on the subject were most useful. His comments on the form the accounts should take will require careful study. I take his point about contingent liabilities being in the notes to the accounts rather than on the balance sheet. However, as regards pensions, we may well find that the notes to the accounts cover an amount far greater than almost any other item in the whole of government expenditure. We shall need to scrutinise that most carefully.
In my opening remarks I conceded that there were certain deficiencies in my amendments and thought it better to deal with the Government's amendments and my amendments to them. I do not accept the Minister's point about the inflexibility of an arrangement in which the ASB and the FRAB fulfil the functions he mentioned but the Government cannot automatically accept their recommendations.
As the Minister rightly said, the crux of the matter is who, at the end of the day, determines what the standards should be. The Government's amendments seem to us to give them and the Treasury in particular 1401 too much flexibility. Our experience of the presentation of government accounts shows that they may give a misleading impression of what is happening. I give the classic example of the working families' tax credit.
For that reason, while I do not propose to move the main group of amendments, at an appropriate moment I shall ask my noble friends to support me in the Lobby in taking the feeling of the House as regards my Amendment No. 22 as an amendment to Amendment No. 21. In the meantime, I beg leave to withdraw Amendment No. 2.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 3 to 6 not moved.]
§ Lord McIntosh of Haringey moved Amendment No. 7:
Page 3, line 29, at end insert—
("( ) For the purpose of subsection (3)(a) and (b) the Treasury shall in particular—
- (a) have regard to any relevant guidance issued by the Accounting Standards Board Limited or any other body prescribed for the purposes of section 256 of the Companies Act 1985 (accounting standards), and
- (b) require resource accounts to include, subject to paragraph (a), a statement of financial performance, a statement of financial position and a cash flow statement.").
§ On Question, amendment agreed to.
§ Clause 7 [Other departmental accounts]:
§ [Amendments Nos. 8 and 9 not moved.]