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Dr. Palmer: The hon. Gentleman is going even further than previous speakers in seeking to include voluntary bodies in the Bill. Is he suggesting that anyone who receives a lottery grant should suddenly be subject to investigation by the National Audit Office?

Mr. Wardle: No, that is not what I am suggesting, but where there is a contract between the Government and another body which involves taxpayers' money, the audit path should be clear and unfettered, and the CAG should be able to proceed, as the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) have said.

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As we have heard, there is no provision for the CAG to be the auditor of all non-departmental public bodies, as he should be, or of limited companies set up by central Government bodies.

Most controversially, the Bill provides for large-scale financial assistance to be made available to the body to be established to carry on public-private partnerships, without giving the CAG access of his own to that body for audit purposes. Yet it is to the Comptroller and Auditor General that Parliament turns, via the Public Accounts Committee, for accountability of the public funds for which it has voted.

The Bill makes no provision for the Comptroller and Auditor General to audit the operational performance measures that Government Departments will be encouraged to publish, once they have become sufficiently familiar with resource accounting. In that respect, the Bill as it stands is a wasted opportunity.I hope that the Government will consider making suitable amendments in Committee, and that appropriate gestures will be made when the Economic Secretary winds up the debate. If that is not done, it will be difficult to avoid the conclusion that Whitehall is trying to fence out the Comptroller and Auditor General and the National Audit Office, possibly because they have become too effective at uncovering the management shortcomings of some Departments. That is a cynical view, but one is tempted to draw such a conclusion.

The third and final danger is the Bill being pushed through without adequate consultation. We must gather the views of as many seasoned financial experts as possible. No doubt, the chief accountancy adviser to the Treasury has had his say, but there appears to have been insufficient dialogue with the Comptroller and Auditor General. Moreover, it is, to say the least, careless of the Government business managers to have scheduled Second Reading of this Bill on a day that the Public Accounts Committee has been sitting.

The Acts of 1866, 1921 and 1983 were all the subject of close prior consultation with the Public Accounts Committee, at a time when that was by no means the norm in respect of other legislation. Yet, at a time when the Government make a virtue of carrying out wider pre-legislative scrutiny and using special Standing Committees, the Treasury appears to be cocking a snook at the Public Accounts Committee--inadvertently, I am sure--and at Parliament.

Unless attitudes change and the Minister decides to send the Bill to a special Standing Committee, it will be difficult not to conclude that, having been dragged into the 20th century just before that century passes into history, Whitehall is determined not to endure the scrutiny that the proposed accounting changes will allow. That would make a mockery both of the Bill and of the accountability of Government to Parliament.

8.37 pm

Mr. David Kidney (Stafford): I apologise for having missed the beginning of the debate. Most unusually, the Select Committee on the Treasury sat this afternoon, and I had to attend that sitting.

It is something of an exaggeration to say that, in the pubs and clubs of Stafford, people speak of little else but resource accounting and budgeting. However, I am sure that they will be as impressed as I am if this great project

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is brought in on time, for 2001-02. It is a mammoth task and its being achieved on time will reflect creditably on Parliament, on the Conservative Government that set us on this path, and on the current Government.

I have listened to the pointed questions asked by my hon. Friend the Member for Brent, North (Mr. Gardiner) about the Treasury accounting for the performance of Departments against the trigger points so far. I shall be interested to hear the Economic Secretary's responses to those questions.

The shift from cash-based to accrual-based accounting requires legislation to amend Acts dating from 1866 onwards. We are witnessing a thorough reform of public finances when the resource accounting and budgeting process is seen alongside the new economic and fiscal strategy framework, the new three-year rolling settlements for public services spending, the separation of capital expenditure from revenue expenditure, and the two rules for capital investment: the golden rule and the sustainable investment rule.

I ask myself, to what end are all those changes being made? The first permissible aim for which we should be aiming is a clearer understanding of public finances--clearer for parliamentarians, for potential partners and for the public at large. The second permissible aim is to improve the performance of "UK plc", especially in the sphere of capital investment. I shall concentrate on two aspects: first, the public process of scrutiny, budgeting and accounting; and, secondly, the effect of the reforms on capital investment.

As for the public process, I have found useful the Treasury's guide of April 1999, entitled "Resource Accounting and Budgeting. A Short Guide to the Financial Reforms". It suggests that the two great benefits from the process are, first, to improve transparency, making it easier for taxpayers to see what they are getting for their money and, secondly, helping us to improve the process of deciding where to allocate resources to achieve the best results.

The system of Parliament supplying money to the Government to spend has never been set down in statute. It relies instead on established usage. The Bill sets out no proposals to make any change to that system. In effect, Parliament decides the procedure by which we grant supply and the Treasury decides the definitions and form of that supply.

Parliament wants very much to retain annual accountability for the resources voted by it to the Government, so it is suggested under resource accounting and budgeting that the first content of the Government's departmental accounts will be a summary of the resource outturn. This will include what remains effectively of the cash requirement from past voting procedures for supply, called now the financial requirement. That is the equivalent of the cash requirement plus the borrowing permissions. That much we will remain familiar with, but because of the change to accrual-based accounting for everything else it will take some time for us as parliamentarians to follow the change from the one system to the other.

Perhaps we shall be more familiar with the second, third and fourth parts of the content of the new accounts. First, the operating cost statement will look like a profit and loss account. Secondly, the balance sheet will speak for itself. Thirdly, there will be the cash flow forecast.

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These will look very much like the information that is provided in the private sector. That feeling is enhanced by the fact that the resource accounting manual will apply wherever applicable to generally accepted accounting practice, which is the same in private practice. The Comptroller and Auditor General's certificate will give a true and fair view of the accounts, which is the same standard as that which applies to private sector auditors.

The fifth content of the new accounts will be a statement of resources by departmental objectives. The explanatory notes in the Bill call this a statement relating costs to objectives. The idea is that Departments will match resources to meeting objectives as expressed in their output and performance analyses. These analyses are something new. There were draft ones last year and they will be finalised next year. Then along came the comprehensive spending review with public service agreements. There is a great source of misunderstanding one from the other. It is reassuring that the Treasury guide of April 1999 states:


That is a welcome statement for the future development of two slightly different statements of the same thing.

As for the avalanche of information coming our way, the same Treasury guide states:


It is true that there will be much more information, but I return to the point that it will still be difficult for us to wrestle with the changes and what I would call the shifting sands. It will involve keeping an eye on resource accounting and remembering the financial requirements that we are voting for each year.

We shall also be treated to departmental investment strategies, departmental plans in the spring and departmental reports in the autumn. Despite all the additional information, I would like to echo the concerns that some hon. Members have mentioned about the way in which the important output and performance analyses seem to be detached from the rest of the statements which will be properly audited and accounted for.

On capital investment, the Chancellor has already made welcome changes by separating capital expenditure from revenue expenditure. That protects necessary long-term investment in our infrastructure from short-term pressures on the revenue side. He has also reversed the long-term decline in investment in the country's infrastructure. All that is to the good, even before we come to resource accounting and budgeting.

Clear accounting, like resource accounting and budgeting, is welcome, but does not in itself cause any more investment to be made in infrastructure; policy decisions do that. In my view--I may be echoing an earlier plea from my hon. Friend the Member for Harlow (Mr. Rammell)--we still need much more capital investment in our infrastructure. I accept that that investment ought to be subject to clear objectives and clear investment appraisal criteria, but the need still exists, as we see every day in our work.

I welcome public-private partnerships in bringing more private sector investment in our infrastructure, but public sector investment is needed at a faster pace. In local

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authority housing, for example, welcome though the capital receipts initiative has been in allowing councils to invest in the upgrading of their existing housing stock, there is still an urgent need for more social housing. Local government needs more than the one option that it hasat present for raising finance--large-scale voluntary transfers of existing housing stock.

On Partnerships UK, the proposed successor to the Treasury taskforce, it is important to remind ourselves that in its two years of existence, the taskforce has been extremely successful. The number of NHS projects has risen from none in May 1997 to 37 major schemes now. Investment attracted into our infrastructure has risen from virtually nil in May 1997 to more than £4 billion now. The Treasury taskforce was established for a limited lifespan of two years, and its two years are up.

The proposal for Partnerships UK arises out of the second Bates review of the private finance initiative. There is welcome news in the second review for those Labour sceptics who are not sure about the efficacy of PFI schemes. Bates has led the way in reducing the complexity of PFI contracts and therefore in reducing consultancy costs, and has clarified the use of public sector comparators, so that we can decide which contract ought to attract purely public sector investment, which some still do.

The Bates review explains the need for protecting the pensions of employees who transfer under TUPE--the Transfer of Undertakings (Protection of Employment) Regulations 1981--and the second review has gone so far as to explain that there is not even a requirement that staff who go with the contract must transfer from their present employers to the new contractor's employment. Those are great benefits from the second Bates review.

Partnerships UK should continue to build up the body of expertise that the taskforce started to amass. It ought to be able to produce more standardised formats for the contracts for private investment, and tackle politically sensitive big contracts and those that are creating replicable models.

Concern has been expressed about a possible conflict of interest because of the additional power of Partnerships UK to take an equity stake in the contracts that it promotes. The reason for the conflict of interest is that PUK will be advising a Government Department how to get the best deal for the contract, and also potentially taking an equity share in that contract's benefits. That is one possible criticism of the set-up of Partnerships UK. The reverse of that coin is the danger of cherry picking if Partnerships UK accepts the easiest contracts, which would have attracted private finance anyway. It would thus risk not fulfilling its brief.

A Library research paper on the Bill explains the way in which Partnerships UK can avoid a conflict of interest. However, it might be best if it concentrates initially on its advice role and on getting contracts to succeed, and leaves the investment role to the private sector when possible.

The Bill is a modernising, if not earth-shattering measure. Taken with other reforms, it will makepublic finances more understandable. Clear accounting procedures are desirable, but, in themselves, they do not provide better services, better value for money or more capital investment in our infrastructure. Quality policy making and scrutiny are required to secure those objectives. Those are the challenges for the Government and for Parliament.

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