§ Motion made, and Question proposed, That this House do now adjourn—[Mr. Chapman.]2.32 pm
§ Mr. Andrew Mitchell (Gedling)
In spite of the momentous events taking place elsewhere, I am pleased to move this debate on extending the role of the Audit Commission.
The Audit Commission is now nearly eight years old. It is one of the most important and effective innovations that we have introduced into the machinery of government. Its success and usefulness is underlined by the fact that even the Labour party acknowledges its value.
Political debate frequently centres on how much money is spent on our public services, but insufficient attention is paid to value-for-money considerations. In many areas of public expenditure, we must focus greater attention on the effectiveness of public spending. Input is extremely important; output is vital. The Audit Commission addresses exactly that point. It is the enemy of waste and inefficiency and the taxpayers' best friend.
The purpose of this Adjournment debate is to place on record the great value that has been derived already from the Audit Commission's work, particularly in its value-for-money studies. If my hon. Friend the Minister takes the same view as I do about that, my second aim today is to press him to explore other aspects where the skills and efforts of the Audit Commission may usefully be deployed. I should also like the House to recognise the skill that has been shown and the success that has been achieved by the current controller of the Audit Commission, Howard Davies, and his predecessor, John Banham.
The Audit Commission should not be seen in any negative or cost-cutting sense. As the commission said, value for money is not simply a matter of economy, of cutting either the quality or the scale of the services provided. Value-for-money opportunities identified can either improve existing services or channel additional funds to other worthwhile policy objectives. It is important to note that in the past the commission criticised central Government where some national policies made it difficult for local authorities to manage their affairs efficiently. That was why some of my hon. Friends and I fought so hard during the passage of the National Health Service and Community Care Bill last year to allow the commission to comment on the effect that ministerial directives on health could have throughout the health service. It must be said that the Department of Health did not at the time regard this as high a priority as my hon. Friends and I did, and we were pleased when my right hon. and learned Friend the then Secretary of State accepted our argument on Report.
I should like particularly to draw the attention of the House to the commission's report last October on day care surgery. That report demonstrated that waiting lists could be cut by one third through more efficient use of day surgery. How did it reach that excellent and helpful conclusion? It certainly was not armchair guesswork or political fantasy. The Audit Commission focused on a basket of 20 common operations which account for about 30 per cent. of all surgery. If all district health authorities used day care treatment to the same extent as the 25 per cent. that use it most, an additional 186,000 patients could 1167 be treated in England and Wales every year at no extra cost. Many other operations are suitable for day care treatment, offering the potential for an estimated 300,000 additional places per year. This is no dry analysis. It means that an increase in activity of this sort could have a significant impact on waiting times for all types of surgery, thus helping many of our constituents who are kept waiting too long for the health care that they need.
It is also worth mentioning the report entitled "Making a Reality of Community Care". That particularly important report made a valuable contribution—indeed, an essential one—to the work that Sir Roy Griffiths carried out on care in the community. He cited that work many times in his report on this subject.
However, it is in the area of local government that the Audit Commission has achieved most. One statistic suffices to demonstrate that point. It is interesting to note that in 1988 the commission reported that £750 million of savings had been identified, of which just under a third had been realised. By March 1990, the saving identified had reached £1,350 million and over £670 million had been achieved.
One of the commission's best reports entitled "Managing Social Services for the Elderly More Effectively" demonstrated clearly that the work undertaken was not about cost cutting but about ensuring that the right people received the right service. It demonstrated that there was a critical need for efficient management systems if clients were to be properly looked after. The report addressed itself to the elected members of a local authority to ensure that they had the right tools and benchmarks against which to judge and assess the performance of their officers. The report did a great deal to promote efficiency and effectiveness in local government. Indeed, I am proud that my local authority, Gedling, regularly receives warm praise from the Audit Commission. This is a credit to the leader of the council, Robert Baird-Parker, and his colleagues and to the chief executive, Bill Brown, and his officers and staff.
More recently, the Audit Commission produced a most helpful report on the cost of absence through sickness to the local authorities. That report deserves far more prominence than it has received so far; what it showed was nothing short of a thorough-going scandal in local government. Absence through sickness in the London boroughs was twice the CBI's national average and these figures, bad as they are, were bolstered by generous terms and conditions of employment.
Before the Audit Commission started its investigation, many authorities had no idea of their sickness levels. Lambeth council was so appalled when it learned from the Audit Commission of its figure that it changed its system and introduced a number of new measures, which promptly caused a strike. It emerged that Brent was losing £8 million a year through sickness.
This is the measure of the value of the survey. If London boroughs controlled their absence through sickness at the level of the national average, the community charge in London would be £25 a head lower. It is now up to local government to benefit those whom it represents by taking action as a result of the Audit Commission's work.
1168 I shall mention several areas in which I want the work of the Audit Commission to be extended or deployed and in which I believe that better value for money, efficiency and effectiveness could be achieved if it were. The first is the police. We have increased funding for the police enormously in recent years and the police have become more efficient. That is true of nowhere more than Nottinghamshire, where we have an excellent force under the leadership of Dan Crompton. However, there are legitimate doubts about how effectively the police use the resources more generally.
A recent Audit Commission report, entitled "Improving the Performance of the Finger Print Service", demonstrated a huge variety in the cost of running different finger printing bureaux, sometimes varying by a factor of six. The report demonstrates the wide variations in effectiveness in terms of convictions secured through finger print evidence. It varies from 75 convictions per officer down to only four per officer per year. That is a staggering difference by any yardstick.
Although the Audit Commission has power to look at provincial forces, it is not allowed to look at the Metropolitan police. Why not? Are we saying that the Audit Commission's disciplines are necessary for the provincial police, but not for the Met? I think not. The Home Secretary should open up the Met to the Audit Commission's scrutiny. I hope that my hon. Friend will not say that the Met is different from provincial police forces because it is not under local control and, therefore, does not come within the powers of scrutiny of the Audit Commission. That point was dispensed with last year when its powers were extended into the national health service. Those powers can and should be extended elsewhere.
Last month, the commission produced another worthwhile report on the police which showed major weaknesses in police monitoring of their own performance. The report, entitled "Effective Policing—Performance Review in Police Forces", concluded that definitions of good policing are not sufficiently backed by an assessment of police performance. It also recommended that police authorities and chief constables should develop a national framework to allow comparisons between forces. The measurement of police performance is no easy matter, but there can be no excuse for failing to make the attempt. The report goes on to recommend a better system of monitoring clear-up rates—an approach which could allow a far closer analysis of the methods used to solve crimes and their progress through the judicial system.
Let us consider magistrates courts. The efficiency unit scrutiny of magistrates courts identified, among other things, an audit gap—no one actually looked at them to see how well or badly they used their funds. Whatever is decided by the Government about magistrates courts and whether they become a "next steps" agency as suggested by the efficiency unit or not, they would benefit from the Audit Commission's attentions. Indeed, I believe that some local authorities have asked that the Audit Commission do just that. But as yet it is not empowered to do so. There is considerable public concern about the speed and efficiency of our courts and the police are concerned about that, too. We need to consider the location of the courts and the costs associated with that. If the Audit Commission deploys its skills on the magistrates courts, we shall, I suspect, save a fortune.
1169 It is the declared intention of the Government that the housing associations should take a greater role in providing public housing. However, it is obvious that some provide this service far more effectively and efficiently than others. I should like the Audit Commisison to deploy its skills to enable the public and Parliament to see clearly what best practice in our housing associations is and how near to providing best value for money the housing associations that, for example, serve my constituents, come to achieving that aim. We need a proper, comparative, intrusive audit of the housing associations to ensure that they are spending the vast sums of public money as effectively as possible, not least because, at the moment, the same body that funds them audits them. That is not in anyone's interest and means that there is no independent scrutiny. There are many other obvious sectors, such as universities, where perennial financial difficulties need closer public scrutiny.
So far, about 50 schools have decided to opt out of local education Authority control. I believe that there will, and should, be many more. Schools are better placed than local education authorities to decide how to spend their budgets in the best interests of the children they are educating. In due course, we should let the Audit Commission take a look at some of the new management and educational ideas implemented by opt-out schools. I suspect that those schools will be well managed and run and there may be valuable lessons for the LEAs to learn from them for schools that have decided not to opt out. The Audit Commission is the right organisation to assess and promote the lessons learnt.
I hope that we shall hear from my hon. Friend the Minister that he is receptive to the sort of ideas that I have outlined. It was not a long list and was far from comprehensive. Will he tell the House that he supports such ideas and encourage the Audit Commission to pursue and extend its excellent work in the directions that I have described? I hope that he will. The Audit Commission has a valuable role to play in securing better value for money in major sectors of public spending. Let the Minister make clear that he intends actively to encourage it in the extension of its existing operations.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Robert Key)
I am most grateful to my hon. Friend the Member for Gedling (Mr. Mitchell) for initiating this debate on the Audit Commission or, to give the commission its full title, the Audit Commission for Local Authorities and the National Health Service in England and Wales. I emphasise the full title because it underlines the remarks of my hon. Friend. Gedling is fortunate to have my hon. Friend as its Member of Parliament and my hon. Friend is fortunate to have, in Gedling borough council, a well-run local authority. I have no difficulty—indeed, I am delighted to join him—in thanking and congratulating the comptroller of the Audit Commission, Howard Davies, and his predecessor, John Banham.
The Audit Commission has a long history—longer than most people realise—of first-class work. The origin of the Audit Commission lies in the Poor Law (Amendment) Act 1844, which established a system for auditing poor law expenditure and thus created the office of district auditor. In the second half of the 19th century new types of local 1170 authority organisations were created and their accounts were gradually made subject to district audit as their functions increased. Some parts of the accounts of boroughs and county boroughs were subject to elective audit: in 1933 those authorities were given the right to appoint either the district auditor or other qualified auditors. It was not until the Local Government Act 1972 that a common system of audit was put in place across all local authorities.
The 1972 Act introduced a right for each local authority to choose whether its accounts should be audited by a private firm of accountants—subject to ministerial approval—or by the district auditors.
In its first special report for 1980-81 the Public Accounts Committee recommended setting up a National Audit Office in which the district audit service and the Exchequer and Audit Department would be amalgamated under the control of the Comptroller and Auditor General. The Government rejected that recommendation as inconsistent with the constitutional position of local authorities, but accepted the need for improvement in the arrangements for local authority audit and for greater attention to value-for-money work. Value for money is important and often misunderstood. Value for money implies and means "value for people". The better the value for money that local authorities and central Government can achieve, the better the value for the people they are serving. As my hon. Friend the Member for Gedling said, the Audit Commission's statutory responsibility, including helping local authorities achieve better value for money, was an innovative measure which has been of great significance in improving the performance of local authorities for the benefit of their local public.
The most recent development in the role of the Audit Commission was the extension of its remit to cover health service organisations, brought about under the provisions of the National Health Service and Community Care Act 1990. I thank my hon. Friend for his remarks about the amendment to the National Health Service and Community Care Bill. Although the Government could not agree completely with the full force of the initial suggestions he supported, there was no doubt that the revision, which was fully included in the Act with his support, was most helpful. It allows the Audit Commission to set out clearly the national framework within which the NHS operates as it undertakes its value-for-money studies under section 26 of the Local Government Finance Act 1982.
My hon. Friend also mentioned the work undertaken by the commission on day surgery in the national health service. That was the first report that it published on NHS matters, although this week it has been joined by further work on pathology services. He is right to congratulate the commission on pursuing the prospect for further value-for-money opportunities in those areas and we look forward to the results of the local audits now being undertaken which will establish what can be done in each local area to contribute to cost-improvement programmes, and what the scope for development nationally is likely to be.
I agree with my hon. Friend's assessment of the importance of the Audit Commission report "Making A Reality of Community Care". Sir Roy Griffiths's report "Community Care: Agenda for Action" contained proposals largely accepted by this Government in formulating the community care policy outlined in the 1171 White Paper "Caring for People". Indeed, Sir Roy Griffiths acknowledged the Audit Commission report as containingthe essential facts on which this review is based".My hon. Friend has rightly emphasised the value-for-money work undertaken by the Audit Commission, but that is only one part of its responsibilities. It is worth reminding ourselves also that much of the Audit Commission's work is performed or given effect by the auditor appointed to each body.
§ Mr. Andrew Mitchell
My hon. Friend has made an extremely important point which bears underlining. When the Audit Commission commissions a report it does not take on the staff itself. It employs third parties and other bodies to carry out that work. I believe that that is one of the most cost-effective ways of achieving the result that we all seek.
§ Mr. Key
My hon. Friend is right. The Audit Commission appoints auditors. It also prepares and keeps under review a code of audit practice and it prescribes the scale of audit fees. It can also direct an extraordinary audit in appropriate circumstances.
The main statutory responsibilities and powers of the auditors are to check that the authority's accounts have been prepared in accordance with statutes and regulations in force, and that proper practices have been observed; to satisfy themselves that the authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources; and to comply with the code of audit practice.
I had the duty of moving the adoption of the code when it was considered by the Second Standing Committee on Statutory Instruments on 21 November last. That was the Audit Commission's code and it duly met with approval. It was noteworthy that the hon. Member for Sheffield, Brightside (Mr. Blunkett) supported the Audit Commission's role and the auditors whom it appoints. He said:There has been no conflict between the Government and the Opposition about the role of the audit service. There is no contention between us… It has never been an issue between the Government and ourselves that the audit service is a vital part of the propriety that we expect from local government".The hon. Member for Brightside went on to consider, as my hon. Friend the Member for Gedling did, one aspect of the future role of the Audit Commission. The hon. Member for Brightside said that he believed thatquality, efficiency and effectiveness should replace economy, efficiency and effectiveness; as quality rather than cheapness should be the benchmark by which we judge what we are getting for our money."—[Official Report, Second Standing Committee on Statutory Instruments, 21 November 1990; c. 6–7.]The same idea of seeking quality was made one of the themes of a lecture that the hon. Member for Copeland (Dr. Cunningham) gave on 2 July 1990 as the second in the series of lectures on management of public services. He said:Quality cannot be had on the cheap. That we need a sustained period of more effective financial investment in our public services and the people employed therein is self evident. Recognising that cash will always be limited we accept the essential drive for greater financial rigour and regard that rather than cheapness for its own sake as a far better approach. If quality is our goal then efficiency is essential.1172 I do not disagree with the intention behind those remarks, but I believe that quality can be achieved and is being achieved within the present framework. The code of audit practice is perfectly clear about that. It states:It is not the auditor's function to question policy. There is, however, a responsibility, particularly in the audit of local authorities, to consider the effects of policy and to examine the arrangements by which policy decisions are reached".My interpretation of the guidelines, which I was pleased to bring before the Committee, is that a local authority may quite properly decide what levels or quality of service to provide, but it is up to the auditor to ensure that the decision was taken in full knowledge of the financial and other consequences. I do not see that the role of the Audit Commission and the auditors that it appoints needs to be widened by legislative means. The ideas of my hon. Friend and the two hon. Members whom I have quoted can be accommodated in the present framework and I think that such ideas on quality are already being accommodated. My hon. Friend referred to the report entitled "Managing Social Services for the Elderly More Effectively" as a report which shows how a chosen level of service can be targeted to deliver the right service to the right people.
I shall now say a word about evenness and quality across the country and the spread of best practice. The quality exchange is an Audit Commission initiative to establish voluntary "comparison levels" for local authorities. The commission's first reports, which covered the seven services of refuse collection, waste disposal, highway maintenance, street cleaning, verge cutting, street lighting and gully cleaning, showed that many councils were already doing a lot to monitor and promote service quality. Nearly 200 local authorities participated in the survey. The Audit Commission's report on it highlighted the importance of four factors—management arrangements, specifications, quality control and customer satisfaction.
Some of the commission's findings may come as no surprise—many local authorities could do much more to keep their tenants' rent arrears under control, for example. Nevertheless, those points need to be made and I am sure that the objective and practical advice offered by the commission is of help to many authorities.
The Audit Commission's recent report on managing sickness absence, to which my hon. Friend referred, revealed the alarming statistics of sickness absence in certain local authorities in London. The report stated that if the six authorities with the worst sickness record in London could reduce levels of such absence to the CBI average for industry, they could save as much as £26 million, or £27 per head on the community charge. The loss to other authorities through that source is not, thankfully, quite as great, but the problem is severe and cannot be measured in financial terms alone. High levels of sickness absence can also lead to poorer services and breakdowns in management systems.
On the police aspects of the commission's work, in which, of course, my right hon. Friend the Home Secretary has the major Government interest, the commission's responsibilities for appointing auditors for local authorities extend to provincial police authorities and the commission is as concerned with recommending ways of improving the economy, efficiency and effectiveness of police forces as any of the other organisations. The remit does not extend to the Metropolitan police, because they are subject to audit by the National Audit Office.
1173 In preparation for local audits of police forces, the commission has been conducting a special study based on fieldwork in several provincial forces. That study began three years ago and the commission has so far published eight papers, to some of which my hon. Friend has referred. I understand that the work continues and that a further two papers, one on management structure and resource allocation in provincial police forces and the other on devolved financial management, are due for publication within the next few months. The commission has also published two audit guides for use by the auditors whom it appoints.
Most of the recommendations are properly the province of chief constables and their police authorities, but the commission's work in this matter is, of course, of great interest to my right hon. Friend the Home Secretary.
My hon. Friend suggests that the Home Secretary should open up the Met to the commission's scrutiny. The Met is different from provincial forces because the Home Secretary, rather than a local authority, is its police authority. Its auditing arrangements are different, too, being linked to those for central Government, with the National Audit Office appointing external auditors and publishing value-for-money reports.
Although I have explained the structural position, it is equally clear that the Metropolitan police benefit from the Audit Commission inquiries into provincial forces. The Metropolitan police force is not ignored, nor does it ignore the work of the Audit Commission.
§ Mr. Andrew Mitchell
My hon. Friend the Minister has outlined the current structural position. As he will know, many hon. Members feel that the skills of the Audit Commission, which are not the same as those of the National Audit Office, are well deployed on all other provincial forces and would benefit the Met if they were deployed in there. My hon. Friend cannot give me a full answer today, but I hope that he and his colleagues in government will keep that point under active consideration because much public money would be saved if the Audit Commission were deployed in the Met.
§ Mr. Key
I undertake to draw my hon. Friend's remarks to the attention of my right hon. Friend the Home Secretary.
The scrutiny into the magistrates courts service, published in 1989, did point to weaknesses in the current arrangements for audit of expenditure on magistrates courts. Detailed consultation has taken place with the service and other interested parties on the main scrutiny 1174 proposal on the reorganisation of the service. I understand that my right hon. Friend the Home Secretary is now considering the results of the consultation and those of a recent costing exercise carried out by consultants.
My hon. Friend suggested also that the Audit Commission might extend its best practice and value-for-money role into the world of subsidised rented housing run by housing associations. I share my hon. Friend's view that effective management and value for money in that area are very important.
Housing associations already manage more than half a million homes in England and the Government are channelling an increasing amount of new investment through them. However, I am not sure that this is an area where an additional input from the commission is needed, certainly at the present time when there are many other priorities for its attention. However, I shall bear that point seriously in mind.
I come now to grant-maintained schools. My right hon. and learned Friend the Secretary of State for Education and Science has now approved, or is minded to approve, 59 applications for grant-maintained status. It is proving popular with parents. Many of the first grant-maintained schools have seen dramatic increases in applications. I am sure that local education authorities and others will have much to learn from the success of the grant-maintained schools sector. The Audit Commission does not have the rights of access to grant-maintained schools, but I will draw to the attention of my right hon. and learned Friend the sort of points that my hon. Friend has made.
My hon. Friend has drawn attention to the many aspects of the work of the Audit Commission, which, because of its great variety, impinges on the responsibilities of a number of Departments. He has also praised the excellence of that work and I am happy to concur with him. As I said, the history of the service is one of steady evolution, which leads me to think that we should allow the Audit Commission to expand into its new role in regard to the national health service before thrusting new burdens on it. My hon. Friend has presented many important ideas, which it may be correct to adopt. For the moment I shall draw my hon. Friend's remarks to the attention of my colleagues. I intend actively to encourage the Audit Commission in its existing areas of operation, including the development of new ideas on standards and quality of service.
Question put and agreed to.
Adjourned accordingly at two minutes past Three o'clock.