Performance Statements

Orders of the Day — Government Resources and Accounts Bill – in the House of Commons at 4:15 am on 29th February 2000.

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'.—(1) This section applies to any government department which is required to prepare resource accounts under section 5, unless otherwise provided by an order made under subsection (6).

(2) A department to which this section applies in any financial year shall prepare a performance statement in respect of that year analysing the performance of the department in using the resources to which the accounts relate in achieving its objectives for that financial year.

(3) A department shall send its performance statement to the Comptroller and Auditor General with the resource accounts sent to him under section 5, or at such other time as the Comptroller and Auditor General may specify in respect of that statement.

(4) The Comptroller and Auditor General may examine any performance statement which he receives from a department under subsection (2) and may report on it to the House of Commons.

(5) Subsection (4) shall not entitle the Comptroller and Auditor General to question the merits of the policy objectives of a department to which the performance statement relates.

(6) The Treasury may by order designate a department as one to which this section does not apply or as regards which the operation of this section is modified to the extent specified in the order, and such order may be expressed to apply to all financial years or to any specified financial year.

(7) An order under subsection (6) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of the House of Commons.'.—[Mr. David Davis.]

Brought up, and read the First time.

Mr. Deputy Speaker:

With this, it will be convenient to discuss Government amendments Nos. 18 to 20 and 35.

Photo of David Davis David Davis Chair, Public Accounts Committee, Chair, Public Accounts Committee

Hon. Members will be happy to know that this will be my last outing, other than a brief comment on Third Reading.

The new clause is about performance reporting—a matter on which the Bill is silent, but which was supposed to be the most revolutionary element of resource accounting as originally envisaged. The clause is developed from amendments that I tabled in Committee on behalf of the Public Accounts Committee. It would require Departments to prepare performance reports, which would have to be independently validated. It would give the Government flexibility in determining the content of reports and allow for further developments in validation techniques. As hon. Members noted in Committee, it is a remarkably mild provision.

We should be clear about what performance reporting and independent validation will mean in practice. The recent report of the Public Accounts Committee on the Bill said: The Government have set the Department of Social Security a target to reduce by 30 per cent. benefit losses from fraud and errors in income support and jobseeker's allowance by March 2007, with at least a 10 per cent. reduction by March 2002. In this case the Government have set the target. The Department and Benefits Agency will collect the relevant information and report on the extent to which they have achieved their target. The role of independent validation would be to check the Department's systems for collecting information, the veracity of the conclusions they have drawn and whether the outcome had been represented fairly, and to report the findings to Parliament. During the passage of the Bill, the Government have set out their objections to the proposals. As before, I shall address each of them. I shall start with the area of common ground. The Chief Secretary told the Committee that he thought that performance reports should be credible, should enjoy widespread legitimacy and should be as objective as possible. I agree with him on all those points. It has long been established that the way to ensure credibility, legitimacy and objectivity in financial accounts is to have them independently audited. The same principle applies to performance reports. An independent report on performance will instil public confidence in the measures and provide Parliament with the assurance that it needs as it considers the Government's spending plans.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

Does my right hon. Friend agree that, given the analogy that he has been drawing, he ought also to insist on the independence of standard setting for performance measures, just as he, I and others have for the standard setting for accounting?

Photo of David Davis David Davis Chair, Public Accounts Committee, Chair, Public Accounts Committee

My hon. Friend is correct. He may remember that I was provoked to rise to my feet against my prior judgment to make that point when we were considering his amendment on standard setting.

Drawing a parallel with the Comptroller and Auditor General's financial audit, I remind the House that the importance of his role is the positive assurance that he provides. Of course, he draws our attention to errors, but for most of Government his opinion is positive, providing vital reassurance each year that taxpayers' funds have been spent properly. That is why I intervened on the hon. Member for Kingston and Surbiton (Mr. Davey), to make the point about the overwhelming honesty of British public service. We take that for granted, but we should not because it is not the case world wide.

The routine, year-on-year nature of the CAG's work is important. It is an important validation and encouragement of that honesty. The same is true for performance information. Routine validation would be far less contentious than the exception reporting that can happen at the moment. There are already 2,500 performance measures planned. Given that volume, each will be of less significance. Exception reports would attract more attention and would be more likely to focus on aspects where there were real concerns about performance. Routine validation will result in routine reporting.

The Government have suggested that the CAG might not be the most appropriate person to validate performance measures. They have observed that the statistics commission that they plan to establish might have a role. They intend the commission to contribute to the integrity of the published data that fall within its purview by ensuring that they are collected in accordance with clear standards and subject to valid statistical techniques. The commission can play an important role in enhancing the quality of Departments' performance reports if they feature data prepared under its authority.

The commission cannot fulfil the role of validating performance reports independently because, fundamentally, it is a creature of the Government whose performance is being reported. It is part of the Government's quality assurance system; it is not an independent body working on behalf of Parliament and reporting to it. In so far as the statistics commission will lay down standards for the collection of Government statistics and periodically review how well Departments are effecting those standards, it can provide an important source of assurance for the person responsible for independent validation, but it cannot fulfil that role.

4.30 am

Furthermore, as I understand it, the commission will not cover all data appearing in performance reports. Information will be drawn from a wide range of systems, not all of them statistical. Indeed, I understand that it is for Departments themselves to decide what information is or is not to be classified as national statistics. So the proposals, important as they are, will not apply to all performance data.

We then turn to the question of who can validate performance information independently on behalf of Parliament. First, I find it hard to imagine circumstances in which there might be a person better suited than the CAG to provide Parliament with an independent view on performance, so my new clause specifies him. However, the Government have expressed the view that the CAG may not always be the right person. The new clause, therefore, enables the Government, by order, to modify the arrangements for performance reporting in any particular cases, including, for example, specifying a different authority to undertake validation.

Secondly, the Government thought that the CAG might have to go into local government in order to validate central Government performance measures, but in the new world of joined-up working the public auditors are already gearing up to work closely together, to take assurance from each others' work and to minimise the audit burden. They will adopt the same model for performance reporting. Indeed, the CAG already relies on the work of the Audit Commission and its appointed auditors, for example in signing off claims by local government bodies for grants paid by central Government bodies. He would similarly place reliance on the Audit Commission and its appointed auditors in validating performance information emanating from local government.

Thirdly, the Minister was concerned that the CAG would have to make judgments involving him in questioning policy matters, but that would not be the case. The policy element of performance measures would be the decision about which targets would be set. Those would always be matters for the Government. The CAG would not question them, just as in his value for money work he focuses on the implementation of policy and, by law, does not question the merits of policy objectives.

The CAG's role would be to check that the systems used to collect the data were robust and that the results had been represented fairly. He would then be in a position to assure Parliament about the integrity of performance information. He has already reported without difficulty on the performance measures of some Government Departments such as the Benefits Agency.

However, since the risk of bringing the CAG too close to policy is a real concern to the Government, I have removed all possibility of such a risk in framing the new clause. It now explicitly prohibits the CAG from questioning the merits of policy objectives. That is exactly the same statutory prohibition that applies to his value for money work set out in the National Audit Act 1983 and which has proved effective. In effect, it is a belt and braces provision as it is a second statement of the same provision. If the Government are worried about it, it is in the new clause.

Fourthly, the Minister noted: No standards for validation have yet been established, and there are still many questions as to what form it should take. That puzzles me because the Government have embarked on initiatives such as the local government best value initiative, which imposes statutory duties on local government auditors without any standards being in place.

Aside from that inconsistency, the fact that standards are fluid is no reason to delay establishing a statutory framework for validation. Auditing standards for financial accounts are being developed and amended constantly to reflect advances in the profession, yet the statutory framework remains unaffected because it is just that—a framework. Similarly, a statutory framework for performance measure validation does not depend on standards being set in concrete. However, I have worded the new clause carefully in order to allow the evolutionary development of standards and methodologies. It simply says that the CAG may examine performance statements and report on them. That will allow him to develop his approach progressively, in consultation with the Treasury and the Public Accounts Committee. The Government also have a safeguard that under the commencement order they can bring the clause as a whole into force again at a time of their own choosing.

Furthermore, to draw any inference that we are in completely unexplored territory would be misleading. The CAG has reported several times on performance measures; the Audit Commission examines performance indicators in local government; and there has been statutory validation of performance indicators in Australia and New Zealand for some years. Therefore, the issue of standards is not a real obstacle.

I shall quote the Economic Secretary's exact words regarding the Government's final concern, rather than imposing an incorrect interpretation on them. The hon. Lady said in Committee: There are also questions relating to the meaning of validation for measures based on data from private sector companies and international bodies, and whether bodies that might conduct validation have the necessary skills and resources to do so.—[Official Report, Standing Committee A, 13 January 2000; c. 101.] I think that she was alluding to the trend to progress from output measures to outcome measures in assessing performance. Outputs are the immediate results of a Department's activity, usually within the Department's control. Outcomes are about the ultimate results that a Department's activities are designed to secure. Their measures tend to be beyond the Department's boundaries.

There are complex issues for those developing such measures, but they are not reasons to avoid validation. Indeed, the very complexities are reasons for validation to be built in from the outset. If the Government are asking the public to take confidence from these measures, they must be capable of validation.

The Bill should put performance reports on a statutory basis and provide for the CAG to validate them. I will be very happy to discuss my proposals further with the Government before the Bill goes to the Lords, if that would be helpful.

I wish to reiterate an important point that I made earlier. I have been struck—as, I know, were Ministers in the previous Government—by the absence of a decent management information system in most Departments and the inability of the Minister, senior managers, permanent secretaries and accounting officers to know how well their Departments are working. A great benefit that will come from resource accounting will be the habitual measurement of the outputs and outcomes. That is a revolution in action in the next decade or so which will, I believe, deliver markedly better public services to our citizens and taxpayers. That is a prize well worth having.

One of the most corrosive risks to afflict that prize would be a belief among the public or among the people trying to deliver services—those hard-working public servants who get very little credit in the tabloid newspapers from week to week—that the figures that they were dealing with were in some sense not validated, not impartial, or were, in some sense, propaganda. If that belief becomes common, it will corrode the basis of what I believe offers a hope of improving public services in the next decade or two more than any revolution since the effective creation of the public sector after the second world war. it is for that reason that I have made this point today and would like to discuss it again with the Chief Secretary. As I said at the beginning of my speech, I am one of those strange creatures—a right-wing Tory who believes in public services.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

We are dealing here with one of the most important issues in the Bill. As my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) pointed out, it was dealt with at length in Committee. New clause 4 is substantially modified in comparison with my right hon. Friend's earlier efforts and those of his colleagues on the Public Accounts Committee, in order to accommodate a number of points that were made.

We may, to our ineffable delight, hear from the Economic Secretary in a few minutes that the Government will accept the new clause or something like it. If so, I hope that she will pass over in silence the remarks that I am about to make on her previous arguments on the matter, that she will let bygones be bygones and celebrate the day.

Lest the Economic Secretary should be tempted to argue against new clause 4, despite the substantial changes made by my right hon. Friend, I want to go through the pattern of argument that she used in Committee. Since then, we have had the opportunity to reflect that that argument is incoherent to the point where the Economic Secretary herself may feel that she does not want to continue it.

When my right hon. Friend first proposed the admirable idea of trying to use the Bill as a way of instituting transparent outcome measures, or performance standards, his ambitions were already modest—as were those of his colleagues on the PAC. Indeed, they were too modest. My right hon. Friend omitted to include in his Committee amendments, and also in new clause 4, any reference to the defining of standards that intermediate between policy objectives, which are the proper concern of the Government and the electors, and enforcement and validation, which he has tried to strengthen, in new clause 4 and previous amendments, through the CAG.

However, betwixt policy, which is the Government's prerogative, and validation, which falls to the CAG in any rational system, lies the question of the definition of standards. The Government might have a particular policy—for example, to re-employ all unemployed people aged between 18 and 21 would be a rational policy objective; indeed, it may be similar to part of the new deal. It would then fall to someone to decide the measure for whether the Government had achieved that policy.

I regret that in my right hon. Friend's earlier efforts and in new clause 4 there is no such intermediation of an independent body—which could of course be the very body that was rejected in our previous discussions of new clause 1. There is no intermediation of any body that could ensure that the standards which measure performance are sufficiently robust for them to be validated by the CAG. That is a lacuna.

The reason that we have not tabled further new clauses or amendments is because we want to cross the first bridge first. Unless the Government are willing to accept the principle of validation, there is not much point in trying to insert independent standards. To take the analogy of the national accounts—the whole of Government accounts and the resource accounts for each Department—if the Government had taken the position that no one should audit them, we should hardly have bothered to propose an independent body to set up the standards against which the audit should occur.

It is because we have been able to assume that an auditor—whether the CAG or private auditors—will validate in all cases that we have been able to argue for the next step, which is to try to secure an independent definition. Alas, unless new clause 4 or something similar is accepted, we shall not be able to have the argument that we want—as I am sure, do our noble Friends in another place—about independent standard setting.

Having explained my right hon. Friend's lacuna, which no doubt occurred because he too wanted to establish a bridgehead, I shall explain the Economic Secretary's valiant attempt—no doubt at the behest of her Department—to defend the proposition that the PAC's assertion that there should be some form of validation of the performance measures was inappropriate.

The Economic Secretary asked: How straightforward a matter is that? She was referring to the checking of systems for collecting information—the veracity of conclusions and whether the outcome was fairly represented.

As my right hon. Friend mentioned, the Economic Secretary then said:

The CAG would need to be able to go into local authority, and even private sector, nurseries and form a judgment about how many nursery places each could reasonably be expected to provide. I do not believe that nurseries would welcome such intrusions. The killer blow to the entire project of having performance standards validated in this country so that we have outcome measures included as part of resource accounts, as has been done for years in New Zealand, was that she did not believe that nurseries would welcome the intrusions. She added: That highlights the difficulties that would take the Comptroller and Auditor General away from auditing and matters of fact into a political arena which he has always rightly avoided. My right hon. Friend has pointed out that the new clause specifically tries to exempt the CAG from any accusation that he is involved in politics. It was pointed out at length in Committee that the CAG, the Audit Commission and anyone else who does anything that could remotely be described as value for money auditing clearly has to make subjective judgments about value for money. Inevitably, those judgments are to a degree representable by people so inclined as political judgments. Therefore, we cannot envisage ever wholly removing such people from the political arena. On the contrary, we must hope that their immersion in the political arena does not in any way vitiate their complete impartiality.

Under Administrations of both colours, it has been the record that the CAG and the Audit Commission—notwithstanding their deep involvement in value for money audits, and hence their subjective judgments—have constantly been regarded as entirely impartial by all parties inside and outside the House. Therefore, I do not accept for a moment the direction of thought that suggests that there is a problem of politicising the CAG. However, where there is such a problem, my right hon. Friend has taken specific steps to deal with it in the new clause. We need not attach much importance to the assertion that the problem with nurseries and their lack of welcome for the intrusions is a problem of the CAG's descent into the political arena.

What is the real problem with the intrusion? I take it as a matter of fact that the Economic Secretary did not mean that nursery teachers would be a little upset when they saw the CAG arriving. It is possible that that is what she had in mind, but I doubt whether she seriously entertained that proposition.

We do not have to look far to see the problem with the way in which the Economic Secretary and her Department thought about the matter. On the same day and in the next column, she went on to provide one of the classic expositions of the bureaucratic mind in Parliament. She said: Quality assurance checks are already in place. Let us note that her first defence for the lack of need to allow the CAG in was that somebody else was already doing the job. All was well; the checks were already in place. She added: Information from many measures is needed by local line management to make day-to-day decisions and set priorities. It is often— note the tone of reasonableness— in the interests of people near the coal-face to ensure that the data that they return to the centre is of high quality. Departments have analytical services and internal auditors who make systematic checks of data quality and advise on methodology and technical matters. That is practically the sort of thing that one would expect to see in a brochure for the internal audit service.

Let us reflect on those comments and on what they mean for the nurseries that would not welcome intrusions. If internal auditors make systematic checks of data quality, presumably—to quote the Economic Secretary—they would need to be able to go into local authority, and even private sector, nurseries and form a judgment about how many nursery places each could reasonably be expected to provide.—[Official Report, Standing Committee A, 18 January 2000; c. 147–48.] I cannot see how internal auditors could make the systematic checks that the Economic Secretary thinks the CAG would have to make and be as systematic as he would have to be without having to do exactly the same things that she thinks he would have to do. Her proposition is remarkable—it is that nurseries welcome intrusions from internal auditors, who already exist, but would not welcome intrusions from the CAG.

4.45 am

It is almost inconceivable that the Economic Secretary remembered her remarks at column 147 when she said what she did at column 148. I suspect that those two passages were written by separate officials—one of whom was given the difficult task of explaining why the CAG should not be let in, and one of whom, in a separate Department, was told to describe all the wonderful arrangements already in place that made it needless for the CAG to have access. We have an assembly of arguments thrown together blindfold, rather like a chap who gets up in the morning after a rough night—as many of us will have had—does his buttons up wrong and looks rather odd as a result. Those remarks are certainly not an example of the Minister's thinking, which is much too acute for anything of that kind.

We have the same problem here that has repeatedly confronted us in our debates on the Bill. We have the arguments but not the reasons. We do not know from detailed discussion in Committee why the Economic Secretary and the Government are resisting the eminently reasonable, rephrased and accommodating new clause proposed by my right hon. Friend and other members of the PAC.

We have to speculate on why the Government are trying to prevent their performance measurements being independently validated by anyone. The Government would not have a reason if their internal audit procedures were perfect and transparent. They could simply relabel internal auditors "CAG" and all would be well. The reason can only be that the collective Whitehall mentality resists the idea of somebody else measuring its performance—the reason my right hon. Friend is so keen that somebody else should measure performance.

We have reached the same point as when debating new clause 1 and the CAG's having access and audit rights in relation to accounting itself. Accounting and performance are two sides of the same coin. It is of no interest to man or beast how much Government spend unless we also know what Government do with the money that they spend. If we could be certain that Government spend £370 billion but we had no idea whether all that money was wasted, we would get absolutely nowhere. The purpose of resource accounts is to perform half the task that we need to impose upon ourselves in Parliament and Government to have a functioning democracy; the other half is to understand the way that the money is used and how effectively.

All the same arguments for independence of definition and validation on the one side have to apply to independence of definition and validation on the other side. The weight of history from 1866 onwards persuades Treasury Ministers and officials, and Ministers and officials in other Departments, of the necessity at least for independent validation if not definition of accounting standards. Because until recently no one concerned themselves with performance measures, they are able to maintain a stone age, pre-1866 attitude towards those measures. They continue to persuade themselves that there is merit in pretending that people will take seriously annual or any other reports that are not independently validated. No one inside or outside Whitehall or in our democracy as a whole will take them seriously. That is sad because, to do them credit, the present Government—like many others—have done many things very well.

Governments do a lot of things well and have much to gain from knowing what they do well and persuading others that they have done them well without people turning round to say, "You have cooked the figures." However, like all Governments, this Government have done some things very badly and also have something to gain from knowing what those things are.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

Does my hon. Friend agree that there is often a shortcoming with internal auditors because all that they are required to do is give a true and fair view of the situation? They are not required to account for value for money, let alone performance indicators, so Parliament and the general public would benefit enormously if the CAG had the powers proposed in the new clause.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

My hon. Friend is absolutely right; that is the point. The very people who employ and unemploy the internal auditors will never give them the task, much less the opportunity, of unearthing real problems of performance management. On the contrary, they will always give the instruction, "Please do not cause too much embarrassment on this front. It is bad enough that you have to tell us the truth about our accounting. We may be able to fuzz up the definitions if those nasty people in Parliament force us to have independent definitions on the accounting side, but you have to tell us the truth. However, be sure that you do not collect too much of this performance stuff. At least we can make sure that only the bits that suit us ever get out."

The problem is that that is counter-productive for Governments of any party because a Government cannot expect to put right those things that they would like to put right—against their own policies—if they do not know that they are getting them wrong because their systems have been so designed that nobody knows that they are getting them wrong. That is the situation we face. It is so acute that it has led, by a strange process of intellectual osmosis, to two incoherent arguments being adduced in consecutive columns of Hansard by the Economic Secretary to defend a proposition that can be defended only incoherently because it is an incoherent proposition.

The time has come for Ministers to ditch this stuff. The Economic Secretary should take from her folder whatever has been written of a similar sort for her to say tonight, put it to one side, think of herself in the light that she is in as a Minister of the Crown trying to defend the Government's integrity and their relationship to our Parliament, and come out and say what is true: although the new clause's drafting may or may not be perfect, we all have a common interest in accepting the burden within. If she does that, she will earn the plaudits of those of us who are unfortunate enough to be here at 4.52 in the morning.

Much more importantly, the Economic Secretary may save the Government, of whom she is a prime representative, from great defects and failures, even in the next little while. She would gain also the plaudits of her ministerial colleagues. As we approach the witching hour, I have every confidence that she will indeed do just that and make our lives much more pleasant.

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

Members on both sides of the House will admire the hon. Member for West Dorset (Mr. Letwin) for managing to crack a few jokes at this time in the morning. However, although he has kept a few of us amused, he was too hard on the Government. I share many of his concerns, but we have been considering new ways of using performance indicators, targets and measures of success in British government for over a decade under what is often called new public sector management. The Conservative Government tried to develop those measures through initiatives such as the citizens charter, but I must remind the hon. Gentleman that they did so haphazardly, and did not subject any of the charter measures to external validation or independent scrutiny. His own party is culpable in that regard.

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

I am grateful for the hon. Gentleman's assent. We need to say, in a spirit of cross-party consensus, that the measures have been developed piecemeal in different Departments and agencies and in local government, and are a mishmash. What we therefore need is coherence in the setting of criteria, and a framework to achieve a logical, rational system. Validation will be a key component of that, but the Government need to do much more to ensure that we have a sensible system for measuring the success of their activities.

As I am sure the hon. Member for West Dorset is aware, the Government have been active in that field, with the publication of public service agreements and the output and performance analysis, both of which are integral to resource accounting and budgeting. They have produced a plethora of targets—indeed, I am sure that the hon. Gentleman shares my experience of reading Government documents and quickly becoming bewildered by the huge number of targets and measures that Departments are supposed to meet.

Crucially with respect to the Bill, Departments often have to meet those targets to get their budgets. It is the link between the performance measures and the budgets that makes the issue so crucial, because if the budgets are to be audited properly and accounted for, and there are performance measures on which those budgets depend, the performance measures ought logically to be audited too.

The Government need to stand back a little. I hope that in the review, which the Chief Secretary has talked about with the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, the Government will make it one of their objectives to get a handle on this growing monster in Whitehall so that we can achieve greater coherence.

I am sure that the hon. Member for West Dorset is aware that bizarre targets and performance measures are being set. They might seem to make sense in the Department in which they are drafted, but when they come to the House in a public document, they seem to be completely unwieldy and do not relate to our constituents' priorities.

I shall give one example of a target set for the Forestry Commission, which is obliged, inter alia, to improve the benefits provided by Forest Holidays through a public/private partnership to refurbish the four existing cabin sites by 31 March 2000 and build two new sites by 31 March 2002. That is an interesting target for a body to meet, but it would not correspond with criteria and a coherent framework for output measures. That is the key point that the Government have to grasp.

The Government need to achieve coherence in their approach. I do not underestimate the size of that task—it is daunting—but they need to do it none the less. If they can achieve that, validation will be the corollary. I made these points in Committee. That task sits neatly with the Government's programme for modernising public services; indeed, it is totally in line with what the Government tell us they want to do.

I share the hon. Gentleman's puzzlement about why the Government seem reluctant to pursue that issue. It may, as the right hon. Member for Haltemprice and Howden said, be a matter of timing—but, if it is, let the Government say so. They should say that they will consider the issue and firmly commit themselves to introducing external validation for the measures in two or three years' time.

As I understand the right hon. Gentleman's new clause and the way in which he is allowing validation to be rolled out, the proposal would allow the Government to take up external validation as they get a better handle on output measures.

The Government should welcome our comments, which are intended to help them to meet their aims. Some commentators suggest that the Government's reluctance stems from concern about the press that they might get if they had a set of targets that were externally and independently validated and did not meet them. It is said by others—not by me, of course—that if such a situation arose, the Government could be blown off target. The hon. Member for West Dorset said that a dislike of independent audit of performance was almost inherent in the civil service culture. Perhaps one could say the same of Ministers.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

As usual, the hon. Gentleman is expounding his arguments with great clarity. Does he agree that everybody, not just Whitehall or Ministers, is in that position, and that if utilities could set their own targets instead of having them set by regulators, they would probably find it more convenient?

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

Indeed. That is why shareholders in private sector companies have demanded that the performance reviews and the customer service analysis which many modern private sector companies undertake are independently audited. Best practice in the private sector is what we are asking the Government to take on in respect of public service agreements and performance measures.

In debates such as this, a parallel is often drawn between the Government's proposals and the experience of other countries that have gone down the same road. My favourite is New Zealand. When New Zealand introduced outcomes and output measures alongside the introduction of accruals accounting, it ensured that an independent neutral body oversaw the setting of those measures. The task was given to the state services commission.

Once again, the Government are borrowing partially from the lessons of New Zealand and Australia, but they are not taking the full text. It is unfortunate to see the Government taking the aspect that suits them while leaving those that would probably suit outside commentators and the Opposition. Their pick-and-mix approach to reforms elsewhere is not good enough. It goes against all the rhetoric of modernisation, which is to be regretted.

I hope that, in the other place, the Government will realise that it is in their own interests to set down a strategy for ensuring that performance measures are credible in the eyes of the public. When the public hear the Prime Minister speaking at Question Time about whether the Government have met the class size reduction and hospital waiting list targets and all the others, they are increasingly beginning to question the statistics.

That devalues politics and the vocabulary of politics. It means that the Government are less able to get their message across. If the public were told that the figures quoted by the Prime Minister had been independently validated, and we could get away from a sterile statistics debate, and if the Government had all the successes that the Prime Minister claims, they would be able to prove it. They would be able to do so if they accepted the new clause.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I am pleased to make my first speech on the Report stage of the Bill—indeed, my only speech on the Bill—at this time of night. As a former member of the Public Accounts Committee, I was privileged to serve under my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). He is an excellent Chairman. The House greatly benefits from his chairmanship.

The world-renowned National Audit Office is scrutinised and supported by the Public Accounts Committee, which is fully accountable to the House. It is therefore unfortunate that the Government rail against increased powers for the Comptroller and Auditor General to audit aspects of Government supply and expenditure.

5 am

I have listened to some of the debate. The Economic Secretary claimed that new clause 3 duplicated the efforts of the Government's internal audit service by granting the Comptroller and Auditor General access to all Departments. New clause 4 provides for additional tasks to those that the Government's internal audit service undertakes.

My hon. Friend the Member for West Dorset (Mr. Letwin) said that the Economic Secretary had advanced the arguments but not the reasons. I say that she advanced the means—taxpayers' money—but not the ways in which to carry out proper scrutiny. New clause 4 is eminently sensible. It is moderate, and carefully considered and drafted. I cannot understand why the Government are so suspicious of the Comptroller and Auditor General and the National Audit Office. They should be able not only to audit Departments, non-departmental public bodies and other public expenditure but to engage in a value for money exercise. As I said in an intervention on my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes), for every £1 spent on the value for money exercise, £8 of public money is saved.

If the Economic Secretary listened instead of talking, she might learn something. She does not seem to want to save public money; she is leaving the Chamber. That shows the Government's contempt for saving public money. The Economic Secretary leaves the Chamber during non-political, non-partisan remarks.

It is worth considering the renown of the National Audit Office, which is clearly demonstrated by the fact that it audits the United Nations accounts. The National Audit Office is renowned throughout the world, and it draws on professional expertise from throughout the world. It is respected in all the accounting convention conferences and is therefore able to set a benchmark on a range of international comparators for the ability of each Department to perform. It can measure the output of every Department far better than any Government internal audit service. [Interruption.] I am glad that the Economic Secretary finds that so funny. Perhaps she will consider the new clause carefully. If not, perhaps she will give good reasons.

The more the Government laugh, the more the public understand that they do not care about taxpayers' money. That becomes clearer by the day. It will be even clearer as the Government become more unpopular in the opinion polls. The Government's current behaviour shows that they do not give a damn about the fact that the National Audit Office is renowned world wide. I should have thought that they would want such an audit service, which has enormous democratic legitimacy. The Government should consider extending that worthwhile service.

I understand that it is awkward for Ministers to be subjected to an internal review, and to have matters pointed out to them week after week when individual Departments, non-departmental public bodies and next steps agencies fail to live up to the highest worldwide standards.

If the Government thought about it carefully, they should welcome that, because Ministers do not have time to go around and look at every nook and cranny where taxpayers' money is being spent. I should have thought that they would welcome somebody looking carefully with an independent eye at the whole situation and assessing it on the basis of international comparators—saying, "You could do a little better in this respect. Money is being wasted here. It is being duplicated there. It is not being contracted out properly here. We could have a better PFI arrangement here."

This is a very sensible new clause to add to a Bill that I welcome enormously. When I was on the Public Accounts Committee, the whole aspect of resource accounting seemed to me to add great clarity to the way in which the House can appropriate public money and scrutinise how it is spent. This is a worthwhile Bill, and the new clause would add to it, which is exactly what Parliament should be all about. It should be improving an already worthwhile Bill.

The Public Accounts Committee is accountable to the House. It has huge powers to require witnesses to come to its hearings and question them in a way that no other financial Committee of the House can. It produces very worthwhile reports which the House can scrutinise and be absolutely certain that public money is being properly safeguarded and, if the new clause is adopted, properly used and properly enhanced.

In an ever more complicated world, that power, that duty, is ever more important. As we get more and more convoluted—we have non-departmental bodies themselves incorporating independent companies to carry out their work, so we are getting further and further away from the individual Department—there is more scope for fraud and misappropriation of public money, and the work done by the National Audit Office, as an independent office, becomes ever more important. That is why the new clause is so important.

There is a safeguard in the new clause, because the Treasury has the power by order to vary the Departments and bodies to which the National Audit Office can apply the performance indicators. Moreover, it would not come into operation until the statutory instrument was laid before the House.

In conclusion—[HUN. MEMBERS: "Ah."] Labour Members say "Ah", but I can tell them that I am quite capable of speaking for another hour on this topic. What do they want me to do? Do they wish me to keep speaking? Then we might find ever more nooks and crannies that we could investigate where performance indicators might be applied. I can reel off a whole list off the top of my head. We used to examine them week in, week out in the Public Accounts Committee. I have a good memory. I can remember where the nooks and crannies are. I hope that the Minister will not require me, perhaps on the next group of amendments, to speak at even greater length, and that she will accept the new clause.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

I assure you, Mr. Deputy Speaker, that at this stage I have no intention, or indeed ability, to speak for another hour. I rise for my second intervention with the intention of speaking for a significantly shorter time than on the earlier occasion. New clause 1 was much more widely drawn than new clause 4.

What I have found surprising, and touching in a way, is how both the Conservative Front-Bench spokesman, my hon. Friend the Member for West Dorset (Mr. Letwin), and the Liberal Front-Bench spokesman, the hon. Member for Kingston and Surbiton (Mr. Davey)—

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

I am grateful to my hon. Friend for giving way. At this hour of the morning, I cannot resist telling him that if he has gone all touchy-feely, my faith in human nature will finally dissolve.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West 5:15 am, 29th February 2000

My hon. Friend may find, as I proceed, that it is not quite as touchy-feely as he imagines.

What I found touching was the fact that both my hon. Friend and the hon. Member for Kingston and Surbiton expected the Minister to accept the new clause, in a reasonable way. I cannot imagine anything that the Minister would do with less alacrity. What I see is the proper tension—the natural tension—between those who seek to hold the Executive to account and the interest of the Executive in defending their preserve.

We who seek to hold the Executive to account consider the new clause to be entirely reasonable, but, were I in the Minister's position, I would consider it to be irksome and unpleasant. Surely the Minister, wishing to defend the interests of the Executive, will resist the new clause, because, while it may impose an entirely reasonable condition on the Executive, the condition is not one that the Executive would welcome.

Subsection (2) of the new clause states: A department to which this section applies in any financial year shall prepare a performance statement in respect of that year analysing the performance of the department in using the resources to which the accounts relate in achieving its objectives for that financial year. That is a very demanding requirement to place on a Department—a requirement for it to account for the resources that it has used in achieving its objectives. That would be a substantial piece of work for any Department to have to supply in any year. I would quite understand if Departments—protected as they are, in this instance, by the Minister—sought to resist the imposition of the requirement.

Moreover, subsection (4) states that the CAG may examine the document when he receives it, and may report on it to the House of Commons. We, of course, will impose an additional layer of expectations and scrutiny on the Department concerned.

The Minister may think that Departments are, to an extent, protected by subsection (5), which states that the CAG will not question the merits of the policy objectives of a department to which the performance statement relates. But we will! When the CAG reports to the House, we will question those objectives and whether they were appropriate—and the process of making the report, subjecting it to the CAG and presenting it to the House will lay bare to the House the appropriateness or otherwise of the objectives.

Although my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) has sought to protect Departments from any scrutiny of the appropriateness of their objectives, the political reality is that the objectives, and the appropriateness of the policy, will be scrutinised as a consequence of the whole process. That, of course, is entirely what we who seek to hold the Executive to account would wish. We see a natural and proper tension between our objectives—the objectives of the Conservative party in seeking to hold the Government to account, and the objectives of the Executive in seeking greater convenience in their way of life.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

I rarely disagree with my hon. Friend, and I certainly agree with him that the tension he describes is natural; but why does he think it proper?

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Perhaps at this early hour I have been rather looser in my use of language than I would otherwise have been. I suppose that it is proper in the sense that it is to be expected and natural that officials or Ministers who are discharging their responsibilities will seek to avoid new, novel and onerous requirements on them and on their Department. I used the term "proper" in the sense that it is understandable, rather than in the sense of probity. I apologise for that lapse in my use of language.

What is entirely proper is the motive behind the new clause. I have said that I understand the Minister seeking to resist the onerous requirements, but those requirements are what the Bill is all about. There is little point in having such a Bill unless we place such requirements on Departments. It is summed up in the first sentence of recommendation (xxiii) of the ninth PAC report, which says: We are disappointed to see broken the link between resources used and performance achieved, as originally intended under resource accounting. What will be the point of having resource accounting if that link is broken and such scrutiny is not applied to Departments? It seems to defeat the purpose. The Bill is not much of a Bill without the new clause, which seeks to restore that link.

Which Department would wish to place itself under such scrutiny? The logical conclusion is that the way in which the Department achieves value for money, or fails to achieve it, will be the basis on which Parliament—which funds it—will apply constraints and conditions to any future funding. That is an entirely understandable point of view for us, but an unwelcome point of view for those who discharge those responsibilities.

As was clear in the debates in Committee, which were quoted by my hon. Friend the Member for West Dorset, the Minister's principal argument against the new clause is that it would be administratively inconvenient. Of course it would. Her argument was that nursery schools would not welcome the attention of the CAG. She is right. I thought that my hon. Friend was somewhat unfair to her in being surprised at such a state of affairs. Of course it is inconvenient. Anyone who has been subjected to an audit of any sort finds that it is thoroughly, fiendishly and excruciatingly inconvenient.

That inconvenience is born of the current accounting practice, which is merely to establish a fair view of the financial reports. Ensuring that value for money has been achieved is a much more discerning audit. The order of inconvenience is multiplied as a consequence of the introduction of resource accounting, but either we accept that resource accounting is a proper way in which to understand the undertakings and expenditure of a Department and the way in which it discharges its responsibilities, or we do not.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

I am following my hon. Friend's argument carefully. He referred to nursery schools, but, when the Office for Standards in Education came into being, did not schools object to external examination? Might it not be the same with the performance measurements? There might be an objection in principle at first, but, once the results were delivered, people might welcome what they achieved.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

My hon. Friend is entirely right. The whole purpose of introducing resource accounting is to enable us better to understand those operations, so that we might better establish the best ways of achieving value for money. As my hon. Friend the Member for West Dorset said, the Government have much to gain by showing us so transparently what they have done well, and what they have learned—as revealed in the process of scrutiny—from that which they have done badly.

If I were in the position of a Department's senior civil servants, who quite rightly look to Ministers to protect their interests, I would be very disinclined to embrace resource accounting with open arms because of the commitment levels that would be imposed on me. I therefore conclude as I began, by saying that there is a perfectly understandable tension between Opposition Members who support new clause 4 and Labour Members who seek to resist it. Nevertheless, the arguments advanced against new clause 4 are arguments against the Bill itself. The Bill is of little value without the new clause.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Let us remind ourselves again what resource accounting is all about. [HoN. MEMBERS: "Oh, please."[Let us do that. The point of resource accounting is to emulate what goes on in the real world, not in the Treasury's pretend and fantasy world. Resource accounts include three statements, emulating the type of statements that are issued by chartered accountants in performing a company's statutory audit. There is the operating cost statement, which is equivalent to the profit and loss account, the balance sheet and the cash flow statement.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

": I simply wonder whether—now that my hon. Friend seems to have woken up Labour Members, which is much to be welcomed—he will join me in hoping that they might actually contribute to the debate, so that we might hear whether, as we suspect, they entirely agree with our arguments?

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

My hon. Friend is always optimistic in such matters. The only contributions that we have so far had from Labour Members are snoring, baying, laughter and walk-outs by Ministers and walk-ins by Ministers. There has been great drama, but no interventions. Nevertheless, I hope that something like that might happen.

Three analyses are produced in resource accounting: the equivalent of the profit and loss account, the balance sheet and the cash flow statement. [Interruption.] Someone has woken up, which is very reassuring.

In the real world, the value of a company's stocks and shares is another measurement of its performance. If the company is not performing well, its share value will decline. If it is performing well, its share value will increase. A target is set externally for the company. Even Labour Members—who operate with their BT shares, which they bought because of a privatisation by a Conservative Government in the 1980s—should be able to appreciate that fact.

Labour Members, however, do not appreciate that it is necessary to establish targets. Companies set themselves internal targets against which they can measure themselves. However, it is doubly important that the Government should set themselves targets, as Departments and Government agencies cannot be valued in the market. There is no share value in the Government that could increase or decrease as appropriate.

Mr. Clifton-Brown:

Before my hon. Friend moves off the principles of resource accounting as they relate to new clause 4, will he comment on the introduction in appropriation accounts of a proper statement of assets for each Department, and on how, in new clause 4, such a statement of assets could be usefully applied in relation to the performance or use of those assets?

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield 5:30 am, 29th February 2000

My hon. Friend raises an interesting point. The previous Government initiated the production of what was colloquially called the Domesday book. That was strengthened by this Government. "The National Asset Register"—I have a copy here—lists all the assets owned by the Government. However, it is no good just owning assets. It is more important to determine whether they are giving a return on the national investment. As an aside, it is interesting that the Department for Culture, Media and Sport, which nominally owns assets such as Trafalgar square, had great difficulty in determining a rate of return on them.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

And indeed on Nelson's column and Nelson himself.

There has to be a measure of performance. I find it strange that Conservative Members have been surprised that the Government do not welcome the new clause. To me the reason is obvious. The Government are king of one thing only—spin. People are beginning to see through that.

Photo of Michael Martin Michael Martin Deputy Speaker (First Deputy Chairman of Ways and Means)

The one thing that I am beginning to see is that the hon. Gentleman is straying from the new clause. He must get back to it. I cannot tolerate him talking about the Government's record on spin, because it has nothing to do with the amendment.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Thank you, Mr. Deputy Speaker. I shall move away from spin and back to performance, which is the opposite of spin.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

I would not want something that was not strictly accurate to go into Hansard. My hon. Friend correctly mentioned that the Department for Culture, Media and Sport holds historic assets. It is specifically stated on page 314 of the so-called Domesday book that no valuation for heritage assets has been included in the accounts. It turned out to be too difficult.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

One might think that that is because the Department for Culture, Media and Sport, and particularly the Secretary of State, know full well that if any performance measurement were made, he would be shown to be wanting.

Mr. Clifton-Brown:

Does my hon. Friend have an idea of what written down value the dome might have?

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

That would be straying from the strict principle of the clause. I suspect that at the moment the dome has a negative value. Given the number of people who are visiting it, I have no doubt that if it were on the commercial market it would be heavily discounted.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

May I disagree with my hon. Friend that the issue departs from the principle of the new clause? It is central to the new clause that, rather than taking a cash accounting view of whether the money can be accounted for and whether the petty cash has been nicked, we should move to considering what the objective was and how wisely the funds have been spent in achieving it. Those are more pressing—and therefore inconvenient and unwelcome—questions for any Department to have to answer.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

As ever, my hon. Friend is precise. The House of Commons Library report on the Bill refers not to a performance statement, but to key performance data by objective. That is important, because it is at the heart of the new clause that the Government have to set objectives, but, at the same time, a measurement must be made—it would be called a variance analysis in cost and management accounting—of the achievement of the Government. I hate to repeat the word, but that is why the system is such an enemy of spin. When there is transparency it is impossible to spin.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

Again in the cause of making sure that Hansard records only accurate statements, I wonder whether my hon. Friend has noticed that on page 340 of "The National Asset Register" it is made clear that the New Millennium Experience Company and all its doings are excluded from the register and that the total value of the Millennium Commission is £291,000.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

That is fascinating, given that the new supremo was earning £30,000 a year as a rollercoaster repair man before he took his new £100,000 job with its £100,000 bonus. However, I shall not continue down that line as I fear that I would be straying just a teeny-weeny bit from the main point of the new clause.

There has to be transparency and open government. The Government say that they want to be transparent and open. More importantly, they want to be the people's Government, but the people have to be able to measure whether the Government—and, in this instance, Government Departments and their agencies—are performing. In order to do that, objectives have to be set and measurements have to be made against them.

My hon. Friend the Member for Cotswold (Mr. Clifton"Brown) raised the subject of the national asset register. I remind the House that a few hours ago we were discussing the problem of determining which items are revenue expenditure and which are capital expenditure. It is quite extraordinary that in 1866, when William Ewart Gladstone established the first legislation on the subject, everything was measured in the form of cash flow, but of course assets have value. They appreciate, but we also expect a return on them. That is why it is so important to set performance measures. It is not difficult.

As my hon. Friends have said, such provisions are in place in New Zealand and Australia. About 40 out of the 50 United States of America have them, as does the Federal Government of the United States for most Government departments and agencies operating out of or as part of the Washington establishment. If it can be done in Australia and New Zealand and in the United States, why can it not be done here? The simple answer is that it can be done, but the Government do not want it because they do not want people to see how they are performing, or, more to the point, how they are failing to perform.

Let me be parochial for a moment and let us suppose that performance targets were set on policing in Staffordshire. We are witnessing 250 fewer police officers in Staffordshire, which is a cut of around 10 per cent. The Government talk about 5,000 more police officers. Is that a target or an objective? If it is, have they met it? What is the variance analysis? Two hospitals in Lichfield are under threat. How does that compare with the Government's performance targets? They say that they want people to be able to get to hospital more quickly than ever before, but waiting lists are longer than ever before. Are there targets for local justice? The magistrates court which has been in Lichfield for more than 600 years is closing. We were told that things could only get better, but, over two and a half years, according to some performance targets, things have got worse very quickly.

How does one set performance targets for the BBC? That is an interesting subject that we have discussed before. How should the BBC be measured? It is funded by the licence payer, independent of Government. The funds come out of the public purse and indirectly from the taxpayer; nevertheless, they are collected on behalf of the BBC by a Government agency, the Licence Agency. Should the BBC be measured in terms of the quality of its programmes? How does one put a figure on that? Should it be measured in terms of the number of people who view BBC television programmes or listen to BBC radio? Should it be a quantitative amount—

Photo of Michael Martin Michael Martin Deputy Speaker (First Deputy Chairman of Ways and Means)

Order. The hon. Gentleman has talked about performance statements and targets, but he cannot roam around talking about those matters and exclude the CAG. He must tie his remarks in with the CAG or his comments mean nothing in relation to new clause 4.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

I am very grateful, Mr. Deputy Speaker. I think that I have given plenty of examples and I appreciate your making that very clear point to me.

The Comptroller and Auditor General—I say that because of the suggestion that I did not know what CAG stood for—

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

The new clause, quite properly, excludes the Comptroller and Auditor General from any decision in respect of performance targets because that is a matter of policy. Does my hon. Friend share the view that there is a weakness in the new clause in that it fails to examine in any depth how performance is to be measured? What is the measure to be?

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

My hon. Friend raises a fascinating point. I tried to give the example of the difficulty of measuring the qualitative output of the BBC. Does one go for popular programming, which might not be of a high standard, or for work of a higher standard that reaches a smaller audience? However, I do not think that it is a question of how performance might be measured. There is no difficulty in measuring it. My point is that performance targets are used all the time in industry and commerce, and resource accounting attempts to emulate that. It is in use in the government of the United States and Canada as well as in New Zealand and Australia.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

Does my hon. Friend agree that the new clause admits the possibility of the Government deciding that the proper measure of the performance of the Ministry of Agriculture, Fisheries and Food is how many long-haired rabbits there are in East Anglia? We simply want to know that if the Government claim that there are 10, there are 10, rather than one or 1 million.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

It goes further than that, because there must also be an aim. Every Department, agency and business has an aim. I was dining earlier with a director of the John Lewis Partnership. He has just moved from being the managing director of John Lewis Bluewater which has monthly targets which have just been exceeded by about 30 per cent.—if I am not giving away internal information.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Are those targets monitored on a resource-accounting basis or on a mere cash-accounting basis? That is the key question.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

My hon. Friend asks a very interesting question. [HON. MEMBERS: "Answer."' They press me to answer, Mr. Deputy Speaker.

Photo of Michael Martin Michael Martin Deputy Speaker (First Deputy Chairman of Ways and Means)

The hon. Gentleman knows that the organisation that he talks about has nothing to do with public assets.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

I shall not, then, give the answer. It is on a cash basis, although I cannot possibly say that.

Resource accounting attempts to emulate the auditing process and the results of an audit from a commercial organisation. Of course the two are not identical. One cannot compare the operations of the Treasury or the Home Office with the John Lewis Partnership. Nevertheless, for the first time, we are moving away from simply considering cash flows, saying instead that there are assets which need a return and have to be measured.

That is why I disagree slightly with my hon. Friend the Member for West Dorset (Mr. Letwin). It is a question not just of measuring, but of measuring the variance between that which is and that which was projected.

As we heard in an earlier intervention, it is not up to the Comptroller and Auditor General to set the targets. That is right. What is also right is that the CAG should look at what has been achieved, as part of his audit, together with the targets and ask why there is a variance, if one has occurred.

I suppose the Government will object to new clause 4. I hope there will be a Division. I suspect that Labour Members will go in sheeplike drives through the No Lobby. Every Labour Member who votes no will be saying, "We do not want to see performance targets published. We do not want the CAG to assess what is the variance between that which has been projected and that which has been achieved." They will signal to their electorate, "We do not want clarity; we do not want open government—we merely want spin from Millbank."

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons) 5:45 am, 29th February 2000

If the Government reject the new clause, they will signal to the public that they do not want clarity. Does my hon. Friend think that a future Conservative Government would introduce an enlightened new clause such as this one?

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

I can give my hon. Friends an absolute guarantee that if a Conservative Government are elected at the next general election, one of our first actions will be to ensure not only that there are proper, independently set standards for these matters, but that there is full validation by the CAG throughout Government.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

That is a great reassurance—not for me, but for the people of the United Kingdom. It means that a future Conservative Government will be obsessed with achievement and not with spin and hype. Spin and hype can be hidden only by lack of clarity, data and transparency. That is what objection to new clause 4 would achieve.

This provision is the acid test.

Photo of Mr Chris Pond Mr Chris Pond Labour, Gravesham

Here is the punch line.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

As the hon. Gentleman says, it is the punch line: can this Government achieve? Can they deliver? Are they proud to show that they can deliver and achieve, or will they be opaque and conceal their lack of achievement by objecting to openness and new clause 4? In the minutes to come, I hope that they will choose open government.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I have only two points to make on the new clause, to which I am proud to have my name, and those of PAC colleagues, attached.

First, it is ironic that in a Bill that is mainly concerned with updating how the Government hold their accounts to a method of accounting that has long been used in local government and business, the Government should nevertheless fail to update how performance reporting is monitored to a method that is already used—at the Government's demand—in local government. It seems that they are all too disinclined to follow the old saying, "What's sauce for the goose is sauce for the gander."

As so often, the Government are imposing measures on local government that they are not prepared to follow themselves. They would be well advised to follow the line that they have taken with local government and ensure independent monitoring of the performance reporting that they are introducing.

Secondly, if proper and objective monitoring of performance reporting is introduced, it can lead to only two results. Many people have said that both would be of value to the Government. If the monitoring proves that some aspect of the reporting is not being properly carried out, that can only be of value to the Government. If it shows that the reporting is being properly carried out, the Government would welcome that, because they would be proud of it.

Although the argument has been well made that to point out that performance reporting is not being carried out can be of value to the Government because they can make changes, I understand that they might be worried that that might lead to some embarrassment. That is the only possible rationale for their objecting to the new clause. If the Government object to the new clause because they expect to be found out and think that external monitoring of their performance reporting will prove that it has not been properly carried out, that shows an incredible lack of confidence in their ability properly to introduce performance reporting. I am sorry to see that lack of confidence, and showing it is a matter of embarrassment for the Government. They should be shamed into accepting the new clause.

Photo of Robert Syms Robert Syms Shadow Spokesperson (Environment, Transport and the Regions)

I shall briefly support the new clause. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) rightly said that the real prize of resource accounting was to measure performance and that the Bill was silent about that. His new clause is good and progressive. The Government should consider it seriously.

All of us in political life believe that it is important to measure output. I am sure that it is sometimes difficult to measure how productive we are as elected Members, but it is important to measure the output of government.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

My hon. Friend refers to output, but how would he measure it? I think that he would agree that length would not be an appropriate measure. That is perhaps a weakness of the new clause in that it does not discuss what the measure should be.

Photo of Robert Syms Robert Syms Shadow Spokesperson (Environment, Transport and the Regions)

The new clause is drafted in such a way as to make policy decisions a matter for politicians and the Government and that is quite right. However, validation, measurement and ensuring the admissibility, relevance and reliability of performance data are important, too.

Prime Minister's Question Time was mentioned earlier. The Prime Minister throws statistics about and it was suggested that they give him great support. I do not think that that is so, but there is another more serious point. We have not mentioned Select Committees. In the heat of the Chamber, each side throws its preferred statistics at the other and, no doubt, in the whole range of government, we can find things that work well and things that go wrong.

However, we want to ensure that the Select Committee system works properly and the new clause, which would give the Comptroller and Auditor General a greater role in validating the information that is produced, could enable them to do a much better job. In the longer term, that would make a more profound difference to the way in which government operates than has the yah-boo traditional politics that we have in the Chamber. That is the key point that I wish to make.

All Governments dislike interference. I have no doubt that if we were in office, we would be a little sniffy about having outside bodies coming in.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Whip (Commons)

My hon. Friend touched on the important subject of Select Committees. The Public Accounts Committee can point out where public funds are being misappropriated and, under the new clause, that process would be that much more effective. Departmental Select Committees can follow up on the shortcomings in a way that the PAC cannot possibly do because it examines the whole gamut of government expenditure. His remarks are frightfully important.

Photo of Robert Syms Robert Syms Shadow Spokesperson (Environment, Transport and the Regions)

It is also important that Select Committees have good information, and we all know that they are under-resourced. However, the movement to resource accounting and the proposal in the new clause to allow the CAG to become involved in the proper measurement of the Government's targets and objectives might enable us to have more objective debates in the quieter Committees upstairs. In them, it is possible to press Ministers on their priorities. That is better than the yah-boo politics in which we all sometimes engage in the Chamber.

There is a real problem with the statistics commission, which will be a creation of government and whose members will be appointed by Ministers. It is important to validate what we do. Measurement and objectivity in relation to the outputs of government would dramatically improve political debate.

My hon. Friend the Member for New Forest, West (Mr. Swayne) asked whether it was proper to involve the CAG. I believe that it is. To all of us who aspire to honest and honourable government, validated measurement is important. My right hon. Friend the Member for Haltemprice and Howden mentioned how honest our government system is. We must be grateful for that. We should not be complacent but try to improve debate. The Bill gives us the opportunity to improve the quality of information provided to Select Committees. Not to endorse new clause 4 would be a tremendous mistake. Ministers should think carefully before they dismiss that opportunity.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I quite enjoyed the turn by the hon. Member for New Forest, West (Mr. Swayne). I thought that it was a bid to become a member of the Public Accounts Committee. I was not sure how to interpret the large grin on the face of its Chairman as that contribution developed.

This is one of those occasions when one looks around the Chamber, notices that it is nigh on 6 am and says to oneself, "Would the public think we were doing a good job? What would be the output and outcome measures for our performance?" Were the public watching, although I hope that many of them are asleep—

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I have not been asleep at any point. I have been here since 3.30 yesterday afternoon, unlike the hon. Gentleman.

Probably no member of the public would think that the House has been doing a very good job. Perhaps that is something on which we should reflect.

I was impressed by the idealism of the hon. Member for Kingston and Surbiton (Mr. Davey) in his desire to arrive at consensus at about 5 am. I have not noticed any consensus; nor is it likely at 5 am.

We tabled amendment No. 18 following discussions in Committee and it would require the financial statements to present a true and fair view. The Companies Act requires that the profit and loss account and the balance sheet present a true and fair view. The amendment goes further, extending that provision to the whole of the resource accounts. The need for accounts to present a true and fair view is an overriding requirement in companies legislation and the Government are content for that to apply to resource accounts.

Amendment No. 19 fulfils an undertaking that I made in Committee to bring forward an amendment that would re-enact, in modernised form, the requirements of section 26 of the Exchequer and Audit Departments Act 1866. The amendment will enable Parliament to see clearly where differences have arisen between planned and actual expenditure. It was always the Government's intention to continue to require, under resource accounting, notes explaining variances between the estimate and actual outturn. We did not originally believe that it was necessary to keep that on a statutory basis, but we have listened to the concerns expressed by the Chairman of the Public Accounts Committee—the right hon. Member for Haltemprice and Howden (Mr. Davis)—and others and the amendment will reinstate the statutory basis of that important parliamentary control.

6 am

On amendment No. 20, clause 7 as originally drafted left the form of the CAG's audit opinion entirely to his discretion. That would have enabled him to report on the regularity of the accounts prepared under the clause when he thought that necessary, but the Government have no objection to making it a statutory requirement for him to report on the regularity of those accounts if that is what he wants. We have, therefore, tabled the amendment, as we agreed to do in Committee.

The Government oppose new clause 4. We have already committed ourselves to reporting annually to Parliament and the public on outturn against performance targets. That will be done through departmental reports, beginning this spring, and the Government's annual report, which will be published in the summer. There is no need to make that a statutory requirement and doing so would lead to inflexibility. For example, the public service agreements relate to three years, mirroring spending plans, so performance assessments tied narrowly to a particular financial year may not be as useful as giving Parliament the very latest outturn. The Government recognise that if PSAs are to affect accountability and raise public service performance, which is what they are aimed at, the information that supports them must be credible.

Photo of Oliver Letwin Oliver Letwin Conservative, West Dorset

I am grateful to the hon. Lady for giving way because I had not realised that she has been supplied with a text even more amusing than previous ones. Is she seriously maintaining that it would be misleading for Parliament to see the simple figures for one year?

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

I did not say that, any more than I said the things that the hon. Gentleman quoted from Committee proceedings in isolation. I said that in some cases tying an issue to a particular financial year may not be as useful as giving Parliament the very latest outturn. Different assessments of what is the useful information need to be made at different times. That is an advantage of moving to PSAs. They will affect accountability and raise public service performance as a result.

Hon. Members have commented on the work of the new independent statistics commission, which we think is important in this regard, and the future of performance information generally. It would be premature to introduce any statutory requirement at this time as both are undergoing considerable development as we speak. Work needs to be done to achieve coherence, which was referred to by the hon. Member for Kingston and Surbiton. [Interruption.] I nearly disturbed him.

The right hon. Member for Haltemprice and Howden commented wisely across the piece on the value of outputs and outcomes and the credibility and integrity of the figures. I could not agree more that they are very important. I also agree that a revolution is taking place in respect of what we can do and how we can manage the public sector and our public services for the greater good of the public, whom we in the House serve. I strongly support placing greater emphasis on evidence-based policy making, as do the Government in all their activities, but the new clause is not the way forward at this point. However, we agree with the import of the changes and the direction in which they ought to take us. We have in hand a number of measures that we believe will take the project forward substantially.

Photo of David Davis David Davis Chair, Public Accounts Committee, Chair, Public Accounts Committee

I thank the Minister for the various Government amendments that have been tabled in response to questions raised in Committee. They are helpful and constructive.

I shall not waste another 15 minutes by pressing new clause 4 to a vote. That is not because I am persuaded by the Minister's arguments; indeed, I hope that in my meetings with the Chief Secretary we will have a more constructive exchange.

Photo of Miss Melanie Johnson Miss Melanie Johnson Economic Secretary, HM Treasury

The hon. Member for Lichfield (Mr. Fabricant) is very keen to have a vote on the new clause.

Photo of David Davis David Davis Chair, Public Accounts Committee, Chair, Public Accounts Committee

He will have to object to my seeking permission to withdraw the motion in a moment, then. I am conscious of the fact that the Economic Secretary has a Select Committee meeting at 9.45 am, so I want to delay her no longer than is absolutely necessary.

I am glad to hear the Economic Secretary talk about the importance of evidence-based policy development. That is the single most important element of the development of resource accounting, all technical aspects and costs apart. That is why the new clause represents the largest missed opportunity in the Bill. That is sad, because this is not a matter of partisan politics; it is a matter of the delivery of public services, which is of common interest to hon. Members on both sides of the House. Although I am not persuaded by the hon. Lady's arguments, I do not want to waste time having a futile vote, and I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.