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9.6 pm

Dr. Nick Palmer (Broxtowe): In this era of cross-party co-operation, and--who knows--even coalition, it is quite pertinent that we should study the heritage of the Gladstone Government, a Liberal Government whom some would remember as being particularly prominent.

Although the debate has been interesting, at times I have had the impression that non-members of the relevant Select Committees could speak only on sufferance. I am grateful for the offer of education from my right hon. Friend the Member for Swansea, West (Mr. Williams), but I shall attempt to speak immediately, as best I can.

The Bill breaks effective new ground in three important ways. As many have pointed out, one relates to capital spending. I think that we all agree that, in that regard, the change is altogether an improvement, as the effect of the current rules has been to depress public spending. As the hon. Member for West Dorset (Mr. Letwin) illustrated, giving the example of the water industry, if spending must be concentrated on one year, there is never a good year in which to do it.

There is, perhaps, a technical issue here. If we enter a transitional phase, during that phase we may produce a spurious impression of falling investment, because the existing investments have been written off and the new ones will be spread over a number of years. That, however, should not deter us. The prospect of whole of Government accounts is equally welcome to all of us who have worked in the private sector, and we look forward to a similar overview of Government activity.

Although Partnerships UK seems to be a useful initiative, I hope that the Economic Secretary will tell us whether she is confident that the new body will be given adequate support in all regions. I note that my region, the east midlands, benefits far the least from PFI contracts, notwithstanding two major projects in the Nottingham area--the Nottingham tram system and the Queen's medical centre extension.

One issue has not been raised so far--I realise that it is linked to traditional accounting theory. The opportunity has not been taken to change the tradition whereby each year's spending is strictly cash-limited, and any money left over at the end of the year must be returned to the Treasury. That is a practice that we have all encountered in the context of our parliamentary office allowances, and that most of us have encountered in either public or private industry. We all know that it results either in underspending, if the budget is not spent by the end of the year--we see that all over Government--or in wasteful spending, following a panicky dash to get rid of the money before it goes away. I hope that the Government will consider whether improvements can be made.

The main issue that has attracted controversy today is that of direct access by the National Audit Office to a company receiving public funding or working intimately with the Government--or, indeed, any body set up by the Government that is essentially a public body. Several hon. Members have made a distinction between the ability to access those bodies and the ability to get information about them, as set out in clause 11(5). It may be helpful to hon. Members to note that clause 11(5) contains a misprint; the reference should be to clause 10(6)(b).

As I have said in interventions, the danger in pressing for full direct access is that we will subject those bodies, not all of which are administration rich, to double

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jeopardy in audits--in fact, in certain circumstances,to a full double audit. That is perhaps most clearly demonstrated by local government, which, as we know, is extremely stretched. It is already subject to the Audit Commission. The proposal is that it should also, in principle, be subject to a partial, or even a full revised audit by the NAO, if it saw fit.

Various possible scenarios have been advanced. My right hon. Friend the Member for Swansea, West gave some examples. One was of an effective second audit that spotted omissions in the first. It is clear that, every time we do a second audit, we will sometimes spot things that were not spotted the first time round, but we would not necessarily suggest that as a normal process.

Mr. Sheldon: My hon. Friend will be aware that the Audit Commission and the NAO work together extremely well and take each other's words for the results of their audits, so the problem that he brings up is not likely to arise.

Dr. Palmer: I am grateful to my right hon. Friend for his intervention. That covers a wide area of the bodies. If the Audit Commission is essentially considered an extended arm of the NAO, that will lighten the burden. However, that is not invariably the case.

My right hon. Friend the Member for Swansea, West referred to a case where the NAO had spotted an illicit embrace in the front office of a chief executive. I agree that that was happy serendipity, but it was not due to any particular skill on the part of the NAO.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that further education councils could be looked at, and that the investigation might lead to a specific college, or to a specific supplier working with the college. Again, I understand the reasoning, but, in principle, it would mean that every body that entered a serious relationship with the public sector would be subject to further intervention. That was expressed most clearly by my hon. Friend the Member for Brent, North (Mr. Gardiner), who suggested that the NAO should have a right to roam, which we could perhaps also call a right to fish.

How often would that happen in practice? It could be done frequently. If it is, we should take the example of the Government since the general election and make the NAO the auditor for the body concerned. Where we think that the NAO will often have questions, why not make it the auditor? I encourage the Economic Secretary to say that, as other bodies' audit arrangements come up for review, the Government will look favourably at whether the NAO might be the most appropriate body. In particular, all hon. Members who have spoken would welcome it if Partnerships UK were specifically brought under the NAO's wing.

The relationship can be more tenuous. The example was given of a company that organises bakery operations for a public body. I think that we would agree that the NAO would study the operation of that bakery infrequently. One might reasonably, then, rely on clause 11(5), which enables the NAO to demand information from whoever is acting as auditor for that body. I think that, to some extent, we should allow the Government to act with some pragmatism in establishing the National Audit Office, when appropriate, as the relevant body.

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The hon. Member for West Dorset (Mr. Letwin) effectively suggested kicking the proposals into touch, for examination by a Special Standing Committee. In some circumstances, such examination would be very beneficial. In this case, however, it seems that the issues are fairly clear, and have been fairly well illuminated in this debate. I therefore urge continuation of the process, with the normal Committee, so that we might conclude on time and without further delay in passing an important Bill.

9.15 pm

Mr. David Rendel (Newbury): I generally welcome the Bill, which has some good aspects. The new form of accounting for public expenditure introduced by the Bill will undoubtedly give more information to hon. Members, and therefore more and better general control over Government spending. However, I am perhaps a bit more cynical than some hon. Members, as I suspect that the Government are introducing the new form of accounting because it will give them, rather than Parliament, more information and control. Nevertheless, the development is welcome and will give us extra information that we need.

I welcome the Bill also because it will introduce for the first time proper capital accounting. I--like many hon. Members--was once in local government, and it has always struck me as extraordinary that central Government capital and revenue expenditure were accounted for in exactly the same way, all mixed up in one pot, whereas, in local government, capital and revenue expenditure were differentiated, and the real value of capital expenditure compared with revenue expenditure becomes much more obvious to everyone concerned.

One of the possible interesting spin-offs of the new form of accounting is that, by showing everyone the real value of long-term capital investment, it may make the private finance initiative rather less attractive than it has been to date. I do not think that that point had been mentioned so far in the debate.

The real value of the new form of accounting will be to give everyone better control of expenditure. Nevertheless, as my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) said, I hope that the Government will also see fit to ensure that we shall be able to use that extra information and control by providing, when necessary, training for hon. Members. One of the extraordinary aspects of this place is that, although many of us are elected without any real experience of audit, accounts or business, without relevant training, we are expected to try--in Select Committees and other forums--to control and monitor Government expenditure. I hope that Ministers will take on board my hon. Friend's point on that matter.

What is wrong with the Bill? As hon. Members on both sides of the House have said time and again today, our main concern is the lack of power provided in the Bill for the Comptroller and Auditor General and the National Audit Office over expenditure in some spheres of Government accounts. I hope that hon. Members, by repeatedly hammering home that concern, have finally made the point to Ministers--if we had not already done so--that we really are concerned about the issue, which they really have to address quickly.

Every organisation needs an audit office and some type of external audit function to help it control its expenditure, and the Government need one perhaps more than anyone.

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I was once an internal auditor for Esso Petroleum. This year, on joining the Public Accounts Committee, I was staggered when I discovered that, in contravention of the basic principle of audit, the National Audit Office did not have full access to all Government expenditure whenever it wanted such access. It is quite extraordinary that, over the years, hon. Members have allowed a system to grow that does not allow our auditor to have full access to all Government expenditure.

I should have liked to have time to make various other points--particularly on Partnerships UK, although the important issue of the possible conflict of interest has already been raised. It is perhaps worth considering one brief example of what might have happened if Partnerships UK had been in charge, for example, of the contract to write a new national insurance recording system.

There were already many problems with writing a new system. If the whole project had been done at rather greater arm's length, with a body intervening between Parliament and the body writing the system, it would have been much harder for us to detect problems with the system and to report them to Parliament. The dangers of the NAO not having full access to all aspects of public accounts are clear, and should be clear to every hon. Member.

The Chief Secretary started the debate by saying that the Bill was not supposed to overhaul the whole audit process. I accept that that was not his original intention. Nevertheless, it must be an opportunity to bring back under the auspices of the Comptroller and Auditor General some aspects of Government expenditure which currently are not in his remit. We should be taking this opportunity to make sure that the powers of the CAG are extended as far as possible.

Even if this Bill cannot now be changed--and even if the Government are unwilling to guarantee tonight that it will be changed to give full access to the CAG in future--I hope that the Economic Secretary will accept the principle that the CAG should in future have access to all Government expenditure whenever he wants it.

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