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9.36 pm

The Economic Secretary to the Treasury (Miss Melanie Johnson): Resource accounting and budgeting is right and necessary. It is right because our focus should no longer simply be on how we spend the cash each year, but rather on what we get for our money. We should focus on outputs rather than on inputs, and on delivery of service rather than on process.

The private sector realised long ago that more comprehensive financial statements were necessary in the modern world. It is time for the Government to recognise that as well, and the reforms in the Bill are the backbone of our modernising agenda. However, resource accounting and budgeting goes further. Under the new system, there

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will be a summary of resource outturns reflecting parliamentary control and, of critical importance, a statement of resources for the aims and objectives of Departments under their public service agreements. With resource accounting and budgeting, there will be only clear and unambiguously prudent planning and control of public expenditure.

I come now to the extent of parliamentary consultation and involvement in preparing the Bill. That matter has exercised a number of hon. Members--perhaps I should refer to them as hon. Gentlemen, as no hon. Lady has taken part in the debate. Parliament has been involved in the resource accounting and budgeting project from day one. The previous Administration published a Green Paper in July 1994 and a White Paper in 1995. Memorandums on the subject have been submitted to Parliament, and there have been parliamentary hearings and the subsequent publication of reports on resource accounting and budgeting by the Public Accounts Committee and by the Treasury Committee. The Procedure Committee has also covered the project, so it is clear that Parliament has played an important role throughout its development.

The debate has been worth while, and several hon. Members have noted that the Comptroller and Auditor General and the National Audit Office have been involved at all stages of the Bill's drafting process. They have seen all drafts and have been involved in the process since the earliest days.

Mr. David Davis: I accept that what the Economic Secretary says is accurate, but two points stand out. First, the memorandum given to the Public Accounts Committee in March differed significantly from the final Bill, as I pointed out in my speech. Secondly, the draft Bill was shown to the National Audit Office only three weeks before its publication date. That does not constitute full consultation.

Miss Johnson: I did not say that we had consulted as much as we should have liked. I said that the Public Accounts Committee and the National Audit Office had been involved.

Mr. Davis indicated assent.

Miss Johnson: The right hon. Gentleman agrees that it is not true that those bodies were not involved. I believe that the Government have already apologised for being unable to send a draft of the Bill to the Public Accounts Committee or to other relevant Select Committees. I repeat that apology, but a draft Bill was simply not available in time. I am sure that the right hon. Gentleman is aware of the problems that can arise in that connection. However, as I said, Treasury officials consulted closely with the NAO throughout the process. The Treasury has attempted to keep Committees informed of progress on policy development and the implementation of the resource accounting and budgeting project. It will continue to do so.

Mr. Letwin: If it was an unfortunate fact of life that, after two and half years of government and five yearsof implementation of the Labour programme, the

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Government could not make the Bill available in time, will the Minister grant the House the Special Standing Committee that would relieve us of the need to divide?

Miss Johnson: I shall come to that matter much later.

We are committed to ensuring that reporting to Parliament will continue throughout the implementation phase. As the availability and relevance of information of interest to Parliament increases, memorandums will be submitted to Parliament to provide regular updates on policy and implementation.

Resource accounting and budgeting will significantly improve the outdated and outmoded system of cash-based accounting in two distinct ways. First, the full economic cost of Government activities will be capable of proper measurement by the inclusion of costs such as capital consumption that are not reflected in cash-based accounts. It will also match costs to the right time period, providing Government with a better basis for allocating resources. Secondly, there will be improvements in the treatment of capital spending. Instead of simply identifying the full cost in the year of acquisition, the cost of capital will be spread over its useful life.

The Government have introduced four trigger points, to which several hon. Members have referred. I can assure my hon. Friend the Member for Brent, North (Mr. Gardiner) that trigger point 2 has been successfully passed by all Departments. There is no problem about that. All Departments have moved on to trigger point 3, which involves the NAO in carrying out an audit of dry-run resource accounts from Departments for 1998-99. The final trigger point is scheduled for next summer, and Departments will make available to Select Committees dry-run, resource-based estimates for 2000-01 as soon as possible after the cash-based 2000-01 main estimates are produced.

Ms Sally Keeble (Northampton, North): My hon. Friend may not be aware that the Agriculture Committee has already been taken through resource-based accounts. There was a great deal of discussion and explanation of them, and the only issue that arose was that some hon. Members, particularly from the Opposition Benches, did not turn up for that.

Miss Johnson: I am grateful for my hon. Friend's knowledge of what has been done on resource accounting and budgeting in the Agriculture Committee. It is disappointing, given the fuss that they have made, that Opposition Members were not present.

Following the trigger points, we aim that resource accounting and budgeting should lead to whole-of- Government accounts. These will fulfil the commitment given in the code for fiscal stability to produce accounts for the whole public sector, on a consolidated basis if possible. Audited whole-of-Government accounts will improve the information available to support the conduct and monitoring of fiscal policy. Those accounts will also improve accountability to Parliament and provide greater transparency for taxpayers.

Mr. Tyrie: Will the introduction of resource accounting have any effect on the calculations of the golden rule?

Miss Johnson: I should not imagine that it would.

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To produce full, audited, whole-of-Government accounts, we will need greater conformity of accounting policies, systems and procedures. Those are major challenges. The Government have decided to adopt a staged approach in which we will first concentrate on delivering audited accounts that cover central Government Departments, agencies and non-departmental public bodies. A final decision to extend coverage to the whole public sector will be taken in due course when the outcomes of various possible developments in financial reporting and further development work is clearer. The purpose of the clauses relating to whole-of-Government accounts is to enable the Treasury to prepare as efficiently as possible by adopting relevant best practice consolidation procedures used in the private sector.

Several hon. Members have mentioned Partnerships UK. As well as covering resource accounting, the Bill puts in place the foundations for another strand of our drive to modernise our key public services--the creation of PUK. That new public-private partnership will operate in the private sector, but with a clear public mission. PUK will offer a long-term home to the type of deal-making skills that are currently temporarily available to the public sector through the Treasury task force. PUK will be instrumental in helping the public sector to address the key weaknesses in the current public-private sector partnership process. In that way, the public sector will become a more effective client. The bottom line is that PUK will help to deliver better value for money and more investment in front-line services.

Since the Government came to power just two and a half years ago, we have fundamentally reformed the PFI. We have prioritised projects, ended universal testing, offered a fairer deal to staff, and standardised contracts. We have put the PFI on a stable and modern footing. We now need to use the new PFI to drive forward our programme to modernise public services in sectors where it has not worked before; we need to develop new, more collaborative partnerships with the private sector as part of our wider public-private partnership programme.

PUK will allow the public sector to form partnerships with the private sector on equal terms. As a public-private partnership in the private sector, but operating in the interests of the public sector, PUK will be able to offer a longer-term home to the skill base required to support the public sector in the execution of public-private partnership deals. The business plan for PUK is now under development; we have been consulting widely throughout, so that PUK generates the greatest benefit for all the stakeholders in PFI--public sector and private sector alike.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) referred to the relationship between the Comptroller and Auditor General and the House. I can reassure him that the CAG will remain an Officer of the House of Commons. He will continue to have complete discretion to decide on his work, with the freedom to report exactly as he sees fit.

Several hon. Members, especially my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the right hon. Member for Haltemprice and Howden (Mr. Davis)--both of whom have given distinguished service as Chairmen of the Public Accounts Committee--my right hon. Friend the Member for Swansea, West (Mr. Williams) and my hon. Friend the Member for Workington, raised issues about National Audit Office

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access. However, the Bill is not about public sector audit; it is intended to be about resource accounting--that is the fundamental point. The Government believe that it is right to focus on that important change without complicating matters.

Moreover, we are not aware that, in practice, there is a problem with NAO access in any regard. In each of the cases mentioned--contractors, non-departmental public bodies and public sector companies--the NAO has access by agreement. Indeed, hon. Members gave some examples of the NAO gaining access and doing extremely good work. I am not aware of any cases where the NAO has not been able to gain access.


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