Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

We have had a debate about accounting practices, regulations and the code. I have a simple question to put to the Minister. Clause 21(2) refers to accounting practices

''(a) which the authority is required to follow by virtue of any enactment, or

(b) which are contained in a code of practice . . . made by the Secretary of State.''

Under subsection (3), when there is a conflict between the two practices, those that are subject to Acts of

Parliament will take precedence. Why would the Secretary of State make regulations to make a code of practice that conflicted with a code of practice enacted by statute? Will the Minister tell us what on earth the Government have in mind and explain in what circumstances a conflict could arise?

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I am happy to assure the hon. Member for Cotswold that the purpose of clause 21 is to carry over into the new system the definition of proper practices for accounting purposes, which is part of the current capital control legislation. The definition has been amended to allow the codes of practice covered by the definition to be clarified in regulations. The present definition leaves the coverage somewhat vague and, given the importance of the definition, that is undesirable. The clause also provides a power to define accounting practices by regulation. That is necessary to allow important aspects of local authority accounting practice to be maintained, such as the treatment of capital receipts, which differs from normal accounting practices adopted in the wider world.

The hon. Gentleman asked why there might be a conflict. If specific provisions applicable to local government are carried forward for a period, general accounting policy and practice may change over time and call into question specific local government practices enshrined in statute. Clearly, if they are enshrined in statute, they should take precedence. I have explained the logic behind the measure; it is a matter not of the Secretary of State making regulations that do not accord with statute, but of accepting the fact that we are bringing together usual accounting processes with specific statutory provision relating to local government.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister is making the best case for the two subsections to be reversed, in that the statute would be modified by a subsequent code issued by the Secretary of State. Is he saying that practices may change? If so, surely he would want a power to modify the practice under statute by a subsequent code. Can the Minister give me a further explanation?

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

The hon. Gentleman will understand that complex territory can change over time. If there were any doubt about proper interpretation, the principle of the primacy of statute should be preserved. That is the sole purpose of the clause. Such a provision is sensible because, over the years, accounting practices can change. There can be variations in them and, while it is appropriate that usual accounting practices should apply whenever possible to local government, differences can occur because of specific issues that apply uniquely to local government. A conflict may arise in the future in respect of changes in accounting rules and practices that have not necessarily been informed by long-standing local authority statutory provision. The provision is in the Bill to avoid ambiguity or doubt, not because we envisage the Secretary of State approving, by regulations, practices that are in conflict with the statute.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister's explanation was reasonable as is subsection (2)(a). It is reasonable to say that that enactment could be changed by regulations. Why on earth one would want a code of conduct that would conflict with that I do not know. Therefore, subsection (3) does not make much sense. However, unless my hon. Friends are minded to do otherwise, I will not suggest that they vote against clause stand part.

Mrs Valerie Davey (Bristol West, Labour)

I apologise for being absent at the start of the debate. The Committee has made better progress than I expected.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

That is not accidental.

Mrs Valerie Davey (Bristol West, Labour)

That is unfair of the Minister, as the record will show.

How are Government discussions with CIPFA on the proposed regulations progressing? CIPFA is concerned about how depreciation costs will be accounted for, and the organisation's briefing papers make some good points. It is concerned that local authorities should properly comply with generally accepted UK accounting practices and that good management information should be available to them to ensure that capital investment is properly sustained. Therefore, when they produce the regulations, the Government must allow for depreciation to be put into the accounts in the usual way under resource accounting, which now guides Whitehall, and they must resource it through grants. The Government reply, on page 8 of the Select Committee report, which CIPFA supports, states that ''discussions are underway''. It would be appropriate to hear how those discussions are going.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

They are proceeding very well. We have a constructive relationship with CIPFA, which does an enormous amount of work in this field. I am happy with the relationship and with our progress, but I can give no specific report on that progress at this stage. I will keep the Committee informed of any developments during the passage of the Bill and will try to ensure that a final agreement is publicised in the normal way, at the appropriate time.

Mrs Valerie Davey (Bristol West, Labour)

I take it therefore that the Minister will not tell us exactly what conclusions the Government are likely to draw.

Mr. Raynsford indicated dissent.

Mrs Valerie Davey (Bristol West, Labour)

In that case, I ask the Minister to look carefully at CIPFA's representations, as I am sure he will. I strongly support resource accounting, which will have a major impact in improving how public expenditure is managed and analysed, so we can get rid of the system that bedevilled us in the last century, which means that the capital infrastructure of the country, at local and national level, is not properly looked after. I am concerned that the new information should be available to local authority chief finance officers and members of local authorities. I would be worried if the Government, through the regulatory powers in clause 21, were not going to take that route. If, at any stage, the Government are going to reject CIPFA's advice I hope that Ministers will have the courage to make that clear in the House and give their

reasons for doing so. The Minister may not want to say that he will, in due course, allow himself to be embarrassed by publicly saying that he does not accept CIPFA's advice, but given the hon. Gentleman's track record, I am sure that he will be able to give us an assurance.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I fully support the hon. Gentleman's views about the importance of resource accounting, and I endorse his views about CIPFA's good work. However, the hon. Gentleman will understand that the ongoing discussions are not yet at a stage that enables me to make an announcement, and it would be premature to give a commitment before discussions are completed. I hope that I have made our intentions clear. We share the hon. Gentleman's objective of ensuring that an effective resource accounting framework is in place.

Question put and agreed to.

Clause 21 ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.