Clause 11

Budget Responsibility and National Audit Bill [Lords] – in a Public Bill Committee at 1:30 pm on 3 March 2011.

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Question proposed, That the clause stand part of the Bill.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

It is probably worth noting that we are moving on to part 2 of the Bill, which is about amendments to and reforms of the National Audit Office and the office of Comptroller and Auditor General, and to the architecture that accompanies those important elements of our constitution, which oversee the sound and prudent use of public money. In many ways, the NAO and the work of the CAG and the Public Accounts Committee are more important and far more serious than the subject of some of the discussions that we have had today, but because they are of long standing—I think that the Comptroller and Auditor General post has existed since 1866—they often pass without much comment.

The term “comptroller” is derived from a conjunction between the English word “controller” and the French word for account—“compte”—and hence the notion of the “controller of accounts” was set up. In Welsh, as stated in the Bill, the term is Rheolwr ac Archwilydd Cyffredinol. This is an important appointment, and I am glad that the office will continue and that the appointment will be made by Her Majesty in response to an address of the House of Commons, prompted by a motion from the Prime Minister. Those are fundamental issues. This whole part of the Bill, in some ways, reflects a rather unfortunate piece of the most recent history of that office respecting certain expenses, accounts, allowances and so forth that were reported in the British media, prompting many people to query whether the structures for checking expenses and the accounts of the office of the CAG were adequate. The Public Accounts Commission commissioned John Tiner to do an inquiry and review.

As a consequence, a series of recommendations were made, including a set of reforms to the law, which the previous Labour Administration sought to put into what is now the Constitutional Reform and Governance Act 2010, but due to the wash-up before the general election, there was no time to give the provisions full and proper scrutiny, so the Government rightly brought them forward and appended them to the Bill. The new structures are already in place. As with the OBR, we are essentially doing a bit of post-hoc scrutiny, given that the new arrangements are up and running but we are here debating the legislation. I always dislike that approach to legislation slightly—I find that I would rather legislate before changes happen—but it seems to be a recent trend in certain circumstances. I suppose needs must.

I was a member of the Public Accounts Committee 13 years ago—I think before nearly any other Committee member had been elected to this place. It shows my age. Obviously I am getting on in years.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I thank the hon. Gentleman for that. I was hoping somebody would say it. I will thank him later as well.

My specific point on clause 11 concerns the change taking place to the tenure of the office of the CAG. Committee members will see on page 4 of the Bill that the person appointed holds office for 10 years and may not be appointed again. It is a single term of appointment, for a decade, and is not renewable. That is a change. Sir John Bourn, a distinguished Comptroller and Auditor General with whom I worked on the Public Accounts Committee, held the post for 20 years in total. I suspect that, partly to reflect the Tiner review, Ministers and others thought that if we were legislating, we should take the opportunity to consider that tenure of office.

Will the Minister explain why 10 years was chosen? It might have been debated in the other place. One anxiety that has been voiced is whether that length of tenure will affect the type of candidate who may be deemed appropriate for appointment or may apply. Obviously, it is a long period in office, but because office holders cannot be reappointed, it would be a significant career choice for an individual to apply for the role. Provisions later in the Bill prevent an individual from working for the Crown, for example, for at least two years thereafter, so doing that job would mean working for 10 years and then moving on to an undetermined something else. Does the Minister have any observations about the career attractiveness or otherwise of the construct? It does not seem massively objectionable to me, but it is quite unusual for a public office. We will come to other aspects of the legislation as the clauses progress.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 1:45, 3 March 2011

It might be the right moment for me to give some background to this part of the Bill. Overall, the coalition programme makes it clear that the Government will take significant steps to increase the transparency of public spending to enhance accountability. The first stage, which we have been debating in the first part of the Bill, is to subject the Treasury’s fiscal judgments to external scrutiny by making economic and fiscal forecasts independent.

The same applies to the scrutiny of public expenditure. Modernising the governance of the National Audit Office will also help advance those coalition Government objectives. The provisions in part 2 strengthen the resilience and integrity of the body that is best placed to assess the Government’s use of public funds. Effective independent oversight of the efficiency of Government spending will be particularly important when public resources are under pressure.

Part 2 implements the recommendations in the Public Accounts Commission’s 15th report. Its proposals were designed to balance two considerations: the need to ensure that the CAG has the authority to form completely independent judgments about the audits and value-for-money studies conducted by the NAO; and the need for the NAO to maintain systems of governance and internal controls that are consistent with best practice. The provisions in part 2 introduce a number of checks and balances to achieve those aims.

In summary, part 2 modernises the governance arrangements for the national audit. It continues the office of the CAG as an independent officer of the House of Commons, but limits the term to a single appointment of 10 years. I shall answer the hon. Gentleman’s questions about that in a moment.

Part 2 provides for the establishment of a new corporate body, the new National Audit Office, the functions of which will include providing resources for the CAG’s functions, monitoring how those functions are carried out and approving the provision of certain services. Importantly, it will be able to support and challenge constructively the CAG’s decisions without, of course, preventing him from carrying out his statutory responsibilities.

The NAO will have a majority of non-executives and will be led by a non-executive chair. The CAG will be the chief executive, but will not be an employee of the NAO . It is important to stress that, within the new governance framework, the CAG will continue to have complete discretion in forming audit judgments and carrying out value for money studies. Schedules 2 and 3 set out details on the new NAO and the relationship between it and the CAG.

Clause 11 is straightforward in that it provides for the office of the CAG to continue. It carries forward the appointment process in section 1 of the National Audit Act 1983, under which the CAG is appointed by Her Majesty by letters patent, following an address in the House of Commons. It is a legal requirement that the Prime Minister agree the appointment of the CAG with the Chairman of the Committee of Public Accounts. The choice of CAG will continue to require cross-party agreement.

To address the point made by the hon. Member for Nottingham East, subsections (6) and (7) limit the term of office to a single 10-year appointment instead of the current unlimited term. A time frame of 10 years is significant, but it gives the incumbent time to settle into the role and to become a strong and effective leader. On the other hand, it mitigates the risk of the office becoming too closely aligned with the personality of a single individual. Refreshing the leadership of an organisation at appropriate intervals is widely recognised as a driver to improving performance.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I have always been sceptical of term limits, perhaps because I began a particular career choice early on in my working life. When people suggested that Members of Parliament should be appointed only for two terms, or that Prime Ministers should serve for a fixed term, I always thought that that would fetter the choice of the public if there were a really good candidate. In many American presidential elections, potential presidents have been unable to be appointed, even though they were popular. Is the Minister certain that term limits, as a principle, are a good thing?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

It is probably unwise for me to make broad comments that do not relate to this role. That would be an entirely different debate about roles that might have different requirements. The hon. Gentleman’s points about politics are separate from the situation that we are discussing; in the case of the CAG it is right to have a single term. High-quality candidates will always be available to carry out the role. There is no question of the CAG seeking reappointment. That means that there is no danger, either in reality or perception, that his or her judgments will be compromised as the period for the renewal of their term approaches. The clause reflects the position of the Public Accounts Committee as set out in its 15th report.

In terms of how our approach compares with that of other countries, many other countries have fixed-term appointments for their similar auditor generals. In Norway, the fixed term is five years, but in the United States it is 15. By setting a tenure of 10 years we have hopefully got it about right. It is a substantial role that needs a substantial person in it. That tenure will give them time to come into the role and develop the leadership that they need.

Question put and agreed to.

Clause 11accordingly ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.