§ (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 380 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. 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 381 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.
§ 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. 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, 382 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 384 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.
385 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.
§ 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 386 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 387 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.
§ 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 388 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 389 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. 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 390 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.
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 391 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.
392 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.
§ Mr. Tim Collins (Westmorland and Lonsdale)
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 393 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.
394 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 toa 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.
395 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.
§ Mr. David Prior (North Norfolk)
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, 396 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.
§ Mr. Howard Flight (Arundel and South Downs)
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 397 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.
§ 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.
398 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.