Schedule. — (Alternative Provisions which may be adopted as to auditors.)

Municipal Corporations Audit Bill. – in the House of Commons on 19th May 1933.

Alert me about debates like this

Photo of Mr George Hartland Mr George Hartland , Norwich

I beg to move, in page 3, line 16, to leave out from the word "he" so the end of line 24, and to insert instead thereof the words: being a member of an incorporated body of accountants, is at the date of appointment publicly and efficiently carrying on the business of an accountant.

Question put, "That the words proposed to be left out, to the word one in line 16, stand part of the Bill."

Photo of Major Abraham Lyons Major Abraham Lyons , Leicester East

I beg to move, in page 3, line 16, to leave out from the word "of" to the end of line 24, and to insert instead thereof the words: a body of accountants established by charter or under the provisions of an Act of Parliament.

The House divided: Ayes, 115; Noes, 39.

Question put, "That the words proposed to be left out stand part of the Bill."

The House divided: Ayes, 109; Noes, 50.

Division No. 184.]AYES.[3.6 p.m.
Adams, Samuel Vyvyan T. (Leeds, W.)Banks, Sir Reginald MitchellBevan, Stuart James (Holborn)
Anstruther-Gray, W. J.Barclay-Harvey, C. M.Bird, Ernest Roy (Yorks., Skipton)
Aske, Sir Robert WilliamBeauchamp, Sir Brograve CampbellBorodale, Viscount
Astor, Viscountess (Plymouth, Sutton)Beaumont, Hn. R. E. B. (Portsm'th, C.)Briant, Frank
Atholl, Duchess ofBelt, Sir Alfred L.Brocklebank, C. E. R.
Brown, Ernest (Leith)Hutchison, W. D. (Essex, Romf'd)Robinson, John Roland
Brown, Brig. -G en. H.C.(Berks., Newb'y)Ker, J. CampbellRunge, Norah Cecil
Buchan-Hepburn, P. G. T.Leckie, J. A.Russell, R. J. (Eddisbury)
Bullock, Captain MalcolmLeech, Dr. J. W.Rutherford, John (Edmonton)
Caporn, Arthur CecilLovat-Fraser, James AlexanderRutherford, Sir John Hugo (Liverp'l)
Castlereagh, ViscountMacAndrew, Capt. J. O. (Ayr)Salmon, Sir Isidore
Chapman, Col.R. (Houghton-le-Spring)McCorquodale, M. S.Salter, Dr. Alfred
Conant, R. J. E.McEwen, Captain J. H. F.Shakespeare, Geoffrey H.
Cooke, DouglasMcKie, John HamiltonSmith, Bracewell (Dulwich)
Copeland, IdaMcLean, Major Sir AlanSomerville, Annesley A. (Windsor)
Craddock, Sir Reginald HenryMacmillan, Maurice HaroldSoper, Richard
Davison, Sir William HenryMacpherson, Rt. Hon. Sir IanSouthby, Commander Archibald R. J.
Danville, AlfredMargesson, Capt. Rt. Hon. H. D. RSpencer, Captain Richard A.
Duckworth, George A. V.Martin, Thomas B.Stewart, William J. (Belfast, S.)
Duggan, Hubert JohnMayhew, Lieut.-Colonel JohnStorey, Samuel
Duncan, James A. L. (Kensington,N.)Merriman, Sir F. BoydStuart, Lord C. Crichton-
Emmott, Charles E. G. C.Morris-Jones, Dr. J. H. (Denbigh)Sugden, Sir Wilfrid Hart
Emrys-Evans, p. V,Murray-Phillpson, Hylton RaiphSummersby, Charles H.
Erskine, Lord (Weston-super-Mare)Nail-Cain, Hon. RonaldThomson, Sir Frederick Charles
Foot, Isaac (Cornwall, Bodmin)Nation, Brigadier-General J. J. H.Touche, Gordon Cosmo
Fremantle, Sir FrancisNunn, WilliamVaughan-Morgan, Sir Kenyon
Fuller, Captain A. G.O'Donovan, Dr. William JamesWard. Lt.-Col. Sir A. L. (Hall)
Grattan-Doyle, Sir NicholasPalmer, Francis NoelWhiteside, Borras Noel H.
Grimston, R. V.Peat, Charles U.Whyte, Jardine Bell
Hall, Capt. W. D'Arcy (Brecon)Penny, Sir GeorgeWinterton, Rt. Hon. Earl
Hamilton, Sir B.w.(Orkney & Zetl'nd)Petherick, M.Wise, Alfred R.
Hanley, Dennis A.Pickford, Hon. Mary AdaWomersley, Walter James
Hannon, Patrick Joseph HenryPotter, JohnWood, Sir Murdoch McKenzie (Banil)
Hornby, FrankRaikes, Henry V. A. M.
Howitt, Dr. Alfred B.Ramsay, T. B. W. (Western Isles)TELLERS FOR THE AYES.—
Hudson, Capt. A. U. M. (Hackney,N.)Rankin, RobertMr. M. Beaumont and Mr. Godfrey
Hume, Sir George Hop woodRathbone, EleanorNicholson.
Hurd, Sir PercyRay, Sir William
Attlee, Clement RichardHaslam, Henry (Horncastle)Reid, William Allan (Derby)
Batey, JosephHicks, Ernest GeorgeRemer, John R.
Bevan, Aneurin (Ebbw Vale)Joel, Dudley J. BarnatoRoss, Ronald n.
Bird, Sir Robert B.(Wolverh'pton W.)John, WilliamRothschild, James A. de
Broadbent, Colonel JohnJones, Morgan (Caerphilly)Sandeman, Sir A. N. Stewart
Clarry, Reginald GeorgeLansbury, Rt. Hon. GeorgeSmith, Tom (Normanton)
Cocks, Frederick SeymourLawson, John JamesThompson, Luke
Cove, William G.Lunn, WilliamTinker, John Joseph
Crooke, J. SmedleyMacdonald, Gordon (Ince)Turton, Robert Hugh
Crookshank, Capt. H. C. (Gainsb'ro)McEntee, Valentine L.Wallhead, Richard C.
Daggar, GeorgeMagnay, ThomasWedgwood, Rt. Hon. Josiah
Doran, EdwardMainwaring, William HenryWilliams, Edward John (Ogmore)
Edwards, CharlesMills, Sir Frederick (Leyton, E.)Williams, Herbert G. (Croydon, S.)
Evans, Capt. Ernest (Welsh Univ.)Parkinson, John AllenWilliams, Dr. John H. (Llanelly)
Grenfell, David Rees (Glamorgan)Pickering, Ernest H.
Groves, Thomas E.Price, GabrielTELLERS FOR THE NOES.-
Hall, George H. (Merthyr Tydvil)Procter, Major Henry AdamSir John Ganzoni and Mr. Lyons.
Hartland, George A.Ratcliffe, Arthur

Question, "That the Bill be now read the Third time," put, and agreed to.

Photo of Mr Maurice Petherick Mr Maurice Petherick , Penryn and Falmouth

I beg to move, in page 3, line 23, after the word "of", to insert the word "Certified."

This is a purely formal Amendment again. One of the societies named' in the Schedule, acting on a strange urge, thought it would like to be certified, and in deference to that wish, which can only have some Freudian explanation, I have agreed to insert that word, if the House will permit.

Amendment agreed to.

The following Amendments stood on the Order Paper:

In page 3, line 24, at the end to insert the words "The British Association of Accountants and Auditors, Limited."— [Mr. Magnay.]

In page 3, line 24, at the end, to insert the words "The Institution of Certified Public Accountants."—[Sir J. Ganzoni.]

Photo of Mr Thomas Magnay Mr Thomas Magnay , Gateshead

I think I can judge the time when the House thinks it has had enough. The decisions which have been given show that it is not likely that my Amendment would be carried, and so I do not move it.

Photo of Mr Francis Ganzoni Mr Francis Ganzoni , Ipswich

For the reasons which have been given, I do not move my Amendment.

Motion made, and Question proposed, "That the Bill be now read the Third time."

3.15 p.m.

Photo of Mr Luke Thompson Mr Luke Thompson , Sunderland

Before we pass from these very interesting discussions I may be permitted to say a few words on the Third Reading of the Bill. When the promoter of the Bill introduced it, he described it as a modest Measure of reform. I think Members in all parts of the House will agree that it has proved to be a very important Measure. The Parliamentary Secretary to the Ministry of Health is not in his place at the moment but perhaps the promoter of the Bill will deal with the point to which I wish to direct attention. As a Member, who, for several years has had to devote considerable time to local legislation committees, I am much impressed with the necessity that the auditing of public accounts should be as efficient as possible, and if I have to utter one word of regret regarding this Bill it is that, while it gives powers to boroughs to use the form of audit here indicated, sufficient safeguards are not attached to that power. Under the District Auditors Act of 1879 it is possible for auditors to make surcharges on accounts which they dispute. Under this Bill we are handing over to corporations the appointment of auditors under the alternative provisions laid down in the Schedule and my opinion is that the Bill does not afford sufficient safeguards in that respect.

The main reason, however, why I rise to address the House is to put a question. We recognise that at present there are four means of auditing public accounts— through the District Auditors Act, 1879, through the Municipal Corporations Act, 1882, through the Public Health Act of 1875 and, latterly, through direct powers which have been sought for by and given to municipalities in local legislation. Under Clause 1, Subsection (1) (a) of the Bill the opportunity is given to any borough in which the provisions of the Sub-section are adopted, to seek powers in regard to auditing. Under the existing provisions what is happening to-day is this. These accounts are made up and are audited for county purposes, and for borough purposes as well, under a dual system, that is, under the District Auditors Act of 1879 and also under the Public Health Act of 1875.

The Clause says: The accounts of the corporation and the accounts of the borough treasurer and other officers of the corporation shall, instead of being audited by borough auditors in accordance with the Municipal Corporations Act, 1882, be audited by district auditors. It is clear to me that the Act of 1882 should cease to operate, but I want to know why Section 246 of the Public Health Act, 1876, has also to cease. That Section reads as follows: Where an urban authority are the council of a borough the accounts of the receipts and expenditure under this Act of such authority shall be audited and examined by the auditors of the borough, and shall be published in like manner, and at the same time as the municipal accounts, and the auditors shall proceed in the audit after like notice and in like manner, shall have like powers and authorities, and perform like duties, as in the case of auditing the municipal accounts. That is what obtains to-day. Does this imply that if a borough undertakes to use this Section, it will absolutely wipe out the assistance of any professional auditors altogether? Does it mean that this work would be handed over to the district auditors without let or hindrance? I think that is a very important point and one that has never been raised during the discussions on this Bill. I hope some kind of explanation will be forthcoming for the help of the local authorities concerned.

Viscountess ASTOR:

Did the hon. Member say "help" or "health"?

Photo of Mr Luke Thompson Mr Luke Thompson , Sunderland

I said "help." I Want the local authorities to be quite clear on the point.

3.24 p.m.

Photo of Mr Rhys Davies Mr Rhys Davies , Westhoughton

I think every Member of every party in the House will be delighted to see this Bill on the Statute Book, and we ought to congratulate the hon. Member who has piloted the Measure so far. I am sure that his name will go down to history as that of the Member who has introduced a Bill to provide, once for all, for the abolition of a ridiculous system whereby a man who knows nothing at all about accounts shall be elected as an auditor for a municipality. In spite of all that may be said to the contrary, it is a very important thing that we have done to-day.

Viscountess ASTOR:

Hear, hear!

Photo of Mr Rhys Davies Mr Rhys Davies , Westhoughton

I do not mean what the Noble Lady means either. I rise because I want to put one or two points to the Parliamentary Secretary to the Ministry of Health. I should like to know whether he can tell us if the Ministry will issue a circular to the local authorities point- ing out what they are entitled to do if this Bill becomes law, because I imagine that there will be some local authorities who will not be alive to what is done in this House affecting their affairs. We have been dealing to-day with the qualifications and capacity of auditors and accountants who will be appointed to these responsible posts of looking into the accounts of local authorities. But we ought to point out to the Government that the qualifications and competency of their own district auditors may be inferior to the qualifications and competency of the men who are to be appointed to audit the accounts of municipalities. I have raised this point before, and it comes within the scope of the Bill because it mentions the district auditor. Hon. Members who have not served on local authorities will be interested to know that where the Government makes a grant towards any service in a municipality they appoint an auditor called the district auditor. If, however, a large municipality owns and controls a transport system, a water supply, electricity, or gas undertaking, where the Government do not make any contribution, the municipality is entitled to appoint its own auditor. It could elect auditors. But once it adopts the provisions of this Bill, it will appoint efficient auditors.

I ask the Parliamentary Secretary to be good enough to inform the Treasury that a large number of Members of the House are not satisfied with the way that their own auditors, who go into the districts to audit the accounts of local authorities, are appointed. No young man in this country can become qualified as a chartered accountant and belong to the oldest institution unless he is articled for five years without any wages and passes a final examination when he is 21. The Treasury will not admit a young man with these qualifications into the Civil Service at all, with the result that the qualifications for auditing the accounts in outside businesses is of a much higher standard than the qualifications and efficiency of men who audit on behalf of the Government. I do not think that that is a very good position for the country. The Government departments are wrong in their assumption. They say, when we raise this issue, that the accounts of Government departments differ fundamentally from the accounts of private businesses, but surely, when a young man learns the intricacies of accounts, profit and loss, balances, debits and credits, and the rest of it, and when he has learned all the principles of accountancy and the law relating to accounts, he ought to be able to walk into a manufacturing firm, a wholesale or retail business, the Ministry of Health, the Admiralty, the War Office or the Air Ministry, and audit the accounts on the principles of accountancy laid down in the lessons that have been taught to him.

I want to say, therefore, without offending the Civil Service, that there is a selfishness in the Civil Service in this connection in that they are unwilling to take these young men inside: their profession if they can help it. What is the attitude of the Ministry concerned? Some years ago a prominent Member of our party who was attending a Commission on this subject was told: The qualification for district auditors, is, as explained by the Ministry, based on experience tempered by efficiency, with, I believe a little patronage added thereto. If we are laying it down in this Bill that only persons with special qualifications, members of the societies mentioned, shall be permitted to audit the accounts of municipalities, then we ought to lay it down that the same high standard of qualifications ought to be possessed by those who audit on behalf of the State. The standard required of these auditors ought not to be higher than the standard set for those employed by the State I am sure I have not detained the House too long [HON. MEMBERS: "Go on."] I am not influenced in the least by the urgings from behind me to speak. As a matter of fact I do not know that I require any urging to speak on this important Measure. I hope the hon. Member for East Leicester (Mr. Lyons) will not be offended when I say that I am glad his Amendment was defeated. I am absolutely certain that we took the right course there, in spite of what my honourable leader said. I think he was falling into a trap. This is what would have appeared in the Bill if that Amendment had been carried—

Photo of Mr Rhys Davies Mr Rhys Davies , Westhoughton

I ought to have known better, with my long experience of this House; but I am delighted to know that as the Bill now stands every person who is qualified to audit the accounts of municipalities will know which societies come within the law. To have said, as some Members suggested, that the members of any organisation which had a charter by Act of Parliament should be qualified to act as auditors would have widened the scope of things too far. I am pleased to see that all these well-known societies are included in the Bill— the Institute of Chartered Accountants in England and Wales, the Society of Incorporated Accountants and Auditors, the Society of Accountants in Edinburgh, the Institute of Accountants and Actuaries in Glasgow, the Society of Accountants in Aberdeen;* the London Association of Accountants Limited and the Corporation of Accountants Limited. I think those cover the vast Majority of persons in this country who are qualified to audit the accounts of municipalities.

I hope the leader of the Opposition does not mind the spectacle of a very humble follower criticising his remarks, but I cannot agree with his idea that provided a man is capable of determining the policy of a local authority and its expenditure it does not much matter whether he can add two and two and make them four. I do not think that is a very good interpretation of the qualifications for the great profession of accountancy, because it is a very great profession; sometimes it is well paid and sometimes it is not. I disagree, also, with some of the observations made by hon. Members of the legal profession who rather inclined to the view that it did not matter very much about the skill of an accountant, that anyone could be an accountant or auditor. Let a layman try to enter the precincts of the law and see what happens to him. He must have passed all the examinations, he must have dined, he must have lunched in LinColn's Inn—I am not so sure about wining. We all have a way of whining. [Interruption.] I do not mean in the same way as hon. Members.

Having made these few remarks about this very important Bill, the House will now, I feel sure, have the privilege of instituting a great clean-up in the audit practice of the municipalities of this country. I am very pleased to join, for the second time to-day, in a chorus of unanimous approval of a Bill, as I did in respect of the first Bill that was before us. It is a high comment on our work in the House that private Member's days, in spite of what might be said to the contrary outside, certainly do provide for this sort of Measure to be brought forward. [Interruption.] I do not understand why hon. Members should belittle the efforts of their own colleagues. This is the second Bill today that has received unanimous support. I am very sorry that the right hon. and gallant Gentleman the Member for New-castle-under-Lyme (Colonel Wedgwood) is not here in order that he might make his comments on this Bill. He called the first Bill by an awful word which I thought was almost unparliamentary. We are very happy to be supporting the Bill, and we congratulate the hon. Member upon what he has done to get it passed into law.

3.37 p.m.

Photo of Mr Isaac Foot Mr Isaac Foot , Bodmin

I have nothing to say whatever about the merits of the Bill, but I cannot allow the occasion to pass without congratulating its promoter, because he is associated with the county that I have the honour to represent and his constituency adjoins mine. He is associated with one of the best known families of that county, and it must be a matter of congratulation to his constituents that so soon after he became a Member of this House he has been fortunate in the ballot and that he has used his ballot to such effect. Many of us have been in this House a long time and have never succeeded in any ballot. When he introduced his Bill upon the Second Reading he said that he was going to make the choice of an uncontroversial Measure—a very wise choice for a private Member to make in relation to his Bill.

I have listened to the later stages of this Debate to-day, and it must be a gratifying matter to him and to his constituents that the Bill will find its way on to the Statute Book very shortly, and that he will have had an advantage which cannot be claimed by any other Member of the House. As one much older than himself, who has seen a good deal of political warfare, I take the opportunity of congratulating a Member who is associated with the same county as myself.

3.39 p.m.

Photo of Mr Maurice Petherick Mr Maurice Petherick , Penryn and Falmouth

I thank the hon. Member for Bodmin (Mr. Isaac Foot) for the extremely gracious remarks that he has made to a political opponent. I take it particularly kindly, coming as it does from him, and I am most grateful to him for his very kind remarks. I am also grateful to the hon. Member for West-houghton (Mr. Rhys Davies) who has been a ardent supporter of the Bill. I am sure that hon. Members in almost every part of the House are anxious to get on to the later business so that I do not propose to make a speech on the Third (Reading. I should, however, like to put one suggestion to the Parliamentary Secretary to the Ministry of Health.

On the District Auditor's staff there is a certain lack of wide knowledge of commercial practice in the auditing of commercial companies' accounts, because members of those staffs have never been in the habit of auditing such accounts. Similarly, in many firms of professional accountants which are engaged in local government work, there is apt to be nobody who has real experience of the practice of auditing local government accounts. My suggestion, which I make with all respect to the Minister of Health, whom I see is now here, is that some arrangement might be made by which junior members of a district auditor's staff might go to selected firms or professional accountants for training in company auditing, and that, in exchange, members of the staffs of the professional auditors might also be received into the district auditor's staffs for a period of temporary instruction.

I should like to thank the Parliamentary Secretary for the help he has given me during the passage of this Bill through its various stages. Obviously, a private Member who has been fortunate enough to draw a Bill in the Ballot is not in the happy position of a junior Minister who has access to all the official documents, but I would like to thank the Parliamentary Secretary for the great help that his Department has given me during the course of this Measure in giving advice when I required it.

3.42 p.m.

Photo of Mr George Lansbury Mr George Lansbury , Poplar Bow and Bromley

My hon. Friend asked a definite and quite important question—I raised the question years ago in this House—as to the status of the auditors that you are asking local government bodies to employ. There is a Schedule in the Bill of people they must employ if they do not take the district auditor. The whole point of the Debate which, in spite of other reasons, has been perfectly serious, has been that you should have duly qualified persons. The hon. Member, if I may also be allowed to congratulate him on getting his Bill, as he will get it, has asked the hon. Gentleman's Department to arrange that the assistant of the district auditors may get experience in the City, and so on. Why did not the hon. Member ask that the district auditors themselves should get that experience? My hon. Friend was a little wrong when he said that it was the-Civil Service which stood in the way of the appointment of accountants as district auditors. It is no such thing. When the Poor Law Commission was sitting, I was intensely interested in this question of auditors, and I asked the then Chief Inspector, "What is the qualification for an auditor?," and he said, "Experience, tempered by patronage." He gave me that answer because I pointed out to him that the auditor for London, of whom all of us complained, was the nephew of a very distinguished soldier, and would never have been heard of as an auditor if he had not been the nephew of that distinguished soldier.

The local authorities are now to be tied down to properly qualified accountants who must belong to these societies. I want to ask why councils who choose district auditors should be denied the advantage of having as auditors men who-have been passed by these societies. If the Ministry do not apply to their own men, who are doing exactly the same work, the same test which they are compelling local authorities to apply, it must mean that the Ministry want to retain in their hands this sort of patronage, which, from my point of view, is very bad indeed.

Photo of Viscount  Turnour Viscount Turnour , Horsham and Worthing

On a point of Order. I understood that we could only discuss on Third Reading what is in the Bill—

Photo of Viscount  Turnour Viscount Turnour , Horsham and Worthing

The right hon. Gentleman is asking that something should be put into the Bill which is not in the Bill.

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

I think the right hon. Gentleman was referring to something which is near enough in the Bill to be in order.

Photo of Mr George Lansbury Mr George Lansbury , Poplar Bow and Bromley

I do not want to be out of Order, but the noble Lord may have heard me long ago—

Photo of Viscount  Turnour Viscount Turnour , Horsham and Worthing

I only raised the question from the point of view of interest in the procedure of the House. I always understood that it was not in Order to discuss on Third Reading something which is not in the Bill. I was asking for information.

Photo of Mr George Lansbury Mr George Lansbury , Poplar Bow and Bromley

Perhaps the noble Lord is partly right and I am partly right. I think, Mr. Speaker, that you rather ruled that way. The words to which I am calling attention are: The accounts of the corporation and the accounts of the borough treasurer and other officers of the corporation shall, instead of being audited by borough auditors in accordance with the Municipal Corporations Act, 1882, be audited by district auditors in like manner as accounts of an urban district council. Later on they are given the choice of selecting persons other than the district auditor, and then the Bill lays it down that, if the Council chooses anyone who is not a district auditor, he must be a member of one of the bodies set out in the Schedule. I am asking why, if the local authorities are to be restricted to persons who must be members of these organisations, the Minister will not see to it that these district auditors shall also be members of such societies. I want to point out the gross inconsistency of compelling local authorities to take a district auditor who has not these qualifications, or, if they do not do that—

Photo of Viscount  Turnour Viscount Turnour , Horsham and Worthing

How can the right hon. Gentleman, on the Third Reading, ask the Minister to make an alteration which requires an alteration in the Bill? It is impossible.

Photo of Mr George Lansbury Mr George Lansbury , Poplar Bow and Bromley

I think the Noble Lord is wrong this time. It is quite within the competency of the Minister to do this without any legislation. He can issue an Order. Or rather, I think it is the Treasury who appoint these auditors. They can make it a condition that, instead of being appointed on the basis of efficiency tempered by patronage, it shall be efficiency according to membership of these various bodies. That is the point that I am making, and I think it is a very important point. I have suffered at the hands of auditors, though it has been the sort of suffering that does one good from the popular point of view. I might not have been here if it had not been for the attention of auditors. I propose not to vote against the Bill. I think it is a good Bill in parts, but it would be a better Bill if the Minister and the Treasury followed out the same lines that they are laying down for local authorities.

3.50 p.m.

Photo of Mr Geoffrey Shakespeare Mr Geoffrey Shakespeare , Norwich

The Leader of the Opposition has addressed one point to me: Why are not the qualifications of District Auditors the same as those laid down in the Bill for professional auditors? The answer surely is that the powers and functions are rather different; a professional auditor has for example no power to surcharge. A district auditor must be a man who knows local government inside out and nowadays a man is not appointed as a rule to that post unless he has been on district audit work for years after coming into the Civil Service and has passed an examination in accounts, audit and local government law. District auditors though they are appointed by us are an independent body and they cherish their independence and many Members have spoken highly of their qualifications. The qualifications, functions and powers of a professional auditor are rather different from those of a district auditor.

Mr. PETHERICK rose in his place, and claimed to move, "That the Question be now put," but Mr. SPEAKER withheld his assent, as he thought the Souse was prepared to come to a decision without that Motion.

Bill accordingly read the Third time, and passed.