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Mr. Smith: I thank the hon. Gentleman for his comments on what he describes as largely sensible action by the Government. In setting up Lord Sharman's inquiry, we were responding to concerns expressed not merely by Conservative Members, but by Members of all parties on the Public Accounts Committee. Today, following Lord Sharman's report, we have taken action where the Conservatives in government did not do so for more than 18 years.

The hon. Gentleman referred to the time that it has taken to publish our response. It would have been nice if we could have done so sooner; I genuinely believe that it is a good-news statement for the House. However, we faced a choice. We could have replied earlier on the principle, leaving much of the detail and the matters set out in section 3—the protocols for access and so on—to be negotiated later. In such circumstances, many hon. Members, including the hon. Gentleman, would have had a lot of questions about how the detail would work. However, we have come back with a comprehensive and detailed response and he should have welcomed that.

I noted that it took the hon. Gentleman a long time to get to the substance of the statement; indeed, his remarks were considerably longer than the statement itself. He asked a number of questions. He referred to the New Millennium Experience Company and asked whether it

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was a good example of a body that would have benefited from access by the Comptroller and Auditor General. The answer is yes. Subject to the points that I made, precisely that access will be provided by our proposals.

The hon. Gentleman also referred to the position of the BBC. In considering both the original Davies report and that of Lord Sharman, the Government have weighed the matter very seriously. We believe that the editorial independence of the BBC, even in terms of the impression that it could be compromised in any way, should not be risked. That is why we have decided not to proceed with the specific recommendation in question.

The Financial Services Authority was established relatively recently and its audit arrangements were extensively debated, along with other matters, in the House. The Government have not ruled out the possibility of the Comptroller and Auditor General undertaking a value-for-money study of the FSA in future. Subject to implementation of our proposals, we will consider that possibility.

The hon. Gentleman asked about the credibility of PSA targets, on which I agree with him. That is why we are taking measures that add to the substantial external validation that is already carried out by the Office for National Statistics and the Audit Commission, the ability of the Comptroller and Auditor General to oversee the data systems as a whole. That should build confidence on all sides in the reliability of the measures that we are taking and help us to not only reform public services, but deliver on our targets.

Mr. Alan Williams (Swansea, West): May I congratulate my right hon. Friend on his statement? As he said, it represents a victory for the Public Accounts Committee in a battle that it has fought for well over 10 years. His remarks about quangos, companies and validation represent a notable addition to parliamentary accountability, for which I thank him.

I hope that my right hon. Friend will not think me churlish if I echo one of the points made by the hon. Member for Buckingham (Mr. Bercow) about the BBC. It is unfortunate that he has not seen his way to agreeing with Sharman, who was himself echoing the recommendations of the current chairman of the BBC before he suffered his conversion on the way back from Damascus. I hope that if we advance further arguments in support of the recommendations, he will at least indicate that he is willing to listen to them as positively as he listened to previous arguments.

Mr. Smith: I thank my right hon. Friend for his welcome for our proposals. I should like to place on record my appreciation and that of the House for all his work on this agenda over the years.

I would never consider any of my right hon. Friend's remarks churlish. I clarified the position on the BBC in my earlier response. The fact that we have made these proposals proves that we are listening. At an early stage of the procedure, I was the only Minister in living memory to appear before the Public Accounts Committee, where I

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said that with goodwill and co-operation on all sides we could make substantial progress on these matters of mutual concern. That is exactly what we have done today.

Mr. Edward Davey (Kingston and Surbiton): I wholeheartedly welcome almost all the Chief Secretary's statement. In effect, he has announced the Government's complete acceptance of the arguments that I and hon. Members on both sides of the House raised two years ago during the passage of the Government Resources and Accounts Act 2000.

I join the Chief Secretary in congratulating my noble Friend Lord Sharman. Does he agree that his announcement is an important victory for Parliament, and that he should therefore continue to work closely with hon. Members as he implements the new regime as speedily as possible?

As for the detail, will the Chief Secretary say more about the Government's proposals for auditing performance measures? Sharman and the Government both favour a step-by-step approach to introducing the external validation of performance information. Will he give a more detailed timetable for full implementation? His statement suggests that the Government are limiting the definition of performance measures to public service agreements, yet surely external validation should cover all relevant public performance measures if we are to have confidence in such figures.

Finally, does the Chief Secretary realise that there is extreme disappointment and anger about the Government's decision not to extend the Comptroller and Auditor General's remit to the BBC? Does not he realise that his arguments against that are so weak as to be ridiculous and fly in the face of the logic of the rest of his statement? We all share his desire to protect the BBC's independence and editorial freedom, but that is completely irrelevant to financial audit. The NAO has audited universities. Universities have academic freedom, but the NAO's remit nevertheless applies to them. It is ironic that Gavyn Davies, before he became chairman of the BBC, recommended that the NAO should audit the BBC. Will the Chief Secretary explain why on earth the BBC should be exempt from NAO audit given that all other bodies, including private finance initiative contractors, are to be included?

Mr. Smith: I thank the hon. Gentleman for welcoming my statement. As he says, it is a victory for Parliament and for parliamentary accountability. The Government's performance in delivering public services and our other objectives is strengthened by the effectiveness of parliamentary scrutiny. That is the important philosophy that underpins the proposal.

We have made a huge step by inviting the Comptroller and Auditor General to take overall responsibility for external validation. As regards areas that are already validated by the Office for National Statistics or the Audit Commission, we would not normally expect them to have much more work to do. Ultimately the Comptroller and Auditor General will make decisions on the reliability of the systems in instances that are drawn to his attention.

It is wise to take a step-by-step approach to these matters. The hon. Gentleman has a point when he says that there are other measures of performance that are not included in public service agreements. It would be

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sensible to concentrate on those PSAs that are quantifiable. Most importantly, we must accept the responsibility of ensuring that the underlying systems are independently validated.

I do not intend to repeat what I have said about the BBC. It would be a grave error even to give the impression that its editorial independence was in any sense being called into question.

Mr. John McFall (Dumbarton): As Chairman of the Select Committee on the Treasury, I welcome my right hon. Friend's proposals. I can do no better than to echo the words of the official Opposition spokesman, who said that the proposals were hugely sensible. Putting the auditing of all non-departmental public bodies on a statutory basis is extremely welcome.

In the words of Sharman,

Will my right hon. Friend ensure that that process still goes on?

Finally, has my right hon. Friend given any thought to merging the National Audit Office and the Audit Commission?

Mr. Smith: I thank my hon. Friend for his comments, and I pay tribute to his work in this area. The answer to his last question is no, I have not given further consideration to that matter. His comments on innovation and risk management are entirely right, and we welcomed the way in which the report of the Comptroller and Auditor General and the National Audit Office showed how properly judged risk and risk evaluation were perfectly compatible with proper accountability for financial probity. As the former Chairman of the Public Accounts Committee said, there is a world of difference between well judged risk and its management, and gambling. We are in favour of the former in these matters, but not the latter.

Mr. Edward Leigh (Gainsborough): I thank the Chief Secretary for his important statement, and pay tribute to his officials for the constructive way in which they have worked with officials from the National Audit Office. We have made a great deal of progress today. We have ensured that the Public Accounts Committee—recognised by the Sharman report as the senior Committee in the House of Commons—can continue the work that it has carried out since 1861 on directing the harsh light of parliamentary scrutiny into all the nooks and crannies of waste and incompetence inside government. I am, therefore, very pleased with the statement.

I want, however, to echo comments made by others, particularly the right hon. Member for Swansea, West (Mr. Williams), about the BBC. The Public Accounts Committee feels strongly that, as the BBC levies the equivalent of a poll tax on virtually every household in the kingdom, and as it is a vital national resource, Parliament should not be denied its right to hold this body up to public scrutiny through the National Audit Office. My Committee is fully cognisant of the importance of preserving the editorial independence of the BBC. The NAO already looks after the World Service, and there is no question of its interfering in the independence of its programming. My Committee would never get involved

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in questions of what programmes should be shown, but we are talking about very large sums of public money, and we want Parliament to be involved.

My Committee also feels that the civil list should be open to scrutiny by Parliament. The system has worked well with regard to royal palaces and royal travel; there have been no complaints there. We recognise that this is a sensitive area, but the Committee believes that Parliament has a right to hold the civil list to account in the way that other public expenditure is held to account. Having said that, I thank the right hon. Gentleman for his statement, and I pay tribute to my predecessor, my right hon. Friend the Member for Haltemprice and Howden (David Davis), for the work that he has done in this area.

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