HC Deb 17 June 1965 vol 714 cc1029-33
Mr. Wylie

I beg to move Amendment No. 34, in page 8, line 23, to leave out subsections (2) to (4) and to insert: (2) The accounts of the Board shall be audited by an auditor to be appointed annually by the Board with the approval of the Secretary of State. (3) No person shall be qualified to be so appointed auditor unless he is a member or in the case of a firm all the partners therein are members of one or more of the following bodies

  • the Institute of Chartered Accountants of Scotland;
  • the Institute of Chartered Accountants in England and Wales;
  • the Association of Certified and Corporate Accountants;
  • the Institute of Chartered Accountants in Ireland;
any other body of accountants established in the United Kingdom and for the time being recognised for the purposes of section 161(1)(a) of the Companies Act 1948 by the Board of Trade. (4) As soon as the annual accounts of the Board for any financial year have been audited, the Board shall send to the Secretary of State a copy of the accounts prepared by them for that year in accordance with this section, together with a copy of any report made by the auditor thereon. (5) The Secretary of State shall prepare in respect of each financial year, in such form and manner and at such times as the Treasury may direct an account of the sums issued to him out of the Consolidated Fund and paid to the Board under this Act. (6) On or before 30th November in each year, the Secretary of State shall transmit to the Comptroller and Auditor General the account prepared by the Secretary of State under subsection (5) above in respect of the last foregoing financial year and the Comptroller and Auditor General shall examine and certify every account so prepared by the Secretary of State and lay before each House of Parliament copies of each such account together with this report thereon. The purpose is obvious. There is no provision in the Bill for the auditing of this statutory body's accounts by an independent body of auditors. This is contrary to normal practice in most if not all legislation of this kind that I have been able to find. One almost invariably finds provisions of this nature in legislation and the terms of the Amendment are to be found word for word in a series of comparable Statutes.

In Committee, the Minister of State failed to convince me of any good reason why there should not be an independent audit. He gave an explanation of the financing of the Board being by grant in aid. I do not think any of us appreciated what difference that made. Unless there is a very sound reason why these accounts should not be audited by independent auditors in the ordinary way the House should accept the Amendment.

Mr. Ross

The hon. and learned Gentleman moved the Amendment sharply and quickly and I hope to ask my hon. Friends to resist it with equal sharpness and speed. There is a fundamental difference in relation to this Board that I do not think the hon. and learned Gentleman adequately appreciates.

The Board cannot be compared with a new town corporation or something of that kind because it operates on money voted annually by Parliament and while it may become involved in some activities of a commercial character there is no question of settling the worthwhileness of expenditure generally by the application of commercial criteria.

The principal safeguard of the Exchequer's investment is the conduct of affairs in this House and in the ways of looking after the facts in this House. The Board is of a class of agency like the Atomic Energy Authority and the Forestry Commission, which was set up under the Agriculture Act, 1947. The audit there is by the Comptroller and Auditor General, who is responsible for reporting to Parliament. Since the Board is to be an agency of this kind it is difficult to see what case can be adequately and justifiably made out for a departure in its case. I hope that the hon. and learned Gentleman will appreciate that it is well looked after in the way we propose to handle it.

10.30 p.m.

Mr. William Clark (Nottingham, South)

With some trepidation I speak in a Scottish debate but I have two qualifications. I am an accountant and my ancestry is Scottish. I am also encouraged by the number of English Members who are paying such attention to Scottish business.

This is a very important Bill and the Amendment is of great importance not only to the taxpayer but to the profession of accountancy. The Secretary of State, in his brief and lucid reply, was not entirely fair to the case put by my hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Wylie). The Board will have very much wider power, particularly under Clause 6, which gives it authority to set up trading activities.

This is a new venture. Although the Secretary of State has said that the Bill cannot be compared with the New Towns Acts, he has not stated the whole position, because, although the new towns operate on repayable Exchequer advances, whereas the new Board will operate on moneys voted by Parliament, there are also the trading activities of the Board. If the Board is to engage in trading activities, why should it not have the professional advice which is given to every trader in the country? We are endeavouring to provide that there is power for the Board to take that professional advice.

There would be no decrease in the powers of the Comptroller and Auditor-General who would still have the right to investigate the Board's accounts, but, with the greatest respect to his Department, it does not have the experience of trading activities which those professional auditors who are engaged in these matters every day have.

The right hon. Gentleman said that there was no comparison between this and other legislation, but I have a long list of Acts—the Local Government (Scotland) Act, 1947, the Hydro-Electric Development (Scotland) Act, 1943, and many others—in which public money is involved and yet in each of which there is a provision for professional audits. Why should not the new Board have the same provision for professional audits? Why is there this antagonism towards this double safeguard for the taxpayer?

If other organisations set up by Parliament can have professional audits, why should not the new Board be able to benefit from the advice which it would receive from professional auditors?

Mr. Edward M. Taylor

There are several matters which the Secretary of State should bear in mind. First, the accounts of the Board will be extremely complicated. There are to be grants to various bodies and individual factories and new businesses, all of which will have to be accounted for. More important, there will be undertakings which the Board will carry out on its own, or through agents, or itself acting as agent.

These activities will introduce three complications. The first concerns taxation, which I have already mentioned. We tried unsuccessfully to obtain some clarification from the right hon. Gentleman about the tax position now with Income Tax and Profits Tax and the position with the new system of Corporation Tax and Capital Gains Tax. It is certain that it will be an extremely complicated formula which will have to be applied in three sections of the Board's activities.

First, as the right hon. Gentleman will be aware, the Board will have to pay tax as local authorities do. Most local authorities, because of the substantial amount of their borrowings, do not pay tax. However, with the new structure which we are now approaching, because of the smaller rate of Corporation Tax and because allowances are to be cut, there is the prospect that the Board, like local authorities, will have to pay tax.

What will be the position of undertakings carried on directly by the Board, or indirectly through agents, or more indirectly by the Board acting as agent? There is the final complication of the implications of the Local Government (Scotland) Act, 1947, with its definitions of what is exempt from taxation. Under English legislation it is quite clear that only local authorities are exempt from taxation but in Scotland the position is not nearly as simple because of the definition in the 1947 Act.

This is a body which charges rates for services. There are mentioned, in particular, water services, electricity services and gas services. The Board will make charges for services rendered. In those circumstances, it is more than likely that it will be affected by the provisions of the 1947 Act in which the definition is quite different from that in the English legislation.

As the accounts will be extremely complicated, and as the new legislation will make the position more difficult, I feel that the Secretary of State has a duty to make sure that these accounts are brought Forward in the way suggested in the Amendment. In the light of what has been said, I hope that the Secretary of State will look at this again, and will accept the Amendment.

Amendment negatived.

Mr. Willis

I beg to move Amendment No. 35, in page 8, line 35, after "activities" to insert "or proposed activities".

The Amendment seeks to meet a point raised by the Opposition in Committee. It does not go all the way that the Amendment proposed in Committee went, but it goes some of the way and I hope that the Opposition will accept it.

Amendment agreed to.