I am most grateful to my hon. Friend the Member for Gedling (Mr. Mitchell) for initiating this debate on the Audit Commission or, to give the commission its full title, the Audit Commission for Local Authorities and the National Health Service in England and Wales. I emphasise the full title because it underlines the remarks of my hon. Friend. Gedling is fortunate to have my hon. Friend as its Member of Parliament and my hon. Friend is fortunate to have, in Gedling borough council, a well-run local authority. I have no difficulty—indeed, I am delighted to join him—in thanking and congratulating the comptroller of the Audit Commission, Howard Davies, and his predecessor, John Banham.

The Audit Commission has a long history—longer than most people realise—of first-class work. The origin of the Audit Commission lies in the Poor Law (Amendment) Act 1844, which established a system for auditing poor law expenditure and thus created the office of district auditor. In the second half of the 19th century new types of local authority organisations were created and their accounts were gradually made subject to district audit as their functions increased. Some parts of the accounts of boroughs and county boroughs were subject to elective audit: in 1933 those authorities were given the right to appoint either the district auditor or other qualified auditors. It was not until the Local Government Act 1972 that a common system of audit was put in place across all local authorities.

The 1972 Act introduced a right for each local authority to choose whether its accounts should be audited by a private firm of accountants—subject to ministerial approval—or by the district auditors.

In its first special report for 1980-81 the Public Accounts Committee recommended setting up a National Audit Office in which the district audit service and the Exchequer and Audit Department would be amalgamated under the control of the Comptroller and Auditor General. The Government rejected that recommendation as inconsistent with the constitutional position of local authorities, but accepted the need for improvement in the arrangements for local authority audit and for greater attention to value-for-money work. Value for money is important and often misunderstood. Value for money implies and means "value for people". The better the value for money that local authorities and central Government can achieve, the better the value for the people they are serving. As my hon. Friend the Member for Gedling said, the Audit Commission's statutory responsibility, including helping local authorities achieve better value for money, was an innovative measure which has been of great significance in improving the performance of local authorities for the benefit of their local public.

The most recent development in the role of the Audit Commission was the extension of its remit to cover health service organisations, brought about under the provisions of the National Health Service and Community Care Act 1990. I thank my hon. Friend for his remarks about the amendment to the National Health Service and Community Care Bill. Although the Government could not agree completely with the full force of the initial suggestions he supported, there was no doubt that the revision, which was fully included in the Act with his support, was most helpful. It allows the Audit Commission to set out clearly the national framework within which the NHS operates as it undertakes its value-for-money studies under section 26 of the Local Government Finance Act 1982.

My hon. Friend also mentioned the work undertaken by the commission on day surgery in the national health service. That was the first report that it published on NHS matters, although this week it has been joined by further work on pathology services. He is right to congratulate the commission on pursuing the prospect for further value-for-money opportunities in those areas and we look forward to the results of the local audits now being undertaken which will establish what can be done in each local area to contribute to cost-improvement programmes, and what the scope for development nationally is likely to be.

I agree with my hon. Friend's assessment of the importance of the Audit Commission report "Making A Reality of Community Care". Sir Roy Griffiths's report "Community Care: Agenda for Action" contained proposals largely accepted by this Government in formulating the community care policy outlined in the White Paper "Caring for People". Indeed, Sir Roy Griffiths acknowledged the Audit Commission report as containing the essential facts on which this review is based". My hon. Friend has rightly emphasised the value-for-money work undertaken by the Audit Commission, but that is only one part of its responsibilities. It is worth reminding ourselves also that much of the Audit Commission's work is performed or given effect by the auditor appointed to each body.