HC Deb 30 January 1980 vol 977 cc1422-9

ANNUAL REPORTS AND ACCOUNTS

Mr. Neville Trotter (Tynemouth)

I beg to move amendment No. 19, in page 5, line 19, leave out from 'year' to end of line 21.

Mr. Deputy Speaker (Mr. Richard Crawshaw)

With this, it will be convenient to take the following amendments:

No. 20, in page 5, line 27, leave out from 'direct;' to 'before' in line 29 and insert:

No. 21, in line 32, leave out subsection (3) and insert: '(3) The Ministers shall cause to be published the report made to them under subsection (1) above, the statement of account and the auditors' report and shall lay copies before Parliament.'.

No. 45—new schedule, 'Qualification of Auditors—

  1. 1. A person is qualified for the purposes of section 7(2)(c) of this Act if he is a member of one of the recognised professional bodies.
  2. 2. Those bodies are—
  3. 3. A person is also qualified if he is a member of a body of accountants established in the United Kingdom and recognised by the Secretary of State for the purposes of section 161(1)(a) of the Companies Act 1948.
  4. 4. A Scottish firm is qualified if each of the partners in it is so.'.

Mr. Trotter

The purpose of these amendments is to allow private auditors and not the Comptroller and Auditor General to be appointed to the fund. Amendment No. 45 states that a person shall be qualified to audit the fund if he is a member of the Institute of Chartered Accountants in England and Wales or the similar bodies for Scotland and Ireland, a member of the Association of Certified Accountants or qualified as a member of a body of accountants established in this country and recognised by the Secretary of State for the purpose of auditing companies.

I should declare an interest as a member of the English institution, but I have no personal desire to be appointed as auditor of the fund. The Government should look favourably on the appointment of a private firm rather than the Comptroller and Auditor General as their policy, in general, is to support private enterprise and to minimise the Civil Service. My amendment seeks to achieve that purpose. The Minister may say that a question of constitutional principle is involved and that the amendment cannot be supported for that reason. If that is the case, I hope that he will elaborate on what that constitutional principle is, so that hon. Members may hear, in detail, arguments to support the appointment of the Comptroller and Auditor General.

The evidence suggests to me that there is no such principle. My research shows that all the nationalised industries are audited by private firms. Many of the largest local authorities are so audited. Eighty per cent. of water authorities are so audited. The British National Oil Corporation is audited by private auditors. The British Airports Authority is audited by private auditors. Quangos, large and small, are audited by private auditors.

The Home Grown Cereal Authority, one of the smallest quangos, is audited by Thomson McLintock. The Housing Corporation, responsible for over £1,000 million—the figure could not be much bigger—is audited byDeloitte. The National Trust is audited by Price Waterhouse. The National Trust for Scotland is audited by Arthur Young McClelland Moores. The Crown Agents are now audited by Deloitte. You will remember, Mr. Deputy Speaker, that in that case it was necessary to pass a special Act in 1979 to remove the Comptroller and Auditor General. I shall not go into the sorry background. I am sure it is within your memory what happened. It is interesting to reflect that the Crown Agents have put the audit out to tender. That should appeal to a Government seeking to reduce public expenditure. Deloitte must have submitted the lowest tender because it was successful. There are good precedents for the appointment of an independent auditor.

There are also precedents for changes being made while a Bill is before the House. The Dockwork Regulation Act 1976 was so changed. As a result, private auditors are now appointed to the National Dock Labour Board. More recently, the Nurses, Midwives and Health Visitors Act 1979 was changed. As a result, private auditors will be appointed for the Central Council and the four national boards.

Mr. Clement Freud (Isle of Ely)

I was unimpressed by the hon. Gentleman's mention of the Crown Agents' auditors. Would there be any financial saving to the fund itself if it went into the private sector as opposed to the appointment of Government auditors?

Mr. Trotter

That cannot be quantified in advance. I have no reason to suppose that independent firms of the highest repute would charge more than the Comptroller and Auditor General. An additional avantage relates to the question of advice. I believe that one of the eminent private firms of auditors would be able to give better advice to the trustees.

This leads me to the question of the independence of the trustees. In the Second Reading debate, a great deal was made of this point. My right hon. Friend the Chancellor of the Duchy of Lancaster told the House that the fund was to be vested in, and administered by, independent trustees. He went onto compare it with a number of other bodies such as the National Trust and the National Trust for Scotland, which have, as I mentioned, independent auditors. He made the point that the trustees should be generally independent and that they should take expert advice before reaching decisions and could seek that advice where they wished. I believe that this should also apply to the audit.

It is laid down in the first schedule to the Bill that the trustees are not to be Crown servants and that the trust should be a charity. I would have thought that independent auditors were the more appropriate. I do not think that one can argue that, just because public money is involved, the Comptroller and Auditor General should be appointed as auditor. I believe that the examples I have quoted support that view.

Mr. Keith Wickenden (Dorking)

I confess to feeling slightly uncomfortable in rising to support my hon. Friend the Member for Tynemouth (Mr. Trotter). Like my hon. Friend, I am a member of one of the bodies set out in his schedule. In my case, however, not only would not wish to be appointed. I am totally incompetent to occupy the post because it is so long since I did any work of that nature.

It seems churlish, on a Bill of this importance, dealing with matters of national interest, to take issue on what, after all, is only a matter of administration. I console myself with the thought that, whereas other hon. Members have demonstrated that they are better fitted to comment on this general matter of national interest, I possess some special expertise in this sphere.

I doubt whether the facilities available to the Comptroller and Auditor General remotely match those of any of the leading national firms of accountants. If the Comptroller and Auditor General had not been auditor of the Crown Agents and that task had been carried out by an independent accounting firm, the Exchequer would almost certainly not have suffered to the extent that it did. It would have been possible for a negligence action to be brought against the firm of auditors, who would be insured at Lloyd's. I therefore support my hon. Friend's amendment. I hope that the Minister will respond favourably.

I should also like to comment on clause 7, which my hon. Friend seeks to amend. I wish to compare the degree of accountability that it contains with the degree of accountability required in the private sector. I refer specifically to public companies. Under clause 7, it is the duty of the trustees to prepare, in respect of each financial year, a statement of account in proper form and to send that statement to their auditors within eight months of the end of the year to which it relates. It speaks of a period before the end of November, referring to the accounting year ending on 31 March. Public companies that may be controlling assets worth many millions of pounds, and certainly dealing with a turnover in those figures, do not merely have to submit their accounts for audit within eight months. They have to lay them before their shareholders in audited form within six months. Otherwise, they do not comply with the listing requirements of the Stock Exchange. It seems to me strange that a fund of this nature should have a lower degree of accountability laid on it than is laid on public companies in the private sector.

I apologise for the fact that I shall have to leave the Chamber shortly. I have to attend a meeting with some constituents who have worked for me for a long time. I know that I shall not agree with what they are asking me to do, and doubtless they are getting angrier and angrier.

I support the amendments.

7 pm

Mr. Monro

I am grateful to my hon. Friend the Member for Tynemouth (Mr. Trotter) for raising the matter dealt with in the amendments. I was very appreciative of the fact that representatives of the professional body to which he and my hon. Friend the Member for Dorking (Mr. Wickenden) belong came to see me in the House last night to put their case, which my hon. Friends have developed admirably today.

I have some reservations about accepting the amendment. However much we hope that over time the fund will attract substantial private donations, the reality is that by far the greatest part of its income will be derived from public funds. The House will rightly have a keen interest in how the moneys are spent and accounted for, and it is entirely right and proper that the Comptroller and Auditor General should conduct the audit and report to the House.

What I have said is in no way to belittle the accountancy bodies. I readily accept that their members could perfectly well perform the function. It is simply that where public money is involved and is paid out in advance of need the Comptroller and Auditor General is the appropriate person to turn to.

I have been looking at similar situations. One that is close to my other (responsibilities is the position of the Sports Council, where the sum involved is almost identical, at £15½ million. That is audited by the Comptroller and Auditor General.

There are exceptions to the general rule, but they normally involve trading bodies or bodies whose expenses are wholly or almost wholly administrative. The fund fits into neither of those categories.

Secondly, it is likely that the Public Accounts Committee will wish at some stage to look beyond the auditors' report. It may wish to take evidence not only from the representatives of the fund but from the auditors. When the audit is performed by the Comptroller and Auditor General, that is straightforward. When it is performed by another person, it is far less so. The Comptroller and Auditor General may have to be asked to examine the books and submit his report. Therefore, use of the Comptroller and Auditor General as a matter of course facilitates the work of the House and its Committees.

A further consideration is that of cost. I know that all hon. Members will examine this matter carefully. Outside auditors would naturally expect to be paid their scale fee, which would come out of money that would otherwise be available to the fund's trustees.

Mr. Trotter

Is it being suggested that the Comptroller and Auditor General has cheaper staff than professional firms? Could that perhaps be why the Crown Agents' audit was carried out in the way that it was?

Mr. Monro

I should not like to say whether the staff were less expensive, but they would certainly be fully qualified.

Mr. Dalyell

This may be a difficult question to answer off the cuff, but is there any way in which we can be given a rough idea of the extra cost of outside auditors? It could be very expensive.

Mr. Monro

I cannot give the hon. Gentleman the answer at once, but we have two distinguished accountants with us in the Chamber and a Treasury Minister. I could not even guess what the scale fee would be for the audit of the fund. Clearly, it would be a substantial sum, which would be paid for by the trustees and would, therefore, be money taken away from the fund.

I accept that my hon. Friends have raised an important point, but I think that they will both agree that their col- leagues in the profession raised it at virtually the last moment. It is asking a great deal to expect a Government to come to a conclusion at such short notice.

I ask my hon. Friend the Member for Tynemouth to seek to withdraw his amendment, but I shall look at the matter in greater detail, and if we think that it has substance we can deal with it in another place. I say that totally without commitment, because I have put forward a strong case for the Comptroller and Auditor General. What I am saying is that I am not shutting my mind to the matter.

Mr. Dalyell

It behoves the Minister to be tactful and polite to his hon. Friends, but I can afford to be less tactful and less polite. If the professional chartered accountants, who are supposed to be efficient folk, were going to raise this matter, they might have done it at the beginning, before we went all through the Committee stage, rather than spatchcocking it in at the last moment out of the blue, when we suddenly see an amendment on the Notice Paper. The hon. Member for Tynemouth (Mr. Trotter), who takes an active part in other Committees and is a diligent hon. Member, will agree that it is a bit irritating for those of us on both sides of the House who have given a great deal of time to the Bill suddenly to find the amendment placed before us.

I agree with the Government. Let us forget any irritation that we may feel with the chartered accountants. It is a legitimate amendment, and I do not make much of that point. What I make a good deal more of is the fundamental principle of responsibility to the Public Accounts Committee. As an alumnus of a previous PAC and one who worked on it for four years, I think it extremely desirable that the fund should be subject to the Comptroller and Auditor General and all the expertise at his command rather than have the matter cluttered up and complicated by outside auditors.

I ask the House not to get me wrong. In many cases outside auditors have their uses and should be brought into the Government's affairs. All that I am saying is that I do not think that there is a wonderful case for so doing here.

Mr. Wickenden

The hon. Gentleman speaks of the considerable expertise of the Comptroller and Auditor General, but does he accept that the numbers of his qualified staff are limited to, at most, a few dozen, whereas the qualified staff of any one of the major five accounting firms in the country run into several thousand? Because of the width of their experience, the resources and advice available from those firms far outweigh anything that the Comptroller and Auditor General can possibly offer.

Mr. Dalyell

I do not have the latest figures, but when I first became a member of the PAC and Sir Edmund Compton was the Comptroller and Auditor General, I spent two days with him learning precisely what the holder of his office did. At that time, if my memory serves me correctly, there was a staff of at least 600, many of whom had varying degrees of qualifications. It is a formidable instrument of Government—the most formidable instrument of its kind that a Government have in Britain. It is certainly the only thing that we have approaching an instrument of the thoroughness of the Senate committees in the United States.

Mr. Trotter

I quite accept the tenor of the comments about the lateness of the amendment. It is a comment that I myself made to the institute. Apparently, a letter sent some weeks ago was not received, which is a pity.

In view of the statement by my hon. Friend the Minister that he will consider the matter further, I shall seek to withdraw the amendment. I only hope that my hon. Friend is prepared to meet the institute for further discussion, similar to that which we held yesterday.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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