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Mr. Sheldon: My hon. Friend refers to a most important matter. The regulator of the national lottery gave the contract to Camelot after one its directors had given certain advantages to the regulator himself. That was a major scandal, and it was only because the National Audit Office was able to investigate that we knew about it.

Mr. Gardiner: I am grateful to my right hon. Friend for those remarks, which have clarified the point that I

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was trying to make. I am a relatively new Member and it is always difficult to know quite how to approach one's colleagues on the Front Bench when one believes that they could improve a Bill. To do that with the support of my right hon. Friend the Member for Ashton-under-Lyne is, I trust, one way of approaching them with impunity.

I was disappointed when I read the Opposition amendment; I thought that it was disgraceful. This subject has been handled quite properly through the Select Committee procedure of the House and by discussions between the Chairman of the Public Accounts Committee and Ministers. The Government have shown their openness and their willingness to engage in dialogue on these important matters, but the Opposition amendment sought to make cheap party political capital. Therefore, I was delighted when the hon. Member for West Dorset (Mr. Letwin) agreed not to press the amendment to a Division on condition that a Special Standing Committee is set up. Such an approach is far more in keeping with the way in which the House has sought to tackle this subject and with the great consensus that has been apparent on both sides of the House.

I am grateful to my right hon. Friend the Chief Secretary for the tone that he set for the debate, which has been one of dialogue and openness to the points that have been made and that will continue to be made. I hope that, in Committee, we can achieve progress on the Bill, because it is fundamentally important. The Gladstonian principle, which was set in 1866 to allow the Comptroller and Auditor General the right to follow public funds wherever they go, is one that the House should hold dear and cling on to.

8.25 pm

Mr. Charles Wardle (Bexhill and Battle): I agree with much, if not all, of what the hon. Member for Brent, North (Mr. Gardiner) said. He and I heard the same briefing in the Public Accounts Committee last week and I shall voice some of the concerns that he has already expressed. However, it has become increasingly clear from this thoroughly interesting debate that the Bill is half-baked and that right hon. and hon. Members from both sides of the House seem to have come to that conclusion.

The Bill is unlikely to attract popular media attention if for no other reason than its dry-as-dust title. Government resources and accounts is not a subject likely to pack the House. Nevertheless, it is fundamentally important to the machinery of government as we have seen from the quality of the contributions that have already been made. The Bill will change the basis on which Parliament funds Whitehall and the way in which the users of the funds then account for their performance. I intend to spend a few minutes enthusing about the principle of resource accounting before discussing what I and others see as flaws in the Bill. I am deeply encouraged by the offer made by my hon. Friend the Member for West Dorset (Mr. Letwin) about how the Bill should proceed after this debate.

After years of prodding and cajoling by the City and industry, as well as by those Members from both sides who have experience of the commercial world, the business of government is at last switching from cash accounting to resource accounting. It is not so long ago that Departments were unable to distinguish between capital account and current account expenditure.

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Now they will enter the next century with profit and loss--or, at any rate, income and expenditure--statements, balance sheets, depreciation and cash-flow analysis. They will be able, if they mean business, to define their operational plans in terms of budgetary projections against which they will be able to measure their own performance by means of management accounts that will highlight favourable or adverse variances against the budgets that they have agreed and to which they are committed.

Performance-related pay will emerge from the shadows as a realistic incentive because performance will be measurable. Better still, the preparations of plans and budgets and management accounts will enable senior officials, if they so choose, to assign measurable targets, goals and objectives down the management line to individual middle-ranking civil servants who will have an opportunity to own the tasks delegated to them and to see for themselves the results of their efforts.

For years, the best-run private sector businesses have empowered middle management within their organisation with real responsibility and an awareness of their employees' contribution to the larger enterprise. Resource accounting should open the same door to junior grades of the civil service, who have hitherto worked loyally and conscientiously but without any means of measuring and accounting for their own efforts.

If all that works as it should, I predict that Whitehall management will discover a new flexibility and informality, and whole tiers of high-ranking officials may find it increasingly difficult to justify their old-style roles. Mandarins who have demanded, and got, salaries comparable with those paid by moderately successful private sector companies will find that the competition for top jobs hots up as more company executives are head-hunted into a public service where the business systems will no longer be regarded as quaint and incompatible.

The scope for public-private partnership enterprise should become much more meaningful because the City will be able to assess and review, on a basis comparable with the private sector, the accounts and financial track record of those parts of the public sector being injected into such partnerships.

There is little doubt that the whole process of privatisation over the past 10 or 15 years would have delivered higher proceeds for the taxpayer if the public sector businesses being sold had regularly produced their accounts on an accruals basis before privatisation, because that would have given institutional investors a clearer idea of what they were bidding for. Equally, it must be said that without the impetus of privatisation, Whitehall would probably still be resisting resource accounting.

A better-run Whitehall is, at least, the theory of the changes presaged by the Bill, which could and should deliver better standards of management performance. That is why I have been an enthusiastic supporter of the switch to resource accounting, but there are already a number of danger signals concerning the Bill which have been touched on in today's debate and which the House simply cannot ignore.

I shall focus briefly on just three of those dangers. The first is that the pace at which resource accounting has developed means that Whitehall is already in peril of

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trying to run before it can walk. It is only in the past couple of years that Departments, most of which have precious little in-house accounting and information technology skills, have begun to grapple with the changeover from cash accounting to a resource-based system.

It is therefore essential that Parliament is given clear evidence that resource accounting is adequately tested and up and running in Whitehall before the Bill takes effect, as several right hon. and hon. Members have said. That is crucial because the Bill repeals the existing audit powers that flow from the Exchequer and Audit Departments Acts of 1866 and 1921. Since the statutory authority for the work of the Comptroller and Auditor General and the function performed by the Public Accounts Committee on Parliament's behalf will in future be contained in the new legislation, it would be disastrous if resource accounting were not working smoothly by the time that the Bill reached the statute book.

As the House has been told, two and a half years ago, the Treasury gave the Public Accounts Committee a specific assurance that the date for the changeover in accounting systems would be decided in the light of progress, which would be judged against a number of yardsticks. The Treasury gave a clear undertaking that the two systems would be run side by side to ensure that the changeover went according to plan.

If, however, the transfer is not done efficiently, and the Treasury persists with its intention to discard the old cash system by April 2001, there will be a risk that Parliament will be unable to hold the Executive accountable for the money that they have been voted. As it stands, the Treasury is saying about the Bill, "Trust us. We'll get it right." One has only to recall the plans and promises made over the past decade in advance of new IT systems installation in Whitehall, which subsequently came to grief, to appreciate that we shall all have to keep our fingers crossed and hope that the Treasury is up to the task.

The second danger concerns the missed opportunity or, dare I say, plain refusal by the Treasury, to take advantage of the first major public accounts legislation since 1983 to extend the scope and powers of the Comptroller and Auditor General. If anything, the Bill is more restrictive of the CAG's audit powers. It does not put right the glaring anomaly whereby the CAG is at present unable to follow the audit path of public funds made over to new forms of service providers such as private companies working under contract to the Government, or voluntary bodies that are allocated large sums of taxpayers' money to carry out programmes approved by Government.

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