I beg to move Amendment 68, page 18, line 19, at end add-

'(9) The principal function of the Comptroller and Auditor General is to further the purposes of national audit set out in section [Purpose of Part 7] by way of investigation and report.'.

With this it will be convenient to discuss the following: Amendment 78, in Clause 38, page 19, line 2, at end insert-

'(6A) The Comptroller and Auditor General shall also have discretion to examine the accounts of any organisation supplying goods or services paid for out of public funds, which within any one contract, or any one financial year, exceed a sum to be determined from time to time by statutory instrument.'.

New clause 41- Purpose of Part 7-

'The purpose of the following provisions is to further strengthen Parliamentary control and supervision of the expenditure of public money, and for promoting economy, efficiently, effectiveness and probity in the use of such money by government departments and other authorities and organisations.'.

It gives me great pleasure to speak to these amendments, if briefly.

In a major piece of legislation it is important that its purposes should be clear, but the Bill nowhere specifies the purposes and aims of national audit, although the National Audit Act 1983 does so. The amendments are intended to remedy that omission.

That is not the purpose of the Bill. The statutory powers are already in place, and the purpose of this part of the Bill is to bring better governance into the processes of the National Audit Office.

I accept entirely what my right hon. Friend says, but I hope that one purpose of the Bill is to restate the objectives of audit.

indicated dissent.

Clearly my right hon. Friend and I disagree, but I hope it will be accepted that the restatement of the 1983 Act would not go amiss in the Bill.

New Clause 41 is intended to be inserted at the head of part 7. It repeats the opening of the 1983 Act, with the addition of the word "probity", which seems appropriate in current terms. Amendment 68 is intended to make clear the function of the Comptroller and Auditor General in relation to the purposes of national audit, and amendment 78 takes account of the modern circumstances in which private firms and third-sector organisations can receive a significant proportion of their funds-up to 80 per cent. in some cases-from the public purse. When the services that they provide were provided directly by public authorities, they were subject to the Comptroller and Auditor General or to local government audit. Modern suppliers of services receiving public money should be subject to the CAG, as plcs will be under clause 50.

It is important to reassert the importance of the CAG and national audit. In the last Parliament, there was a brief, surreptitious attempt by the Government to insert a degree of Treasury control over national audit. That was seen off by a combination of Labour Members, Opposition Members and the House of Lords, and the Bill never proceeded, but it is important that we now reaffirm our commitment to national audit. After all, our primary purpose is to vote moneys for government on behalf of the people. We must ensure that what moneys we vote are spent appropriately. That is what national audit and the CAG are all about.

I thank the hon. Gentleman for tabling these amendments and the new Clause. I suspect that the question whether it is necessary to reassert such objectives in this Bill given that the 1983 Act, which also states them, is not being repealed, will be addressed in a moment, but the CAG's objective of carrying out examinations of the economy, efficiency and effectiveness of public bodies is, as the hon. Gentleman says, very important. Perhaps it is more important now than ever, at a time when we will see spending restraint. The Government are spending more than ever before and, indeed, borrowing more than ever before in peacetime, so the focus must clearly be on achieving more for less. The NAO and the CAG have an important role in achieving that. Taxpayer value for money should unite us all-it should not be a partisan point-whether we are left or right. I do not think the hon. Gentleman will take it as a criticism if I say that it does not get more left wing than him. We must all ensure that public spending achieves good value and it is worth paying tribute to the work that the NAO and various CAGs have performed to achieve that.

We may differ on how to achieve greater economy, efficiency and effectiveness in public bodies, and in many ways, this is a matter for great political debate-I am sure the hon. Gentleman would not necessarily share the Conservatives' views about the importance of choice, competition and contestability in achieving better value for money. However, there is a less political role, and the NAO performs it very well, in conjunction with the Public Accounts Committee. The new clause refers to Parliament's important role. As I said, we could question whether the amendments are necessary, but the objective of the NAO and the CAG is important.

I have one or two points to make on clause 37. If there is a stand part debate on it, I will do so then.

The Chairman:

Order. I was hoping not to have a stand part debate in view of the fact that, with the new Clause, this is a fairly wide grouping.

In which case, Sir Alan, I shall make those points now.

This part of the Bill, as the Father of the House has said, is predominantly to do with the governance of the NAO and the CAG, and there is a combination of continuity and change in the new arrangements. I think it would be fair to provide a little background on how we got into this situation and why there was a need to look again at the governance of the CAG-doubtless the Chairman of the PAC, my hon. Friend Mr. Leigh, and the Father of the House will say things to the same effect.

We cannot ignore the fact that there was some adverse publicity regarding the expenses of Sir John Bourn, who was CAG for some 20 years or so. It is a great pity that there was a cloud over the last few months of his service, because he was a distinguished Comptroller and Auditor General. He did much to enhance the reputation of the National Audit Office and worked very effectively with the Public Accounts Committee. Nevertheless, there was some concern and adverse publicity over his expenses, which in many respects led to the commissioning of the Tiner review and various recommendations made as to the governance of the Comptroller and Auditor General and the NAO.

I wish to make various points about corporate governance at a later stage, but two points are appropriate to address in the context of Clause 37. The first is the length of term of the Comptroller and Auditor General, and the second is the appointment process. Clause 37(7) provides that the length of term should be 10 years and subsection (8) provides that it should be non-renewable. We welcome those provisions. The tension that exists in the Government's arrangements in this area relates to independence and accountability, and that is a point to which we may return later. However, a non-renewable term of a reasonable length gives the CAG a degree of independence. The Tiner review initially suggested eight years, and we now have 10 years in the Bill. No doubt others will explain the reason for that change, but it is not enormously significant. We welcome those provisions.

The issue of the appointment process has been touched on recently in a couple of debates when new Comptrollers and Auditors General have been appointed. I have had the opportunity to speak in both debates-first, on the temporary appointment of Mr. Tim Burr in January 2008, and secondly, on the appointment of Mr. Amyas Morse as the permanent CAG. The debate has centred on whether the existing structure, which has been in place since 1983-by which time the appointment was made by a combination of the Chairman of the Public Accounts Committee and the Prime Minister-is appropriate or whether Parliament should have a wider role, and remove the Prime Minister and the Executive from the process, either altogether or with a diminished role.

Another issue is whether pre-appointment hearings should be introduced. This is not a new debate. In the debate that took place when Sir John Bourn was appointed, the Parliamentary Secretary to the Treasury, Mr. Brown, then the Opposition spokesman, said, on the question of a greater role for Parliament:

"The Labour party intends to give effect to this principle when in government."-[ Hansard, 16 December 1987; Vol. 124, c. 1201.]

The argument for that approach is that we should have greater parliamentary involvement in public appointments. It is an argument that the Prime Minister espoused in his very first statement to this House as Prime Minister. It is one with which I have some sympathy, as it seems to be a more democratic approach, but there are specific arguments that apply in this context that suggest that the continuation of the present system may be a sensible approach.

The first argument is that the Chairman of the Public Accounts Committee is a Member of the Opposition. That is a long-standing convention, and one that I am sure will continue. The Chairman has a substantial role in determining an appointment. In fact, by and large, as I understand it, in practice the Chairman essentially makes the selection, which is then approved by the Prime Minister.

It is important that the CAG is seen as independent of the Executive, and an appointment made by a senior Opposition Member demonstrates an important degree of independence.

I have been wondering whether the CAG would be the right person to be in charge of the office for budget responsibility that the Conservative party has proposed. I wonder that for exactly the reasons that my hon. Friend has outlined: the independent nature of the CAG appointment process.

I am grateful for my hon. Friend's Intervention. That would be an interesting structure, although I would be reluctant for the CAG to perform that role. Although the CAG and whoever would be in charge of the office for budget responsibility would play an important role in budget responsibility, I would not want to complicate the role of the CAG because it is a substantial job in itself. Furthermore, the skills required of the CAG-being able to identify waste in specific programmes-involve performing a role at a micro level in identifying particular problems, whereas we envisage the office for budget responsibility working at much more of a macro level. It would be a role for an economist to assess the needs of the Government in reducing the deficit, and the progress-or lack of-made by the Government in achieving those objectives. The parallel is strong in that both roles require a high degree of independence to have the credibility required to perform successfully.

My first thought was that, to assess the sustainability of public finances, we need expert economists, as my hon. Friend just said. However, there would be two other aspects of the role of the new office: to audit fully the national debt-or debts-and to enforce a long-term strategy of value for money in public spending. Those fit in well with the role of the CAG. Would there be any logic to giving him that role? I simply cast out that thought to him.

I am grateful to my hon. Friend, and I am sure that his points will be noted. Both roles would be important. It is helpful to the Committee highlight the significance of the office for budget responsibility, and I think that we agree on the significant role that it would play-I hope-in addressing the current huge levels of borrowing. I hope that it would be important, just as the CAG has been important.

On Clause 37, we think, on balance, that the result that we have got to, which is largely a continuation of the previous process, is an important one. We are pleased that it remains a requirement for the Prime Minister to move the motion for the appointment of the CAG. As I said, I have had the pleasure of responding to the Prime Minister twice when he has performed that role-I am sure that he was delighted to have that opportunity too. All being well, however, such a motion should not happen very often-once in 10 years, as the Bill envisages-although it is always possible that things will not go entirely to plan. Because of the independence provided by the Chairman of the Public Accounts Committee, there is a danger that the existing independence might be diminished in those circumstances by a straight vote in Parliament-whether a vote in Committee or a vote by the whole House-given that the Government will always be the Majority party. Consequently, we welcome clause 37.

I rise to speak in favour of Clause 37, which covers the office of the Comptroller and Auditor General, and to oppose amendments 68 and 78, and new clause 41.

A number of provisions already protect the independence of the post holder, including the appointment process, the length of tenure and the terms of the appointment. Let me start with some context, so that we can understand the significance of the legislation, why it is important to be clear about the purpose of the Bill and why we must tread carefully in this territory.

The Comptroller and Auditor General is an Officer of the House of Commons. He is not a civil servant and is completely independent of the Government. Uniquely, he is selected by the Government and the Opposition. He reports to Parliament on the activities of the Government and his work is overseen largely by the Public Accounts Committee-the oldest Committee in Parliament, which was set up 150 years ago-which is always chaired by a member of the Opposition. Therefore, there are a number of locks throughout the process to ensure the independence of the Comptroller and Auditor General.

All those arrangements are supported by complex legislative structures and significant parliamentary conventions, many of which have existed for a long time. The result of all those conventions and Laws, as well as what we are talking about in clause 37, is to enable the Comptroller and Auditor General to function absolutely independently of the Government. That is what they all do. He must have complete discretion in how he carries out his functions.

I worked closely with the Father of the House, after the retirement of Sir John Bourn. We were clear at all times that we must not mess with the traditional independence of the Comptroller and Auditor General. There may be an opportunity later to discuss the corporate structure and all the rest of it, but the fundamental point is that the Comptroller and Auditor General is completely independent of the Government and that he alone and nobody else-not the Public Accounts Committee and not the board of the National Audit Office-signs off the reports. Nobody else can affect his judgments. He is completely independent, and that is vital.

That statutory independence, which is underpinned by the new Bill, is not a notional phenomenon, shrouded in cobwebs and dating back centuries, or at least back to Gladstone. Rather, it is real, it is current and it forms a key plank of our constitutional fabric. One only has to look around the world at what has happened in other countries to know how important it is-indeed, vital-to have an independent supreme audit office. Every country has a supreme audit office, but not all of them are as independent or effective as ours. Indeed, ours is arguably the best in the world.

I am therefore pleased that the current arrangements, whereby the Comptroller and Auditor General's appointment is proposed by the Prime Minister following consultation with the Chairman of the PAC, have endured-I say "consultation", but it goes much further than that. Frankly, they both have a veto. This gentleman-Amyas Morse, although the Comptroller and Auditor General may be a lady in the future; we do not know-can be appointed only if the Prime Minister, who is obviously a member of the Government by definition, and the Chairman of the PAC, who by convention is a member of the Opposition, both agree.

In fact, in appointing the current Comptroller and Auditor General we improved the process further. Last time, when Sir John Bourn was appointed, my predecessor, Bob Sheldon-now Lord Sheldon-was given a list by the civil service and he interviewed the candidates in his flat. It was a closed process. We now have an open competition, and this time there were a number of advertisements, and anyone could apply. The interviews were carried out at length by myself and the permanent Secretary to the Treasury, who represented the Prime Minister. I would like to thank the permanent secretary for the many hours of work that he put into this. By that stage, we had already appointed the new chairman of the National Audit Office, Sir Andrew Likierman, and he was also involved in the latter part of the process. We had an open competition with a number of good candidates, and I believe that we came out with the best.

My hon. Friend has just referred to the chairman of the National Audit Office having some involvement in the selection of the current Comptroller and Auditor General. Will he elaborate a little further on the relationships involved, in the context of the appointment of a Comptroller and Auditor General? The Prime Minister is involved, as is the Chairman of the Public Accounts Committee, but what is the role of the chair of the National Audit Office in the appointment of its chief executive?

The chairman's role was simply to advise. He is a very distinguished gentleman-he is the dean of the London Business School, and he was head of the Government resources office in the Treasury-and he simply gave me advice. Obviously, I am not going to reveal who was on the shortlist or what happened in the discussions, but I can say that, ultimately, the decision was mine and no one else's. I listened to his advice and that of Tim Burr, the then Comptroller and Auditor General, who was also on the selection panel as he was not a candidate himself. Nick Macpherson, the permanent Secretary to the Treasury, also gave me his advice. I chaired the meeting, and I made the decision: I appointed the new Comptroller and Auditor General.

Then, however, my decision had to go to the Prime Minister, and I give him credit for acting promptly, because, within a week, he had approved the appointment. So he, too, had a lock on the process. Of course, it is not surprising that he approved the appointment, because Nick Macpherson was part of the process. If I had insisted on appointing someone who was obviously not qualified, the Prime Minister would have vetoed it. So we each had a lock on it, and that is a very good process.

It might sound democratic to suggest that the House as a whole should vote for the Comptroller and Auditor General, but that would go against everything that I have been arguing for-namely, that the Opposition and the Government should both have a lock on the process. If the House as a whole voted on the appointment, the Government party would effectively appoint him.

Does the hon. Gentleman recollect that the one proposal that we turned down from Tiner was his suggestion that the chair should be selected by the Prime Minister and the chair of the Commission? We unanimously rejected that, because the chair of the Commission is chosen by the Prime Minister, or by the Government party, and is of the same party. For that reason, we insisted on reverting to the situation that the hon. Gentleman enjoyed.

It was the same process. I am grateful to the Father of the House for his generous offer to surrender his right to appoint the chairman of the National Audit Office, along with the Prime Minister; that was what was originally proposed. We immediately spotted the problem that he has just alluded to-namely, that that would effectively mean that the Government party would appoint the chairman. The right hon. Gentleman therefore immediately, and very generously, surrendered that right. Just as there was an appointment panel for the Comptroller and Auditor General, there was also one previously for the chairman. Again, the Prime Minister, as a member of the Government, and I, as a member of the Opposition, had a lock on that process. So I think that we have the right structure.

The independence of the Comptroller and Auditor General is guaranteed by a jigsaw of measures that hang together as a whole, and we should be very wary of unpicking any one part of it without careful consideration. We do not know what is going to happen in the future. There could be some kind of appalling financial scandal at the heart of the Government, for example, and it is absolutely essential that this man-or lady-is completely independent.

Central to this has always been the fact that the Comptroller and Auditor General also has tenure of appointment and, like a judge, cannot be removed from office except on a vote of the entire House of Commons. The Public Accounts Commission, which I also sit on-it is, of course, separate from the Public Accounts Committee-has concluded that the current unlimited appointment was "anachronistic". I do not think that when Sir John Bourn was appointed anyone spotted that the civil service retirement age at the time was 60: it was rigidly enforced; all senior civil servants had to retire at 60.

Will the Chairman of the Public Accounts Committee bear in mind that there is an important extra safeguard even there? If a vote of only this House were required, the Government could use their Majority, which is why a vote of both Houses is required to dispose of the Comptroller and Auditor General.

I should have made that clear; it is a very important point. In other words, it is virtually impossible to get rid of him. That is absolutely right.

I was saying that the previous appointment was anachronistic and that no one spotted at the time Sir John Bourn was appointed that even though the civil service retirement age was 60, he could basically go on. I had a very good relationship with Sir John Bourn, who was outstanding public servant. Frankly, however, let us be honest about it, 20 years is perhaps too long. The equivalent office in the United States has a fixed single term of 15 years, which we also thought was too long. The Public Accounts Commission thus concluded that a fixed term of 10 years was appropriate. There was some argument over whether it should be eight or 10 years. I think that the Government probably favoured eight years and I would have been happy with eight years, but 10 years is a real good length of time to make one's mark-it could span three, certainly two, Governments.

It is very important that this appointment be non-renewable. We do not want the CAG to suffer the fate of all US Presidents and most new Prime Ministers where the first term is overshadowed by the need to be re-elected. This chap owes nothing to anybody. Nobody can sack him-short of he or she having a hand in the till-and nobody can get rid of him; he is there for 10 years and then he retires.

We need to take great care before tampering with any of the founding legislation, which was carefully drawn to provide broad rights of access and reporting and to safeguard the independence of the CAG as an Officer of the House and the external auditor of the Government. That is not to say that no aspect of the arrangements can be improved upon. I am in favour of the changes proposed in the Bill. I think that the arrangement is being improved, but we need to take great care and to be alert to our old friends-the unintended consequences.

The Public Accounts Commission has worked very closely with the Government to ensure that the clauses improve the governance arrangements of the National Audit Office. I pay tribute to the Government for adopting all that the commission proposed; there was complete agreement within it, as well. We should also pay tribute to the fact that the Government, working with the commission, have ensured that we are not going to undermine the audit independence of the CAG.

The commission agreed that it was possible to separate the internal governance-this is a very important point-of the NAO from the responsibility for making audit judgments, but we recognised that to do so required arrangements that were unique among the panoply of organisational models used in 21st century Britain. What the Father of the House and myself were absolutely determined to avoid was some kind of new corporate structure in which a board could affect the independence and audit judgments of the CAG. I know that there has been some debate about this, and some worries that we were creating something like the Audit Commission-we are not. The CAG is completely independent. This board will deal only with the organisational structure of the body.

The Bill thus proposes no changes that will affect the work-the real and important work-of the CAG in the audit of Government accounts or in the 60 reports on value for money that he makes to the Public Accounts Committee every year. He remains independent. He alone will be responsible for all audit judgments; he alone will maintain complete discretion in the discharge of his office. His access rights are not affected and the results of his work will continue to be reported in full to Parliament through the Public Accounts Committee.

I am grateful to the Chairman of the Public Accounts Committee for clarifying the important tenets of independence that the Comptroller and Auditor General will continue to have in carrying out his day job, if I can put it that way. Will he elaborate a little further on the distinction he made a few moments ago about the role of the board and the chairman in so far as they relate to the CAG? In a conventional sense, a chairman would normally have some authority over the CAG, but it appears from what my hon. Friend said that that is not intended.

I hope that I am not giving away any confidences by saying that Amyas Morse told me this week that it can be a very lonely job-and, as I have described it, a very important one-and he welcomes the advice of the chairman of the board, Sir Andrew Likierman. The Comptroller and Auditor General can go to him in confidence at any time and ask for his support and advice. However, the arrangement is unique: although Sir Andrew Likierman can give his advice, the buck ultimately stops with the Comptroller and Auditor General.

The Comptroller and Auditor General has a large staff of 800 people who help him to write reports, but he puts his signature on the document, and it is his document and his alone. The board will be involved, for instance, in appointments, such as deciding who should be deputy Comptroller and Auditor General, what the travel arrangements of the Comptroller and Auditor General should be, and what should be the size of the staff. It was wrong that, under the previous incarnation of Sir John Bourn, who was a fine public servant, the Comptroller and Auditor General was a complete dictator-that was always the case; Sir John did not change anything in that regard. He not only had complete independence on his audit judgment, which is right, but appointed all the deputy Comptroller and Auditor Generals, decided the travel arrangements and everything else. In the modern world, one cannot go down that route. One must have a modern corporate structure, involving a board, as long as the board does not tell the Comptroller and Auditor General what to do in relation to his audit judgments.

Does the Chairman of the Public Accounts Committee agree that, taking all things into account, we now have a structure that deals to some degree with the loneliness problem, and creates a relationship between the board chairman and the CAG that will enable the morale of the NAO to be not only sustained but strengthened? Does he also agree that the work of the Public Accounts Commission, and particularly of its chairman, was instrumental in enabling such significant changes to be made without damage to the morale of the NAO, at a time when the structure had a sense of fragility about it?

As I understand it, morale in the National Audit Office is now very high. It went through a sticky patch-there is no point denying it-and there was bad publicity, much of it unfair, but that is now past us. Morale is high and people feel that the structure is fair and open, that people are appointed entirely on ability, and that their career is judged by a number of people sitting on the board, the chairman and the non-executive directors. I believe that we have got it right, and for that reason, I oppose the amendments, as they serve to define the Comptroller and Auditor General's audit purpose and to open up discussion of his access rights, neither of which was covered by the review commissioned by the Public Accounts Commission that led to this part of the Bill.

We do not need to define the Comptroller and Auditor General's access rights. He has all the access he needs. Make no mistake: the National Audit Office can interview any civil servant, open any filing Cabinet, and report on anything it likes. Having been Chairman of the Public Accounts Committee, I assure the House that no restraint or inhibition is placed on the Comptroller and Auditor General doing his job. Clause 37 is right, and gives him the power he needs.

May I say that I was immensely reassured by the speech of the Chairman of the Public Accounts Committee? It is vital that the Comptroller and Auditor General remains absolutely independent in judgment. Whatever the governance arrangements and administrative structure built up behind the Comptroller and Auditor General, his judgments-perhaps hers in the future-on reports must be independent. As the Chairman of the Public Accounts Committee said, that is built into the entire structure, the cross-party nature of the appointment and the nature of the office.

I shall not pursue the argument about the overall structure of the Bill. I fully accept that the commission and the Government have struck the right balance in relation to the NAO and its board, so I shall not detain the Committee for long. I intend simply to comment on the amendments and new Clause, and to ask a question about the application of clause 37 which I hope the Minister will be able to answer.

I agree with the Chairman of the Public Accounts Committee that it would not be a good idea to define the functions of the Comptroller and Auditor General too closely. Any such definition might result in a restriction that we would not want to see. However, I think it worth asking about a particular aspect of new clause 41. The new clause states:

"The purpose of the following provisions is to further strengthen Parliamentary control and supervision of the expenditure of public money".

One of the problems that I see with the present structure, not in theory but in practice, is that it is far better at supervision than control. In other words, it is far better at looking back than looking forward. The Comptroller and Auditor General has two roles. The job of Comptroller is the forward-looking job of ensuring that the Government do not obtain the public's money for purposes that have not been authorised by the House, while the job of Auditor General is that of looking back to see whether that money has been properly spent. I think that, at some point, we must consider the important question whether the arrangements for the forward-looking role are as strong as they could be, and as strong as the arrangements for the backward-looking role.

I disagree with the PAC Chairman about Amendment 78. Kelvin Hopkins made clear that what concerned him was the problem of bodies which are not, in organisational form, public bodies at all but private trusts or companies of various sorts, but which are in reality carrying out public functions. That is the whole point of the discussion of contracting out. I think that the Chairman was referring to issues relating to non-departmental bodies, in respect of which the National Audit Act lays down clear guidelines on the Comptroller and Auditor General's powers. I understand that there is no power of the kind that the hon. Member for Luton, North is suggesting in the existing legislation. The point is that there should not be anything in the way in which we set up our audit arrangements that biases the entire system in favour of contracting out. Similarly, there should be no bias against contracting out.

It seems to me-and I think the amendment raises this point-that an immensely effective audit system involving great powers, which successfully terrorises public officials into compliance with their duties but does not apply to private organisations that carry out state functions under contracting-out arrangements, effectively gives those organisations a huge advantage over the state.

I have taken advice on this. The Comptroller and Auditor General has statutory access to contractors for the purposes of examining the public body concerned, but the National Audit Office does not think it would be appropriate for him to have access to suppliers' commercial records further than is needed to audit public bodies. I think that we only need to secure access to the part of the contractors' work that directly affects his contract with the Government.

That is absolutely right. The purpose is thought to be only to audit the Government Department and not to have any access to the private body, but I think that is a problem under current arrangements. As I remember it-I might be wrong on this-if a Minister agrees and the body agrees, there is further possibility of an audit of a private body. I am, however, unsure whether that is often invoked.

The problem that has been identified is worth thinking about, but I am unsure whether the proposed solution is the right way to deal with it, as that is a discretion at large, which might produce problems in itself.

The Bill is primarily about the governance of the National Audit Office; it is not about audit rights. We in the Public Accounts Commission thought it wise for the Bill to concentrate on the governance, as that is set in concrete and is permanent, whereas audit rights can change over time. Indeed, only last week the Government announced that the NAO was for the first time to be allowed to audit the Financial Services Authority. We have also got a long-running campaign to audit the BBC. If the Bill starts getting into the territory of contracts, suppliers and so forth, that could make things quite messy and difficult in terms of an Act of Parliament that we hope will last for many years.

I accept that point from the Chairman of the Public Accounts Committee. In fact, many of these considerations are themselves legislative, because they are all to do with issues such as, for instance, which bodies are listed in schedule 4 to the National Audit Act 1983. There has not been a long and organised debate that can advise the Committee on this issue, but I think Kelvin Hopkins has raised an important point, and although I do not expect him to press his Amendment to a vote tonight, I would like the Government to accept that it is a matter that it worthy of further debate.

I do not intend to detain the Committee for long, but I would like to follow up the observation I made to the Chairman of the PAC, my hon. Friend Mr. Leigh. He has described the process governing the first appointment under this legislation-although it has not been enacted yet, of course. He said that the chairman of the NAO was able to offer his advice to both the Chairman of the PAC and the Prime Minister, which is proper. However, I would like the Minister to explain what would happen if the NAO chairman were unhappy about the appointment being made. There seems to be no provision in this Clause for formal consultation; that just happened by way of practice rather than under statute. Does that not leave the NAO open to the possibility of having a fractious appointment imposed over the head of the chairman of the body?

It is a pleasure to serve under your chairmanship this afternoon, Sir Alan.

This part of the Bill implements the recommendations of the 15th report of the Public Accounts Commission. I would like to begin by paying tribute to the work of the NAO and the Comptroller and Auditor General. Part 7 of the Bill modernises the governance arrangements for national audit and continues the office of the Comptroller and Auditor General as an independent officer of the House of Commons, but limits the term of office to a single appointment of 10 years.

At this point, will the Minister clear up one particular problem with the drafting of Clause 37? Clause 37(1) says:

"The office of the Comptroller and Auditor General is to continue", but it does not say that the person currently in office will continue to hold that position. Can the Minister confirm that that is the Government's intention, and that these arrangements will not apply until the next appointment?

I can certainly confirm that that is the Government's intention. After all the work the Chair of the PAC has done on the appointment of the current Comptroller and Auditor General, he would be most unhappy if we had to go through the process all over again.

The Bill provides for the establishment of a new corporate body-the new National Audit Office-whose functions will include providing resources for the Comptroller and Auditor General's functions, monitoring the execution of those functions and approving the provision of certain services. Importantly, the new NAO will be able to support and challenge constructively the CAG's decisions without, of course, preventing him from carrying out his statutory responsibilities.

I come to the proposals made by my hon. Friend Kelvin Hopkins. As he was not feeling too well during the Second Reading debate, he did not get on to the points he wanted to make about the national audit provisions-I hope he is feeling better today. Amendment 68 would set out in statute that the principal function of the CAG is to further the purposes of national audit, which he set out in new Clause 41. Amendment 78 would enable the CAG to have access to thousands of private sector companies that supply central Government. I thank the hon. Members for South-West Hertfordshire (Mr. Gauke), for Gainsborough (Mr. Leigh), for Cambridge (David Howarth) and for Ludlow (Mr. Dunne) for their contributions to this debate. Most who spoke this afternoon are of the same opinion; we welcome the contribution that these proposals have made to the debate, but the consensus is that they are not necessary. I shall now discuss the detail, where we have been extremely fortunate that the Chair of the Public Accounts Committee was able to share his insight into the appointments process.

On new clause 41, of course the CAG exists to assist Parliament in holding the Government to account for the use that they make of public funds and, in doing so, promotes the objectives that my hon. Friend the Member for Luton, North mentions. I can assure him that the Government value that work as much as he does. I cannot dispute the fact that the effect of the arrangements in this part of the Bill will indirectly strengthen parliamentary scrutiny, but that is not their primary purpose.

The Government are implementing the recommendations of the Public Accounts Commission's 15th report. In doing so, we are accepting the commission's two driving principles. The first is the need to ensure that the CAG has authority to form completely independent judgments about the audits and value-for-money studies conducted by the NAO. The second is the need for the NAO to maintain systems of governance and internal controls consistent with best practice. When we prepared the provisions in part 7, we took the utmost care not to jeopardise the CAG's independence in those areas.

As now, the Public Accounts Commission will oversee the work of the CAG and the NAO-indeed, its role is increased by these reforms. However, it would be inaccurate to describe the main purpose of this part of the Bill as strengthening parliamentary control, because, as the Chair of the Public Accounts Committee said, its focus is rather on strengthening governance.

I would add that the Government are doing a number of things to improve parliamentary scrutiny of government expenditure. Hon. Members will be aware that the Government provided a memorandum to the Liaison Committee in March containing formal proposals to Parliament for better alignment between budgets, estimates and accounts. The memorandum explained the plans to simplify the Government's financial reporting to Parliament, ensuring that they report in a more consistent, transparent and straightforward fashion on spending plans, estimates and expenditure outcomes. I hope to assure the hon. Member for Cambridge that further work on the way Parliament supervises expenditure continues in a number of ways, including through the work of the Select Committee on Reform of the House of Commons, which is expected to bring forward its proposals shortly.

Can the Minister explain, therefore, why the Government have, in recent years, refused to publish the whole of Government accounts? For the past two years the work has been done but the information has not been released-I believe that we are going to have to wait until 2010 for it.

I can only say to the hon. Gentleman that, as I said just now, further work is ongoing on what we can introduce. We want to be more transparent and to have a better way of ensuring that we can look at our spending plans, our estimates and the expenditure outcome.

We all agree, of course, that it is important that Parliament should continue to play an active role in scrutinising the expenditure of public money, but we do not think that a declaratory provision of the type envisaged in the proposed new Clause accurately reflects the purpose of the provisions.

On Amendment 68, the national audit responsibilities of the Comptroller and Auditor General are already set out in legislation, and within those responsibilities some matters are left to the Comptroller and Auditor General's judgment and discretion, such as whether to carry out a value-for-money examination into a particular subject. That is consistent with his independent role in holding the Government to account.

Part 7 of and schedule 7 to the Bill already draw an important distinction between the services to be provided by the Comptroller and Auditor General. The resources available to the Comptroller and Auditor General fall into two categories, those whose allocation is at the sole discretion of the Comptroller and Auditor General and those for additional but important services, which require National Audit Office approval.

We do not consider it to be necessary or desirable to impose any further restriction on the way in which the Comptroller and Auditor General and the NAO choose to exercise discretion on the use of resources by suggesting that one function should be elevated to the status of a principal function. We consider that, while all the work carried out by the Comptroller and Auditor General is important, the provisions relating to the use of resources give a clear indication of where the Comptroller and Auditor General's priorities lie.

Beyond that, it is for the Comptroller and Auditor General and the National Audit Office, within the framework established by the Bill, to establish priorities. That is consistent with the independence of their roles.

Before I move on to discuss amendment 78, the hon. Member for Ludlow asked me a direct question about what would happen if the NAO chair did not get on with the Comptroller and Auditor General. It is right that it is for the Prime Minister and the Chair of the Public Accounts Committee alone formally to make the appointment. The NAO chair would serve only in an advisory capacity and he would not be the one who was making the final decision.

Let us be practical about this. We worked as a team. I was sitting there with Nick Macpherson, the permanent Secretary to the Treasury, with Andrew Likierman and with Tim Burr. Although the decision was ultimately mine, I would not have insisted on proposing somebody who was unacceptable to the permanent Secretary to the Treasury. What would have been the point of that? I do not think that I would have insisted on proposing somebody who was completely unacceptable to the chairman of the NAO. What would be the point? In the real world, those involved act together as a team but ultimately one person has to make the decision, and that is the Chairman of the Committee.

That is absolutely true.

To meet that situation, we built in a requirement that there should be a code to govern the relationship that they had to develop within the board and to govern the relationship between the CAG and the Chairman. That code has been agreed, as has a strategy, and both have already been approved by the commission.

I thank the Father of the House for that Intervention, too. It is important that we have seen the practicalities of how these decisions are made and I do not think that it would be necessary to put anything on the face of the Bill.

The Minister referred a moment ago to the powers of the Public Accounts Commission being strengthened by the Bill. In the context of the exchange that we have just had on the point that I made earlier, will she reflect on how that will be achieved if the new board of the NAO is enhanced or enlarged with more non-executive members and a new chairman? Surely much of the advisory role that the commission has been able to play in the relationship with the Comptroller and Auditor General will now be supplanted by the board, in which case the powers of the commission will be reduced.

I do not agree. Although we are reforming it and making the NAO more accountable, there is still a very powerful role for the commission, which will be holding these people to account. We have demonstrated what the commission has done to enable us to get to this stage. I still envisage that it will play a powerful role in the future.

May I move on to Amendment 78? We all recognise that the Comptroller and Auditor General should have access to the information that he needs to be able to access documents. I think that we have heard that he already has a considerable power to get to the documents that he needs, but amendment 78 would result in a considerable extension of his reach that is not necessary or justified at this stage.

The CAG already has a statutory right of access to documents held by, or under the control of, not only Government Departments but also a wide range of other public bodies and bodies that are in receipt of substantial Government funds. However, the purpose of this access is to allow him to audit effectively the accounts of Government Departments and to carry out value-for-money examinations with access to all relevant information. These powers allow him to ensure that public money has been used for the purposes approved by Parliament and report on whether it has been well used.

Allowing the CAG access to the books of thousands of individual suppliers in the way proposed is another matter altogether, and would require very clear justification. Thousands of non-governmental organisations and private companies provide services to the Government. The amendment could harm the relationship between the Government and their suppliers.

Many Government suppliers are small businesses or charities that are financed to fulfil Government policies. Others are larger accountancy and consultancy firms that are used to provide expertise that the Government do not have in-house. Suppliers of goods and services have already been through an extensive tendering process, not just to check whether the goods and services can be provided at best value for money but also to ensure that the suppliers are reputable and can fulfil the order. If public bodies are failing to achieve value for money in their dealings with the private sector, the CAG already has the powers to examine and report on the use that such bodies are making of public funds.

I am always willing to listen to concerns that the powers of the CAG are inadequate, but I do not think that is the case in this instance. The amendment runs the risk of being an unwanted intrusion, without offering any clear improvement to the ability of the CAG to perform the task that Parliament has given him.

I listened very carefully to the arguments presented by my hon. Friend the Member for Luton, North, but I am not convinced that they are necessary and I hope that he will withdraw his amendment.

I give notice that I shall seek leave to withdraw Amendment 68, but I want to make a few remarks in response to the debate. First, I thank my hon. Friend the Minister for her kind remarks about my health: it is improving but it is not quite there yet.

The amendment has provoked a debate, and that is important. I was particularly impressed by the speech from Mr. Leigh, the Chair of the Public Accounts Committee. I thought it was clear, strong and impressive, and it is good to restate these matters. I know that many people in this Committee share his view; I certainly do, and my intention with the amendment was to maximise the strength of the CAG and the NAO-I did not want to restrict either of them in any way. That intention was most true of amendment 78, which the Minister said was impracticable and unnecessary. However, there was an argument to be had and a point to be made, and I thank David Howarth for giving what I was saying a degree of support.

I am absolutely passionate in my belief that we must make sure that the strength of the legislature in relation to the Executive is maintained-and, indeed, improved, as I do not think that it is strong enough now. The roles of the CAG and the NAO play a crucial part in that.

I like to think that I have provoked a useful debate, and that I have made some points that needed to be made. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill .