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6.49 am

Mr. David Davis: May I start by joining the Chief Secretary and my hon. Friend in thanking the staff of the House, the Clerks of the Committee, all the members who served on the Committee, the Public Accounts Committee, which laboured mightily over its views on this and, most importantly in my view, the staff of the National Audit Office? The Comptroller and Auditor General's staff worked very hard to brief on the Bill and to produce amendments, some of which the Government have accepted either in detail or in spirit. Even where they have not been accepted, the amendments have been valuable in illuminating aspects of the Bill.

For all my criticism of it, the Bill has merit. If we divide on Third Reading, I will vote in favour of the Bill. I hope that those on the Treasury Bench will forgive me if I spend a little time talking about its demerits. First, however, I should like to put to one side a component of the Bill that also has merit--the aspect that relates to Partnership UK. The drawback of the involvement of Partnership UK in the Bill is that it set a pace that was perhaps faster than would have been comfortable. Had we had more time to consider some of the elements of the Bill that have caused controversy between us, we might have been able to resolve some of the questions before the Bill reached its final stage. Partnership UK had that effect. I understand the reason for the pace; I understand the merit of having Partnership UK has an instrument of Government policy. We all agree on the virtues of the

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private finance initiative. However, it has sat awkwardly in the Bill and could easily have been the subject of separate legislation. That might have been a better approach, but that is what we had, and we had a deal from that point of view.

The purpose of the Bill is desirable. The original intent of resource accounting was the better management of Government resources for public service. Nobody can dispute that. The two major elements of that--better measurement and control of the resources, in either costs or capital--have been debated ad nauseam. The missing component of the Bill is the better measurement of performance. We have just had a short but constructive debate on that.

The missing component, for me, is the weakest aspect of the Bill. It is the largest flaw. Even the Economic Secretary agreed that that was the major component of the motor for reform in the next couple of decades. We must all bear that in mind as we work through subsequent discussions.

My arguments throughout the Bill's proceedings have been about preserving the rights of Parliament via the Comptroller and Auditor General. Audit, access--for purposes of value for money, propriety and regularity--and validation performance measures are the three areas for argument. Throughout the Bill's progress, we have heard a wide range of reasons against them. I hope that the Minister accepts that I have sought each day to identify those reasons. That may have led to tedious repetition in the debates overnight, but I tried each time to identify the reasons and address them in the amendments before us. We were not successful in getting them accepted, but it was more of a refusal than a rebuttal in most cases. Those arguments may prove more persuasive when the Chief Secretary and I have discussions later on.

I do not blame the Ministers for this. It is more a problem between Westminster and Whitehall than a problem between parties. Whitehall does not like scrutiny, because it is painful. It is not unusual in that dislike. Most organisations that suffer scrutiny find it difficult from time to time. Also, Whitehall does not understand well the rights of Parliament. That is something to which I have returned time and again in our long discussions on the Bill.

Two components make the Bill less good than it should be. One is the weakness in the component that will be the motor of the delivery of that massive reform in public service, and the other is honest data. I am talking about Parliament's certainty about honest data, not just the certainty enjoyed by the Government or the Treasury, which has its own view. Honest data--truth--is the diet of a healthy democracy. That has been a missed opportunity when it comes to the Bill.

During our interesting proceedings, the Chief Secretary offered a review. As I said, I am minded to take part in that. I want to discuss with him the remit, the timetable, the staffing, and so on. I am sure that we shall reach a useful conclusion. I welcome that warmly.

However, there is a weakness in that plan: in carrying out the review, we may lose the opportunity to introduce primary legislation. The Banquo's ghost in this matter has been the fact that such an opportunity occurs only every few decades. There have not been many opportunities since 1866. For that reason alone, I should have preferred

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even permissive amendments to be accepted in this place or in the Lords, to ensure that we had the opportunity to deal with such items as parliamentary right of scrutiny, access and validation.

If, as I suspect will happen in three or six months' time, the Chief Secretary and I come to complete agreement on the proper way for the future of resource accounting and all the associated elements, the conclusion will be impossible to deliver, because there will be no primary legislation on which to hook it. I hope that we do not arrive at that conclusion. I hope that the Chief Secretary will give that matter some thought before the Bill goes to the other place.

However, if there is a Division on Third Reading, I shall vote for the Bill. Even with its weaknesses, the Bill is still a move forward in the management of good government.

6.56 am

Mr. Edward Davey: I echo the thanks given by the Chief Secretary and by the hon. Member for West Dorset (Mr. Letwin) to the staff of the Palace, because we have kept the staff up all night.

I also thank the staff of the National Audit Office and the CAG, who graciously gave advice to all members of the PAC--often giving detailed answers to our questions. That helped the deliberations of the Committee. I thank my hon. Friend the Member for Newbury (Mr. Rendel), who has worn two hats during the debates on the Bill--as a Liberal Democrat Member and as a member of the PAC.

The Bill is historic. It is most important. As the right hon. Member for Haltemprice and Howden (Mr. Davis) said, opportunities to debate the Government accounts and to legislate on them occur infrequently. The last time was in 1921 and the time before that was in 1866. We could go into more history--as I did in Committee, when I talked about various predecessors of the CAG. However, I shall not do that now. I emphasise that this is an historic opportunity, although as the hon. Member for West Dorset pointed out, it has been a missed opportunity.

The Bill is important for two major reasons. First, it will enable better decisions to come from Whitehall--especially decisions on capital spending. Secondly, it will improve democratic accountability--the way that the House scrutinises the Government's budget.

On the first point, resource accounting and resource budgeting will remove the bias against capital investment that has existed in the public sector for so long. It has been easy to chop capital budgets; the money is saved during the first year and no one seems to notice for a while. Maintenance and basic investment have always suffered.

That has been true for decades. There have been occasional blips when the issue could no longer be avoided. However, in general, public sector investment has been sub-optimal for many decades because the public finance framework has had an in-built bias against capital expenditure. The Bill will help to remove that.

It is slightly ironic that, at the same time that we are removing that bias and creating a level playing field for public sector managers to consider capital investment, we are creating a new body--Partnerships UK--and telling

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the private sector that it can undertake an increasing amount of the public sector's capital investment programme. I am not against the establishment of PUK, but, as I pointed out earlier, I hope that, as there is a decent financial framework in which the public sector can consider capital investment decisions, public sector managers will be given the chance to carry out duties that, in many respects, they have managed well despite having one arm tied behind their back.

I wish to focus on the second major advantage that I see resulting from resource accounting and budgeting--improved accountability. For more than 80 years, this place has failed the people of Britain by failing to hold the Executive to account for their Departments' budgets, It has failed for three major reasons. First, we have not had the information to be able to debate properly what is going in Whitehall, the spending decisions that have been taken and how taxpayers' money is used. Secondly, even if we had had the information, we do not have the resources, even with departmental Select Committees, to analyse that information properly. We do not have the training--I know that I do not have it--to analyse the information that we have under the cash accounting system and I doubt whether we could analyse it under the new resource accounting system. Thirdly, even if we had the information and understood it, this place does not have the procedures to amend the spending decisions that have been made or to persuade the Government to change their proposals.

I pointed out on Second Reading that the last time the House rejected a spending proposal of the Government of the day was in 1919. It was an estimate on the royal palaces vote and the House rejected the Government's spending proposal for a bathroom for the then Lord Chancellor. We remember the hue and cry that occurred when the current Lord Chancellor wanted extra money for wallpaper for his apartments. However, despite that hue and cry, the House failed lamentably to do anything. That is just one example of how the Executive have all the power over the Budget. It is time that the imbalance was redressed.

I am not arguing that we should take away the Crown financial initiative. Clearly, the Executive have to be the main initiator of spending decisions. However, if this place cannot amend those decisions, does not have the information and the resources to enable it to do that and interpret the information, Ministers will never have properly to defend their budgets. They are able to make spending decisions in the full knowledge that they will probably have left their Department by the time that the scrutiny that works in the House--the Public Accounts Committee--gets to them. They are rarely held to account for the way in which they run their departmental budgets. If we could change that, we would end up with much better decisions resulting from the financial process in Whitehall.

The Chief Secretary rightly said that the Government have listened to many of the complaints made in Committee and have tabled amendments. We welcome that. The Bill is certainly a lot better on Third Reading than it was on Second Reading. However, I share many of the concerns of the hon. Member for West Dorset about definitions of accounting standards and how they should operate, performance measures and National Audit Office powers. I hope that the other place will address the issues and that Ministers will take the time to reflect and see

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whether they can offer a little bit more. If they cannot give too much in the other place, I hope that the review process that the Chief Secretary has set up will result in changes.

Possibly, Ministers could introduce a Bill to the House in a year or two. That could address thoroughly all the points that we were not able to deal with in this Bill's passage through the House.

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