Mr Bill Wiggin (Shadow Secretary of State for Wales, Local and Devolved Government Affairs; Leominster, Conservative)

I beg to move amendment No. 4, in page 2, line 41, leave out from 'must' to end of line.

Mr Win Griffiths (Bridgend, Labour)

With this we may discuss the following amendments: No. 5, in clause 2, page 3, leave out lines 33 to 39.

No. 6, in clause 2, page 3, line 39, at end insert—

'(3A) Arrangements may not be made under subsections (1) or (3) unless the Auditor General for Wales has satisfied himself that the independence of any audit carried out by him or by a person appointed by him is not impaired by the arrangements.'.

Mr Bill Wiggin (Shadow Secretary of State for Wales, Local and Devolved Government Affairs; Leominster, Conservative)

Amendment No. 4 would delete the words

''if so required by a relevant body''

from proposed new section 96B(1) of the Government of Wales Act 1998, which clause 2 inserts, because they imply that certification is optional. Certification is an important process, which should be an integral part of the Auditor General's duty, but the Bill allows a relevant body to request the Auditor General to certify. We are concerned that the clause allows bodies to shop around for certification of their claims, which is an undesirable practice.

Amendment No. 5 would leave out new section 96C(3) as inserted by clause 2. It is a probing amendment to find out what arrangements will be made between the Auditor General and the three types

of organisation set out in the subsection—a ''relevant authority'', a ''qualified auditor'' and an ''accountancy body''. What arrangements might be made with each type of organisation, and will the Minister confirm which bodies are covered by subsections (1) and (3)?

Amendment No. 6 deals with the Auditor General's independence. Our suggested new subsection would ensure that his independence was not impaired by arrangements that he made with the various bodies for the various purposes in subsections (1) to (3). Maintaining the same standards of auditor independence in the public sector as exist in the private sector is vital. The amendment would give the Auditor General a clear obligation to satisfy himself that the arrangements entered into did not weaken his independence. That statutory requirement would provide firm roots for both actual and perceived independence.

In Committee in the other place, Lord Davies argued that the Government do not believe that a statutory duty is necessary to ensure that the Auditor General upholds the highest standard of independence. As the proposed duty would support what will be the outcome anyway, the amendment would do no harm. In fact, it would strengthen high-quality public audit to have the same firm guidelines and protocols as the private sector has.

Mr Don Touhig (Parliamentary Under-Secretary (Wales), Department for Constitutional Affairs; Islwyn, Labour/Co-operative)

The provision in clause 2 that inserts new section 96B into the 1998 Act is intended to make it clear that the Auditor General is required, on request, to make arrangements for the certification of claims and returns or accounts relating to public bodies for which he has a statutory audit responsibility. At present, there is a mandatory requirement for certification, about which the hon. Member for Leominster has sought reassurance. However, bodies have discretion in respect of the people whom they ask to carry out the certification. In practice, the great majority of bodies ask their appointed auditor or a statutory auditor to undertake such work.

The strong likelihood is that public bodies covered by new section 96B will request the Auditor General to arrange certification work under the arrangements in the Bill. The clause gives them the security of knowing that if they ask him to make arrangements he must comply—for instance, if they are having difficulty in obtaining certification services from another source.

Giving the Auditor General a monopoly of such certifications would not be appropriate. Retaining a measure of discretion, as proposed new section 96B would, gives bodies an element of choice—the in word of the moment—in certifying work, and could alleviate the work pressures that the Auditor General's office might face.

The key safeguard is that any shortcomings in certification work arising from the use of an auditor other than the Auditor General, or one with whom he makes arrangements, would be identified during the statutory audit of that body's accounts by the Auditor General, or, in the case of local government, by the

appointed auditor. Claims and returns in respect of European Community grant schemes are examples of such certification work.

Amendment No. 4 would also require the Auditor General to make arrangements for the certification of claims, returns or accounts relating to bodies for which he has no statutory audit responsibility. The fact that he would be required to perform those functions irrespective of his wider audit relationship with a body could result in his undertaking such work in a vacuum, without any background knowledge of what he is to certify, for whom and why.

Amendment No. 5 could prevent the Auditor General from making arrangements with other regulatory and audit bodies for co-operation and mutual assistance that would be beneficial to the exercise of their respective functions. It could also hamper his ability to participate in joint working and co-operation. Hon. Members will be aware that the Welsh Affairs Committee endorsed the objective of wide powers of co-operation.

The Committee also welcomed the case for a public mechanism to ensure that the benefits of the growing diversity of provisions among the nations of the UK are realised. The clause furthers that aim. A key principle of the Bill is to ensure that there is greater collaborative working through joint reviews, and strategic forward planning between audit and regulatory bodies—including bodies from elsewhere in the UK, such as Audit Scotland—and from outside the UK. Increased collaborative working would also reduce the administrative burden on client organisations.

Examples of work that could be undertaken under the provision are as follows: joint review work between the Auditor General on an England and Wales basis, or a wider UK or international basis; the secondment of staff between the proposed Wales Audit Office and other bodies covered by the clause for training or specific work-related reasons; the provision of specific expertise by one body to another, such as specialist forensic accounting services and the interrogation of complex databases; and international co-operation in developing audit standards and financial accountability, which would be valuable because risk management structures may also affect European audit bodies.

I mentioned in my opening speech on Second Reading that the Auditor General and his staff would have much to contribute. The Auditor General, by virtue of his office, may have implied power to enter into arrangements, but without the provision, each of the categories of body referred to would have to consider whether its powers were sufficiently wide to enable it to enter into such an arrangement. The key objective of the clause is to make clear the powers of all prospective parties to enter into such arrangements. International audit offices equivalent to the Auditor General for Wales would be covered by the definition of ''relevant authority'' in the clause.

Amendment No. 6 would require the Auditor General to satisfy himself that his independence in conducting audits was not impaired as a result of his

entering into co-operative arrangements, including arrangements with the National Assembly. We touched on the imperative for the Auditor General to maintain his independence, and he already abides by the auditing practices board's guidance on standards of independence. Objectivity and independence are two of the key ethical principles that govern auditors' professional responsibilities.

The independence of public sector auditors from the organisation that is being audited is also a fundamental principle adopted by the Public Audit Forum, which comprises the principal audit bodies for the four home nations. The auditing practices board is in advanced stages of discussion with the national audit agencies, which include the Auditor General for Wales, on the adoption of ethical standards that the board proposes to introduce later this year.

Agreement is a matter for the audit agencies and the board, but the Government believe that it is appropriate for common standards to apply across the audit profession and we would welcome such an agreement. I am confident that agreement can be reached and that standards will be adopted, particularly given the Auditor General's adherence to the existing auditing practices board guidance.

The Auditor General also has in place local protocols that ensure independence and guard against conflicts of interest arising. For example, in the case of the secondment of national audit staff to a client organisation, those members of staff, on returning to the National Audit Office, do not perform any audit functions in respect of that body for three years. It will be open to the Auditor General to reconsider existing arrangements, strengthening them if he considers it necessary. For that reason, I do not believe that a statutory duty is necessary to ensure that the Auditor General upholds the highest standards of independence.

The hon. Member for Leominster asked what is covered by subsections (1) and (3). A relevant authority can mean a Department, a local authority, an Assembly-sponsored public body or the holder of a public office such as the Children's Commissioner.

In respect of amendment No. 4 and clause 2, the hon. Gentleman asked about the implication that certification is optional and what arrangements are to be made with other bodies to avoid that. The provision does not affect whether the body in question must seek certification in particular circumstances; it simply means that where that body requires the Auditor General to do the certification work, he must do so. The provision is equivalent to the position under the Audit Commission Act 1998 that applies in England and Wales. When making grants and so on, the Assembly and its sponsored bodies would include specific provision in grant conditions to ensure that certification is done by the Auditor General.

Given that clarification, I hope that the hon. Gentleman will ask leave to withdraw the amendment.

Mr Bill Wiggin (Shadow Secretary of State for Wales, Local and Devolved Government Affairs; Leominster, Conservative)

I have been most remiss in not thanking colleagues in another place, especially Lord Roberts of Conwy and Baroness Noakes, both of whom did a fantastic job in scrutinising the Bill. Even if I did not like the Minister's response, I am reminded of the Greeks at Thermopylae in that numbers on the Opposition side of the Committee are reduced compared with the hordes on the Government side. I looked around for potential allies, but the Liberal Democrats are not present. According to the Flint and Holywell Chronicle, that is because they have already won:

''Delyn Liberal Democrats are celebrating victory over controversial plans to gag Welsh whistle-blowers. The Government is to shelve plans to fine or imprison ''whistle-blowing'' Welsh auditors who leak information about improper behaviour by local authorities. Liberal Democrat peers, MPs and Ams, with support from other opposition parties, vigorously fought the proposal contained in the Public Audit (Wales) Bill now before Parliament.''

However, the Liberal Democrats are not here. The quote continues:

''Now the Government has relented and plans to drop the proposals. During a House of Commons debate, Liberal MP Lembit Opik acknowledged the part played by Delyn Lib Dems in opposing the gagging of whistle-blowers. Delyn Lib Dem vice-chairman Cllr Robin Baker has welcomed the Government climbdown and says the decision reaffirmed his belief in the democratic process in Wales and the UK as a whole.''

[Interruption.] I can see that Labour Members are delighted with that recognition.

Mr Win Griffiths (Bridgend, Labour)

Order. I am waiting to see which of the hon. Gentleman's amendments this relates to.

Mr Bill Wiggin (Shadow Secretary of State for Wales, Local and Devolved Government Affairs; Leominster, Conservative)

Amendment No. 4. I am grateful for your sharp intervention, Mr. Griffiths. I shall stop tormenting the absent Liberal Democrats about their hypocrisy; as they are not here to fight back, perhaps your plea for clemency should be borne in mind.

The important point is that it is clear from the Minister's reply that certification is not questioned in the way that it could have been. It allows bodies to shop around, but the important point that he made is that the Auditor General must not certify bodies with which he has no link. I am grateful for that reply. The idea that he would have too much work is not one that I take on board, although he should not be working in a vacuum, as the Minister described it. I am also grateful to him for describing the local protocols, and I am happy that that answers some of my concerns about amendment No. 5.

Turning to amendment No. 6, which would ensure that arrangements

''may not be made under subsections (1) or (3) unless the Auditor General for Wales has satisfied himself that the independence of any audit carried out by him or by a person appointed by him is not impaired by the arrangements'',

obviously the Auditor General must be satisfied that his independence is maintained. From the comments that are now on the record, any doubts about that will be allayed.

I am grateful to the Minister for his replies, although I am not particularly grateful to the Liberal Democrats for not turning up, but as one can tell from their press releases, they think that they have already done their

job. I am sure that the electorate will hold them to account at the next election. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.