moved Amendment No. 1:
After Clause 7, insert the following new clause--
:TITLE3:NON-DEPARTMENTAL PUBLIC BODIES' ACCOUNTS: AUDIT
(" .--(1) Subject to subsection (7), this section applies to any non-departmental public body, unless otherwise provided by any order made under subsection (8).
(2) On the prescribed date for each non-departmental public body to which this section applies, subsections (3) to (6) shall have effect in relation to that body.
(3) Every non-departmental public body shall prepare accounts in respect of each financial year and shall send them to the Comptroller and Auditor General.
(4) The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself--
(a) that the accounts present a true and fair view, and
(b) that any public money provided to the body has been expended for the purposes for which the money was paid.
(5) Where the Comptroller and Auditor General has conducted an examination of accounts under subsection (4) he shall--
(a) certify them and issue a report,
(b) send the certified accounts and the report to the department which is responsible for the non-departmental public body, and
(c) if he is not satisfied of the matters set out in subsection (4)(a) and (b), report to the House of Commons.
(6) The Comptroller and Auditor General shall lay a copy of the accounts and reports referred to in subsection (5)(b) before the House of Commons.
(7) Subsections (3) to (6) do not apply to any body to the extent (but only to the extent) that any of its accounts are or become subject to audit--
(a) by the Auditor General for Scotland, or
(b) by the Auditor General for Wales.
(8) The appropriate Minister may by order designate a non-departmental public body as one in relation to which this section does not apply for so long as the designation remains in force.
(9) An order under subsection (8) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of both Houses of Parliament.
(10) In this section--
"the appropriate Minister" means, as regards any non-departmental public body, a minister in the department which is responsible for that body;
"non-departmental public body" means a body--
(a) which is not a government department or comprised within a government department,
(b) which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government, and
(c) an officer of which has been designated by a government department as its accounting officer in respect of the preparation of its accounts, but does not include any such body which is a company registered under the Companies Act 1985; and
"prescribed date" means, as regards each non-departmental public body, the first day of the first full financial year of that body commencing after the expiry of the term of appointment of the person who is the auditor of the body when this section comes into force.").
My Lords, in moving this amendment I shall say a brief word about the previous proceedings. We have made it clear throughout discussion on this Bill, both in Committee in the Moses Room and on Report, that we are strongly in favour of the Government's proposal to introduce resource accounting. But we have some reservations in relation to the scope of the Bill as it now stands, and Amendment No. 1 seeks to improve it, as does the second set of amendments.
It is important to remember that control of money has always been the basis of parliamentary authority in relation to the executive. That is certainly so in relation to auditing arrangements. They are matters which should have the attention of all Members of Parliament. It is a question of the relationship between the executive and Parliament, both in the other place which normally has primary responsibility for financial matters, and your Lordships' House. As has already been pointed out, this Bill is one of the few Bills--only the third since 1866 or so--which gives an opportunity to put right a number of matters which are cause for concern, and it is important that we do not miss that opportunity.
Perhaps I can say a few words in relation to previous comments made by the noble Lord, Lord McIntosh. We are considering these amendments against the proposal to have a so-called "Sharman Committee" and a steering group. I welcome the strong membership of the steering group. But we are still unclear about the relationship between the committee and the steering group. On the last occasion the noble Lord, Lord McIntosh, said that the task of the steering group was to steer. That did not really get us very much further forward. It would be helpful if we had some idea as to what the relationship is between the steering group and the Sharman committee.
At all events, although we look forward to studying the results from those inquiries, it is important for us to take this opportunity to improve matters with regard to the proposals now before us. Again, on a previous occasion the Minister questioned why we wanted to change something that has been the same since 1866. But, of course, that is precisely what the Government propose to do and we certainly welcome that move. We see no reason why we should not go further as far as concerns these amendments.
The amendments and the following group have received strong support not only from the chairman of the Public Accounts Committee but also from the all-party membership of that committee. We are seeking to ensure that the Comptroller and Auditor General audits all non-departmental public bodies, as he does at present in respect of all departments and executive agencies. This has been recognised by the present Government because all the new NDPBs they have established have been audited, or scheduled to be to be audited, by the Comptroller and Auditor General. It is, I believe, common ground in all parts of the House that the present arrangement is a hotchpotch. The amendment seeks to clear up the situation and ensure that in future, once the contracts of the existing auditors with some of the NDPBs expire, the process should be taken over by the NAO.
Having listened most carefully to the arguments put by the noble Lord, Lord McIntosh, I have to say that we on this side of the House--and I believe that this applies to other parts too--do not find them convincing. We believe that we should ensure that all the NDPBs are audited by the NAO and, in turn, referred to the PAC. The evidence in favour of this is very strong. As I said, the chairman of the PAC and his committee members are strongly in favour of such a move.
In evidence to the PAC, the Chief Secretary said that there was a presumption that the audit should be carried out by the NAO. Moreover, when speaking on the gas and electricity Bill, the Minister said that to have such matters audited by the NAO would improve transparency, openness, certainty, clarity, and so on. Indeed, I believe that that applies to previous statements of Lord Chancellors on other legislation. Therefore, we do not see why we should not take this opportunity to sort out the matter and thereby ensure that future arrangements are more satisfactory.
However, I should stress that that does not mean that in very exceptional circumstances a non-departmental public body should not be audited by outside auditors rather than the NAO. Indeed, our amendment makes provision for such an eventuality. If the Government feel so strongly that that should be so, they can appoint a different auditor, subject to approval by statutory instrument. The present arrangements are not satisfactory. Although it is true, as the Minister said during previous debates, that all NDPBs are accountable through Ministers, there is a difference between the situation where the auditor reports to the Minister and he, in turn, reports to Parliament and one where the NAO carries out the investigation, reports to the PAC and directly to Parliament. If you like, there is no ministerial filter in that respect.
The Minister argued previously that the situation where one size fits all is not satisfactory. However, except in the most exceptional circumstances--provision for which is made in the amendment--we see no reason why it should not all be done by the NAO and the Comptroller and Auditor General.
There are three amendments in this group. Amendments Nos. 2 and 3 seek to cover some of the points made by the Minister during earlier debates. I should stress strongly that Amendment No. 1 takes into account the comments that he made; namely, that the previous amendment was defective because it was the Treasury and not the sponsoring department that would become accountable. We have revised our amendments to ensure that the Comptroller and Auditor General will send the certified accounts and report to the sponsoring department and then, in turn, to the PAC. That is in line with present practice. I hope that the Minister will accept that we have met that particular point.
The other problem that concerned the Minister was the question of definition; in other words, how does one determine the situation with regard to a NDPB? While, on balance, I believe that Amendment No. 1 is entirely satisfactory, we have put forward two alternative forms for doing this by reference to the Executive NDPB annual report--I have with me a copy of this year's report CM 4657--which clearly would provide a possible set of definitions. Subject to what the Minister may say in that regard, my personal feeling at this stage is that Amendment No. 1 is satisfactory. I hope that the Minister will accept it. However, if he does not, it is a matter of some concern to Parliament and, as such, I believe that we ought to take a decision on it. I beg to move.
My Lords, I wish, first, to reiterate from these Benches our general support for this Bill and for its main purpose; namely, to shift from cash accounting to accrual accounting. We believe this to be an extremely important shift and we are very pleased to see it.
I recognise that this amendment is about the issue of audit and that the prime purpose of the Bill is not. As I said, it is about shifting from cash accounting to accrual accounting. Nevertheless, in putting forward this amendment about auditing, it is important for us to recognise that Bills on the subject of the way in which accounts are made to Parliament come very rarely before Parliament. Indeed, this is the first such Bill we have had since 1926. Moreover, the Government have already diluted its purity by adding a considerable element to the end of the Bill about partnerships in the UK which, again, has nothing to do with accounting and accrual accounting.
As I said on Report last week, we on these Benches do not find the question of who should audit NDPBs an easy one. Indeed, as I made clear, it is the central issue to be considered in the review of public sector audit arrangements chaired by my noble friend Lord Sharman. I sought assurances from the Minister last week that the Government would take seriously the findings of that committee and act on its recommendations. As far as he could, the Minister gave me such assurances. However, as he acknowledged, no government can give unconditional assurances on such issues when recommendations have still not been made. Inevitably, also, action would lie with the Treasury.
Since our debate last week, I have had discussions with a large number of people about these issues. As time has gone by, I have become the more convinced that at the end of the day we need to go back to first principles. As the noble Lord, Lord Higgins, said, the root of this amendment, and of the subsequent amendments regarding access, is about the powers of Parliament vis-a-vis the executive. If Parliament is to maintain its sovereignty it is essential that it has the power not only to make appropriations but also to ensure that its will is done--that those appropriations are allocated, as Parliament has willed, and that people obtain the best value for money from them.
From these Benches we have long taken the view that under successive governments, both Conservative and Labour, the power of the executive has increased, is still increasing and ought to be diminished. Although I recognise that the Sharman review will go over the same ground--that is, the area of audit--there is nothing in this amendment that would prejudice that review. As I argued at Report, it provides an insurance policy that the present most unsatisfactory hotchpotch of arrangements will be tidied up. That being so, we have decided that the underlying issue--the reinforcement of the role of Parliament and parliamentary scrutiny vis-a-vis the executive--should be the deciding factor. On those grounds we on these Benches add our voice of support to the amendment.
My Lords, I support the amendment standing in the name of my noble friend Lord Higgins and associate myself with the remarks made by the noble Baroness. When one reads the 1999 report on non-departmental bodies, it is striking to note how many there are and the size of their public expenditure. I believe that it is now in the order of £12 billion per annum and that there are some 90 major public sector bodies.
This Bill provides an opportunity to make sure that we have a consistent practice in terms of audit and accountability to Parliament. I well understand that the Minister has argued--and perhaps may argue again--that it would be more convenient to wait until the appropriate opportunity arises to change the auditors. However, now is the time to change. We have the Bill and we are introducing a most welcome method of accounting in the public sector. Noble Lords on all sides of the House have mentioned the principle of resource accounting and the need to change from the old-fashioned method of cash accounting. In my judgment noble Lords should accept the principle of resource accounting being applied uniformly throughout the public sector, including for all non-departmental public bodies.
There are two simple reasons for accepting Amendment No. 1 and the principles enshrined in it. I am sure that my noble friends Lord Lane of Horsell and Lord Shaw and many others on these Benches would agree with that. First, the National Audit Office stands in a different relationship to the public sector than either the Audit Commission or professional firms. The National Audit Office provides the information to the Public Accounts Committee to exercise, through Parliament--principally through the House of Commons--control over public expenditure. That is a vital link. We should extend the powers and capabilities of the National Audit Office.
The second reason is allied to the first. In five, 10 or 15 years' time--when the Minister will, no doubt, remember these debates with interest and will reflect on what has been said--we shall move into an age where we measure output and performance and ask the National Audit Office to comment on the effectiveness and efficiency of the public sector in spending the money that we give it. A single body such as the National Audit Office can develop those skills and apply them uniformly.
This is almost the end of a long process to reform the basis of public accounting which began some seven years ago. We are not quite there yet. I conclude by making a plea to the Minister that he will use whatever influence he can exert over his colleagues to ensure that we do not end up in the muddle of parallel accounting involving both cash and resource accounting. If we are to change--I hope sincerely that we can do so quickly--let us move with some boldness and clarity to resource accounting once and for all.
My Lords, I support the amendment. My noble friend Lord Bridgeman said in the debate last week that the C&AG's independence was diminished by his reliance on negotiating his way into a number of bodies to provide the assurance to which Parliament is entitled. That is the absolute nub of the situation. The C&AG must, as of right, have the ability to act at a time that he feels appropriate to seek the assurances that he is pledged to give to Parliament. I support entirely what the noble Baroness, Lady Sharp, and my noble friend have said. I believe that we should support the amendment.
My Lords, on Report last week we had a full debate on the amendments which were then tabled by the Conservative Opposition. Although I made it entirely clear that we did not agree with the amendments--I shall make it clear that we do not agree with the thrust of the change that is proposed--at least we dealt with amendments which had some kind of internal coherence and some kind of relationship to the speeches made in support of them.
The three amendments we are considering in the group before us today are so much more irrational and extreme that it is difficult to conduct a rational debate on them. They are not only worse than the amendments we considered last week. They are in stark contrast to the clear provision the Government have already made in the Bill to deal with this issue.
The provisions of subsections (6) and (7) of Clause 25--this has not been mentioned once today by Opposition spokesmen--allow the Treasury by order, following consultation with the Comptroller and Auditor General, and subject to affirmative resolutions by both Houses of Parliament, to make him the auditor of a public body even where the current legislation governing that body currently prohibits the Comptroller and Auditor General from being the auditor. This, of course, could not apply to companies which I shall mention in a moment.
This provision will enable any recommendations which the review of the noble Lord, Lord Sharman, makes concerning the auditor of non-departmental bodies to be implemented without primary legislation. I believe that that is the assurance which the noble Baroness, Lady Sharp, sought last week. Of course I cannot say in advance that we shall agree with every recommendation that the review group makes as I do not know what they will comprise. However, we can implement them as we have subsequently included provisions in the Bill to make that possible.
At Report the noble Lord, Lord Higgins, somewhat uncharitably described the review of the noble Lord, Lord Sharman, as a red herring. That is not the case. The review is an opportunity, such as we have not had before, to consider in detail and on a case by case basis what represents the most appropriate audit arrangements for these bodies. The Government believe that the results of the study of the noble Lord, Lord Sharman, will provide the basis for future policy in this area and in the other areas to be covered by the review.
The noble Lord, Lord Higgins, asked me again about the steering group. I cannot go much further than I did on the previous occasion we discussed this matter. The job of the steering group is to steer. As to the relationship between the steering group and the review group, I can hardly comment on that as the steering group meets for the first time later this month. At that stage the detailed relationship will be worked out. It seems absurd to pre-empt the results of the work of the noble Lord, Lord Sharman, through amendments of the kind proposed.
I also remind the House of the considerable powers that the Comptroller and Auditor General already enjoys in relation to non-departmental public bodies where he is not the auditor. The noble Lord, Lord Higgins, and the noble Baroness, Lady Sharp, have heard me make that point on several occasions. Therefore, I address my remarks to the noble Lords, Lord Freeman and Lord Shaw, as it appears from their remarks that this point is not clear. It is simply not true to say that unless the C&AG is the auditor of a particular body, that body is not properly accountable to Parliament. It is certainly not true to say--as the noble Lord, Lord Freeman, appeared to suggest--that somehow non-departmental public bodies will not be subject to resource accounting. If the noble Lord seeks an assurance on that point, I give it to him gladly. The C&AG has inspection rights in respect of all non-departmental public bodies. That means that he already has the access needed to investigate and to report to Parliament on any irregularity or impropriety discovered at a non-departmental public body.
Most importantly, under the National Audit Act 1983 he has the right to carry out value-for-money studies at all of these bodies. In many respects it is these studies rather than matters arising from routine financial audit which are the most important form of parliamentary control. Value-for-money reports of both departments and non-departmental public bodies normally account for about 40 of the 50 or so hearings held each year by the Public Accounts Committee. That means that even where he is not the auditor, the Comptroller and Auditor General already has the powers to hold these bodies properly to account.
Turning to the amendments, when Amendment No. 3 was tabled I thought that it was an attempt to correct the manifest defects in Amendment No. 1 and that the noble Lord, Lord Higgins, would speak to that amendment instead of to Amendment No. 1. The proposed new clause in Amendment No. 1 is similar to the one tabled on Report. The only change seems to be one of relieving the Treasury of the duty of presenting the accounts. It does not respond in any way to the concerns that I expressed at Report stage about the deficiencies in its definition of a non-departmental public body.
Amendment No. 1 is deficient because, as the tabling of Amendment No. 3 recognises, the definition of a non-departmental public body is defective. It is too wide and could lead to bodies such as National Health Service trusts being caught. It is definitely open to legal challenge--and the result of that could be that the courts and not the Treasury will decide which bodies the Comptroller and Auditor General can audit. That may not worry noble Lords, but certainly it will not be Parliament making the final decision.
I cannot say that the proposed new clause in Amendment No. 3 is any kind of improvement. Indeed, it seems to me to be a good deal worse--even from the point of view of the Opposition. It gives up any attempt to define a non-departmental public body; instead it relies on a listing of those bodies which the Government decide to include in any particular year in a particular command paper. This approach would leave it entirely in the hands of the executive as to whether a particular body is included or not. Under this proposal, Parliament will have no say over which bodies are to be audited by the C&AG.
As definitions adopted by the Government change over time, bodies may be included or excluded, with the possibility of consequent disruption to their audit arrangements. Is that really what is intended? It is even possible that at some point in the future a government will decide to stop publishing the document and information would rapidly become out of date.
The publication referred to in the clause is not designed as a comprehensive listing of NDPBs. It lists 89 bodies--20 of which report to the Scottish Executive or Welsh Assembly--but there are more than 200 executive NDPBs. So the listing covers only a third of all NDPBs, those spending more than £15 million a year. I do not see how relying on this document will fulfil the aim of ensuring that the C&AG is the auditor of all such bodies. The fact that the Opposition have been forced to rely on a listing of NDPBs contained in a document published by the Government highlights the impossibility of adequately defining these bodies. Relying on a government publication will remove parliamentary control.
Amendment No. 2 is even more extraordinary. It is entirely new, and it seems strange to bring forward such an important new clause at Third Reading in the second Chamber. It would appear--although the drafting is unclear to the point of unintelligibility--to make the C&AG the auditor of all the subsidiaries and associates of NDPBs, assuming that the undefined reference to government executive non-departmental public body means NDPBs. These are mainly the trading and commercial arms of bodies such as the national museums and galleries. These bodies are set up as companies. As a matter of company law, the C&AG cannot audit companies--which at least Amendment No. 1 recognised. No such exclusion is included in this proposed clause. It is simply not possible without a change in company law.
As I said earlier, because the proposed clause is so loosely drafted it would require the C&AG to become the auditor not only of subsidiaries but of associated companies--even if they were a small minority. It does not seem to be a recipe for encouraging public/private partnerships or for dealing with the issue of the burdens on business, which noble Lords opposite appear to have ignored. So this clause, too, is highly defective.
Even if it were right to impose a blanket access on all NDPBs--which I think is the fundamental objective behind all of the amendments--we have shown that it is not necessary for scrutiny; we have shown that it is not necessary for parliamentary control; and we have shown that even the Comptroller and Auditor General himself does not believe it is necessary. There has never been a comment from any of the value-for-money studies that the Comptroller and Auditor General has been held back by lack of access.
Even if any of the points raised have any validity--which they do not--each and every one of the three amendments is hopelessly defective. Amendment No. 1 is hopelessly defective, as I said, because it does not provide an adequate definition--and, heaven knows, noble Lords opposite have had three goes at this and still they have not come up with anything useful; Amendment No. 2 is hopelessly defective because it covers not only all subsidiaries but all associates, including companies--which is nonsense in company law; and Amendment No. 3 is hopelessly defective because it relies not on a definition of an NDPB but on a government command paper. This House cannot in conscience agree to these absurd amendments.
My Lords, I am somewhat astonished by the hyperbole and the passion exercised by the Minister in replying to these amendments. We are seeking to do something quite simple. We are saying that government bodies, in particular non-departmental public bodies, should be audited by the National Audit Office rather than by outside auditors. The Government and the noble Lord have made it clear on various occasions that they believe that is the right approach.
At the moment we have got what has been described time and time again as a "hotchpotch". We are seeking to clear up that mess and to ensure that there is consistency between the various public bodies which, as my noble friend Lord Freeman pointed out, are spending vast amounts of public money. So far as concerns Sharman, I merely used the expression "red herring" in relation to this amendment. I find it difficult to think of any reason why the noble Lord, Lord Sharman--if he should report on this aspect of the matter--should come to the conclusion that there should be an arrangement whereby the vast majority of public bodies are audited by the National Audit Office and the Comptroller and Auditor General but some are not. If there is some extraordinary argument why a particular body should not be so audited, then Amendment No. 1 makes provision for that.
I accept a number of the noble Lord's points so far as concerns Amendment No. 2--it is a poor thing, but mine own--and Amendment No. 3 also has various problems. But, in your Lordships' role of asking another place to think again, this is something which it is itself concerned about--particularly the PAC--and it is appropriate that this matter should go back for further consideration. I believe that what we are seeking to do is entirely justified; it will lead to an improvement in our practices and increase parliamentary responsibility and authority in relation to the executive. That being so, I therefore beg leave to seek the opinion of the House so far as concerns Amendment No. 1.
My Lords, in moving Amendment No. 4, I should like to speak also to Amendments Nos. 5 to 9. We moved a similar amendment on Report. At that stage the Minister told the House that the amendment did not address the concerns he had expressed in Committee. I must ask the Minister to think again. I suggest to the House that a number of points require further consideration. I shall take those points in turn. First, the Government said that the amendment would significantly increase the C&AG's right of access. It did not. It translated existing negotiated practice into statute. That is an important point which was not addressed by the Minister in reply to my previous amendment. I was pleased to hear my noble friend Lord Shaw make that point also. Secondly, the Government said that the amendment would allow the C&AG to follow public money wherever it went. But the amendment limits access to documents to which the NDPBs can obtain access. Thirdly, the Government said that it would lead to the duplication of work of other departments. As I understand it, it is not the C&AG's intention to have a programme of routine monitoring. The power of access will be exercised only for a specific purpose. The Minister also suggested that the powers would deter contractors from coming forward to compete for PFI work. Such contractors do come forward in numbers despite the fact that the Government have already agreed to give such contractors access.
The Government had a further objection. They said that the provision would increase the right of access of the C&AG far beyond what is reasonable. As my noble friend Lord Freeman pointed out, the C&AG is effectively the servant of Parliament and it is for Parliament rather than the Government--in practice, civil servants--to decide what he reasonably needs in order to carry out his work for Parliament. Our amendment is designed to extend the C&AG's statutory rights but--I repeat this point--only in a way which replaces negotiated access. The Public Accounts Committee has already stated that it wants access to be more robust and more consistent. I quote the words of the ninth report of the Public Accounts Committee:
"In order to examine the accountability of departments, the C&AG needs matching statutory rights of access so he can give Parliament independent assurance that public funds have been spent properly".
As I stated on Report, the present regime of negotiation is time-wasting, somewhat unseemly and threatens our independence. The Government have already agreed that the C&AG should have a right of access to contractors, but the terms of access have to be written into each and every contract. Quite simply, such terms are often missed. The Minister mentioned the Housing Corporation and the disposition of its funds. The C&AG has already reported individually on the handling of funds by a number of housing associations. That is a matter of established practice.
I return to the question of overlap. The C&AG is seeking statutory powers which will have the effect of saving time and effort. They will avoid the possibility of errors in drafting contracts and will be used only in specific instances where there is a specific purpose. To the question, "How do you know they will?", the answer is, "The C&AG is, like any other public body, accountable to Parliament for the efficient use of his time and resources". At Report stage, the Minister gave the example of the supplier of paper clips. The extent to which the paper clip supplier has made available his records to the government department or NDPB with which he contracts will, under our amendment, be available to the C&AG, but no more than that.
The Minister has difficulty with the matter of access to documents which are held or controlled by a non-departmental public body on the ground, inter alia, that it is difficult to define what an NDPB is. That sounds like inhibiting the C&AG from making proper investigations because, through a difficulty with definition, it might result in his straying into places where he should not. I suggest that the question of definition is not insurmountable and could be solved with the co-operation of the C&AG. I would also point out that the inclusion of "accounting officer" in Amendment No. 9 expressly corrals the extent of powers of access to NDPBs. I beg to move.
My Lords, I do not wish to delay the House with a lengthy speech. We discussed this matter at considerable length in both Grand Committee and on Report. We have consistently supported the Opposition on the issue of access. As I made clear on Report:
"The Comptroller and Auditor General has audit responsibility, but at present he does not have all the powers necessary to fulfil that responsibility".--[Official Report, 4/7/00; col. 1434.]
He has to rely on government departments for access to documents which are relevant to the pursuit of his duties. It is important that he has those powers. We therefore support the amendment.
My Lords, I support the amendments brought forward by my noble friend Lord Bridgeman. Clause 8(1) of the Bill states:
"For the purposes of an examination by the Comptroller and Auditor General of a government department's accounts--
(a) he shall have a right of access at all reasonable times to any of the documents relating to the department's accounts".
I suspect that those words will be interpreted as meaning freedom of access only to those documents relating to the financial regularity of the account. But the duties of the C&AG run much wider than that, not least in looking at the value for money aspects of a department's activities. For example, at Question Time yesterday I asked the Minister this question:
"My Lords, is the Taylor report available to the Comptroller and Auditor General?"
Perhaps I should have asked, "Will it be available after the Bill becomes law?" The Minister replied:
"My Lords, I do not think that it is a financial report, so it does not come within the scope of the Comptroller and Auditor General's responsibilities".--[Official Report, 11/7/00; col. 130.]
As I understand it, the Taylor report concerns the smuggling of tobacco. Is the Minister saying that there will be no circumstances whereby the Taylor report might be relevant to any future investigations of the C&AG? I find that difficult to accept. If, in fact, the C&AG felt that the report was relevant to his inquiries, my fear is that the department might refuse to make it available. If that were to be the case, perhaps I may refer the Minister to a debate in the other place on 24th October 1985. In that debate I referred to a meeting of the PAC where the basis for certain actions had been contained in a letter from the Permanent Under-Secretary of State. At that meeting we asked why the letter had not been available. We were told that it referred to a certain helpful report submitted privately to the Secretary of State for Defence by the then Mr Peter Levene, now, happily, with us as the noble Lord, Lord Levene. It was submitted by him when he was in a position in industry and before he became a member of the staff of the MoD. Since that report influenced the ministry's decision, the C&AG had felt it right to demand sight of it. The PAC agreed and suspended its own inquiries until the report was produced. It was produced at our next meeting. At the end of that debate, Mr Moore, then the Financial Secretary to the Treasury, said:
"My hon. friend the Member for Scarborough also mentioned what is known as the Levene report. All I can say is that there is no reason to suppose that any similar reports in future will not be released".--[Official Report, Commons, 24/10/85; col. 493.]
Perhaps I may deal briefly with the amendment to Clause 8 which would give the C&AG access to all information to which the European Court of Auditors has access in relation to the United Kingdom. I was a Member of the European Parliament when the European Court of Auditors was set up in 1977. I was also Rapporteur for the Financial Regulation of 1977.
In setting up the Court of Auditors, it was obvious that much of the revenue and expenditure transactions of the Community were nationally based. Therefore, the more that the various national audit bodies could become involved in working with the European Court of Auditors, the better; otherwise, the Court of Auditors would have--and has had--a quite impossibly large task. There must be a continuing need for the European Court of Auditors to seek to establish as much co-operation and confidence as possible in the work of each of the national audit authorities.
In this country we are blessed with a first-class National Audit Office under the leadership of an outstanding C&AG. It would go greatly against the interests both of this country and of the European Court of Auditors if we did not assist in achieving the utmost co-operation between the two bodies.
If the C&AG was in a position to act on behalf of the European Court of Auditors when required, that would also remove the resentment that I have already heard expressed; namely, "Why should the European Court of Auditors be allowed to come nosing around our affairs?" Of course, occasions will arise when it must do so, but wherever possible, it would be much more acceptable if it could seek the assurances it requires through the good offices of the C&AG. I strongly support my noble friend's amendment.
My Lords, I am faced with the difficulty--this happens from time to time--of having to decide whether to respond to the speeches or to the amendment. It is clear that the speeches that have been made--I have listened to them with great care--bear no relationship to the amendments before us. However, before I try to respond to the amendments, which I believe is my duty, I should say a few words to the noble Lord, Lord Shaw of Northstead.
I believe that I was wrong in what I said yesterday and I am glad to have been given an opportunity to correct it. I was taken by surprise by his question about the Comptroller and Auditor General and the Taylor report on tobacco smuggling. From Section 8 of the National Audit Act 1983 it is quite clear that the Comptroller and Auditor General has separate rights of access to value for money studies, and that such access is not limited to financial information.
My Lords, I shall take advice as to whether there is any other way in which I should put the record straight. However, it is clear that I was wrong on that occasion.
Perhaps I may now turn to the amendments. The Opposition have responded to the point I made on Report; namely, that additional access is not needed for the purpose of auditing departmental accounts. Indeed, the Comptroller and Auditor General himself admitted that in giving evidence to the Public Accounts Committee. However, the Opposition have responded in the most extraordinary way: by removing the requirement that the clause should apply to departmental accounts, which is what is meant in Amendments Nos. 4 and 5.
That will not make matters better; it will make them very much worse. These amendments would divorce this clause from the subject matter of the Bill, which is government accounts, and instead turn it into a general power of access for the Comptroller and Auditor General. By referring in general terms to "examinations", it would apply both to his value for money examinations carried out under the National Audit Act and to the audit of accounts. The amendments appear to be a way of changing the National Audit Act by stealth. This Bill is not, and never has been, a replacement for the National Audit Act 1983. It seems extraordinary to be proposing at this late stage of the Bill--at Third Reading in the second House--amendments which open up entirely new topics and suggest sweeping changes which have not been subject to any debate or consultation and which are not based on any evidence of problems of access.
Amendment No. 8 would give the Comptroller and Auditor General access to any body to which a department or one of its NDPBs--I shall not labour the point about the definition--has, or can obtain, access. Furthermore, it repeats an amendment discussed on Report. The effect would be to allow the NAO access to a very wide range of businesses and even individuals who have financial dealings with government.
Amendment No. 7 would give the Comptroller and Auditor General the same rights of access as the European Court of Auditors has in the United Kingdom. I must admit that I am astonished that a member of the Conservative Party, who has trumpeted his concern for UK sovereignty, would wish to make the access rights of Parliament's auditor partly dependent on the rights enjoyed by a European body under the European treaties. That surely represents a unilateral surrender of parliamentary sovereignty.
It is clear that the intention behind the amendment, contrary to what was said by the Official Opposition at earlier stages of the Bill, is to enable the Comptroller and Auditor General to be able to follow public money wherever it goes. That is confirmed if we look at Article 248(3) of the European Treaty which states:
"The audit shall be based on records and, if necessary, performed on the spot ... including in the premises of any natural or legal person in receipt of payments from the budget".
That would give the C&AG access to, among others, every farmer in the country. Perhaps I may point out that Article 248(3) is very clear that the Court of Auditors should co-operate with other auditors and with national governments in exercising these rights. The amendment contains no such safeguards.
How can we reconcile the sweeping powers of access conferred by Amendments Nos. 7 and 8 which, if the other amendments in this group are accepted will no longer even be tied to the audit of departmental accounts, with the concerns expressed by the Government and, as I mentioned on Report, by the British Chambers of Commerce and the Federation of Small Businesses; namely, that additional powers for the Comptroller and Auditor General could result in additional burdens on business, over-regulation and an overlap of functions? The simple fact is that they cannot be reconciled. As I said earlier, if my noble friend Lord Haskins were in the House today, he would be horrified at the suggestion.
Amendments Nos. 7 and 8 would not have the effect, as the Opposition would have us believe, of simply entrenching in statute the C&AG's existing access rights, thus putting him on a par with the Court of Auditors. What they will do is to give him extensive rights of access, unrelated to the audit of departments' accounts, to anyone who has financial dealings with government.
It has been said already that this clause is not essential to the central purpose of the Bill, which is the introduction of resource accounting. However, by introducing the clause, we sought to take the opportunity to make provision to ensure that the Comptroller and Auditor General has the access he needs to carry out the audits of departmental accounts. The clause as it stands already ensures that he has that necessary access, so additional amendments are unnecessary.
This was the concern expressed by the noble Baroness, Lady Sharp, at an earlier stage. I understand that point. However, as I said when we debated this on Report, the Comptroller and Auditor General has already audited the first "dry-run" sets of resource accounts. Although he qualified many of these, he did not once do so on the ground of insufficient access. Even more tellingly, on 7th June the Comptroller and Auditor General said, in giving evidence to the Public Accounts Committee, that although he would like additional access, he does not need it in order to audit departmental accounts. I think that that in itself renders Amendments Nos. 7 and 8 redundant.
The Government have responded to a number of the key concerns expressed by the Comptroller and Auditor General and the Public Accounts Committee. At Report stage in the Commons the Government tabled a completely redrafted version of this clause to take account of those concerns. In particular, we have added what is now Clause 8(2)(b) to give the Comptroller and Auditor General a statutory right of access to third parties which hold departmental financial records. This deals with one of the major concerns expressed by the Comptroller and Auditor General and the PAC that over the past few years many departments have contracted out the operation of their accounting and other information technology operations. As a result, the Comptroller and Auditor General needs a statutory right of access to do his audit of departmental accounts. The new subsection recognises that and provides him with that power.
More generally, the Government have accepted that the whole area of audit and accountability needs to be carefully looked at. That is why we have set up the review under the noble Lord, Lord Sharman. We recognise that Parliament must be satisfied that the Comptroller and Auditor General has the powers he needs to do his job on behalf of Parliament. But that must be balanced against legitimate concerns that to give the Comptroller and Auditor General further powers may result in additional burdens on business, over-regulation and an overlap of functions.
These are wide-ranging and complex issues. The Government do not believe that they can be adequately dealt with during the passage of a Bill that is concerned with reforming the way the Government do their accounts and, therefore, deals only with audit issues to the extent that they impact on those accounts. The study chaired by the noble Lord, Lord Sharman, can look at these issues in the detail they require and deserve. The Government believe that that review provides the necessary basis. The Government have as much interest as Parliament in ensuring that the Comptroller and Auditor General delivers independent and high quality audit scrutiny.
The new amendments tabled by the Opposition are so different from those tabled on Report that I must appeal directly to the Liberal Democratic Party. I understand its support for the previous amendments, but I do not see how it can conceivably support these amendments. We were told that the amendments tabled on Report were necessary to enable the Comptroller and Auditor General to carry out his audit of departmental accounts. Although we understand that, we do not share the view of those who have sympathy for that proposal. But the amendments that the House is being asked to consider today are of a completely different order. They break the fundamental link between the clause and the subject-matter of the Bill.
At this very late stage we are being asked to consider changes which would make this clause a general purpose right of access for the Comptroller and Auditor General that would cover his value for money examinations as well as his audit of accounts. The amendments raise entirely new issues which have not been the subject of previous amendments, debate or consultation at any time during the passage of this Bill. We cannot accept them.
My Lords, the Minister has, quite understandably, coupled Amendments Nos. 7 and 8. I have listened to his comments on European legislation and shall study them. I do not intend to press that particular amendment. I should like to uncouple Amendments Nos. 7 and 8. Amendment No. 8 is the nub of our case in this matter. I do not believe that the Minister has addressed the question of negotiation and time-wasting. We have built safeguards into this amendment which applies only to documents to which an NDPB has or can obtain access. We have also built in a provision about the position of the accounting officer. This amendment is fundamental to the Bill. We seek to test the opinion of the House on Amendment No. 4.
moved Amendment No. 8:
Page 5, line 38, leave out from ("documents") to end of line 42 and insert ("--
(a) which are held or controlled by a government department or a relevant non-departmental public body, or
(b) which are documents to which a government department or a relevant non-departmental public body has, or can obtain, access.").
On Question, amendment agreed to.
moved Amendment No. 9:
Page 6, line 2, at end insert--
("(4) The rights of access conferred by subsection (1) shall not be exercisable in relation to any document relating primarily to accounts which--
(b) are subject to audit under section 2 of the Audit Commission Act 1998 or section 97 of the Local Government (Scotland) Act 1973 and do not relate to a body specified in section 98(1) of the National Health Service Act 1977.
(5) In this section "relevant non-departmental public body" means a non-departmental public body which is one for which the department whose accounts are undergoing examination is responsible; and for this purpose "non-departmental public body" means a body--
(a) which is not a government department or comprised within a government department,
(b) which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government, and
(c) an officer of which has been designated by a government department as its accounting officer in respect of the preparation of its accounts.").
On Question, amendment agreed to.
Clause 30 [Commencement]:
moved Amendment No. 10:
Page 15, line 14, leave out ("19") and insert ("20").
My Lords, unlike the rest of the Bill the clauses relating to Partnerships UK are to come into force as soon as Royal Assent is achieved. Therefore, when we added at Report stage the clause enabling the devolved administrations to invest in Partnerships UK, now Clause 20, we should also have amended the commencement procedures. Due to an oversight, for which I apologise, we failed to do so. The amendment corrects that oversight. I beg to move.
My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.--(Lord McIntosh of Haringey.)
On Question, Bill passed, and returned to the Commons with amendments.