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Dr. Palmer: Does my right hon. Friend agree that, where a public body such as a local authority is being audited--in that case it would be by the Audit Commission--it would be unreasonably onerous to expect it to be audited twice? If all public bodies of any type were to be brought under the Comptroller and Auditor General, which I understand to be my right hon. Friend's recommendation, would not the legislation governing the audits for all those bodies have to be amended?

Mr. Sheldon: The NAO should have access. It has access in certain circumstances at present, but we want to ensure that it is regularised. The NAO should not have to plead for it, but should be able to gain access as of right.

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The Bill makes no provision for the NAO to have access to bodies whose accounts are going to be consolidated into WGA--whole of Government accounts. Instead, it offers the inadequate alternative of access to the auditors of such bodies.

It is important that the National Audit Office should have access to all bodies, but also that it is able to audit them. It is not enough for auditors simply to have access, because they must then have knowledge that something is wrong or have some other reason for inquiry. There should be a basic right of access. All sorts of important matters have emerged only because of audit. For example, in the Metropolitan police, the person responsible for paying money for secret matters was living like a lord in Scotland, having taken £5 million. He used to return from his weekends there because he had the power to authorise expenditure and to sign cheques under a provision of secrecy. That matter would not have come out without audit. Only when audit occurs do we discover what has happened.

The Public Accounts Committee and the Public Accounts Commission strongly and unanimously want the changes that I have outlined. What those who drafted the Bill saw as a mainly technical measure did not allow for the important aspects that I have detailed. We are concerned with the accountability of the Executive to Parliament on the most important matters that concern both. I recall a meeting in the Treasury with Denis Healey during which I had occasion to remind him that I was a Minister second and a Member of Parliament first. That is the proper order of priority.

Let me now refer to the rest of the Bill. The important part relates to work on getting the private finance initiative into better shape, and a new body is being formed. The intention is to make the public sector a more intelligent procurer of PFI projects. Like the taskforce, the new body will advise public sector procurers to help to develop projects to the point at which they can be put to market, and it will help them to choose the best advisers for the project.

I am in favour of the PFI, but we must be rigorous about the conditions. If the private sector is more efficient in certain areas than the public sector is, that is splendid, and we should ask that sector's advice and have the work undertaken by it. The private sector can overcome the cost of capital, and the public service can have capital at a lower level. The private sector must mount a not unreasonable hurdle, but if it can be more efficient, by all means let us allow it to be so.

The private sector must also accept risk. Our main tasks are to ensure that it has the right expertise, and that it accepts risk. I see considerable merit in Partnerships UK. To ensure that all that I have said will happen, the Comptroller and Auditor General must have full access to PUK.

I am delighted about resource accounting in more general terms. It is difficult to understand what the estimates and the appropriation accounts really mean. The headings would put anyone off. As the Chairman of the PAC knows, he must go through the papers and must sign them off, but it is difficult to know exactly where the money is going in the detailed programmes. What he must ensure is regularity. We have long taken regularity for granted, but we must not underestimate it. One of my favourite quotations is that cash is certain while

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everything else is guesswork. There is something in that, but certainty is not enough. We must know how procedures operate.

We must not go over to resource accounting while losing the advantage of cash accounting during the changeover period. We could fall between two stools in moving from cash accounting to resource accounting. I want parallel operation. Those who work in the area dislike parallel operation because they believe that the work is done twice. But we have seen the consequences of that idea in computerisation projects when the old system has been destroyed but the new system has not worked. Hundreds of millions of pounds have been lost. I always used to ask people whether they had not thought of parallel operation for a reasonable time. They always said yes, but that they were sure that they had got the new system right. I want to ensure that they get it right in this case too.

The Bill gives us the opportunity to correct what John Garrett described as the hijacking of the Exchequer and audit Departments; it will assert the rights of Parliament that Gladstone intended, which which need to be restored. The full implications of what I have outlined have not been adequately appreciated, and I certainly expect that my right hon. Friend the Chief Secretary, with his concern for the duties of his office and for the rights of Parliament, will accept certain amendments in due course.

5.35 pm

Mr. David Davis (Haltemprice and Howden): I confess to having some sympathy with the Chief Secretary to the Treasury, who took up his job not six weeks ago and received the beautifully wrapped parcel of this Bill, only to hear an ominous ticking from inside it. Let us hope that we can turn it into an alarm clock.

As the Chief Secretary implied, the Bill goes right to the heart of the relationship between Government and Parliament. It is seen by some people as a technical measure, but it is a constitutional measure because it is primarily about that relationship between Parliament and Whitehall and the way in which Parliament allows the Government the money that they need to run the country. It is as simple as that.

Sound and proper finance in the UK is underpinned by the virtuous circle of accountability that has already been referred to by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), my predecessor as Chairman of the Public Accounts Committee, and the Bill affects every aspect of that circle. The virtuous circle, outlined by Gladstone, involved, first, the system of supply by Parliament; secondly, proper accounting by Government; thirdly, audit by the Comptroller and Auditor General; and, finally, scrutiny by the Public Accounts Committee on behalf of the House of Commons--with, of course, some estimates votes along the way.

The Bill affects all stages of that cycle, so it is of fundamental importance to the powers and responsibilities of Parliament in general and of the PAC in particular. Despite the measure's critical importance to our work, the PAC was not properly consulted on the draft Bill; the whole Committee is concerned about the content. We were promised a draft Bill in March, but it never arrived. The National Audit Office was given only three weeks between receipt of the draft Bill and publication. That does not represent proper consultation by any stretch of

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the imagination. To give the House some insight into how short that period was, the original memorandum seen by the PAC in March contained no proposals about the CAG's access rights, whereas the Bill repeals section 28 of the Exchequer and Audit Departments Act 1866 and substitutes an inadequate access provision.

The memorandum contained nothing about WGA--the whole of Government accounts. It contained nothing on Partnerships UK. It stated that section 26 of the 1866 Act might need to be amended, whereas the Bill repealsthat section without replacing it. That section requires Departments to explain any excess of expenditure beyond the original estimate--a rather important component of the Act. The memorandum specified an intention to retain the statutory appropriation accounts timetable for resource accounts, whereas the Bill allows the Treasury to change the timetable by statutory instrument, subject only to annulment by either House.

Those are serious shortfalls in the consultation process. I happily accept that some were caused by problems with the parliamentary draftsmen--I am sure that the Government have hit the timetable problem that occurs every year. None the less, the procedure was inadequate. My hon. Friend the Member for West Dorset (Mr. Letwin) referred to the comedy programme "Yes, Minister". My hon. Friend might think that the programme is a comedy, but, after three years as Chairman of the PAC, I know that it is a training film.

The Bill meddles with the existing legislation governing financial accountability--a process that dates from the Exchequer and Audit Departments Acts of 1866 and 1921. It may not have been intended that the Bill should meddle in those procedures--in effect, the Chief Secretary said that--but it does. Perhaps the absence of intent explains the inadequacy of the new wording. For example, the Bill does not modernise the audit process to reflect changes in the delivery of public services. That was the thrust of the speech made by the right hon. Member for Ashton-under-Lyne; I shall return to his comments.

The Bill locks into place weaknesses in accountability that have grown up in the past century or so, and it does nothing to put them right. The public sector financial environment has changed almost beyond recognition since the passage of the first Exchequer and Audit Departments Act in 1866, yet legislation providing a foundation for the work of the Comptroller and Auditor General in examining accounts remains--even in this Bill--largely as framed 130 years ago.

As the Chief Secretary to the Treasury said, the Bill provides an historic opportunity to remove obstacles that have hampered the House's ability to scrutinise the work of government. Legislation passed in 1866 appointed a Comptroller and Auditor General to audit all Departments, including automatically any new Departments created. That was clearly intended to cover every piece of Government expenditure. Since then, government has undergone massive reorganisation, putting large amounts of expenditure outside the departmental boundary. It is a dangerous anomaly that those managerial changes should have arbitrarily removed from automatic parliamentary scrutiny a large amount of expenditure. The Bill should correct that.

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I hope that the Government and the House will seize the chance, which is unlikely to return for many decades, to provide a legislative environment that will nurture and foster the highest standards of openness and transparency. The Chief Secretary said--I think in all candour and honesty--that he wanted to make the best of the Bill and to take on board as best he could the proposals and wishes of the Public Accounts Committee. When I referred to the original memorandum, I hope that I pointed out how many aspects of the Bill were unexpected or not as the Committee expected them to be. The Chief Secretary has a major task before him, but I will do my best to facilitate it. However, I shall do that with the single intention of enhancing the effectiveness of Parliament so that it returns to Gladstone's intention and does not apply the letter of the 1866 Act as it is today.

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