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Mr. Davey: Indeed; in this sphere, New Zealand is so far ahead of us that we can only struggle to catch up. Its example should be a lesson to the Government. In Committee, I referred right hon. and hon. Members to the New Zealand Government's website, at www.gov.newzealand. With a few clicks, one can access New Zealand's Acts of Parliament, including the Financial Reporting Act 1993, which established the type of independent accounting standards body that we propose in new clause 1.
Subsequently, the New Zealand Act has been amended several times, based on New Zealand's experience of some of the matters that we have been debating. It started off by saying that the board should simply adhere to generally accepted private sector accounting practices, but, because of experience, it has seen fit to amend those instructions. However, we could learn lessons from New Zealand. We could ensure that, in establishing the board, its remit goes slightly wider than New Zealand originally envisaged.
Mr. Cash:
Is the hon. Gentleman aware that the original advice given to the New Zealand Government on
Mr. Davey:
I have always admired Professor Charles Goodhart and thought that he was a great authority on monetary policy, but I did not realise that his expertise and skills have been sought on those aspects of fiscal policy. I am grateful to the hon. Gentleman for enlightening me on that.
The Treasury seems to have a problem in relation to the Accounting Standards Board and Departments' internal accounts. In evidence--I think to a Select Committee--Professor Likierman really focused on that issue. He said that he believed that the ASB had little experience in dealing with private sector internal accounts, and that it would therefore be inappropriate for the ASB to consider public sector internal accounts. However, I do not think that the two cases are related. The House could develop the ASB as we want it to be developed.
In the private sector, the various regulatory bodies are increasingly passing regulations, guidelines and advice on how internal management accounting should be performed within companies. The public sector could benefit from that information and learning, and from those processes in the private sector. The arguments against our proposals--to the extent that we have heard any from advisers or Ministers--do not stand up to analysis.
I conclude by reiterating the importance of the new clause. This place ought to take financial accountability far more seriously than it does and should realise its significance in the life of the nation. If we do not ensure that the information provided to the House is of the highest quality and has the mark of legitimacy and credibility so that we can have faith in the accounts, the whole process will be undermined.
Mr. Letwin:
Does the hon. Gentleman agree that, shamefully, we have something to learn from local government? We would never tolerate the arrangements that are being proposed for this place and the Government being applied to local government.
Mr. Davey:
The hon. Gentleman is right. Local government has had aspects of resource accounting for some time. Local government financial scrutiny is far from perfect, but it is better than in this place. On my local council, the royal borough of Kingston, the opposition parties--I am sure that this is true for all local authorities--table amendments to move resources from one spending area to another. The House does not have procedures for such amendments. We do not examine accounts properly. Local government is way ahead in accounting standards practice and the way in which debates take place. I hasten to add that there is massive room for improvement, but the room for improvement in central Government accounting and reporting is so huge that it does not compare.
We come down to an issue of democracy. Are the Government happy for their policies to be properly reported on and accounted to Parliament? It will be a great
shame if they do not accept the new clause and questions will increasingly be asked about what has happened to their modernising agenda.
Mr. David Davis:
I had not intended to speak on the subject, largely because the Public Accounts Committee has not opined on it recently, but I have been provoked to offer a few words, however briefly, because this is a constitutional issue of some magnitude.
Democracies live on a diet of truth. Indeed, they die when they get the opposite. That is why the House spends a great deal of time battling over what is the real information in front of us. When the previous Government were in power, the battle tended to be about whether the unemployment figures were correct and whether the multiple changes in calculating them were properly founded. Now there are battles about issues such as tax burdens and hospital waiting lists.
Unfortunately, the battle in the Chamber does not serve to ground the real truth in the statistical areas that we are talking about, be they accounting numbers or performance numbers. That falls to a much more technical process. To some extent, the Select Committees do a better job. That is why they have been the jewels of this faded House in recent times. We are dealing with the fundamentals of the figures that will be in front of us if we are to see the public service revolution that the hon. Member for Kingston and Surbiton (Mr. Davey) referred to.
Labour recognised that in opposition. One of the jewels of the Labour manifesto was the notion of an independent national statistics office with an independent director of statistics. That has not yet come about, but its inclusion was a measure of the importance of the issue, particularly to Oppositions, but also to Governments and democracies in general. It is of course a pity that, if the figures are left subject to political influence of Ministers of whatever party, there is always a temptation to alter the numbers to suit the Government of the day.
Mr. Letwin:
Does my right hon. Friend agree that whatever logic gave rise to making the statistics function more independent must also apply to the accounting functions?
Mr. Davis:
That is my general point. Whatever the argument--and it is one based on the importance of accurate factual data for a democracy--it applies to all data, whether they are accounting numbers or performance figures.
One of the few conversations with my right hon. Friend the Member for Henley (Mr. Heseltine) in which I have agreed with him 100 per cent. was when he and I agreed that when we first became Ministers we were both shocked by the complete absence of decent management information in Whitehall. Ministers arrive and are interested in the effect of their policies, but they find it almost impossible to get a measure of it. I see the Chief Secretary smiling at me. He probably recognises the syndrome--certainly most Ministers do. When I was at the Cabinet Office trying to make the citizens charter work, I remember asking for examples of how it was working, only to be told by the civil servants that it was not possible to get those examples or the aggregate data
that would tell us whether we were delivering a performance for the citizens. That is a disgrace in a small organisation; it is a total disgrace in an organisation as large, complex and public service oriented as the Government.
Resource accounting offers the first step towards that. Eventually, the existence of resource accounts, in conjunction with public service agreements, will mean that there will have to be management information systems within Whitehall. However, we face a serious risk if something like the amendments proposed today--I am concerned not so much with the amendments, but with the principle that they encompass--is not espoused by the Government or their successors. The temptation to bend the figures or to choose one set of figures rather than another because they are more favourable to the Government of the day will have the effect in due course of corrupting not just the numbers, but the belief in the numbers. That is very important. If the people who run the public service do not believe the information or it has no credibility for them, their actions on the basis of those numbers will be weakened. They will worry more about the perception than the reality.
Back in the 1960s there was a wave of creative accounting in the private sector, partly as a result of changes in accounting standards with which the hon. Member for Kingston and Surbiton will be familiar. That had a massively deleterious effect on the operation of British business, which in my judgment was just as bad as some of the trade union problems that existed at the time. It was the capitalist half of the equation. All those factors undermined the entire decision-making mechanism in British industry. If we do not have some external standard, be it an independent FRAB, the ASB or some other body, we shall be taking a risk with that standard.
Mr. Letwin:
Does my right hon. Friend agree that in a sense the situation is even worse in the public sector because the Government necessarily have to deal with highly inadequate data on the macro-economic front? The only aspect of macro-economics which they could account for properly is their own income and expenditure if there were an independent body.
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