HC Deb 20 July 2004 vol 424 cc33-45WH

2 pm

Mr. Christopher Chope (Christchurch) (Con)

Accountability and openness are two of the key responsibilities of holders of public office. They form two of the six principles of public conduct, so I am delighted that we are joined this afternoon by my right hon. Friend the Member for North-West Hampshire (Sir George Young), the Chairman of the Standards and Privileges Committee. One of the means by which accountability and openness are facilitated is through objective accounting and statistical standards. They are what underlie this debate.

What is a public corporation? Is it different from a nationalized industry? How should Ministers monitor public corporations? Fortunately, I do not have to invent the answers to those questions; they are set out in the Treasury document, "Public Expenditure: Statistical Analyses 2004". That document defines a public corporation as a term from national accounts—the European System of Accounts. So it is the Office for National Statistics that determines which bodies are public corporations. The characteristics of public corporations are: they are mainly trading bodies, largely recovering their costs from fees charged to customers…they are owned or controlled by central government, local authorities or other public corporations; and they have substantial day to day operating independence so that they should be seen as institutional units separate from their parent departments. In terms of public finances, a nationalised industry and a public corporation are no longer treated differently. The PESA document goes on to set out the controls in place over public corporations, and I draw hon. Members' attention to the following paragraph: Monitoring plays an important role in controlling public corporations' performance in the interests of the taxpayer and the consumer. Sponsor Ministers and departments… continuously monitor bodies' performance against all aspects of the controls described. It is up to Departments to set individual financial targets for public corporations and any dividend or interest payments required. It is significant that where public corporations compete in the same market as a private company, there can be an issue of fair competition.

That sets out some of the background behind the subject, but does any of it make any difference in practice? It certainly does. There was a headline report in newspapers earlier this year about the change in the definition of Network Rail. On 27 February 2004, the ONS announced that Network Rail would be regarded as a public corporation until 31 March 2003. As a result, £9 billion—a lot of money in anyone's language—has to be put on the balance sheet in the national accounts to reflect that ruling. I know that my right hon. Friend the Member for North-West Hampshire intends to say more about the conundrum presented by that decision. I find it amazing that it took a newspaper editor digging behind what appeared to be an innocuous statement by the ONS about the classification of Network Rail to highlight the issue. When one examined the statement and the attached document closely, one saw that it was not so much a statement about classification as a change in classification with the implications that I described. I use that as an example of how significant a decision on whether an organisation is a public corporation can be.

Whether enterprises are in the private or the state sector is relevant to the definition of capital business investment. Are state-controlled enterprises crowding out the private sector? Is business investment as a share of gross domestic product rising or falling? Recent statistics reveal that business investment by public corporations is rising compared with capital expenditure by private companies, especially in the manufacturing sector. I hope that I have shown that we are able to have proper accountability by having a robust and accurate definition of public corporations.

One may ask, "What has been happening?" I shall illustrate my argument using trust ports. On 26 October 2000, the ONS decided to classify certain major trust ports as public bodies whose financial transactions were to be included in the public sector borrowing requirement. The background was set out in reply from the Financial Secretary to the Treasury to a written question of mine. She enclosed a copy of a letter from John Pullinger, the national statistician. In explanation of the decision taken on 26 October 2000, John Pullinger stated: Classification decisions are made by applying international standards for National Accounts … The classification of corporations to either the public or the private sector is determined by control. The public sector has control over the major trust ports, usually through both appointment rights and powers contained in the Ports Act 1991. I asked which major trust ports had been reclassified as public corporations, and the Under-Secretary of State for Transport, the hon. Member for Plymouth, Devonport (Mr. Jamieson), replied: In discussion with the Office of National Statistics, we have identified 21 trust ports in England and Wales that might fall within the classification as public corporations at the present time. These are:

  • Bridlington
  • Caernarfon
  • Chichester
  • Dover
  • Falmouth
  • Flamborough (North Sea Landing)
  • Harwich
  • Hope Cove
  • Langstone
  • Littlehampton
  • Milford Haven
  • Newlyn
  • Orford
  • Poole
  • Port Isaac
  • Port of London
  • Port of Tyne
  • Sandwich
  • Sandersfoot
  • Shoreham
  • Teignmouth."
I asked what the financial reporting arrangements were for the trust ports that had been reclassified as public corporations. The Under-Secretary stated: As we are still working to assess what the impact of this classification might be, there have been no changes to the financial reporting arrangements at this time.

That was in March 2003, although the classification change had been made in 2000. I asked what progress had been made on discussions with the ONS. The Under-Secretary stated:

We have now identified with the Office of National Statistics which trust ports might fall within the classification as public corporations, and my officials are currently working to identify the financial and resource implications of this classification for those ports and the Department.

I asked

why there is no reference to the trust ports classified as public corporations in the Resource Accounts … of the Department for Transport, Local Government and the Regions".

The Under-Secretary's answer was that, at the time of preparing the resource accounts,

we were still discussing the proposed classification with ONS, including trying to identify which ports would fall within that classification. Therefore we were unable to include any reference to the trust ports in those accounts."—[Official Report, 5 March 2003; Vol. 400, c. 1025–1026W.]

I hope the Financial Secretary shares my concern that the Department for Transport resource accounts for 2002–03, which were published on 29 January this year, make no reference whatsoever to any of the trust ports being defined as public corporations. Indeed, the only public corporations referred to—on page 55, note 26—are the Air Travel Trust and the Civil Aviation Authority. Why do the resource accounts for the following year make no reference to the classification of the trust ports as public corporations and to all the things that flow from that, including returns on capital and so on? I have not had an answer to that question, but I hope that the Financial Secretary will be able to give me one today.

We are not talking about insignificant organisations. In answer to my question, the Under-Secretary of State for Transport said:

The latest published accounts we have received from the major ports defined as public corporations show on the balance sheets that the net worth of each port is as follows:

Port £million

net worth
Port of London (at 31 December 2003) 48.3
Dover (at 31 December 2003) 124.8
Milford Haven (at 31 December 2002) 31.9
Poole (at 31 March 2003) 11.8
Tyne (at 31 December 2002) 47.6
Harwich Haven (at 31 December 2003) 33/".
—[Official Report, 13 July 2004; Vol. 423, c. 1016W.] Only those six ports are listed as major ports that are defined as public corporations, but at least for the first time there is an implicit admission by the Department for Transport that they are public corporations rather than potential public corporations. This is not merely an academic or semantic dispute; it is serious and important, because a significant part of the ports industry is in limbo as a result of doubts about whether major ports are classified as public corporations. If they are, why is the Department for Transport not requiring a rate of return or monitoring them, as required by Government convention?

The confusion still exists, certainly in Dover, the largest of the trust ports. On 16 June 2003, I asked the Chancellor of the Exchequer to what extent the borrowing authorisation of £50.4 million to Dover Harbour Board is included in the Government's public sector borrowing requirement. The response from the Chief Secretary to the Treasury stated:

Dover Harbour Board is classified to the public corporation sector in the national accounts. Thus spending and borrowing of Dover Harbour Board is public sector spending and borrowing, in particular its borrowing from the private sector is included in Public Sector Net Borrowing. While facilities to borrow do not themselves impact on PSNB the draw down of that facility to finance expenditure would."—[Official Report, 16 June 2003; Vol. 407, c. 37W.] Yet the annual report and accounts of the Dover Harbour Board for 2002 contain no reference to the fact that it may be a public corporation. Picking up on the answer in June 2003 from the Chief Secretary, Mr. C. Madderson, managing director of George Hammond plc, a user of the port of Dover, wrote to Dover Harbour Board about the situation, asking whether it affected the board's ability to borrow or whether a return on capital was needed. About a month later, he received an interesting reply from Mr. Bob Goldfield, chief executive of Dover Harbour Board, who said:

With reference to your letter of 17 September regarding Trust Port status, I apologise for the delay in replying but I was checking the latest position with Ports Division"—

that is a reference to the Department for Transport—

and they were slow!

It is true that there is a proposal from the National Audit Office"—

I think that should have been the Office for National Statistics—

to have the major trust ports redesignated as public corporations. This proposal is based upon the fact that, for those ports, the Secretary of State appoints the majority of the Board. However, the Department for Transport are vigorously rejecting the proposal and they have stated publicly that they will withdraw from appointing Board members, thereby removing the rationale for redesignation, should the proposal receive serious consideration.

We therefore see no prospect in the immediate future of any change to the status of Dover Harbour Board as a Trust Port.

That extraordinary response from Dover Harbour Board was sent, it seems, on the advice of officials at the Department for Transport.

What is going on? I asked the Department for Transport whether it had it mind to change the board membership of Dover Harbour Board. On 28 October 2003, I received this answer from the Under-Secretary:

Seven board members, including the Chairman, are appointed by the Secretary of State to the Dover Harbour Board … Government appointments to the DHB are made in strict accord with its policy on the appointment of all non-executive directors and board members of public bodies and we abide by guidelines set out by the Office of the Commissioner for Public Appointments … We have no current plans to alter this policy."—[Official Report, 28 October 2003; Vol. 412, c. 154W.]

Any suggestion that the Department would try to alter its control over the board to change the classification of Dover Harbour Board as a public corporation seems to be without foundation.

In March, I had the privilege of attending the annual lunch of the British Ports Association. If I say that at that lunch before the Under-Secretary spoke there was an air of expectancy, I understate the position. Everybody at that lunch was expecting an announcement on the status of ports as public corporations and the implications that flowed from that. The Minister made no such announcement, and in correspondence that I have had with him since all he has said is that the issue is still under consideration and discussion. How, almost four years after a ruling by the Office for National Statistics, can the Department be saying that the issue is not clear? As a result, it is defying the conventions and, indeed, the rules.

Can the Minister confirm that the major trust ports have been public corporations since 2000, and still are? As her Department, the Treasury, has responsibility for the ONS, can she confirm that neither the Department for Transport nor any other Department should be acting in defiance of an ONS ruling? What sanctions are available, and what will her Department do about the action of the Department for Transport in not complying with that ruling?

The implications for public expenditure are relevant, because the Minister's Department provides money to the Department for Transport, and it is clear that that Department, by not demanding a rate of return on capital employed by the public corporations under its control, is depriving itself of important income. One wonders why, particularly as just today we have had another statement from the Secretary of State saying that he is strapped for cash and there is a lot he would like to do but he has not the resources with which to do it. That seems to be an area in which some saving could be made immediately—a subject on which Members on this side of the Chamber are expert.

If the Minister cannot respond in substance to my concerns, what else can one do? I could take the matter to the Comptroller and Auditor General and ask for it to be referred to the Public Accounts Committee, but do I really need to go that far in the light of the clearest possible guidance to Ministers under the rules for people in public positions? Why can we not just get a Department to comply with the rules that are already laid down? That is the burden of my concern.

If the Department for Transport is defying the Government on this issue, that puts a question mark over what is happening in respect of Network Rail. We know—I am sure that my right hon. Friend the Member for North-West Hampshire will refer to this in more detail—that the ONS found out exactly what was going on with Network Rail only when it came across an item on another website. The information was not given to it fairly and squarely to enable it to determine whether Network Rail was a public corporation or a private company.

One is particularly suspicious at the moment about what is happening in the Government. We know from the Macpherson report that racism in the Metropolitan police was institutional: people did not realise that they were being racist because it was so much part of the arrangements and the culture. I fear that we are getting into a situation in which deception by Departments is almost institutional. Departments do not deliberately deceive, but they encourage attitudes and a culture that are designed to minimise the information available to Members of Parliament and the scope for proper public accounting and accountability.

On the day when the Butler report is to be debated in the main Chamber, I hope that the Financial Secretary to the Treasury will be able to assure us that, in this relatively small field of activity, her Department is on the case and will ensure that the rulings of the Office for National Statistics carry weight and are implemented by the Departments that are given the responsibility for individual public corporations.

2.21 pm
Sir George Young (North-West Hampshire) (Con)

I should like to add a brief footnote to the excellent speech of my hon. Friend the Member for Christchurch (Mr. Chope). I begin by commending him on his choice of subject. He might not get the coverage that he deserves in tomorrow's press because of rival attractions—indeed, we might be asked what we were doing when the House was debating Iraq, and the answer will be that we were debating definitions of public expenditure.

However, as my hon. Friend said, the topic is important because the Government have set themselves standards of probity in fiscal and monetary policy. They have set themselves many rules, and it is important to know whether and how they are being adhered to. If the public, the City and financial commentators suspect that the rules are being kept through some accounting sleight of hand—I have a quotation to support that notion—the whole purpose of having rules, which is to maintain confidence in financial prudence and integrity, begins to disappear. Yes, the Government might be keeping their rules, but they might be doing so in such a way that their behaviour and borrowing are put in a very favourable light, and the totality of the commitments into which they are entering on behalf of the taxpayer of the future is not revealed.

I shall focus on Network Rail and whether it is a private or a public sector company. There have been two views on that question. I go back to 21 June 2002 and quote from the Financial Times:

But in a move that shocked financial experts, the Office of National Statistics acceded to Treasury requests that the big liability would not be included in the government's accounts. The row concerns the Strategic Rail Authority's role in underwriting the debts of Network Rail.

We were then talking about some £9 billion. The ONS view, as stated in its press release of 5 July 2002, was that Network Rail's borrowing would be classified as private sector borrowing in the national accounts. That decision was taken after advice from the head of accountancy profession at the Department for Transport, whose view was that that support was considered a contingent liability of Government and so was unlikely to be called on. It goes without saying that had that decision gone the other way, the finances of the Department for Transport would have been in serious difficulty, because it would have had to find £9 billion from the rest of its budget.

The reasons for that decision were amplified in the statement "Setting the record straight on Network Rail" on 11 July 2002. In it, the ONS said:

In national accounts, the guiding principle for classifying institutions as public or private is who exerts control over general corporate policy, including the appointment of directors.

I shall return to that in a moment. However, the National Audit Office took a different view. The Financial Times said on 5 December 2002:

Sir John Bourn told the Commons Treasury sub-Committee that Gordon Brown should make it clear that the Government might have to raise an enormous sum of money, over and above its published estimates for debt, in certain circumstances.

Sir John said:

If this had been in the private sector, and I had been auditing this, I would have said that this is essentially a subsidiary company and I would have expected it to be put on the balance sheet.

He continued:

The government is providing security through the SRA to the providers of debt and it is acting as a lender of last resort to Network Rail so it is assumed that there are liabilities that could accrue.

The NAO went on to classify Network Rail's debts as public sector borrowing, taking a different view from the ONS. I wonder who would have lent any money at all to Network Rail without the Government standing behind it, particularly after the Railtrack debacle. The NAO also determined that Network Rail would be on the balance sheet of the SRA—indeed it now features on the SRA's consolidated Companies Acts-style accounts, because of the degree of influence that the SRA could exercise over Network Rail.

The disagreement between two professional accountants caused some concern to the Treasury Committee, on which the hon. Member for Yeovil (Mr. Laws) then sat. A rather unsatisfactory truce was agreed after the intervention of the Statistics Commission and a joint statement was issued in October 2002, in which they agreed to disagree because they came to the issue with different perspectives.

Last Thursday, the Secretary of State made a statement on Network Rail. I want to deal first with the balance sheet issue. The Secretary of State announced:

It follows, therefore, that the Strategic Rail Authority will be wound up, and that the majority of its functions, including all its financial obligations, will be transferred to the Secretary of State."—[Official Report, 15 July 2004; Vol. 423, c. 1547.]

One might therefore assume that, if the SRA's liabilities were absorbed into the Department for Transport, Network Rail would end up on the balance sheet of the Department, which is of course part of the Government. In that case, it would be on the Government's balance sheet. Perhaps the Minister can confirm that that is what will happen. On control, the position has fundamentally changed. Whatever it may have been in the past, the Secretary of State's announcement last Thursday fundamentally changed the position of Network Rail, and the ONS should now review its earlier decision. The White Paper that was published last week, "The Future of Rail", states:

Under this new structure: Government will have clear control of the strategy for the railways".

Chapter 3 states:

The Secretary of State … will take responsibility for setting the national-level strategic outputs for the railway industry, in terms of capacity and performance.

Elsewhere the White Paper states:

This means that the Government will be responsible for deciding the overall size and shape of the network; the key timetable outputs; policy on regulated fares; minimum performance targets; enhancement priorities; and policy on information provision and accessibility.

Later, we read that

The Government will specify the very largest projects, such as the construction or upgrades of major lines, and will determine the overall approach and by whom they are delivered". Any notion that Network Rail is an ordinary private sector company is strictly for the birds. It is a company that does what the Government ask it to do. It is not a company that is controlled by its directors or members, which is the key definition used by the ONS. The question asked by ONS is: who is exerting control over general corporate policy? There is only one body doing that, and it is the Department for Transport. One of the reasons for the Secretary of State's statement last week was that the Government felt that they did not have enough control over Network Rail. Can the Financial Secretary confirm that the time has come to end the fiction that Network Rail is a private sector company? Will she give an undertaking that the borrowings will in future score as Government debt?

2.29 pm
Mr. David Laws (Yeovil) (LD)

Like the right hon. Member for North-West Hampshire (Sir George Young), I congratulate the hon. Member for Christchurch (Mr. Chope) on raising this particularly important topic. He began his speech by saying that the subject was important because of principles of objective accounting and transparency, which are important in their own right, but he went on to describe how the way in which we classify public corporations and other entities on the dividing line between the public and private sectors has real effects in terms of public borrowing and public expenditure. He has extended the list of areas in which there are concerns about Government policy from the traditional ones of foundation hospitals and Network Rail to trust ports. He has set out clearly some of the issues, to which I hope the Financial Secretary will respond later.

The definition of a public corporation is set out clearly in the public expenditure statistical analysis. I shall not read that into the record because it is relatively lengthy and hon. Members can look it up for themselves. In the Government's definition, and in statements made by Treasury Ministers and advisers, there is a sense that the classification of public and private sector bodies is fairly clear and straightforward.

When the subject of foundation hospitals was at the centre of public and political debate about a year ago, the Secretary of State for Health wanted to put them outside the public sector so that they could borrow more easily, and the Treasury resisted because those bodies would be outside the Government's control over borrowing. The then chief economic adviser to the Treasury—Mr. Balls—described the distinction between public and private sector entities in very clear terms. On 27 February 2003, in the evidence that he gave to the Treasury Committee's inquiry into the euro, he said:

if you are running a sound fiscal policy and, therefore, you are looking at all borrowing by public bodies, then there are only really two categories, either institutions in the public sector or there for the purposes of the public accounts in the private sector. If bodies are in the public sector, whether that is central government, local government or hospitals, then they count as public borrowing, and if they are in the private sector, they count as private borrowing.

He went on to make it absolutely plain that the only way in which bodies could not be in the public sector was if they were in the private sector, and that they would have to be in the public sector if they were not in the private sector. It could not really be any clearer than that. On that basis, the Treasury managed to resist foundation hospitals sneaking out of the public sector and borrowing willy-nilly as if they were private sector bodies outside the Chancellor's control.

Unfortunately, as the right hon. Member for North-West Hampshire pointed out, when we are dealing with Ministers who are in the Chancellor's favour—such as the Transport Secretary—or when the Government are particularly keen to keep public borrowing out of public accounts because it has been inherited from some other entity, it seems that the Government are willing to stretch definitions that ought to be clear in order to achieve their own priorities. The hon. Member for Christchurch cited the Treasury Committee's report on Network Rail, and the disputes and controversy at the time. We ended up with the extraordinary position of the ONS classifying Network Rail as a private sector entity based on the fact that the directors were private sector directors, even though the body that appointed them was selected by the Secretary of State for Transport, while at the same time the Comptroller and Auditor General was insisting that, on the basis of the substance rather than the form of the transaction, Network Rail should be in the public sector.

Briefly, I remind hon. Members of the forceful words used by the Comptroller and Auditor General in his evidence to the Treasury Committee on 4 December 2002. He said:

In essence, my point was this: if Network Rail goes down, we are not going to have no railways in this country—the Government will provide them—and it is stacked up to the extent of £21 billion in the last analysis to do it. For those reasons I thought that, since that liability could accrue to the Government, it was right to make it clear and, indeed, there is a financial reporting standard, and I do my work in accordance with the financial reporting standards in the United Kingdom, that urges the principle of substance over form: that the auditor should, as it were, tell it how it is in his own judgment but should not seek to find mechanisms to, as it were, produce surprising results. It was quite clear what the surprising results were. The Government had created a structure that led to the appointment of supposedly independent private sector directors, whose presence on the steering group of Network Rail allowed the ONS to insist that that body was a private sector body even though the risks that it was taking would fall to the public sector balance sheet if Network Rail came a cropper.

The right hon. Member for North-West Hampshire has underlined how the Government have got themselves into an even deeper hole as a consequence of removing the Strategic Rail Authority from the equation and giving the Secretary of State for Transport direct control. The Strategic Rail Authority already had a long list of direct responsibilities for Network Rail, which included not only appointment of non-executive members of the board but the right to remove the chairman and chief executive of Network Rail in certain serious circumstances, receipt of information from Network Rail, provision of grant support payments, and provision of credit facilities. Now, as the right hon. Gentleman said, those responsibilities have been transferred to the Secretary of State for Transport, making it even more difficult for the Government to argue that Network Rail is a private sector rather than a public sector entity.

All those examples—trust boards, foundation hospitals and Network Rail—demonstrate the importance of having objective accounting standards and transparency, not least because the way in which those standards are applied has a real effect on the way in which public borrowing and public expenditure consequences appear on the public balance sheet. It is incumbent on the Financial Secretary to explain to us today how the Government's existing rules give priority to substance over form rather than form over substance, which seems to have been the case with Network Rail and, to some extent, foundation hospitals. I hope that the Financial Secretary will respond to that, not least in the context of trust ports, which the hon. Member for Christchurch raised today.

2.37 pm
Mr. Andrew Mitchell (Sutton Coldfield) (Con)

This has been an excellent debate, ably opened by my hon. Friend the Member for Christchurch (Mr. Chope). It is a debate about accountability and openness, and many of the important issues that have been raised lie on the public record. We look forward to the Financial Secretary answering some of the questions that have been asked today.

My hon. Friend referred to the relationship between public corporations and nationalised industries, their relationship with their Department and the need for a robust definition of public corporations. My right hon. Friend the Member for North-West Hampshire (Sir George Young), who is a distinguished former Transport Minister, spoke about the absolute requirement for transparency in public accounts. He drew our attention to Network Rail, as did the hon. Member for Yeovil (Mr. Laws), the Liberal Democrat spokesman, and the difference between classification by the ONS, which said that borrowing would be classified as private sector borrowing, and the different view taken by the National Audit Office. In passing, I draw the Chamber's attention to an article on other work done by the ONS, which appeared in the Financial Times last week and which made it clear that the ONS has massively overestimated the amount of pension savings in the economy: the organisation is clearly under some pressure at the moment. My right hon. Friend also made a point about transparency in public accounts. It is clear that, as he said, since last Thursday Network Rail is no longer a private company.

I want to dwell briefly on the important issue of trust ports, which was raised by my hon. Friend the Member for Christchurch. Although trust ports play a relatively minor role in the industry, handling only 13 per cent. of UK trade and accounting for less than one third of commercial facilities, they are, nevertheless, an extremely important part of an important industry—UK ports. Just one trust port features in the top 10 UK ports, which together handle 67 per cent. of UK freight tonnage. However, those mainly small and medium-sized ports have considerable regional and local significance and are considerable economic players. They provide particular benefit to their areas because they are free to reinvest their profits for the benefit of all port users and wider regional and local interests.

As a result of the Government retaining appointment rights and the nature of the Ports Act 1991, which allows the Government to compel the conversion of trust ports to private companies, the ONS has classified major trust ports with a turnover of £6.6 million or more as public corporations. In 2003, the Government identified 21 trust ports in England and Wales that might fall into the classification of public corporations at that time. My hon. Friend identified a number of them. Together they have a total annual net worth of almost £300 million. That classification, however, has been confined to the national accounts and, as my hon. Friend explained, the Department for Transport has as yet neither tackled the issue, nor given any guidance to trust ports on the implications of reclassification. As I am sure the Financial Secretary will acknowledge, that uncertainty is damaging.

Ports have been advised by the Government to continue to operate as normal, but they are uncertain about the future and about the possible consequences of classification. There is, I believe, no good reason for that continued delay after nearly four years. The Financial Secretary has been asked a number of important questions both on trust ports and on Network Rail and the most appropriate thing that I can do is sit down and let her answer those points.

2.41 pm
The Financial Secretary to the Treasury (Ruth Kelly)

We have had an excellent debate. I thank the hon. Member for Christchurch (Mr. Chope) not only for securing it, but for introducing it in a fairly reasonable fashion. However, while listening to him I sometimes felt that a Transport Minister should have been present to respond to some of the issues he raised. I am the Minister responsible for the Office for National Statistics, although I emphasise that the ONS is independent of Government.

The hon. Gentleman is concerned about the ONS classification of bodies in the national accounts and what that means for trust ports. Before tackling the precise points that he made, it may be useful if I provide him and other Members with a little background about how public corporations are defined. I will not go through the detail of how they are defined, because he covered that in his opening remarks.

The decision on whether a particular body should be classified as a public corporation or a private one is taken by the ONS. As in all other matters, it makes its decision free from any political interference, as is only right and proper—I am sure the hon. Member for Christchurch agrees—and uses internationally recognised standards. The classification of bodies and their transactions and the production of those statistics is, therefore, a matter solely for the ONS. In new, novel or contentious cases, ONS may refer to EUROSTAT, the EU body responsible for the compilation of EU economic statistics. As such, it would not be right or proper of the Treasury to attempt to influence or put pressure on the ONS on issues pertaining to the national accounts.

I emphasise that statistics are used for different purposes. The ONS classifies public corporations as being in either the public sector or the private sector according to a national accounts definition on international best practice. It refers to EUROSTAT work where necessary. The National Audit Office has a different remit. It classifies organisations for a different purpose. After the debate that the hon. Member for Yeovil (Mr. Laws) and the right hon. Member for North-West Hampshire (Sir George Young) referred to, that issue was raised in the context of Network Rail. Len Cook from the ONS and Sir John Bourn issued a joint statement saying that they were considering the same issues but had different purposes when classifying the organisation, so it was entirely appropriate that they came to different conclusions.

As all hon. Members know, the activity of all public corporations is included in the Government's key fiscal indicators and impacts on the fiscal rules. That gives a full picture of Her Majesty's Government's transactions, assets and liabilities, measured to include all public sector bodies, and ensures that the UK public sector's fiscal position is fully reported. So it is essential that we ensure that the activities of public corporations are properly reflected in our controlling and reporting of public expenditure.

The hon. Member for Christchurch raised particular issues about the classification of trust ports. That issue has been debated between the ONS and the Department for Transport—since 2001, I believe, rather than since 2000. He rightly points out that the question is complex. The answer depends on exactly how those corporations are controlled. The ONS was in discussions with the Department for Transport for a long period—until spring this year—about the appropriate classification. Initially, it thought that all 100 trust ports ought to be in the public sector. Once the Department for Transport had gathered and presented evidence from the ports, the ONS agreed that only 18 ports fell within the definition of a public corporation.

The matter has taken a long time to sort out, but now, I understand, the Department for Transport is completely content with the ONS decision. It is right that the ONS takes the decision, and that the Department abides by it.

Mr. Chope

The Financial Secretary has already given more information than I have been able to gather from Transport Ministers, for which I am grateful. She referred to the fact that 18 ports come within the classification. Can she say which of the 21 to which I referred have been excluded from the 18?

Ruth Kelly

I cannot tell the hon. Gentleman here and now, but I will write to him with the classification agreed by the ONS. How the Department for Transport accounts in its resource accounts is an entirely different question, does not relate to the national accounts definition of a public corporation and is a matter for the Department and its auditors.

The Department for Transport is working closely with trust ports to identify why those 18 have been classified as public corporations and whether that is the appropriate structure for them. However, it is completely content with the ONS interpretation and classification. There is nothing further that I can add as Minister, except to say that the Department is now working closely with the trust ports. I am sure that any issues that the trust ports have with their classification will be dealt with directly by the Department for Transport.

2.47 pm

Sitting suspended.