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Mr. Edward Davey (Kingston and Surbiton): As usual on this Bill, I find myself in almost total agreement with the hon. Member for West Dorset (Mr. Letwin). Our parties fought side by side in Committee to try to get an independent body to set the standards for Government accounts. The Government did not give way. I agree that the Lords have done a good job in moving them some way down that path.

I agree with much that the hon. Gentleman said about the wording of the Lords amendments, and especially the phrase "have regard to"--I hope that the Minister will give a clear and frank response--but I think that they are rather stronger than he suggested. The amendments do not allow only the Government to ask the ASB for guidance. Other parties, such as the National Audit Office, will be free to write to the board and express worries about what is going on. Indeed, the Opposition parties could do so. That is an important safeguard.

Mr. Letwin: I may have paid insufficient attention to that, and I agree wholeheartedly that perhaps our very first action--it could be a joint action--should be to seek guidance from the ASB on a range of contentious issues in the accounts.

Mr. Davey: I am grateful for that contribution.

In Committee, we expressed a concern that a future Government might fiddle around with the accounting standards in a way that is not transparent or immediately obvious and could go undetected by parliamentarians and even the NAO. When, at the start of this process, we examined the resource accounting manual, which lays down the principles, guidelines and definitions, it became immediately clear that this is a complex area with huge detail, so it will be very difficult, when a future Chancellor makes, say, the fourth or fifth comprehensive spending review statement--which may contain millions of different figures for the House to come to terms with rather quickly--for us to notice slight changes in the underlying accounting definitions.

Mr. Howard Flight (Arundel and South Downs): I seek confirmation that the hon. Gentleman intends that the ASB's investigation should be public and transparent.

Mr. Davey: I can confirm that. I am only surprised that the hon. Gentleman had to ask.

The benefit that the amendments bring to our scrutiny of the accounts is that, now that the ASB has a remit to issue guidance, to which the Treasury must at least

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"have regard"--whatever that phrase means--there will be an independent body with a statutory duty to consider these matters and to have a watching brief for them. I hope that the board will take that new statutory function very seriously. It should note that hon. Members of all parties want that. It should see itself as the watchdog patrolling this complex area, which generally receives far too little attention from the House.

7.30 pm

This is a major step forward. I look forward to the ASB pulling up future Governments of whatever colour on any tricks that they might seek to play. However, I agree with the hon. Member for West Dorset that it is not the best solution--it is not the perfect solution. We would have liked the ASB or a similar independent body to be the initiator in the process of defining what the public sector's accounting standards should be. If I may answer his query as to what "have regard to" means, to me, it is the last-ditch defence by the mandarins to give the Treasury a last attempt at flexibility. That is why I am not totally happy with it and why I would like the ASB or a similar body to be the initiator.

The Liberal Democrats would seek to empower an independent body to be the guardian of the public sector's accounting standards. That is the best solution--we debated the matter at length in Committee--but, because we see the measure going a long way to meeting that aim, at this stage, we will not seek to disagree with the Lords on the amendments.

Miss Melanie Johnson: To answer the hon. Member for West Dorset (Mr. Letwin), it is perhaps important to rehearse where we are coming from. I remind him that the Bill requires resource accounts and the whole of Government accounts to show a true and fair view and to conform to generally accepted accounting practice--GAAP--subject only to such adaptations as are necessary in the context of departmental accounts. The Government's new amendments further strengthen that by requiring the Treasury to have particular regard to guidance issued by the ASB.

The hon. Gentleman asked what the words


mean. They mean that the Government will apply the ASB's guidance, where it is appropriate, to the accounts of Government Departments. Compliance with the relevant accounting standards is usually necessary to ensure a true and fair view. Resource accounts will be required to meet that particular standard.

It is important to recognise--I reiterate what I said before--that any variations from the guidance will have to go through the FRAB, too, so it is not possible for such variations, as it were, to go by without some attention being drawn to them. Any proposal to depart from GAAP is discussed with the FRAB. If it disagrees with the Treasury's proposed accounting treatment, it can report to Parliament, so there is a chain of events. Were there to be any need to vary things, for whatever reason--good in our view, or otherwise in the view of the Opposition--it would require that process to be gone through. I hope that that is reassuring to Opposition Members.

Mr. Letwin: That is very helpful. I wonder whether the Economic Secretary could complete the loop by telling us

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whether she will ensure that, where there is a departure from the ASB's guidance and the matter is referred to the FRAB, she will make that plain to Parliament in some appropriate way.

Miss Johnson: I am not quite sure what the hon. Gentleman is suggesting. I have said that, where there is a disagreement in some way, obviously, it must go to the FRAB, and the FRAB is in a position to report that to Parliament. I would have thought, if that disagreement were not resolved in some way, it was highly likely--it will be entirely up to the FRAB to take a view--that it would be reported. That is my understanding of the arrangements. Therefore, that disagreement will be drawn to the attention of hon. Members, including those on any Committee that might consider such matters.

As for persons with particular expertise on accounting matters, the Government are planning to consult with the Comptroller and Auditor General on the membership of the FRAB to help to ensure independence. We regard it as important that the independence, skill and expertise of such individuals be clearly established. We will seek to achieve the same objective as that of the hon. Member for West Dorset.

The hon. Member for Kingston and Surbiton (Mr. Davey) referred to ASB guidance. As I know that he is aware, the ASB does not generally provide specific guidance for particular sectors or individual bodies, but it issues standards that are of general applicability across all bodies that produce accounts. It is on that basis that we will be tied in with its guidance. It is important to recognise that what I said earlier builds into the process a number of safeguards. I hope that that meets his concerns.

Lords amendment agreed to [Special Entry].

Clause 8

Comptroller and Auditor General: access to information


Lords amendment: No. 5, in page 5, line 5, leave out
("of a government department's accounts")

Miss Melanie Johnson: I beg to move, That this House disagrees with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Michael J. Martin): With this it will be convenient to take Lords amendments Nos. 6 and 7 and the Government motions to disagree thereto, Government amendments (a) and (b) in lieu, Lords amendment No. 8 and the Government motion to disagree thereto.

Miss Johnson: The Government fully recognise the arguments that led to the amendments that were passed in another place. However, the amendments go far wider than is justified and contain drafting defects that need correction. The Government therefore propose instead two amendments that provide a more balanced approach to the issues. Our approach also paves the way for the Sharman review of audit and accountability, which is about to start; it will have its first meeting on Wednesday, I believe.

The main subject of the Bill is departmental accounts. Clause 8 and the preceding clauses contain provisions relating to the audit of accounts by the CAG. Amendments Nos. 5 and 6 would divorce clause 8 from that subject and

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instead turn the clause into a general power of access for the CAG. By referring to "examinations" without any qualification, the amendments would extend way beyond the audit of accounts to all other examinations by the CAG, including his value for money examinations carried out under the National Audit Act 1983.

The 1983 Act contains its own provisions for access for the CAG. It has never been the intention that this Bill should extend into that Act's territory. To do so opens up entirely new issues that have not been the subject of debate or consultation at any stage so far. The Government expect that, in his forthcoming review, Lord Sharman will look at issues relating to the 1983 Act, as well as audit issues.


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