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Session 1999-2000
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Standing Committee Debates
Finance Bill

Finance Bill

Standing Committee H

Thursday 29 June 2000


[Mr. Frank Cook in the Chair]

Finance Bill(except clauses 1, 12, 30, 31, 59, 102 and 113)

9 am

Clauses 146 to 148 ordered to stand part of the Bill.

Clause 149

Exchange Equalisation Account. 1979 c. 30

Mr. Howard Flight (Arundel and South Downs): I beg to move amendment No. 454, in page 114, line 40, leave out from ``in'' to ``accounts'' in line 41 and insert

    `accordance with generally accepted principles of accounting'.

Amendment No. 454 and some aspects of the next amendment might be better dealt with under the Government Resources and Accounts Bill. The point of the amendment is simple. If the Treasury wants transparency and accountability in drawing up the equalisation accounts, it must prepare them on the same basis as companies engaged in currency transactions do and according to standard accounting practices. Surely it is unhelpful for the provision to say that the Treasury can prepare those accounts on whatever basis it chooses.

Mr. Oliver Letwin (West Dorset): In another place, amendments are about to be considered to the Government Resources and Accounts Bill, which the Economic Secretary and I spent a long while debating in this House. That would allow the Financial Reporting Advisory Board to be the body that determines which accounting principles apply to Government accounts. I hope that the Economic Secretary will tell us that, if that amendment is accepted in the Lords, the same body will define standards for the exchange equalisation account. I understand that there is some possibility of the Government's accepting that amendment. As my hon. Friend says, we want to achieve some equilibration between the general principles that apply to Government accounts and those that apply to the EEA.

The Economic Secretary to the Treasury (Miss Melanie Johnson) I hesitate to introduce into our proceedings anything that the Lords are doing. We shall doubtless have a further opportunity to debate the Government Resources and Accounts Bill when it returns to this House in the fullness of time.

It is not appropriate at the moment to make a general commitment to accounting principles that apply to private companies, because Parliament has already accepted in the context of the Government Resources and Accounts Bill that those principles require adapting for public sector accounts. That general requirement does not apply elsewhere in Government accounts.

The amendment is too inflexible. There cannot be any doubt about moving the EEA on to an accruals basis. I can reassure Opposition Members that monthly figures for 2000 to 2001 are being published on that basis. However, we want to ensure that we can compile the EEA in line with the best accounting practice, without continually amending the legislation as accounting standards change and develop. It would therefore be a problem to accept the amendment.

In any case, annual reporting and annual publication will take place, and that will include publication of the accounting policies, to ensure that the basis of the accounting is clear. I hope that the hon. Gentleman is reassured and that he will withdraw the amendment.

Mr. Flight: I shall press the Economic Secretary a little further If the arrangements to which my hon. Friend the Member for West Dorset (Mr. Letwin) alluded were adopted as the result of a Lords amendment or further consideration by the Commons of the Government Resources and Accounts Bill, it would be appropriate to apply the same principles to the exchange equalisation account. That is a conditional point, but I would like to hear some confirmation that the Government have such an intent.

Miss Johnson: The hon. Gentleman talks about what might happen. As it is so early in the morning, I am not tempted to follow the path of ``might'' and ``what if''. However, it is worth pointing out that the amendment does not make sense, because it does not refer to a recognised framework such as the generally accepted accounting practice framework. As I said, it is inappropriate to apply a private sector framework to the public sector, unmodified. The situation is not as simple as the hon. Gentleman suggests.

Mr. Letwin: I shall not dwell on the issue for long, because I am sure that the Economic Secretary is right to say that they will be discussed again when we consider Lords amendments to the Government Resources and Accounts Bill. Although we are not discussing the biggest issue in Government accounting, the exchange equalisation account is nevertheless important and tricky. As the Economic Secretary will be aware, the proper level of foreign exchange reserves has been discussed for the better part of a decade. It is difficult to know to what extent there is an implicit lien on the reserves. A predecessor to the Financial Secretary tried for a long time to find a means of liberating some of the reserves. That would have had interesting accounting effects on the EEA.

We need to know that the measure will not be used as the Government's Bermuda cash box-to hark back to our discussions on double tax relief-in and out of which resources will be shifted, not for personal gain or shareholder gain but for political purposes, to disguise the movements that transparent resource accounts would otherwise reveal. That is not in the spirit of resource accounting.

We shall not press the amendment or lock the Economic Secretary into some assurance for the sake of a hypothetical situation. We simply want her to tell us that once the standards and definitions for Government accounts have been resolved, the EEA will not be a special exempt entity, to be used as a subterfuge for distorting the otherwise transparent accounts. If she told us that, we could rest easy.

Miss Johnson: I am sure that the hon. Gentleman will rest easy. First, I shall re-emphasise the first point that I made earlier. We shall report and publish annually. I remind the hon. Gentleman that it was this Government and not previous Governments who decided to publish the EEA. That is now in the public domain, so we have everything to be proud of in terms of improved practice.

On 28 April, we announced our commitment to preparing United Kingdom gap accounts for EEA for 200001. To meet that commitment, we have put in place an accounting system that observes UK gap from the start of the financial year. We have also satisfied International Monetary Fund requirements, so we are meeting all national and international demands.

Mr. Flight: We are delighted with the Economic Secretary's final response on the matter. As it meets our objectives, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Flight: I beg to move, in page 114, line 43, leave out from beginning to end of line 7 on page 115 and insert-

    `(2) Following the relevant account date and no later than the relevant publication date the following steps are to take place:

    (a) the Treasury shall send the accounts to the Comptroller and Auditor General;

    (b) the Comptroller and Auditor General shall examine and certify the accounts, issue a report on them and return the certified accounts and report to the Treasury; and

    (c) the Treasury shall lay the certified accounts and the report before each House of Parliament.

    (3) In subsection (2) above ``the relevant account date'' is the last day of the financial year to which the accounts in question relate and the ``relevant publication date'' is the date by which a company would be required to file its accounts with Companies House in respect of an accounting period which ended on the relevant account date.

    (4) The Treasury shall also publish the certified accounts and report in an electronic form capable of access by members of the public.'.

Most of the amendment refers to the point previously discussed. If the Comptroller and Auditor General is required to audit the account in the interests of transparency and accountability, the Government could apply the same principles and processes as pertain in the corporate sector. We also suggest that the accounts might be put straight on to the net.

Miss Melanie Johnson: The amendment would tie the audit and publication of accounts to a timetable laid down for companies in the Companies Act 1985. It would also make electronic publication compulsory.

It is unnecessary to manufacture a link to the timetable for companies' publication of accounts, because the clause follows a well established and generally accepted timetable for audit and publication of Government accounts. In particular, the clause follows the timetable for other main central Government accounts, namely the consolidated fund, national loans fund and the debt management account timetables. There is no case for treating the EEA differently. For consistency's sake, we would have to change the timetable in the same way for other Government accounts, which would be a waste of time.

The publication date for EEA accounts would be only one month later than a private sector account, and scope has been made in the clause to tighten the timetable by statutory instrument. I am grateful to the hon. Member for Arundel and South Downs (Mr. Flight) for suggesting compulsory electronic publication. However, EEA accounts are already published on the Treasury's website, and monthly EEA figures have been published on the Bank of England's website for the past 12 months, so the public have access to the figures. There is no question of dropping such publication. The Government's commitment to electronic publishing in general and to openness for EEA accounts is well known.

Mr. Flight: I congratulate the Government on the extent to which accounts are being published on the net. I am satisfied with the Economic Secretary's response about the timetable. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 149 ordered to stand part of the Bill.

New clause 3

Offence of fraudulent evasion of income tax`.-(1) A person commits an offence if he is knowingly concerned in the fraudulent evasion of income tax by him or any other person.

    (2) A person guilty of an offence under this section is liable-

    (a) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;

    (b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine, or both.

    (3) This section applies to things done or omitted on or after 1st January 2001.'.-[Dawn Primarolo.]

Brought up, and read the First time.


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