HC Deb 07 July 1982 vol 27 cc358-77

Lords amendment: No 18, in page 16, line 28, leave out "of local authority services" and insert by such bodies of their services besides the studies referred to in subsection (1) above and section (Reports on impact of statutory provisions etc.) below

Mr. King

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

With this we may take Lords amendments Nos. 19, 22 and 23.

Mr. King

The House will be aware that these amendments seek to carry out the undertakings that I gave in the House on Report, specifically to the right hon. Member for Heywood and Royton (Mr. Barnett) and my right hon. Friend the Member for Taunton (Mr. du Cann), to try to establish some, in their eyes, improved relationship between the public expenditure of public funds voted by the House, and their disbursement by Government and expenditure by local authorities.

I gave certain undertakings at that time and said that while I was anxious that the particular amendments should not be pressed by the right hon. Gentlemen, we should seek to table our amendments in the other place. The amendments have sought to reflect accurately the undertakings that I gave, and have been accepted as such. Therefore, I confine myself to saying that I recognise the significance of these amendments. It is an important step forward in terms of the accountability of Ministers to the House, something that I resent in no way, and which the Government are fully prepared to accept. The House is the proper place for Ministers to be held accountable, responsible as we are for the allocation of more than £10,000 million of public money, which forms part of the nearly £30,000 million of local authority expenditure.

That money is not a small part of the national Exechequer and the national budget and it is right that Ministers should be accountable, and through the mechanism of the Public Accounts Committee. My right hon. Friend the Member for Taunton, as a former Chairman, took a close interest in these matters. It is right to have this accountability.

My right hon. Friend, the right hon. Member for Heywood and Royton and the House will be aware that there has been a particular sensitivity on the part of local authorities about the access of the House to the accounts information of individual authorities who would claim that they are separately accountable to their electorates through their councillors and that their position would be distorted if they were also to be accountable to the House. We understand that concern, and feel that it can be met as we have sought to provide in the amendment.

We feel that this concern is not a proper reason why the accountability of Ministers to the House, and the proper wish of the House to exercise its responsibilities in checking on expenditure by the Executive, should not be monitored and approved in this way. I hope that this, which may seem to some to be rather a dull and bureaucratic amendment, may be seen by others as an important development in public accountability and the proper role of the House in public expenditure.

Mr. Joel Barnett (Heywood and Royton)

I should like to place on record my appreciation, as no doubt will the right hon. Member for Taunton (Mr. du Cann), of the way in which the Minister has fully met the undertakings that he gave the House.

I shall not comment in detail on the clause, because I did so when I introduced a similar new clause on Report. The clause is of value to the House of Commons, as the right hon. Gentleman said, in improving the accountability of Ministers to this House. That is absolutely vital. I know that the right hon. Member for Taunton is of the same opinion, and that he and others have sought to improve that accountability in spending substantial funds in excess of £10,000 million which we here vote, without having any control over it.

The clause will ensure that we get better value for money. That is what we all want, although there will be political differences of opinion at all times in the House about what the expenditure should be, both in total and in individual areas. At times there is a difference of opinion, because people misunderstand the services of those who carry out the function of helping to achieve better value for money, but I hope that it will be better understood in the future.

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As the Minister rightly said, this is a significant step. There has never been anything like it before, and I am fully aware of its significance. At the same time, I recognise the sensitivity of the issue. One cannot speak to local authority representatives without being aware that they fear the intervention of the House, the Comptroller and Auditor General, and the Public Accounts Committee. In my view, they are wrong.

I hope that local authorities will now understand that neither I, as Chairman of the Public Accounts Committee, nor the former Chairman, nor members of the Committee, in any way seek to interfere with individual local authorities and the way in which they carry out their functions where they are directly responsible to those who elect them. Indeed, the clause specifically excludes the Comptroller and Auditor General, who will be reporting to the Public Accounts Committee and the House, from looking at individual local authorities. I wrote that into the new clause that I introduced, and it is in the clause that was introduced in another place, in an effort specifically to erase such fears from the minds of individual local authorities.

Perhaps I might make a slightly political comment. When the local authority representatives appeared before the Public Accounts Committee, they equated the Comptroller and Auditor General with the Secretary of State or with the Executive. They thought that the two were the same. That is one more reason why I want the Comptroller and Auditor General to be given full and true independence, and for that independence to be seen, as we suggested in the Public Accounts Committee report. I do not for a moment suggest that he is not wholly independent now. He is. Certainly the present incumbent of the office is very independent of the Executive. There is no question about that. So is his method of appointment, even though it is on the advice of the Prime Minister. Once he is appointed, he is wholly independent of the Executive. I hope that local authorities will understand that.

I hope that local authorities will also understand that the work of the Comptroller and Auditor General, when he gets the reports from the Commission, will not in any way be to hinder or interfere with local authorities, either as individual authorities or as a whole. His function will be, along with the Commission, to ensure better value for money. Certainly, I do not want him to be involved in the way that local authorities fear. Nor would he want to be. I cannot stress strongly enough that local authorities have nothing to fear from the clause.

The powers of the Comptroller and Auditor General remain circumscribed, so that local authorities will not have the slightest doubt about their position. I underline a few of the words that the Minister has put in the clause and which are broadly in line with what we wanted. Subsection (1) makes it quite clear what we are talking about. The Comptroller and Auditor General will be dealing with economy, efficiency and effectiveness in the provision of local authority services and of other services provided by bodies whose accounts are required to be audited in accordance with this Part of this Act and of the financial management of such bodies.

That is what he is doing. He is helping local authorities and the House of Commons to ensure that the expenditure of more than £10,000 million of public money is more accountable to hon. Members who vote it on behalf of taxpayers. It is not Government money, but taxpayers' money, and it is right that we, as their representatives, should have an opportunity to ensure that it is spent in the best way possible. When the Comptroller and Auditor General makes his report to the House of Commons and when the Public Accounts Committee studies it, I can assure the local authorities and the local authority associations that our only concern will be as set out in the clause, to ensure that there is as much value for money and as little waste and inefficiency as possible. I hope that the measure will work well; given reasonable co-operation between the Commission and the Comptroller and Auditor General, it will work well.

Will the Minister give an assurance—I know that he will happily do so because he has done so privately—that he will give every encouragement to the Commission to co-operate fully with the Comptroller and Auditor General in the best interests of local authorities and, above all, of greater accountability to the House of Commons?

Mr. Edward du Cann (Taunton)

I should like to associate myself most warmly with the admirable sentiments that have just been expressed by the right hon. Member for Heywood and Royton (Mr. Barnett). I am certain that the assurances that he has clearly given to people outside who do such splendid work in local authorities will he welcomed and taken most seriously. The right hon. Gentleman speaks with great authority as the current Chairman of the Public Accounts Committee.

I have come to the Chamber from another engagement, and I hope that my right hon. Friend the Minister for Local Government and Environmental Services will not think me rude if I return to it when I have made my contribution to the debate. I particularly wanted to express my gratitude and appreciation to him.

The right hon. Member for Heywood and Royton and I pressed my right hon. Friend extremely hard at an earlier stage to include a clause of this type in the Bill. He has been good enough to discuss the matter with us privately and to propose the clause. I should like to express my gratitude for that. He has kept his word and kept us and the House fully informed. I hope that my right hon. Friend will not be embarrassed by my compliments, but this has been a model of how Ministers and Back Benchers can sometimes work together for the common good. In addition, I should like to thank him for the way in which he introduced the clause. What he said about the responsibilities of the House and the need to survey closely the way in which expenditure is made was entirely right. I endorse every word that he used.

It is within the knowledge of all hon. Members that some of us have worked and are continuing to work hard in order to ensure that the people's representatives on the Back Benches obtain a better opportunity to scrutinise what is being done by the Executive in their name. It is a commonplace to say that Governments are necessarily secretive and that they prefer to do their work behind closed doors. That is not necessarily because their motives are wrong. They are under heavy pressure, they have huge responsibilities and the work must get done. Yet it will not do in a democracy.

In no respect is it more important to survey what the Government are doing than in the way that they spend money. The right hon. Member for Heywood and Royton was correct in saying that we on the Back Benches have a duty to do our utmost to ensure that when money is spent, the best possible value is obtained for it. Many of us hive argued that we need better information to carry out that surveillance. Some of us have taken and expressed the view that it is our right as well as our duty to follow public money wherever it goes.

I do not doubt that the right hon. Member for Heywood and Royton was right to emphasise reassurance. Many of us are aware of the anxiety of those doing important practical work in the Civil Service, local government and nationalised industries that their work may be interrupted or frustrated if too many people are continually peering over their shoulders with a view to auditing and bringing into the spotlight the minutiae of their daily decisions.

I remember such anxieties being expressed when it was proposed that the Exchequer and Audit Department should have the duty of surveillance of the work of the University Grants Committee. It was thought that that would destroy the independence of the universities, but the surveillance of the Comptroller and Auditor General turned out to be a useful and valuable tool, not least for the UGC. The committee found that having an independent body to which it could refer its methods and workings and against which it could check its efficiency reinforced its work. I have no doubt that it will be the same with the local authorities and, in clue course, the nationalised industries.

A number of right hon. and hon. Members on both sides of the House have tried to make this a reforming Parliament. We have made substantial progress, but there is more to do, and we may be able to discuss that matter next week when we debate how the House can more closely scrutinise Estimates.

In the meantime, I congratulate my right hon. Friend the Minister on the important part that he has played in our efforts. The new clause, dull though it may be, is a milestone in the progress that we have been attempting to make.

Mr. Cartwright

I too welcome the new clause, which is an important step towards increasing accountability and strengthening control over spending. I accept what the right hon. Member for Heywood and Royton (Mr. Barnett) said about strengthening the activities of local government by providing a genuinely independent judgment of the effectiveness, and impact on local authorities, of Government spending and legislation.

However, we ought to be concerned about the sensitivity of local authorities. One of the most important problems was the feeling that the affairs of an individual local authority might be included in a report and brought before the House for scrutiny. The right hon. Member for Heywood and Royton went to considerable trouble to deal with that problem when he moved on Report a new clause providing that any report from the Comptroller and Auditor General should not refer to the affairs of any authority in a way that identified it by name or otherwise. He said that his new clause specifically provides that the Comptroller and Auditor General will not be able to report on any individual local authority. That is rightly a matter for the audit commission and local authority auditors. That is their function, and not that of the House, or the Comptroller and Auditor General."—[Official Report, 5 April 1982; Vol. 21, c. 746.] The right hon. Gentleman's statement went a long way to reassure those in local government who are extremely sensitive about their relationship with the Government. They believe that their accountability is downward to their electorate and it would be undermined if the House scrutinised individual local authorities.

We welcomed the attitude of the right hon. Member for Heywood and Royton, but our reassurance was undermined by a statement in another place by Lord Bellwin. The statement has been drawn to the attention of a number of hon. Members by the Association of Metropolitan Authorities, which is clearly worried about it. Lord Bellwin said: It will be open to the commission … to identify individual authorities … if it so wishes. He went on: There is nothing in Clause 24 to prevent the Comptroller and Auditor General from identifying individual authorities in his report to Parliament."—[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 381–2.] That has clearly started alarm bells ringing in some local authorities. It may be that they exaggerate the issue, but if we are trying to get good will in local government it is important that we have due regard to susceptibilities in such matters. I hope that we shall be able to reassure them that individual local authorities will not be reported to Parliament in the way suggested by the noble Lord in another place.

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Mr. Timothy Smith (Beaconsfield)

I start by declaring my interest. I am a chartered accountant and parliamentary adviser to the accountancy profession, which I hope will benefit from the proposals in the Bill. I think that it will, as long as the fees are fixed at a sensible level. I do not expect to benefit personally.

The audit of local government undertaken by some firms of accountants is not particularly profitable, although the fees have recently been raised marginally. There must be substantial investment in research and development before a firm can enter the field.

I welcome the new clause. I congratulate my right hon. Friend the Member for Taunton (Mr. du Cann) and the right hon. Member for Heywood and Royton (Mr. Bennett) on their initiative. I also commend the Government for accepting their proposals. By accepting this proposal the Government have rounded the circle for the audit commission.

Some felt that if there were to be changes in local government audit a national audit office was the right solution and that parliamentary accountability was important. Some in local government properly felt that this was not the sphere for the Exchequer and Audit Department.

There is clearly room for improvement in the present arrangments for local government audit, but that does not mean that there is any criticism of the district audit service. Its members are experts in the field. However, by definition their experience is limited to the audit of local government.

Although in theory councils can choose either an approved auditor or the district auditor under the Local Government Act 1972—some have, although only a small minority—in practice that has not worked. One reason is that there is no provision in the law for local authorities to consider the matter. A company has to consider the matter every year at its annual general meeting. There is no such provision for a local authority to consider it since the passing of the Local Government Act 1972, which is unfortunate. Therefore, it is appropriate that the Government should seek to introduce changes.

Mr. Christopher Price

The hon. Member for Beaconsfield (Mr. Smith) has compared local authorities and companies. However, when companies consider the matter they have the undoubted right to choose their own auditor and not have an auditor that they might not want imposed on them by a superior body. Does not the hon. Gentleman think that local authorities should also have the right to choose their auditors?

Mr. Smith

That is a difficult question. It is the shareholders of a company who appoint the auditors at a general meeting. Who are the shareholders in local authorities? Are they the councillors or are the councillors more akin to a board of directors? Are not the shareholders in a local authority the ratepayers? They are the people who provide the finance in the same way as the shareholders of a company. How can we arrange a device for ratepayers, meeting annually, to choose the auditors? The answer is that we cannot. Therefore, we have to have a procedural device called the audit commission. That seems to me to be entirely reasonable. The audit commission will include representatives of different interests.

Mr. King

I hope that my hon. Friend is aware that he is on pretty strong ground, although the hon. Member for Lewisham, West (Mr. Price) seemed to challenge his argument. Both the Layfield committee and the advisory committee on local government audit which was appointed by the Secretary of State for the Environment under the previous Labour Government took the view that it is not right that a local authority should appoint its own auditor.

Mr. Smith

I am grateful to my right hon. Friend. I was aware that the Maynard committee was much in favour of an audit commission. One of the unfortunate and undesirable aspects of audit in the United Kingdom is the clear divide between the public sector and the private sector. Compared with Canada, for example, we have little cross-fertilisation of ideas or audit techniques between the two sectors and there is far too little cross-border co-operation.

One of the great virtues of the audit commission, which will be responsible for both the district audit service and private firms of auditors, is that the commission will be in a position to remedy the problem and to ensure that local government benefits from the experience of both the district audit service and auditors in the private sector.

In Committee, the hon. Member for Lewisham, West (Mr. Price) attacked some of the private firms of accountants currently involved in local government audit. In a way, I was glad he did. It brought home to those firms something that they had not appreciated hitherto. They now realise that if they become more involved in this area in future, it is inevitable that from time to time they will be in the political firing line. For most of the time, they will be dealing with professional and competent local government officers and members, but from time to time they will be dealing with politicians, who are concerned not so much with value for money in local government as with rather narrower political objectives, which they seek to achieve whatever the cost.

As I have said, the first proposal for change in local government audit was the audit commission, which is the Government's proposal. The second was the Public Accounts Committee's proposal of a national audit office. There were serious constitutional objections to the second proposal from local government. I understood the reservations that it had about the PAC's proposal. They were based on the audit of individual local authorities becoming the responsibility of the Comptroller and Auditor General if the district audit service had become part of the Exchequer and Audit Department.

Local government associations accept that if there is to be some change in local government audit, the audit commission is the right change to make. That leaves open the important issue of parliamentary accountability. The right hon. Member for Heywood and Royton (Mr. Barnett) has referred to the £10,000 million of rate support grant, which accounts for about 30 per cent. of local government spending. It is only right that Parliament should be able generally to examine how that money is spent. That is why the new clause is such an ingenious device in achieving that objective. I pay tribute to its authors and to the Government for going along with it.

When the new clause was discussed in another place, much of the criticism directed to it was based on a misunderstanding of what is proposed. The criticism was based largely on the premise that the clause would result in yet further erosion of local government autonomy and yet another group wanting to investigate yet another aspect of local government affairs. However, subsection (3) makes it clear beyond all doubt that no information shall be required by the Comptroller and Auditor General under this subsection in respect of any particular body." Therefore, no local authority can be the subject of a particular report. Sometimes when local authorities are criticised for employing additional staff and spending additional cash, they respond to the criticism by observing that they are doing it only because of the additional obligations that have been placed upon them by Parliament.

Reports prepared under the new clause will be

  1. "(a) of the operation of any particular statutory provision or provisions; or
  2. (b) of any directions or guidance given by a Minister of the Crown".
That will enable Parliament to assess the validity of claims by local authorities and to decide whether the claim that we have placed intolerable burdens on them is justified. That is another reason why we should welcome the new clause. Although it is a late addition to the Bill it provides arrangements which will work well.

Local authorities will benefit from the widening of audit experience. Ratepayers will benefit from the greater value for money that will result from the exercise. Parliamentary accountability of local authorities in general terms will be increased. The Public Accounts Committee, with the help of the Comptroller and Auditor General, will be able to examine value for money in local government, so the taxpayer will benefit. I welcome the establishment of an audit commission. I hope that before long its chairman and members will be appointed and that it can begin its important work. I wish it well.

Mr. Christopher Price

We welcome the hon. Member for Beaconsfield (Mr. Smith) back to his place. It must be gratifying that he has so quickly become parliamentary adviser to the accountancy profession. I have been critical of the accountancy profession and I shall explain why, but we need its expertise in the House, and it is nice to have the hon. Gentleman back, if representing slightly lusher pastures.

The question that I put in Committee was a type of quis custodiet question: who will audit the auditors? Underlying all the praise of the brand new quango—the audit commission—and the Comptroller and Auditor General having an input is the assumption that any public money spent on auditors and accountants must, by definition, be a good thing. Sometimes we can spend money on accountants—the good folk whom the hon. Member for Beaconsfield represents, and who do not come cheaply these days—when it could be better spent on textbooks, teachers and the nuts and bolts of local government.

We are subjected to waves. I remember in the 1960s when there was a fashion for time and motion studies. I was a member of a local authority which spent a great deal of money on such studies to no real benefit.

In Committee I referred to some worrying factors. One was that the accountancy profession has overtaken the medical and legal professions in the rewards available to it. The senior partner of the best of the big 13 can earn about £1 million a year. That story is attested to in Accountancy Age. I am not accusing the hon. Member for Beaconsfield of picking up £1 million a year, but accountants are extremely expensive people to hire.

Mr. Ken Sharpe, the head of the Government's accountancy service, has found it necessary to write and tell each of the big 13 to stop touting for public business. Auditors are meant to be professionals. They should not tout. People should go to them. I also drew attention to that matter in Committee. It is a worrying development; I put it no higher than that.

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I also drew attention to the activities of an eponymous firm in the city of Birmingham. As a result of auditing Birmingham's accounts, it found itself with a little consultancy money without anything going out to tender. It started with £10,000 and the figure crept up to £30,000 and then to £65,000. There should be some rules about the difference between audit and consulting. There should be no room for suspicion that the only reason that big firms are moving en masse out of lucrative private work into extremely lucrative local authority audit work is to earn big consultancy money, especially with the micro-technology work that must move into local authorities in the next few years and which will be expensive to install. I do not believe that they do it for love rather than for money. It is worth pointing those matters out amid the welter of congratulation.

The hon. Member for Beaconsfield was right to point out that some of the big 13 are in difficulty in the United States. Arthur Andersen, for example, received an $80 million judgment against it for its involvement with the Fund of Funds. Such firms are not anxious to get mixed up in political controversy, but, in his heyday, Arthur Andersen was best known not as an accountant but as the opposition leader in Greenwich and as a Conservative parliamentary candidate. Another problem is that there are few Labour parliamentary candidates among the partners of the big 13 of the accountancy profession. I acquit my right hon. Friend the Member for Heywood and Royton (Mr. Barnett). I am not making an issue of the matter, but it should be borne in mind that there are accountants among politicians in Parliament as well as on local councils.

I welcome the amendment. I shall say a little about Lord Bellwin later. I knew him by another name at school.

Mr. Graham

I do not remember him.

Mr. Price

He was a little older than us. I welcome the activities of the Comptroller and Auditor General. He might make some sense of the problem that I described when we discussed the previous clause. The Department of the Environment tells local authorities "Cut your expenditure" and another Department says "Increase your expenditure." That cannot be good government. There must be a better way.

I am sure that when my right hon. Friend the Member for Heywood and Royton and the Comptroller and Auditor General receive a report from the audit commission, which will no doubt draw attention to that type of problem, they will provide useful reports to Parliament demonstrating the difficulties facing local authorities when they receive contradictory directives from Departments of State.

At the moment, local authorities have no means of knowing what to do. With recent litigation in the courts, they are spending a great deal of money on counsel's opinion as to whether they are in jeopardy of breaking the law. I am sure that if the Comptroller and Auditor General applied his mind to the problem of contradictory advice and how to cope with it, much good would come from it. It is a genuine worry. Local government has difficulty knowing whether it is government at all or whether chief executives are to be mere préfets to some Minister in Whitehall. It is important to keep local government alive and to give people a motive for serving on councils.

Why did Lord Bellwin say that there was nothing in clause 24 to prevent the Comptroller and Auditor General from identifying individual authorities in his reports to Parliament? What on earth was he talking about? My reading of the clause is a little different. It clearly states that no information shall be required by the Comptroller and Auditor General under this subsection in respect of any particular body. Was Lord Bellwin simply asleep, or did he not understand? We need to hear the Minister's interpretation of Lord Bellwin's remarks. I advise the House to trust my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), because I think that he is right. I do not think for one moment that the Comptroller and Auditor General would identify a local authority in a report to Parliament. I believe that local authorities can be reassured about that. Nevertheless, we cannot leave the matter until the Minister has interpreted Lord Bellwin's remarks. I look forward to hearing that interpretation.

Mr. Dover

I rise to intervene briefly to applaud the speech of the right hon. Member for Heywood and Royton (Mr. Barnett) and his emphasis on the need for value for money. I spent nearly three years working for a large local authority and, indeed, for a sizeable quango, so I appreciate the urgency of that need.

I seek the Minister's assurance on one matter. Amendment No. 18 replaces the words "of local authority services" in clause 20(2) with the words by such bodies of their services", and so on.

As one who greatly favours the privatisation of services in local authorities and other bodies, I wonder whether there is a slightly suspicious reason for that rewording or whether the drafting has merely caused suspicion. Therefore, will the Minister confirm that it is not intended to stop privatisation? I believe that the greatest possibility for opening up opportunities for value for money lies in privatising many of the services in such bodies rather than allowing them to be carried out only by officers of those bodies, as now happens. I hope that the Minister will give that assurance.

Mr. Bob Cryer (Keighley)

I do not particularly welcome the clause, as it seems to propose a burgeoning of the Public Accounts Committee. That Committee, after all, merely considers decisions well after they have been made. It then makes reports, most of which are not discussed. In any event, it is usually too late by then to do anything about the matter involved. We elevate that Committee to great importance, but its importance is generally overstated.

Mr. Timothy Smith

Will the hon. Gentleman give way?

Mr. Cryer

I should like to develop my theme a little further before I give way. I wonder why this additional clause has been pressed so hard. I know that many members of the Labour Party believe that it would be an advantage, but there is a delicate line between central Government and local government. Local government has its own accountability.

It is, after all, elected. There is often a clash between central Government who say they are elected on one set of ideas and a local authority which says that it is elected on another set of ideas. This sort of clause seems to tilt the balance towards central Government, and the Government of the day control this place. This is not the open debating Chamber that mythology suggests. If the Government want to provide time for discussing reports, they will do so. If not, they will not provide an opportunity. It is a tilt not so much towards Parliament as towards central Government. After all, the audit commission will be appointed by central Government.

Local authorities do not have the secrecy that bedevils central Government. They are open. I remind the House, in its concern with the scrutiny of local authority expenditure, that the standard of conduct in local authorities, by and large, is vastly superior to the standard of conduct in this place. People who have financial interests are not allowed to debate in local authority committees. If they are council tenants and the local authority is discussing rent increases, they have to obtain special permission from the Minister to be present, or even to vote.

For example, it has been held that people who are unemployed and serving on a council cannot discuss measures to alleviate unemployment without first obtaining a dispensation. The scrutiny of local government is much tighter. In any case, local government has always, historically, displayed a much better control of expenditure than central Government.

A warning about the clause has already been given by the hon. Member for Chorley (Mr. Dover)—the man who tried to have two jobs when he came into this place; one in local authority and one here. He said that he wanted value for money. That is the usual cliché Tories use about every Labour-controlled local authority. They want to claim that local authorities are inefficient and wasteful. This clause will be used for that attack. Local authorities, by and large, provide services that cannot be provided by any other organisation. They provide them efficiently and councillors scrutinise that expenditure with care and diligence. Of course we know that there are exceptions, but, by and large, there is truth in that statement.

I am also worried about another matter. These reports and the enhanced power of the Comptroller and Auditor General are not related to the position of the accounting officer of the Department of the Environment. The accounting officer, under section 22 of the Exchequer and Audit Departments Act, 1866, has some power and often it is not realised what it is. The accounting officer is generally the permanent secretary of the Department. The accounting officer can say to the Minister, "I feel that this expenditure cannot be justified before the PAC." The Minister trembles and says that it must be reconsidered. In other words, the permanent secretary has considerable influence that he can use to push forward ideas if he so chooses.

One of the extraordinary things, for example, about the Department of Industry between 1974 and 1979 was that two minutes written by the accounting officer at the Department of Industry, were not about Concorde or about lavish expenditure—necessarily lavish—to support British industry, but about two workers' co-operatives. That is either a political judgment of the accounting officer or a remarkable coincidence.

The point here is that if the Comptroller and Auditor General receives a report that also covers the ground of a minute by the accounting officer, and duly reported under direction to the Comptroller and Auditor General, that accounting officer has a way into the whole of the local government area that is denied to the accounting officer and the present bureaucracy in the Department of the Environment.

At present, if the Secretary of State makes a decision about expenditure; if the minute is sent by the accounting officer to the Comptroller and Auditor General, in accordance with the general instructions, that he will carry out the Minister's decision only on a written instruction overruling the objection; and if the instruction says: He should then send the papers to the Comptroller and Auditor General and inform the Treasury of the circumstances"; it is up to the Secretary of State to justify that expenditure. There is now a possibility that a minute can be sent about something that is dealt with by a local authority which places the onus on the local authority to justify the expenditure by virtue of representations to the Comptroller and Auditor General. Therefore, the area of accessibility through the power of the accounting officer is broadened. That is a consideration that has not been mentioned in the debate so far.

9.15 pm

I may be over-suspicious about this, but the power of the accounting officer is not widely known. Often, he is an element of discussion when decisions are being made by an elected Government, and there is a narrow line between the operation of the Department of the Environment and the operation of the local authorities.

Local authorities are right to have reservations about this matter, because they face a continuing battle with the Department of the Environment to obtain more funds.

There is, of course, a case for saying that the costing of new obligations placed on local authorities should be calculated, but local authorities do that anyhow without the necessity of introducing legislation to authorise such studies.

I do not find the new clause helpful. I suspect that it will not be helpful to local authorities, but we shall have to wait and see. In the rneantime, I shall be interested in the Minister's comments on the relationships that I have outlined.

Mr. Michael Morris (Northampton, South)

Initially, the hon. Member for Keighley (Mr. Cryer) seemed to say that he had no confidence in the Public Accounts Committee, but in his final remarks he outlined the strength and the responsibility of the PAC in so far as the accounting officer reports through the Comptroller and Auditor General. Therefore, the hon. Gentleman undermined his case from the start.

It was not the Government's wish that the new clause should be introduced. It is only because of the pressure of the House that it is before us at all, and that is something of which the House should be proud. My right hon. Friend recognised the feelings of the House, and his Department put forward some proposals which to a large extent met what we were seeking to achieve. To that extent, I say a sincere "Thank you" to my right hon. Friend.

The word "body" appears at the end of new clause G(3), which states: under this subsection in respect of any particular body. A point was made by the hon. Member for Lewisham, West (Mr. Price) and others about not naming individual authorities, and I share and respect that view, but what happens with a body that is not a rating authority?

Although it is not a rating authority, the London Boroughs Association, on which I used to sit, undertook major studies of areas that were important to those of us working in local government in London. At some time the Audit Commission may wish to examine an activity of the London Boroughs Association. Presumably, under this subsection, the officer in charge at the Audit Commission will be precluded from undertaking any review of the association's work. I should be grateful for clarification.

It seemed to me when we took evidence in the Public Accounts Committee that from the start the one problem that the House has never tackled is that local government, like it or not, has to accept any legislation that goes through the House. Until recently, the financial effect of legislation on local authorities has mostly been uncosted. There used to be the little phrase "It is not thought that this will have any adverse financial effects on local authorities or they will be minimal", but when one was on the receiving end the effects were not always so minimal.

If nothing else, the new clause and the Bill will enable local government to highlight those occasions on which it is charged to undertake a policy and is given inadequate resources to do so. That safeguard would be of great benefit to local government. The proceedings today on the Bill have highlighted the continuing deficiencies in the National Health Service and the nationalised industries. I hope that my right hon. Friends' colleagues in the Departments responsible will respond in the same manner as he has.

Mr. Graham

I do not use the phrase tritely when I say that this has been a valuable discussion. Reviewing what has happened to the initiatives in another place since this matter was last before the House and listening today to the practical experience in local government of the hon. Member for Northampton, South (Mr. Morris) and other contributions, I can say that the speakers are very experienced in local government and therefore they merit our respect. Considering the contributions that have been made by my hon. Friends, I am satisfied that the amendment has come under close scrutiny.

The hon. Member for Northampton, South, who was a member of the Public Accounts Committee, said that no Government would have had the initiative to bring this measure forward. The debate was initiated not by the Government but by individuals who were then backed by the Opposition. I have a shrewd suspicion that the Minister made a calculated guess whether, had he resisted the measure, he would have won or lost the day. It is a normal parliamentary convention for a Minister to prevail upon those who have proposed any change to withdraw their proposal in order that he might redraft it. The Minister has shown that he was at one with those who generally supported the principles proposed.

The Minister must grasp the points made by the hon. Member for Woolwich, East (Mr. Cartwright), my hon. Friend the Member for Lewisham, West (Mr. Price) and, obliquely, my right hon. Friend the Member for Heywood and Royton (Mr. Barnett). It is essential that any suspicion about the Government's intentions to put flesh on the bones should be cleared up. Some comments have clouded the issue, but I know that the Minister will explain the matter to us. I shall be satisfied if he says that that was not in his mind at the time. The words in the Bill make it clear that what the Minister said is not possible. Yet, in Committee, the Minister—with a brief or perhaps off the cuff—used words that could be misinterpreted outside the House.

It would cause terrible damage to a good concept if it were suspected that, not necessarily for political motives, a witch hunt or identification may be carried out under the cloak of the Bill. We must demonstrate tonight and in ministerial statements that the trust and confidence that are prerequisites to the relationship between local and central Government will be strengthened, not damaged, by the clause.

I am grateful to my right hon. Friend the Member for Heywood and Royton for stressing the independence of the Comptroller and Auditor General. He must be independent of everyone with whom he must work, so that he can criticise them fairly and honestly.

My hon. Friend the Member for Keighley (Mr. Cryer) was right to say that the line between central Government and local government on responsibility is thin. There is no doubt that local authorities are responsible to those who elect councillors for the money that they raise and spend. Equally, Parliament has responsibilities. Many references have been made to the colossal sums of money with which we deal. It is amazing to someone who has come on the scene rather late, as I have, that for many years Members of Parliament have been slightly uneasy because they could not find the right mechanism to show Parliament's responsibility for the money that it raises. The proof of the pudding must be in the eating.

It is clear that the original words have been improved in another place. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) acknowledged that the Minister has done justice to our intentions. However, we must ensure that we do not load too much responsibility on local government. I do not say that to be accountable, prudent, wise and honest is a great burden, but the Local Government, Planning and Land Act 1980 lays down many additional responsibilities for accountability, presentation and public relations.

No one can oppose the idea that people have a right to know. Local authorities have responsibilities, even when the Government are screwing down their opportunities to raise money and directing how that money can be spent.

I am a little apprehensive about causing resentment in local government by appearing to interfere. The House has said that Parliament will not interfere with the proper discharge of the functions of local government. We need to present to the people a marriage between local councillors and Parliament in the control of the money that needs to be spent. We have been left in little doubt that there is disquiet within the ranks of local government about what is seen as the Government's arrogance in seeking power over local government where it does not believe it to be necessary.

I have been approached by local Labour councillors—and I am sure that Conservative Members have been approached by members of their party—who are suspicious about Parliament's motives in carrying through this measure. I understand that they are as jealous of their position as were those of us who served as councillors. We acknowledge that local government has a constitutional responsibility and is accountable to the electorate. Nothing in the clause interferes with that principle. Parliament is accountable to its electorate. The test whether we have this right will be seen in practice.

I am heartened by the conditions that are required to be fulfilled before anything can happen.

Subsection (5) of new clause G provides: Before undertaking or promoting any study under this section the Commission shall consult". Not only does it state that there shall be consultations, but it sets out with whom the consultations shall be carried out. It refers to such associations of local authorities or other bodies whose accounts are required to be audited in accordance with this Part of this Act as appear to it to be concerned and such associations of employees as appear to it to be appropriate. If there were enormous disagreement by any association or by any association of employees, it would be difficult to envisage this proposal getting off the ground. There is an onus on the audit commission and on the staff of the Comptroller and Auditor General to assure employees and councils about the manner in which this proposal will be carried out and about its implementation being essential. The Opposition expect a steady march towards greater and more effective government from the implementation of the new clause.

Mr. King

I agree with the closing remarks of the hon. Member for Edmonton (Mr. Graham). I took them as a message to local authorities and councillors, of both his party and mine, of the approach that might be adopted. I listened with interest and I agree with the majority of what he said.

It was unfortunate that some of the hon. Gentleman's historical allusions were slightly incorrect. A new clause along these lines was moved on Report, not by the Government, but by the right hon. Member for Heywood and Royton (Mr. Barnett). It has been welcomed and discussed with interest by myself and my colleagues. After the mathematics had been done by right hon. and hon. Gentlemen on the Opposition Benches they decided, rather grudgingly, that they had better come along with us.

I do not want to dwell on that, because there is no suggestion of any such cold calculation on the part of the Government, We examine these issues entirely on their merits. It should be said to the hon. Member for Keighley (Mr. Cryer), as my hon. Friend the Member for Northampton, South (Mr. Morris) did, that although he may see a sinister Government plot in everything, this was originated in the House of Commons, but not by the Government. But that does not mean that it was right, as I am sure he will be the first to tell me.

I welcome back my hon. Friend the Member for Beaconsfield (Mr. Smith). I enjoyed campaigning with him on his earlier success and I am glad that he managed to achieve his more recent success without my intervention. His contribution, and the interest that he has taken for some years in both his professional and advisory capacity, is something that we welome in the House, because he speaks with real experience. I noted his comments and was pleased with the welcome that he gave to the amendment.

On the other hand, my hon. Friend found himself crossing swords with the hon. Member for Lewisham, West (Mr. Price), and will no doubt find himself doing so again. The hon. Member for Lewisham, West on the strength of one article in Accountancy Age has already filled about 45 columns of Hansard and will no doubt seek to deploy these arguments again. The salary of the senior partner has gained a few noughts since we last heard of it. No doubt it is index-linked, which will have an impressive effect.

The hon. Member for Lewisham, West asked an interesting question, and drawing on the lessons never forgotten from days on the benches under the eagle eye of Mr. Scott, whom we learnt to love in Committee—quis custodiet ipsos custodes—it is a fair question. Despite what people think, the possessor of a Somerset accent occasionally manages some classical background. The question here, as my hon. Friend the Member for Beaconsfield pointed out, is: who will appoint the auditiors? At the moment, individual authorities are entitled to appoint their own auditors.

The Layfield committee had a strong representation of disinguished local councillors of both parties with no party political axe to grind. They took the view that it was wrong that local authorities appointed their auditors, and that the system should be changed. Under the Bill, the audit commission will appoint the auditors. Quis custodiet ipsos custodes? The question then comes: who will audit the audit commission? The Comptroller and Auditor General will do that and, to the distress of the hon. Member for Lewisham, West, the Treasury will audit the Comptroller and Auditor General. Those are the sentries and guards posted along the line.

The other distirtgished alumnus of the alma mater, if we are working entirely in the Latin tongue, is my noble Friend Lord Bellwin. He said that there was nothing in clause 24 to prevent the Comptroller and Auditor General from identifying individual authorities in his report to Parliament." —[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 382.] Concern was expressed that that appeared to be in direct conflict with Lord Bellwin's statement that no information should be required by the Comptroller and Auditor General under this subsection in respect of any particular body. I shall say briefly why I do not think that there is any conflict between those two statements.

The clause refers to the powers of the Comptroller and Auditor General to try to obtain information about individual bodies or to publish information that is riot otherwise available. It is possible that the commission will publish these studies, and they may refer to individual authorities. If that were so, it would be pointless if the Comptroller and Auditor General could not refer to those studies. However, he cannot have access to any privileged information held by the commission but—this is the point that I am seeking to make—he can quote published information. I see nothing improper in that. If the commission identifies individual authorities in its reports, the Comptroller and Auditor General can quote that.

In case this seems a remarkable and perhaps shocking situation, I should add that in any case we are requiring local authorities to publish considerably more information than hitherto about their activities. The Chartered Institute of Public Finance and Accountancy publishes a vast range of information about individual authorities. The only names of individual authorities that will come forward to the Comptroller and Auditor General will come from the commission reports, and it has already been made clear that there will be a significant element of local authority representation on the audit commission. Thus, local authorities will have a real say in the way that these studies are tackled. Although, at first sight, there may appear to be some conflict, in fact there is total consistency. It would be ludicrous if, no matter how widely published and distributed this information was, it was then suppressed by the Comptroller and Auditor General.

Mr. Christopher Price

No one is asking the Comptroller and Auditor General to suppress anything. The impression that we all gained from the speeches of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and the right hon. Member for Taunton (Mr. du Cann) was that the Comptroller and Auditor General would confine himself to general value for money issues related to statutory provisions, Government directives, Government advice, and so on, and to matters that he could investigate. If he cannot require information from individual local authorities, what is the point of referring to them in his report?

Perhaps we can accept Lord Bellwin's statement that the Comptroller and Auditor General can refer to published authorities and that there is nothing in the law to say that he should not do so. What worries me is that the Minister appears to be condoning the idea that the Comptroller and Auditor General should go beyond the general statement and allude to other information about particular local authorities.

Mr. Joel Barnett

Obviously, local authorities may publish information about themselves that will be available both to the Comptroller and Auditor General and to everybody else, even the noble Lord, but one thing is clear, and I hope that the Minister will comment on it. There will be no intention under the clause of the Comptroller and Auditor General reporting on any individual local authority. He would not be able to require any such information from a particular body—an individual local authority—and certainly he would have no intention of reporting on an individual local authority. Nor would the Public Accounts Committee have any intention of dealing with the affairs of any individual local authority.

Mr. King

I am happy to endorse what the right hon. Gentleman says, and I know that the House will have listened with interest to that categorical statement from the Chairman of the Public Accounts Committee.

We should come back to what we are talking about. The commission is to prepare reports on the impact … of the operation of any particular statutory provision or provisions; or … of any directions or guidance given by a Minister of the Crown on the economy, efficiency and effectiveness in the provision of local authority services". If it is clear that ministerial direction is having a particular impact in different areas, and if the commission happens to draw attention to it in particular areas, it appears to me reasonable that the Comptroller and Auditor General should be entitled to report that. The House may have thought it odd coming from a Minister, but I said earlier that the main impact of the clause relates to ministerial accountability, statutory provisions—the House must understand what is happening—and the direction or guidance given by a Minister.

The hon. Member for Lewisham, West made the fair point that it will enable questions to be asked about the way in which the Government are dealing with local authorities over the requirements that are being laid upon them. If the reports and studies quote that impact on individual local authorities—those reports coming only through the commission and not as a result of further detailed searching and intervention by the Comptroller and Auditor General—I see nothing wrong with that.

Mr. Kaufman

In the closing moments of the debate it is extremely important that we get this right. What is said in the debate on the final Lords amendment will be read with care by local authorities, which are deeply concerned about the implications of the amendment. The purport of the speeches of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and others has been to seek to demonstrate that there is no need for that concern.

I can understand why the Minister has sought to reconcile—I do not criticise him for it—the statement of his noble Friend Lord Bellwin in another place with the Lords amendment. We can say what the Minister is unable to say, which is that his noble Friend made an embarrassing slip, which the Minister is now doing his best to reconcile with the Bill. But his zeal to protect his noble Friend, on which we congratulate him, must not be allowed to intrude in any way upon the clarity of the assurance given by my right hon. Friend the Member for Heywood and Royton, which local authorities will value. We look to the Minister to repeat that assurance with the same clarity. Let us now set aside Lord Bellwin's words and keep that assurance.

Mr. King

I am intrigued by the right hon. Gentleman's contribution. He has a charming way of referring to me and saying that I have a role in life, which is to follow behind my right hon. Friend the Secretary of State, rather like the gentleman with the shovel at the Lord Mayor's show. I now realise that he has twisted this further and that the idea is that once he has got me with the shovel in my hand suitably loaded I should transfer the load on to one of my colleagues, whom he feels should suffer similarly. I am sure that the hon. Member for Lewisham, West will agree that that was a very unfortunate unprovoked attack on a former school chum of the right hon. Member for Manchester, Ardwick (Mr. Kaufman). I felt that it was my duty to protect my noble Friend.

There might be a misunderstanding over the word "identifying". My noble Friend said: There is nothing … to prevent the Comptroller and Auditor General from identifying individual authorities". —[Official Report, House of Lords, 10 June 1982; Vol. 431, c. 382.] What he said can be taken in two ways. He was saying that there was nothing to stop the Comptroller and Auditor General from mentioning the names of authorities which had already been identified in the commission's report. That is not a complicated item. If the commission mentions the names of local authorities, there is nothing to stop the Comptroller and Auditor General from repeating those names in his report. I do not see anything wrong with that. I entirely endorse the basic approach of the right hon. Member for Heywood and Royton.

Mr. Kaufman

We are grateful for that clear, categorical assurance, which will be much appreciated by local authorities. I congratulate the right hon. Gentleman on having demonstrated that he is able to clear up not only after the Lord Mayor's procession, but after a donkey.

Mr. King

My hon. Friend the Member for Chorley (Mr. Dover) is worried about amendment No. 18. There is nothing sinister about it. The amendment clarifies one aspect of the comparative studies and makes it clear that they stand distinct from the new clause.

My hon. Friend the Member for Northampton, South asked whether it would be possible for the audit commission to study the London Boroughs Association. That would not be possible. Clause 6 lists the bodies that the commission can audit.

I listened with interest to the hon. Member for Keighley, but found it difficult to follow the point that he was making. His historical allusions were interesting, but it was difficult to see how the accounting officer would have more than a tenuous connection with the matters under discussion. However, if I have failed to understand the right hon. Gentleman's argument and he wishes to pursue it I shall be happy to write to him.

I gave the right hon. Member for Heywood and Royton an assurance about ministerial accountability. I also gave him the further assurance for which he asked. We will give every encouragement to the commission to co-operate fully with the Comptroller and Auditor General. Our task will be to establish the audit commission and the proposals in the amendments, which will improve ministerial accountability, will then be put into effect.

Question put and agreed to.

Lords amendments Nos. 19, 22 and 23 agreed to.