Ministers now face a Public Accounts Committee investigation into the terms of its Government Resources and Accounting Bill after refusing a proposal to submit the legislation to a Special Standing Committee.

The Bill was approved in principle by 327 to 140 votes despite disquiet on their own benches after giving the cold shoulder to a Conservative plan to set up a shadow accounts commission - to be chaired by Sir Brian Carsberg.

Spokesman Oliver Letwin, a former merchant banker, said the aim was to 'mirror the statements of standard accounting practice in the private sector so that no future Chancellor, Labour or Conservative, will ever have the opportunity to misrepresent the accounts and mislead the public.'

Chief Secretary Andrew Smith insisted the Bill leaves the existing powers of the Comptroller and Auditor General, the National Audit Office and the PAC unchanged.

He said: 'The Bill was never intended to overhaul audit arrangements, but I am happy to discuss with the PAC or anyone who is interested, serious points of interest that arise on auditing.'

Financial Secretary Melanie Johnson claimed Treasury discretion will be subject to a requirement to follow Generally Accepted Accounting Practice, subject to the discipline of the independent Financial Reporting Advisory Board.

But the debate started with former Labour PAC member Dale Campbell-Savours highlighting an NAO statement 'that, as currently drafted, the Bill threatens to weaken the C&AG's independence and his relationship to Parliament.'

Present Tory PAC Chairman David Davis and former Labour PAC Chairman Robert Sheldon criticised the failure of the Bill to give the C&AG access to the accounts of all quangos and state-owned companies.

Sheldon demanded parallel operation of resource and cash accounting during the changeover.

Davis sought a Government assurance that the changeover will not be implemented until the PAC have signified its satisfaction with progress.

Senior PAC member Alan Williams revealed he has proposed a committee investigation into the bill.

Government urged to decide how performance measurement in Whitehall will be audited

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