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Mr. Letwin: As one would expect, my right hon. Friend is making an interesting speech. Does he agree that it is essential not only that the Comptroller and Auditor General should have the audit powers to which he referred, but that either the CAG or an independent body, such as that which is being set up in shadow, should establish clear rules on definition and presentation, so that hon. Members and the public are able to understand the accounts presented to them?

Mr. Davis: My hon. Friend makes an excellent point, although I shall not major on it in my remarks. There is a serious risk that the information that the Government and the House put into the public domain could be undermined if it is not properly treated on an agreed basis. That could be done either by the Comptroller and Auditor General or by an independent person, such as an independent director of national statistics, who would be appointed in the same way as the CAG. One or other approach would benefit the Government as much as anyone else; I do not make a partisan point.

My remarks follow closely those of my predecessor as Chairman of the Public Accounts Committee, the right hon. Member for Ashton-under-Lyne. I make no apology for that, because we are making not party but parliamentary points, which are largely accepted by the Public Accounts Commission and the Public Accounts Committee. The proposal in the Bill to change the basis for supply and the way that Departments are held accountable to Parliament should not be brought into force until it is clear that the new system is better than the one that it is intended to replace. I have already pointed out to the Chief Secretary that the new system is not yet very close to demonstrating that it can do that. Therefore, I seek an undertaking from the Government--I think that I have already got it, but I hope that it will be confirmed when the Economic Secretary winds up--that the relevant clauses will not be implemented until the Public Accounts Committee has signified its satisfaction and that the Government have provided it with assurances that all Departments are fully prepared for the change.

The Bill must preserve in existing statute the protections that allow the Government to spend only what Parliament authorises and that bring to the House's attention any excess or improper expenditure. That is an essential minimum requirement. We want to move forwards, and, in giving discretion in those matters to the Treasury, the Bill seems to move backwards. That is quite improper, because Parliament is the final arbiter in those matters.

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The Bill must provide the Comptroller and Auditor General with access arrangements that mirror those of the Government. He should therefore automatically have access to third parties contracting with public bodies and organisations carrying out public functions authorised by the Government or Parliament.

Mr. Campbell-Savours: The right hon. Gentleman is the Chairman of the Public Accounts Committee, which could take evidence on the Bill. He could bring in civil servants, including Treasury officials, and question them on the Bill's implications. Am I correct in recalling that a Treasury official is always in residence in the Committee, representing the seat taken by the Chancellor of the Exchequer and advising the Committee? If the right hon. Gentleman can take evidence, why does he not do so? We could all attend the sittings to hear the interesting explanations that the Treasury would have to give to justify the way in which the Bill has been framed.

Mr. Davis: I am not sure whether the hon. Gentleman is trying to tempt me or intimidate the officials in the box, but that point will be put to my Committee, and if the members so choose, that is what we shall do.

I return to the point about outside bodies doing the Government's bidding. I am not seeking a licence for the Comptroller and Auditor General to go on fishing expeditions; I simply want him to be able to verify proper use of public money and proper delivery of public services. That seems to me to be a straightforward point.

I remind the House that private finance initiative expenditure, for example, is expected to amount to some £70 billion over the next 25 years. We are not talking about small beer. Another example that comes to mind is the computer centres that handle £4 billion a year of civil servants' wages. There are serious potential problems in those areas, and the CAG should therefore have access.

At the moment Departments regularly secure greater access for themselves than they do for the Comptroller and Auditor General, which seems to be completely the wrong way round. That is not acceptable.

The Bill must also ensure that the Comptroller and Auditor General is automatically the auditor of every non-departmental public body. The right hon. Member for Ashton-under-Lyne made that point clearly. He said also, as I think I told him in the first place, that the Government have appointed the Comptroller and Auditor General to audit every one of the 15 executive NDPBs that they have created and placed the Legal Services Commission, which was the Legal Aid Board, under the NAO's purview. The Government have made sensible, worthwhile and laudable decisions, but I am saying--as is everybody who has knowledge of these matters--that the process should be regularised and systematic.

The Bill must also enable the CAG to audit limited companies established by central Government Departments. One of the arguments put to us is that it is difficult to do that under European law because a European directive prevents it. If that is the case, I should be interested to hear the Economic Secretary, when she winds up, explain why Austria, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands and Sweden all have CAGs who can do just that. Presumably, they face the same problems.

Members of the House may be surprised to learn that more than 200 such companies--the Student Loans Company and Remploy have been mentioned--receive

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between £2 billion and £3 billion of public funding every year. The Minister pointed out that there had been a study on Remploy, and he is perfectly correct--the NAO did a study on Remploy. [Interruption.] However, as a voice from across the Floor is prompting me to point out, that was a value-for-money study, which does not meet the same requirement and does not enable the NAO to check for regularity and propriety. It does not involve the NAO's intelligence-gathering function, which sees what is happening and can start studies that are to the benefit of Parliament as a whole.

Existing legislation does not permit the CAG to audit companies, which is another dangerous anomaly, but not one for which I will ever again accept the argument about the European directive.

Most worrying is the fact that those drafting failures leave quangos and publicly owned limited companies as voluntary loopholes in the access rights of Parliament, to be exercised at the whim of the spiritual equivalent of Sir Humphrey Appleby in Whitehall. Civil servants will make the decisions--no doubt, Ministers will ratify them--effectively to have auditors appointed by the Minister and reporting to the Minister. That voluntary exemption from parliamentary scrutiny should not be allowed.

If whole of Government accounts are to be introduced, the Bill should provide properly for the Comptroller and Auditor General to have access, similar to that contained in companies legislation, to bodies whose accounts are consolidated into the wider whole of Government accounts. That requirement amounts to a matching of that which happens in the private sector. If an auditor audits a large company and is required to give a view on the accounts of that company, no matter that another auditor may audit a subsidiary, the auditor who audits the total is allowed to go in an check for himself. The hon. Member for Broxtowe (Dr. Palmer) said that we do not want double auditing. Of course we do not, but what I describe is a rare occurrence. The fact that the central auditor has that right acts as a check and a deterrent on the operation of the subsidiary auditor.

Dr. Palmer: To assist the House, will the right hon. Gentleman give a concrete example of the sort of inquiry which he would like the Comptroller and Auditor General to be able to carry out, but which the Comptroller and Auditor General cannot carry out under clause 11(5), under which he can require


Mr. Davis: From time to time, the Comptroller and Auditor General should carry out a statistical investigation. The right hon. Member for Ashton-under- Lyne said that sometimes, unless one goes inside a subsidiary body, one cannot know precisely what it is. Much of the value-for-money work carried out by the National Audit Office arises in the first instance from the understanding arrived at by taking a direct look. That understanding cannot be obtained at one remove. It would be difficult for the Comptroller and Auditor General to give an unqualified view of the whole of Government accounts unless he was able to do that. The existence of the deterrent effect would, in any event, give him extra confidence.

Mr. Tyrie: To reinforce my right hon. Friend's point, the subsection to which the hon. Member for Broxtowe

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(Dr. Palmer) referred makes it clear that the Comptroller and Auditor General's access is limited to the work of other auditors.

Mr. Davis: I had assumed that everyone knew that, but perhaps not everyone has read the Bill as many times as I have.

The Bill is designed to facilitate public-private partnerships. I approve of that: like the right hon. Member for Ashton-under-Lyne, I think that public-private partnerships offer the Government a good way forward. However, substantial sums will be involved--as I said, £70 billion over 25 years--and it is certain that any body receiving such funds will advise on even larger amounts of expenditure by other public sector bodies. Therefore, it is essential that the Bill gives the Comptroller and Auditor General full access to any body funded with public money to improve the delivery of public-private partnerships.

The Chief Secretary told my hon. Friend the Member for Arundel and South Downs (Mr. Flight) that the partnership is not a bank, but a co-sponsoring arrangement, involving far less than the £1 billion that my hon. Friend suggested. However, the leverage of that money is enormous. The effectiveness of the use of public money is enormously important to the public and tothe Government, so the National Audit Office and Comptroller and Auditor General should have access. They have access to the current equivalent, so it would be a backward move if the Bill were passed as drafted.

It is extremely important that the Bill should include provision for the Comptroller and Auditor General to validate the Government's performance measures. The resource accounting reforms are important in terms of reforms to the cost base assessment of the capital base, and all the other measures that the outside world would regard as purely technical. However, the real revolution that they offer--one that will occur in the first part of the next century--lies in the attempt to measure the output of government, as well as its cost. That offers the possibility of massive improvements in public service over time.

My right hon. Friend the Member for Henley(Mr. Heseltine) once commented that he could not believe how little there was in the way of management accounts and management information in government. These reforms are the first base for the management information that will allow Ministers to make better decisions, and they will allow the public to understand those decisions--to understand what they are supposed to be getting and what they are getting. It is vital that that information is completely trustworthy and beyond criticism. The only way in which the information can be seen to conform to a gold standard or, in a phrase the Chancellor might prefer, a golden rule, is by the National Audit Office or some other body being the arbiter of its veracity--being the auditor, or the check of last resort.

In the past few years, under the current Government and previous Governments, we have had arguments about all sorts of policies and measures. I recall employment statistics being the subject of several such arguments. That sort of thing is corrosive of the way in which resource accounting is supposed to work. My view is shared by the Treasury Committee and reflected in the Government's approach to the best value initiative. The Government are

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rightly spending millions of pounds on enabling the Audit Commission to verify the performance measures in local government. National Audit Office validation would strongly reinforce both public acceptance and the effectiveness of the performance measures.


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