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Mr. Letwin: How does the hon. Gentleman imagine that what he is seeking can conceivably be achieved unless there is clarity of definition? How does he imagine that there can be such clarity of definition without an independent body setting those definitions?

Mr. Davey: I am grateful to the hon. Gentleman for that intervention. I am coming to that point and, as he will remember, I intervened on him to make similar points in that vein.

There are more deep-seated concerns about the accounting information that will be provided and the hon. Gentleman touched on some of them. The first major concern surrounds the fact that accruals accounting is inevitably more subjective than cash accounting. As the private sector continually debates its accounting procedures and has developed generally accepted accounting practice, so, too, have Governments had to tackle difficult issues in respect of valuing assets and liabilities. How does one calculate the asset value of a nuclear missile? How does one decide how to take account of inflation in presenting balance sheets? It is vital for the success of this project that such subjective issues are not used as opportunities for creative accounting. There has to be some way in which the users of the accounts can have faith in the figures as presented.

The hon. Gentleman made heavy weather of that point at times. I agree with many of his criticisms, but he seemed to forget that the previous Conservative Government, because of the approach that they took to the issue, could have been subject to all the accusations that he made against the current Government. They set up the Financial Reporting Advisory Board to provide the Government with advice on those difficult areas, but allowed it only to proffer advice. At no stage did the Conservatives give it any determining role or establish a statutory independent body that would be responsible to Parliament and allow it to consider those issues, a process that should perhaps be called the governance of public sector accounting.

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I agree with the hon. Gentleman that, in clause 5(2), the Treasury has given itself unfettered discretion to decide on accounting standards and I hope that, in Committee, we can jointly persuade the Government to reconsider. Liberal Democrats believe that we should develop practices similar to those used in New Zealand, the United States, Australia and Canada. New Zealand has its Accounting Standards Review Board and the United States its General Accounting Office. We wish that this country had had such offices at the start of the process, but I hope that we can now achieve them.

Mr. David Davis: I am listening to the hon. Gentleman with interest and agree with a great deal of what he is saying. I was discussing that matter the other day with Lord Burns, the previous permanent secretary at the Treasury, who offered as a model not the General Accounting Office, but the Congressional Budget Office, which is probably closer to what the hon. Gentleman is trying to achieve than the GAO.

Mr. Davey: I am grateful to the right hon. Gentleman for that intervention, and I shall suggest later that we should have another body that is more like the Congressional Budget Office. I am suggesting here that we need a separate body to focus solely on accounting standards. The CBO does another job and we need a similar body in the House.

Mr. Letwin: The hon. Gentleman has explained the point, and he and I--and, indeed, his party and my party--concur on it. Does he agree that it merely falls to the Economic Secretary to consent to the Government introducing into the Bill a proposal establishing precisely such a statutory body--something that we both seek?

Mr. Davey: Again, I am grateful to the hon. Gentleman for his intervention. I hope that he is right; I fear that he may not be. We await the Economic Secretary's winding-up speech with interest and, if the Government were to give ground on that point, the Bill would make much easier progress through the House.

I am not an accountant. I confess to having not read the resource accounting manual, which is rather large. I do not know whether the many hundreds and thousands of decisions about new accounting practices made under this initiative are fair and reasonable, but I know that, if those decisions were being taken outside Her Majesty's Treasury by a body that, like the Comptroller and Auditor General, was genuinely independent, I would trust that manual far, far more. Ministers must take that point seriously. Will the Economic Secretary consider amending the Bill so that, rather than the Treasury, the FRAB is responsible for directing accounting practices for public sector Departments and bodies? Perhaps there is a job for a different body--the Public Audit Forum, about whose role the House has heard so little. We should be told more.

Mr. Letwin rose--

Mr. Davey: I may be able to pre-empt the hon. Gentleman's intervention: I suggest that the Chief Secretary is cautious about joining his proposed commission. A shadow accounts commission will not engender much faith outside the House.

Mr. Letwin: I am grateful to the hon. Gentleman for giving way again. Does he agree that, were he to go

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through the manual to discover the response of Departments, he would see that, on depreciation, for example, they have come up with absurdly differing schedules? Does he also agree that, if we are to have a proper depreciation account that can be consolidated sensibly, single depreciation methods would have to be applied across the Government?

Mr. Davey: I do not feel qualified to give the hon. Gentleman a full answer. There may be legitimate reasons why there are different types of depreciation for different types of assets. I honestly cannot give the hon. Gentleman a considered reply. I agree with his substantive point that we need an independent body so that we can have faith in whatever accounting standards are applied for depreciation.

We need reassurances from the Government that the new information and accounts will be constructed on an independent basis. If it is too late to affect the construction stage of the new accounts, the Government could ensure that all future revisions and changes are independently determined, not Treasury directed.

Resource accounting and budgeting is not just about accruals accounting, but about new information on outputs and performance. Alongside the new balance sheets and schedules, the Government will publish something called an output and performance analysis. That information is to assist the quest for better value for money, and is welcome. However, the Bill makes no provision for auditing that information. The Comptroller and Auditor General will not be able to certify it. There may be good, practical reasons for not auditing it in the first year or two, but the National Audit Office will not even be able to validate it. That is a real concern, which I know is shared by the right hon. Member for Haltemprice and Howden, the Chairman of the Public Accounts Committee. I hope that we can rectify that during the passage of the Bill.

If Parliament is to take this new information seriously, a third party must examine those statistics to ensure that they give a true and fair account of what has happened. It is not just the information that we will get, which will have to be monitored carefully, but the information that we will not get that is worrying many. Hon. Members have already expressed concerns about issues such as which public sector bodies will be covered by the new resource accounts and which will not be, and whether the National Audit Office will have jurisdiction over those accounts. The right hon. Members for Ashton-under-Lyne (Mr. Sheldon) and for Haltemprice and Howden discussed those points in some detail, and I associate the Liberal Democrats with their remarks on extending the institutional jurisdiction of the National Audit Office.

The Government may say that clauses 10 and 11 on Government accounts will help to bring that about. In the explanatory notes and the code of fiscal stability, the Government say that their intention is to prepare consolidated accounts for all public sector bodies--but when? There is no time scale, and there is certainly no independent body to oversee them: only the Treasury will decide.

The House has no guarantee that all public sector money will eventually be properly accounted for and audited. That is not good enough. The Government may mean well, but the House should remind them that the

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Comptroller and Auditor General has independence for good reason. The House of Commons and the public need to know that audits of public money are genuinely independent. We will still need to know about the billions of pounds of taxpayers' money that currently falls outside the ambit of the Comptroller and Auditor General.

Whitehall has been preoccupied trying to prepare resource accounts for central Government. Governments can always use the excuse that a narrow focus is the right way to start but, if Ministers do not set ambitious targets for the public sector, they will never meet them. Frankly, the delays and problems in preparing for resource accounting and budgeting suggest that Ministers need a different approach to obtaining whole of Government accounts. Unless the civil service is required by statute to provide Parliament with this information by a certain date, I doubt whether this exercise will be seen in Whitehall to have the priority that it ought to have.

Before I leave the subject of improving financial information for Parliament, I want to touch on an issue raised by clause 9 on the access rights of the Comptroller and Auditor General to accounting information. Other hon. Members have raised this point, and it goes back to my point about the need to widen the jurisdiction of the CAG. Far too often, the National Audit Office's access rights to information are on the basis of agreement and not on a statutory basis. If the country's top financial watchdog is to have the teeth it needs, it should have the statutory right to examine all papers of any public body. That would surely be the most secure way to ensure that all fraud and malpractice is wiped out. I commend the Government for abolishing the previous Government's practice of allowing civil servants routinely to mark documents "Not for NAO eyes" but, as I have argued, they need to go further.

Earlier in my remarks, I said that, if we are to re-empower the House to do its job of financial scrutiny properly, we need to go back to first principles. We need to consider the information, resources and procedures that Parliament has at its disposal to examine the Budget. I have spent some time on information aspects, because that is the core of the Bill, but I want to say a few words about the House's resources--individual MPs and Select Committees--and its procedures, because they are crucial to our ability to use this new information productively.

The vast bulk of the work of the House in analysing the Government's accounts is done by the PAC with the help of the NAO. They consider what has already happened--ex-post analysis of spending and examination of the accounts. Parliament needs to be involved at the start of the public spending process. That would mark a radical departure, but I believe that the House should play a much more active role in scrutinising budgets ex ante.

I have been very much influenced by the recent inquiry of the Select Committee on Procedure, which led to our sixth report "Procedure for Debate on the Government's Expenditure Plans". Under the able chairmanship ofthe hon. Member for Macclesfield (Mr. Winterton), the Committee came up with significant proposals in this area. Liberal Democrats would like to go further, but our ideas are very much in the spirit of that report.

If the House is to become involved in analysing spending proposals ex ante in a thorough and meaningful way, we will need more resources. That point was made

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time and again to the Procedure Committee by witnesses. I am afraid to say that the Committee did not come up with a firm and single conclusion as to what resources should be available and how they should be organised--whether there should be more resources for the Select Committee on the Treasury or a new free-standing body, which the report calls an "estimates office". Liberal Democrats favour the latter proposal. We believe that the House needs a new and authoritative body to assist in the work of scrutinising spending plans. Such a body should, like the NAO, be independent of Government, but, unlike the NAO--

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