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Dr. Nick Palmer (Broxtowe): I am slightly surprised that the hon. Gentleman suggests that private sector accounts have been easily comprehensible for the past 600 years. I do not remember that always being the case, but is he not letting the best be the enemy of the good? He is saying that, because at the moment we do not account for any of those things--capital expenditure, schools, hospitals and roads--no reform of the accounting system should be countenanced; but reform should cover all those things. Does he agree that logically his position would lead to a delay in the revision of the accounting system until such time as all those elements could be introduced? Another year or two might pass before we reach that point.

Mr. Letwin: The hon. Gentleman, who is a friend of mine, asks a typically acute question, which I shall answer as best I can. As I was not able to ask Professor Likierman, I cannot give an exact reason--but I have a speculation. I think I know why it is that schools, hospitals and roads, which are usually the first items that one would start with, have been excepted. It is because "Yes Minister" is often less of a parody than a reality.

I think that what happened, roughly speaking, is that a Minister--probably my right hon. and learned Friend the Member for Rushcliffe--said, "We ought to have some resource accounts". Subsequently, many permanent secretaries went into a huddle and said, "This is a most frightful thing that is hitting us--we shall for the first time have to put everything down. What can we do? We must find the smallest items--those that will cause the most technical difficulty, but reveal the least--and begin with those. Indeed, we must begin with those items that do not guarantee that we will ever have to move beyond them. We must remember to include such words as 'it is likely that', and assure the House that 'in due course', 'perhaps', 'maybe', 'if', 'sometime', 'never' we shall get to it. Meanwhile, we will have the most enormous resource accounting manual. We will also be able to give the Minister a Bill"--which I shall deal with shortly, as it will make the Chief Secretary one of the most powerful people in the whole world--"so that he will be very, very happy with us. We will get our knighthoods early while having succeeded in not writing down anything that matters two hoots."

I grant the hon. Member for Broxtowe (Mr. Palmer) that company accounts are an imperfect mechanism--as those of us who have been dealing with them for many years in the private sector know all too well--but they have the great advantage of regularity--a term to which I shall return momentarily--and the advantage of relative simplicity. The combination of those two advantages means that people who are skilled with such accounts and the notes accompanying them, because they are composed under standards of accounting practice, have at least a chance of doing the detective work to find out what is really happening. I fear that because the Bill contains no such provisions in the public sector, no such ability will pertain to the public sector. That is my biggest complaint.

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As some of my hon. Friends have already started to explain, the situation is really very bad in one respect. What does clause 5(2) do? Does it say something about establishing an independent watchdog to ensure that there are proper definitions? No, it says:

Clause 5(3) states:

    "The Treasury shall exercise the power to issue directions under subsection (2) . . . subject to such adaptations as are necessary in the context of departmental accounts"--

which I think should read "as are judged necessary by the Treasury", and "subject to such adaptations as the Treasury chooses".

In clause 7, we might expect to see mention of an independent body, but not a bit of it. Subsection (1) states:

Subsection (2) tells us:

    "Accounts under subsection (1) shall be prepared in accordance with directions issued by"--

you guessed it--

    "the Treasury."

When we come to the whole of government accounts, in clause 10(2), we are told:

    "The accounts shall--

    (a) contain such information in such form as the Treasury thinks fit, and

    (b) be designed to conform to generally accepted accounting practice subject to--

our old friend--

    "such adaptations as are necessary",

as determined by the Treasury.

I think that we are able to describe the Bill and its provisions on who will define terms and the rules of the game as a Bill that allows the Treasury to do exactly what it chooses. Quite a good first clause in the Bill would be one that said, "Under this Bill, the Treasury may do anything it likes." That is why I said that the Chief Secretary will be a very powerful person.

Mr. Edward Davey: I have much sympathy for the point that the hon. Gentleman is making. However, will he tell us where in the previous Government's White Paper, "Better Accounting for the Taxpayer's Money", they proposed an independent body to determine public sector accounting standards?

Mr. Letwin: I am very grateful to the hon. Gentleman for that question, but am unable to answer it. However, in about two or three minutes, I shall be making an announcement showing that, unlike the current Government--the Liberal Democrats have never had the chance to be in government--some of us learn from our mistakes. Although Liberal Democrat Members never--I have checked the record--mentioned the point at the time, I am grateful for converts at any time. As I shall explain shortly, Conservative Members have been converted on the issue.

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The problem is deeper in two senses--only one of which has been dealt with by the hon. Member for Workington (Mr. Campbell-Savours); by my right hon. Friend the Member for Haltemprice and Howden(Mr. Davis), the current Chairman of the Public Accounts Committee; and by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the former Committee Chairman.

In clause 11, there is the first glimmer of an independent body. It states:

Nobody doubts the independence of the Comptroller and Auditor General, nor his competence. The problem is that the clause goes on to say that the Comptroller and Auditor General

    "shall examine accounts sent to him under this section with a view to satisfying himself that they present a true and fair view."

That language has been constructed precisely to limit the scope of his inquiries--with all the impediments that were described as to how he conducts them--to the questionof whether something has been taken, stolen or misappropriated.

We are blessed that British government, under any Administration, is, on the whole, honest. The Comptroller and Auditor General and the Public Accounts Committee do good work but, on the whole, they do not have to work very hard because, on the whole, our Administration is honest. Thank goodness for that. The proposal continues that fine tradition--there is no complaint about that--but also prevents the Comptroller and Auditor General from doing more.

We do not have to look far for the truth of that assertion. In the notes on clauses--which are remarkably open and splendid--we are told:

We are dealing here with a clear case. The Bill sets up the Treasury--because the Treasury designed the Bill--as the body which will decide on the definitions, on how accounts are prepared and presented and on whether, in the words of Professor Likierman, they do or do not contain an undue proportion of public relations about them. All these things are to be left to the Treasury. Yes, there is proper regard to whether money has been stolen or misappropriated, but none to having an independent body verify whether the presentation of the accounts is comprehensible, clear or designed to provide a misleading opinion.

Mr. Edward Davey: Is the hon. Gentleman aware that the National Audit Office, the Public Accounts Committee and the Select Committee on the Treasury prefer the Government to go for the true and fair opinion basis, rather than the proprietary and regulatory basis that the Conservative party has proposed?

Mr. Letwin: If the body was independent and was setting up standards of accounting practice, I would entirely accept the proposition that true and fair would be the right measure. Alas, there is no such body and no such set of definitions.

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That leads me to the indictment. This Bill--not so surprisingly from the Government--is a triumph of presentation over substance. The Government are saying one thing and doing another. The Bill is an empty box. The most important assets and liabilities are missing; there is total discretion for the Treasury; and there is no independent check on definition or presentation. It is not a resource accounting Bill in anything but name; it is a creative accounting Bill, from a Chancellor who has proved himself to be the most brilliant creative accountant in British political history. [Interruption.] I thought that that was a compliment and I am surprised that the Chief Secretary rejects it. That compliment has been paid to the Chancellor by many external observers, and will continue to be paid as long as he continues on his course.

To be constructive, I shall make a promise. We are binding ourselves once and for all--because we have learned from our mistakes--to a clear, complete and comprehensible set of public accounts. That is democratically proper, and a matter of common sense. We have announced today that we have asked Sir Bryan Carsberg--the chairman of the International Accounting Standards Committee, and one of Britain's most distinguished accountants--to head a new shadow accounts commission. It will remedy the defects in the Bill by setting out standards of national accounting practice, clear definitions and clear systems of presentation which mirror the statements of standard accounting practice in the private sector, so that no future Chancellor--Labour or Conservative--will ever have the opportunity to mispresent the accounts and mislead the public again. I believe that that is one of the great advances in the conceptualisation of fair and accountable government in this country.

I will make an offer, beyond that promise, to the Chief Secretary--come with us. Take our shadow accounts commission with its chairman intact and we can set it up as an independent body with cross-party consensus. Then we can take this lamentable empty box of a Bill and turn it into an Act that we can all be proud of and that gives us genuine resource accounts for the whole Government.

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