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Mr. Hammond: The hon. Gentleman will recall that we voted against the timetable motion in Committee.
Mr. Davey: I do recall that. The point I was making was that we did not get to examine the clause the first time around. No doubt we could have raised points about it and other matters that have not been debated.
The new power under the clause is clearly to be welcomed. It is important that disabled people are able to participate in polls, and I hope that we can move on.
Mr. Raynsford: There was no intention to impose requirements in respect of local polls more onerous than those that apply to elections or referendums conducted other than under the provisions of the clause. However, during the Lords debate, questions were raised as to whether the Disability Discrimination Act 1995 applied in this area. Under the Act, it will be unlawful from October 2004 for service providers, including public authorities, to discriminate against a disabled person in how the provider provides services. There has been some doubt as to whether "services" includes the provision of polling facilities for local and national elections or local polls. We expect the future extension of the Act to cover local authority functions to clarify whether it applies to local polls. This will not come into force until 2006. In that situation, we felt it sensible that guidance should be extended to ensure that what applies in relation to elections—for example, guidance issued by the Electoral Commission—should also apply to local polls.
Mr. Hammond: The Minister is coming to the key point. He referred to the expectation that the Disability Discrimination Act will be extended to cover local authority functions and, thus, local polls. Does the Act already cover elections and referendums? If not, does he expect it to be extended to cover those services?
Mr. Raynsford: My understanding is that the guidance issued by the Electoral Commission ensures that there are suitable arrangements that would comply with the requirements of the Act. I have said that there is some question as to whether the Act applies. We want to make sure that there is a consistency of approach between local polls, national elections and referendums
and that there should be an easy passage from where we are now to the future position if the Act is extended. I hope that that satisfies the hon. Gentleman.After Clause 117
8.15 pm
Mr. Raynsford: I beg to move, that the House agrees with the Lords in the said amendment.
The new clause tabled by the Government on Report gives the Secretary of State in England and the National Assembly for Wales power to amend or repeal by order any enactment relating to a local authority in the light of generally accepted accounting practice as it applies to local government. The new clause was tabled partly in response to the Liberal Democrat amendment to clause 18 tabled in the House of Lords Grand Committee.
Clause 18 concerns the definition of a local authority company and the Opposition amendment reflected the pressure from local government for a modern, all-purpose definition of such a company. In resisting the amendment, we acknowledged that it raised an important issue and we promised to bring forward our own measure. The new clause enables the definition of a local authority company to be brought into line with accounting practice at the earliest opportunity. The timetable for that will depend on the work being done by the Chartered Institute of Public Finance and Accountancy. CIPFA is currently working on a revision to its standard local government accounting code to incorporate a group accountancy requirement for companies. As soon as the CIPFA code is ready, the new power will be used to substitute the accounting definition for the one now in clause 18.
The immediate need to update the definition arises from work being taken forward on the Treasury-led whole of Government accounts exercise, in which the Audit Commission and CIPFA are closely involved, along with officials from our Department and the Welsh Assembly. The aim of the initiative is to produce a consolidated set of accounts for the whole public sector. It must encompass all central and local government bodies, including not only local authorities but those companies in which authorities have a major interest.
The definition of a local authority company used in the Bill for the prudential borrowing system is not based directly on accounting principles. That means that it would not meet the needs of the whole of Government accounts exercise. Authorities would have to follow two different accounting procedures in relation to their companies. This would be onerous, unwelcome and confusing, so the new power will solve that problem. However, the new clause will also allow any other aspect of the local government finance system to be harmonised with accounting practices and to be adapted to reflect future developments without the need for primary legislation. Such a move would implement the Government's policy objective of bringing public sector accounting more into line with standard accounting practices.
In leaving the term "generally accepted accounting practice" undefined, we were aware of a precedent. The Government Resources and Accounts Act 2000 requires the Treasury to use its powers to ensure that departmental resource accounts comply with "generally accepted accounting practice" subject to adaptations that are necessary in the context but no definition is given. In fact, the expression has a well-established meaning. In the UK, it covers the aggregate of the accounting practices that companies are required to follow in preparing their accounts. It has as its principal source the practices recommended by the Accounting Standards Board, a body independent of Government. For local government, accounting practice is established by a code issued by CIPFA, which is recognised as a statement of recommended practice within the Accounting Standards Board framework.
It might be helpful if I explained the difference between the new power and the one already provided for under clause 21. The latter enables the Secretary of State to specify codes that are to count as proper practices. The two powers work in different ways. Clause 21 ensures that local government accounting practice is compliant with appropriate professional codes, namely those issued by CIPFA. However, the clause 21 power could not be used to amend existing legislation that might be acting as an obstacle to the adoption of proper practices.
In the next few years, there are likely to be major developments in national and international accounting practice to improve transparency and reduce the scope for the kind of "creative" accounting highlighted in the Enron affair. For example, there could be fundamental changes in the treatment of borrowing and investments, the full implications of which may not become clear for some time. The changes would need to be applied in local government. Clause 21 is unlikely to be adequate on its own for that purpose, but we are confident that the new clause would make it possible.
I should also like to comment on the breadth of the power, which can be used only to change legislation to which accounting practice is relevant. When the power is used, the Secretary of State gives up his own freedom to devise accounting practices and relies instead on standards imposed by the independent accounting bodies. In all cases, the relevant provisions of a published accounting code or standard that lie behind the order should be readily identifiable. However, since this is a power to amend primary legislation, we have recognised that orders exercising it should be subject to the approval of both Houses of Parliament. The approach was endorsed by the House of Lords Committee on Delegated Powers and Regulatory Reform.
Mr. Hammond: I am grateful to the Minister for his full and explanatory speech, and I congratulate his Department on its economy in the use of civil servants' time. Anyone who also sat through the debate in the Lords the other night will have noticed a marked similarity between his speech and that delivered by his colleague in the other place. One Government, one set of briefings, one speech template—that is commendable economy.
We Conservatives are generally wary of extending the powers of the Secretary of State to amend primary legislation by order, but in this case we can see the merit
of the Government's proposal. I understand—the Minister has confirmed this—that the original issue was specifically concerned with local authority companies: the possible need to produce consolidated accounts for local authorities and their companies, to avoid off-balance sheet scams of the type that we have become rather familiar with in the past few years; and the need to support the whole of Government accounts exercise. CIPFA, as the Minister said, identified the need possibly to amend definitions in clause 18(2) to deal specifically with local authority companies and preparing consolidated accounts for local authorities.The Government went on to identify a possible broader need, and the Minister's speech dwelt greatly on local authority companies and the whole of Government accounts exercise. To my mind, the perhaps more important issue is the ongoing question of the rapid evolution of UK generally accepted accounting practice, partly in response to the demands of legislators and investors for greater transparency in the wake of Enron, WorldCom and other well-documented accounting scandals. We support moves to bring public sector accounting as far as possible into line with GAAP. For the record, the Committee that deals with matters relating to local government and the regions has also clearly endorsed that position. We therefore have to trade off the benefits of the rapid implementation of further moves in that direction. That necessarily means amending obstructing legislation, whereby procedures to be followed in local authority accounting have historically been prescribed in statute—against the objection in principle, which a diligent Parliament ought to start from, to granting the Government powers to amend primary legislation through secondary legislation.
The Government's amendment, which was accepted in the Lords, has been reviewed by the Lords Delegated Powers and Regulatory Reform Committee, which found it acceptable. Any orders made under it will be subject to affirmative resolution, as the Minister said, which always helps to reassure any sceptics in this place. However, as I have said the weakness in resorting to that procedure to tighten scrutiny is the feebleness of the scrutiny process itself. We are certain to reach a 90-minute Committee debate when we have an affirmative procedure, rather than a negative one. But as anyone who has taken part in such debates—as we all have—will agree, once we reach that stage we are a very long way away from really effective scrutiny of the Executive, because of the time limitations that such debates entail. But on balance, we believe that this is a justified measure and we will support it, particularly given that the power to amend is strictly limited to cases in which it is appropriate to do so in the light of the GAAP of the time.
It is important, however, that we recognise that we are agreeing to quite a wide power. It is not, as Lord Rooker appeared to suggest in Grand Committee, merely a power to alter definitions across a wider range than just clause 18(2). It is a power to amend any Act that requires amending in order to bring local authority accounting procedures into line with GAAP. So any statute that prescribes a different procedure, or which inhibits the adoption of GAAP, could be amended by this measure. This is an appropriate provision to include in the Bill, but the House should be in no doubt that it does give the
Government significant powers—rather more significant ones that the Minister's colleague suggested during the Grand Committee debate. However, we will support this measure tonight.
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