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Mr. Lansley: Would the hon. Gentleman care to reflect on the point that he has just made? A battleship is an asset that is used but offers no economic return, whereas revenue expenditure on education may be construed as having a direct economic return. Which of those two should be capitalised in a firm's accounts?
Mr. Davey: There is obviously a difference. It clearly makes sense to budget on a cash flow basis for large sums
that are consumed over a period of years. A battleship has value over its lifetime, and there is no reason why the accounts should not reflect that.
It is time that the House had access to the sort of meaningful information that would be provided by resource accounting and budgeting. I am astonished that the Conservatives should talk about the sovereignty of the House in terms of the European debate. When they were in government, they failed to produce information of the kind that the House needs to hold the Government to account. The House does an appalling job in holding the Executive to account over the spending of billions of pounds of taxpayers' money; but the Conservatives, when they were in power, failed to provide the House with the information that we need in order to hold the Executive to account. That was a lamentable failure.
The Conservatives talk about sovereignty, and about defending the rights of the House. When they were in office, they did nothing to enable the House to do its job properly.
Mr. Derek Foster (Bishop Auckland):
I find the hon. Gentleman's argument interesting. How would he propose to strengthen the ability of the House--particularly that of Select Committees--to bring the Government to account? In fact, we do not scrutinise any accounts in this place, do we? They all go through on the nod, when no one is here. It happened for years under the Conservatives. Only when the then Opposition called votes--as we often did, until 3 am: unfortunate people were having to vote every 15 minutes--did we actually vote on the accounts. We did it just to keep hon. Members here: we did not do it in order to scrutinise the Government. [Interruption.]
Mr. Deputy Speaker (Mr. Michael Lord):
Order. The right hon. Member for Bishop Auckland (Mr. Foster) has probably finished his intervention.
Mr. Davey:
I am grateful for the intervention, which enables me to draw hon. Members' attention to a report that will soon be forthcoming from the Select Committee on Procedure--a Committee of which, for my sins, I am a member. We are reporting to the House on financial procedure, and on financial reporting to the House.
A number of issues will feature in our report. It relates to information, and resource accounting budgeting will go some way towards providing that. It relates to resources for Select Committees. It relates to changing procedures in the House to enable it to vote on Select Committee reports that have examined departmental spending programmes. A change in procedures and information could enable the House to hold the Executive to account far more effectively.
Let me add a rider. I do not think that this will appear in the Select Committee's report, but we need to change the political system--the rules of our political culture in the United Kingdom. I believe that proportional representation would be very effective in enabling the House to bring the Executive to account.
If the next code for fiscal stability really does develop my theme of resource accounting and budgeting, that will take the fiscal framework much further. Let me say to the Chief Secretary that I hope that that theme will be linked with the public service agreements which I believe that he is soon to announce. I think it very important for those
targets to be linked with the accounts, so that the House can see the targets in the context of the money that it votes to the Executive. There is a link there, which follows from the principles of transparency and efficiency that are embedded in the code.
Having praised the Government to some extent, let me add that there are some shortcomings, some of which were mentioned in the Standing Committee that gave rise to this discussion of section 155 of the Act. Those shortcomings are still germane, and I hope that the Government will produce better codes in future. The main point, however, is that there is still no link with the environment--no link with sustainable development. Clearly, sustainable development is connected with fiscal stability, and it should be at the heart of Government economic policy.
Recently, the Deputy Prime Minister published a document called "Sustainability Counts"--and a very good document it is. My only concern is that it was launched by the Department of the Environment, Transport and the Regions, not by Her Majesty's Treasury. If the environment is going to be put at the heart of government, such documents should come from the Chancellor of the Exchequer. That would be a case of joined-up thinking.
The Deputy Prime Minister's foreword to the document states:
Another aspect of that document is directly linked to fiscal stability. One of the headline indicators proposed by the Deputy Prime Minister is social investment. That is introduced in the document with these words:
I am not suggesting that privatisation was not a good thing in many industries, but it did not create any new wealth; it just switched ownership. The headline indicators in that document could usefully be incorporated into the code.
There is another shortcoming in the way in which the codes are being framed. They do not talk much about the role of fiscal policy in economic management--how it can be used counter-cyclically, and how, within a single
currency, it could, as we heard earlier, take a proactive, not a passive, role in the national economic management of the United Kingdom.
The final shortcoming is that such a code and the documents that it requires a Government to publish, particularly economic and financial projections, will not be updated just before a general election. One of the benefits of the code is that it enables us and the general public to hold the Government to account, so what more important time do we need the code to be updated and published? We need it just before a general election.
History shows us why we need the code to be published at that time. In 1992, I had the pleasure of being economics adviser to my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith). We were analysing the pre-election Budget, which was published by one of my predecessors, now Lord Lamont. He had published the Budget two days before the general election was called in 1992. In that Budget, he introduced the 20p income tax rate, and published a public sector borrowing requirement of £20 billion.
That was not audited. It was much disputed and debated during the general election. When the Conservatives managed to scrape back, unfortunately, after the 1992 election, they changed the PSBR within a few months. It magically went up from £20 billion to £50 million. That is why we need such codes, and why we need them to be published just before elections--so that the British people can vote on facts, not on fatuous made-up figures from the Executive.
The code borrows from an innovation from New Zealand. It borrows many of the ideas in its Fiscal Responsibility Act 1994, but the one lesson that it has not borrowed is the requirement to publish the code just before a general election. That is one reason why Liberal Democrats, although for the moment we are prepared to give the Government the benefit of the doubt, remain sceptical about how they will use the code. If the code is merely an illusion--that was the charge made by the right hon. Member for Wells (Mr. Heathcoat-Amory), from the Conservative Benches--it will be a great disappointment. There is the potential for a significant innovation in economic policy. If it is missed, it will be a great shame.
"The Government is committed to a new way of thinking. One which puts environmental, social and economic concerns alongside each other at the heart of decision making."
That is absolutely right. It continues:
"We are used to judging the economy's performance on the basis of statistics such as GDP, inflation and employment figures. I want these broader 'quality of life' headline indicators, over time, to become just as useful and familiar."
That is why they should be in the code. The code refers to gross domestic product, to inflation and to employment. I hope that, in due course, the code will refer to those other indicators, which the Deputy Prime Minister at least thinks are important.
"Sustainable development means living off our income, not eroding our capital base, so that we are not storing up problems for future generations. Especially important is investment in 'public' assets which benefit everyone."
The Deputy Prime Minister was right. The previous Government eroded social investment, ran down public assets and reduced public wealth in an attempt to create an economic golden legacy, but we knew that just switching things from the public to the private sector did not necessarily create any wealth.
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