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Lord Higgins: I am grateful to the Minister for that explanation. One would obviously wish to read it very carefully as this is an extremely technical point. None the less, I am not clear even now—we have probably not considered it for many years—what the argument is for proceeding on an appropriations in aid basis rather than simply paying into the Consolidated Fund whatever is received and allocating funds in the opposite direction.

I take the Minister's point in relation to cash flow. However, we seem to be getting into a situation where the old system is being changed to an accruals basis and one is then making adjustments to get back to the point where one takes account of when the cash is paid. The arrangements proposed in the Bill seem to have some implications for the cash flow of individual departments. If we are to move to a system where cash flow is given greater prominence, then I am not clear what the advantage of that is.

Lord McIntosh of Haringey: There are two alternatives. One is under subsection (4) when the money is received in the year for which it is authorised, in which case the noble Lord, Lord Higgins, may agree that there is no problem. The other is when it is received in a year other than that for which the appropriation in aid is, or is to be, authorised. In that case, we are saying that it is retained and applied as a use of resources authorised under the appropriation Act for the service of the year in which it is to be received. If that is not possible, or if it is not the right thing to do—in other words, if there is a surplus—it goes into the Consolidated Fund where, presumably, it earns interest for the Government.

If we had anything other than that division between those two sections, Parliament would be continuously allocating and authorising in dribs and drabs. By dividing it into those two sections, in and out as it were, we are avoiding the need constantly to refer back to

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Parliament for cash for specific purposes. At the same time, we are achieving the control which Parliament needs to be sure that a department is receiving only what it needs within a year for the expenditure that has been authorised or, if it is receiving it out of the year, that there is a control of it in the sense that it is held for the purposes authorised by the appropriation Act. If that is not appropriate, it is put into the Consolidated Fund.

There does not seem to be a meeting of minds on this matter. I had better write to the noble Lord, Lord Higgins, about it between now and Report stage.

4.45 p.m.

Lord Higgins: It may be helpful to have that as a separate discussion outside the Chamber before Report stage. On that basis, I would not wish to pursue the matter.

Clause 2 agreed to.

Clause 3 [Payments out]:

Lord McIntosh of Haringey moved Amendment No. 1:


    Page 2, line 16, after ("requisition") insert (", request").

The noble Lord said: In moving Amendment No. 1 I shall speak also to Amendments Nos. 2 and 3. These amendments provide for a new clause to replace Clause 4 and minor consequential amendments to Clause 3. The amendments have been agreed by the National Audit Office.

They would permit the Treasury to repay, with the agreement of the Comptroller and Auditor General, money which,


    "should not or need not have been paid into the Fund".

"The Fund" is now defined to include the National Loans Fund as well as the Consolidated Fund.

A specific statutory power is needed to make any payment out of the Consolidated Fund or the National Loans Fund. In addition, all such payments, except for transfers between the two funds, require the prior approval of the Comptroller and Auditor General, technically known as "credit", or authority to pay. This presents a problem when sums are credited to either fund in error and ought to be repaid.

As the law stands at present, there is no power to repay any sums of money that are paid into either the Consolidated Fund or the National Loans Fund but should not have been—I do not know how we have got away with that for so many years but perhaps my noble friend Lord Barnett can enlighten me on that point—so any such sums are effectively imprisoned inside the fund concerned. This has occasionally caused problems, so the Government believe that it would be sensible to provide a power to refund such sums from the National Loans Fund as well as the Consolidated Fund.

As our original intention was simply to modernise the provisions of the Exchequer and Audit Departments Act 1866 relating to the Consolidated Fund, we originally sought only a power to repay sums credited in error to the Consolidated Fund. The main example we had in mind was where departments

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surrender receipts that they believe are surplus to their needs, but which subsequently they find they need in order to avoid incurring an excess vote. However, other payments could be credited to the Consolidated Fund in error, so we sought a general power to repay sums credited in error to the Consolidated Fund. That is what the present Clause 4 provides.

We now wish to change this for two reasons. First, there is a need for a similar power for the National Loans Fund. Secondly, discussions with the National Audit Office and our lawyers have led to the conclusion that the term "as the result of an error" would not have provided the desired degree of flexibility—hence the new formulation,


    "should not or need not have been paid into the Fund".

I beg to move.

Lord Higgins: The Committee is grateful for that explanation, but it really brings us back to the point we were making a moment or two ago. Would it not be much easier, instead of having appropriations in aid, which are then sometimes hung onto wrongly and sometimes remitted wrongly and in error, simply to allow that whenever there is an amount going from one department to the central Exchequer, even if one needs the money to meet something which has been authorised by Parliament, one does so. It does seem rather complicated to have these amendments. I accept that they have been, apparently, approved by the National Audit Office—that does not worry me at all. The fact that they are approved by the department's lawyers may worry me a little more. It does seem that this is a very complex way of dealing with a problem with which perhaps one could deal in a simpler manner.

I do not wish to oppose these amendments. None the less, it is a strange situation. I am not at all clear what happens to anyone who may have made such a payment in error and whether any penalty is imposed.

Baroness Sharp of Guildford: I join the noble Lord, Lord Higgins, in being somewhat surprised at the sheer complexity of these procedures. We certainly would not oppose this element of modernisation, but I would ask this question. In subsection (2)(a) of new Clause 4, is there any specific reason why the word "requisition" is used rather than "request"?

Lord McIntosh of Haringey: We use both words: "requisition" appears in subsection (2)(a) and "request" appears in subsection (3)(a). In practice there is no difference between the two words but they are used in preceding legislation. It is probable that if we changed them now we would have to change all kinds of other parts of the preceding legislation. The Committee would not wish us to table more government amendments.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 2:


    Page 2, line 21, after ("requisition") insert (", request").

On Question, amendment agreed to.

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Clause 3, as amended, agreed to.

Clause 4 [Payments in by error]:

Lord McIntosh of Haringey moved Amendment No. 3:


    Leave out Clause 4, and insert the following new clause—


PAYMENTS IN BY ERROR
(" .—(1) Where—
(a) money is paid into the Consolidated Fund or the National Loans Fund, and
(b) the money should not or need not have been paid into the Fund,
all or any part of the money may be paid out of the Fund in accordance with this section.
(2) In the case of the Consolidated Fund—
(a) the Comptroller and Auditor General shall on receipt of a requisition from the Treasury grant a credit on the Exchequer account at the Bank of England (or on its growing balance), and
(b) an issue shall be made on orders given to the Bank by the Treasury in accordance with a credit granted under paragraph (a).
(3) In the case of the National Loans Fund—
(a) the Comptroller and Auditor General shall at the request of the Treasury grant a credit on the National Loans Fund, and
(b) a payment out of the Fund shall be made by the Treasury in accordance with a credit granted under paragraph (a).
(4) A payment or issue made under this section shall be recorded in—
(a) the daily account under section 15(5) of the Exchequer and Audit Departments Act 1866 (Consolidated Fund), or
(b) the daily statement under section 1(2) of the National Loans Act 1968 (National Loans Fund).").

On Question, amendment agreed to.

Clause 4, as amended, agreed to.

Clause 5 [Resource accounts: preparation]:


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