HC Deb 24 July 2000 vol 354 cc831-59

Lords amendment: No. 5, in page 5, line 5, leave out

("of a government department's accounts")

Miss Melanie Johnson

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

Mr. Deputy Speaker (Mr. Michael J. Martin)

With this it will be convenient to take Lords amendments Nos. 6 and 7 and the Government motions to disagree thereto, Government amendments (a) and (b) in lieu, Lords amendment No. 8 and the Government motion to disagree thereto.

Miss Johnson

The Government fully recognise the arguments that led to the amendments that were passed in another place. However, the amendments go far wider than is justified and contain drafting defects that need correction. The Government therefore propose instead two amendments that provide a more balanced approach to the issues. Our approach also paves the way for the Sharman review of audit and accountability, which is about to start; it will have its first meeting on Wednesday, I believe.

The main subject of the Bill is departmental accounts. Clause 8 and the preceding clauses contain provisions relating to the audit of accounts by the CAG. Amendments Nos. 5 and 6 would divorce clause 8 from that subject and instead turn the clause into a general power of access for the CAG. By referring to "examinations" without any qualification, the amendments would extend way beyond the audit of accounts to all other examinations by the CAG, including his value for money examinations carried out under the National Audit Act 1983.

The 1983 Act contains its own provisions for access for the CAG. It has never been the intention that this Bill should extend into that Act's territory. To do so opens up entirely new issues that have not been the subject of debate or consultation at any stage so far. The Government expect that, in his forthcoming review, Lord Sharman will look at issues relating to the 1983 Act, as well as audit issues.

Mr. Robert Sheldon (Ashton-under-Lyne)

Those matters were debated extensively in 1983. The Standing Committee that considered the National Audit Bill spent days and days on the matter because it felt that it was an opportunity for Parliament to reassert itself. That was important, so it looked at the nationalised industries. Unfortunately, the Chief Secretary of the day was persuaded by one or two of the more prominent nationalised industries and he gave in. That was very sad, but, as a result, the debates ranged widely. We are only now re-examining some of the major issues that were looked at then. It is right that we should.

Miss Johnson

I am grateful to my right hon. Friend for expressing his views on that matter, but to some degree I disagree about the 1983 Act because, as I have said, it is not the Government's view that that is the right territory to discuss in the context of the present Bill. Although I am sure that he knows how well it was discussed in 1983 better than I do, it is the case that that opens up an entirely different issue. I am sure that we will have some discussion of these matters. I will perhaps come back, when some right hon. and hon. Members have had a chance to contribute to the debate, to some of the reasons why we believe strongly that it is inappropriate to open up the 1983 Act as well as the audit issues; but, as I have said, the Government expect that, in the review, Lord Sharman will be able to look at the issues relating to the 1983 Act, as well as the audit issues. They are not off territory, but discussion of them is not appropriate in the context of the Bill.

I urge the House to accept the Government motion to disagree with Lords amendments Nos. 5 and 6.

Lords amendment No. 7 would give the Comptroller and Auditor General access to all bodies to which Departments or non-departmental public bodies have or can obtain access. The amendment would, in practice, give the CAG unrestricted access to all taxpayers—including, of course, businesses—to social security recipients and other recipients of Government grants, to many Government contractors and suppliers, and to virtually anyone who has financial dealings with a Department or an NDPB. That means most businesses and many other organisations, and, of course, many individuals. The amendment is therefore potentially intrusive and burdensome. Moreover, the formula "can obtain access" is unclear, and could be a source of dispute between the CAG and individuals, businesses and other organisations.

Lords amendment No. 7, especially in conjunction with Lords amendments Nos. 5 and 6, would give the CAG extensive rights of access, unrelated to the audit of Departments' accounts, to anyone who has financial dealings with Government. It would confer a right to roam at will—Opposition Front Benchers nod in agreement.

Mr. Letwin

In case those reading the record cannot grasp what has been happening, let me say that I entirely subscribe to the Economic Secretary's description. The only difference relates to value: we consider that right to roam to be invaluable, accurate and proper.

Miss Johnson

We have already supported changes that give the CAG more rights, but we propose to give further help. Such matters can best be discussed through the independent inquiry headed by Lord Sharman, on which the right hon. Member for Haltemprice and Howden (Mr. Davis) is to sit.

The prospect of a right to roam at will is not welcomed by the British Chambers of Commerce or the Federation of Small Businesses, which said earlier this year that additional powers for the CAG could result in additional burdens on business, over-regulation and an overlap of functions. I shall explain the Government's alternative approach to the concerns that gave rise to the amendment; first, however, let me say a little about Lords amendment No. 8.

Lords amendment No. 8 attempts to give a statutory definition of a non-departmental public body. To date, there has been no such definition.

Mr. David Davis (Haltemprice and Howden)

I wonder why.

Miss Johnson

NDPBs are a wide and disparate group, and are not at all easy to define.

The amendment defines an NDPB as a body which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government. That definition is descriptive rather than legally prescriptive, and is very wide ranging—wide ranging enough, in fact, for us to envisage the mounting of legal challenges to decisions to include or exclude certain bodies from the operation of clause 8.

The problem appears to be partially recognised in the amendment, which adds a further criterion to the first two—namely, that NDPBs are bodies with accounting officers who have been appointed by a Department. Accounting officers for bodies other than Departments, however, must be appointed under administrative arrangements that may, of course, change over time. The definition therefore rests on an administrative decision made by an individual Department with no central or parliamentary oversight. I do not consider that to be a satisfactory way of defining bodies that are subject to statutory provisions.

Mr. Edward Davey

This is not intended to be a trivial intervention. Does it not worry the Minister that the Government are unable to define their own activities?

7.45 pm
Miss Johnson

We have lived for many years without a definition of NDPBs, although we have no difficulty in defining our own activities in this context. The Lords amendment could lead to a definition that, for the reasons I have given, would be unworkably wide and subject to dispute, and would introduce aspects of administrative decision making. Such a definition is clearly unacceptable.

The technical deficiencies that I have mentioned illustrate the difficulties involved in devising an acceptable legal definition of NDPBs. To overcome the problems, the Government have in clause 23 taken the power to designate bodies on a case-by-case basis, and to enable the CAG to be appointed auditor of NDPBs where current statute prevents it. I hope that that will satisfy those who propose an alternative. I invite the House to reject Lords amendment No. 8.

Before I say something about the Government's position in the wider sphere, let me remind the House of some key facts. In clause 8, the Government have already given the CAG new rights of access beyond his existing statutory rights. Subsection (2)(b) gives him access to documents, wherever they are held, relating to a Department's financial records. The paragraph deals with one of the major concerns expressed by the CAG and, I believe, by the Public Accounts Committee—namely, the fact that because over the past few years many Departments have contracted out the operation of their accounting and other financial operations, the CAG needs a statutory right of access in such cases to perform his audit of departmental accounts. Subsection (2)(b), added to the Bill on Report, recognises that concern and gives the CAG that new statutory right of access.

Clause 23 gives the CAG the same access for the purpose of his audit of NDPB accounts as is provided by clause 8 for the purpose of his audited departmental accounts. Clause 23 also gives him a new power to be made auditor of NDPBs where current statute prevents that.

The Government accept that the whole issue of audit and accountability needs careful investigation. We recognise that the CAG must have the powers that he needs to do his job on behalf of Parliament, but we think that that must be balanced against equally legitimate fears that additional powers for the CAG could result in additional burdens on business in the form of over-regulation and an overlap of functions, or disincentives to initiative and risk taking. These are wide-ranging and complex issues, and the Government have therefore tabled an amendment on access to replace those made in another place.

Our amendment will enable the CAG's access to documents to be extended, in a considered way, when that is necessary. The procedure would be by draft order, subject to affirmative resolution by both Houses. The Treasury would be required to consult the CAG before making an order. That approach would allow a balance to be struck between the CAG's desire for additional access, and the need to respond to legitimate concerns about burdens on business. The extent to which the CAG needs additional access rights for audit purposes will be one of the issues considered in Lord Sharman's review, and our amendment would provide an opportunity for the implementation of its conclusions.

Our amendment is a reasonable and practical response to concerns expressed about the CAG's access rights, and I urge the House to accept it in place of the Lords amendment.

Mr. David Davis

The Minister started by saying that the Lords amendment involved drafting problems. I believe that this is the third form in which the two Houses have seen it.

Mr. Peter Brooke (Cities of London and Westminster)

The fourth.

Mr. Davis

I am told that it is the fourth, but let me deal with the first three.

The first version that the House saw was tabled in Committee and was intended to serve precisely the same purpose as this group of Lords amendments. Subsequently, similar amendments were tabled on Report. Then—this is what my hon. Friend the Member for West Dorset (Mr. Letwin) was referring to—a version was presented in the Moses Room debates. We now have the version that we are debating. Additionally, however, before the Bill was published, the Treasury was provided with a version of this group of Lords amendments, so that it could take the point on board. The Treasury has, however, made no attempt to do that.

The Minister also made a point about the Bill's purpose. She made the same point in Committee. The point that I made to her then was that more than one third of the Bill—seven of 27 clauses—is about audit. The Bill repeals 15 or 16 out of 17 of the key clauses in the Exchequer and audit departments' legislation from 1866 to 1983. If the Bill were intended simply to enable resource accounting, all it would have to do is amend elements of the control and estimates procedures operated by the House. That could have been done in a three-clause Bill. As all of the Bill's audit content is unnecessary to resource accounting, I am a little suspicious about why it has been included.

The Minister also mentioned the Sharman review. Like the right hon. Member for Swansea, West (Mr. Williams), who is one of my colleagues on the Public Accounts Committee, I am a member of the Sharman review. That review was not presented to either of us as an alternative to amendments to the Bill. If it had been, I do not think that either of us would have become a member of the review. The key reason for that is that the Sharman review cannot deliver the necessary statutory vehicle to entrench the House's rights. This Bill is about the House's rights. It is not about technical accounting matters or methods of measurement, but about the rights of this House. This group of Lords amendments is certainly about the rights of this House.

The purpose of the Lords proposed amendment to clause 8 was quite straightforward. It provided: 8.—(1) For the purposes of an examination by the Comptroller and Auditor General—

  1. (a) he shall have a right of access at all reasonable times to any relevant documents, and
  2. (b) person who holds or has control of any of those documents shall give the Comptroller and Auditor General any assistance, information or explanation which he requires in relation to any of those documents—
so far, so good.

We were told about a right to roam. That right would apply to documents that are held or controlled by a government department or a relevant non-departmental public body, or (b) which are documents to which a government department or a relevant non-departmental public body has, or can obtain, access. That is the limitation—it is not an unfettered right to roam.

The National Audit Office and the Comptroller and Auditor General cannot go to every paperclip supplier to the Government and ask to see the accounts or performance records. They will have to follow the access guidelines that the Government themselves follow. I shall deal with that matter at the end of my speech, when I address the issue of burden.

As our consideration of the Bill will be examined in some detail in the other place, I should like to put on record the Comptroller and Auditor General's views on the issue. The Minister has represented the proposals as a Government concession. However, from the Comptroller and Auditor General's point of view, the order-making power that the Minister described is not only an unsuitable alternative, but a retrograde step. There are four reasons for that.

First, the power provides the Treasury with the right to decide to which bodies the Comptroller and Auditor General can or cannot have access. The Public Accounts Committee—under my chairmanship, and under that of my predecessor—has consistently argued that the CAG's access should never be at the discretion of the Executive. Allowing such a discretion would negate the purpose of the CAG and the original purpose of the PAC. We should not forget that Ministers are accountable to Parliament; it is not the other way round.

Secondly, the proposal does nothing to overcome the problem of the time-consuming negotiations that are currently necessary to secure access. The PAC has commented that such negotiations are administratively burdensome and diminish the CAG's independence in many ways. The Government amendments would make that worse and add additional hoops for the CAG to go through in negotiating access. In a moment, I shall give the House an example of how that process operates.

Thirdly, the provision would also place the CAG's access powers in secondary legislation, rather than in primary legislation. Hon. Members know how easy it is for the Government to amend secondary legislation in a relatively unscrutinised manner. Such an arrangement would in itself be a bad thing.

Finally, the effect of the order-making power is to add to the hotch-potch of arrangements referred to in the Committee's ninth report. It is not a global solution and will allow current anomalies to be handled only on a piecemeal basis. That is in contrast to the Lords amendments in this group, which establish the clear principle that the CAG should have equal access rights to the Government.

Those are the views of the CAG. I have put them on the record because I think that they will be very important to considerations in the other place if, as we expect, the Government press their amendments in this group and the matter returns to the other place.

The purpose of those Lords amendments, and of their House of Commons predecessors, was not to create anything new, but to reinstate Parliament's rights of oversight, which were established in the Exchequer and Audit Departments Act of 1866, 1921 and 1957. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), my predecessor on the PAC, is in the Chamber. I suspect that he will correct me if I am wrong in my suspicion that, had consideration of the National Audit Act 1983 not been foreshortened by the 1983 general election, the powers would have been dealt with and corrected in that legislation. There was certainly an intention to do so.

Therefore, we are talking about reinstating Parliament's rights. To do that, we shall have to deal with the erosion of those powers that has occurred over many decades. I am not making a political point, as the erosion occurred under Governments of all persuasions, from the Wilson Government onwards. Indeed, it began with the creation of those very bodies that the Minister had such trouble defining—non-departmental public bodies. Subsequently, the erosion continued with companies wholly owned by the Government, with contractors and with other bodies outside the usual purview of the CAG.

All those bodies were created to allow the Government to do their business more efficiently, and there is nothing wrong with that. The side effects, however, have suited Whitehall. I do not think that the erosion has necessarily suited Ministers, and I doubt that most Ministers, in whatever Government, have even thought about it. Over the years, the erosion has suited Whitehall and the Sir Humphreys. It is certainly more a sin of the Sir Humphreys than of Ministers.

As I said, the Lords amendments in this group will not cause public money to be followed wherever it goes, and they do not provide a complete right to roam. The amendments are limited to the issue of governmental access. Therefore, both in the Lords and in this place, we have been trying to stop and reverse the process that started with the creation of companies and agencies and allowed them to escape oversight.

The process is more important now than ever before. The Government themselves have said that they are proposing to use the private finance initiative to provide £75 billion worth of value. Therefore, the process affects a huge tranche of public expenditure. If we are to make those PFIs work, as both sides of the House wish, it is vital that Parliament maintains oversight. The set of modifications in the amendments would not necessarily allow that to happen. They would leave Parliament's ability to maintain oversight entirely at the discretion of the Government of the day.

8 pm

We should not assume that the Treasury would permit these rights automatically. Time and again, even in the course of the Bill's passage through Parliament, the Treasury has argued that the Comptroller and Auditor General should not have access to private bodies. That happened in connection with housing associations, which now are known as registered social landlords. It will happen again in connection with the PFI companies that will deliver public services in coming years.

Mr. Letwin

Does my right hon. Friend agree that the Minister's argument about intrusion, which she said was not welcomed by the British Chambers of Commerce and other bodies, has force only if the Treasury intends not to apply the Government's amendment on a general scale?

Mr. David Davis

I can see my hon. Friend's point, but to talk about intrusion, regulatory burdens and inspection overload is to misunderstand how the CAG and the National Audit Office work. It costs about £10 million a year to run the NAO. That is good value for money. The NAO is a minnow when compared with the regulatory arm of Government. Inspections by the CAG and the NAO probably amount to less than one tenth—perhaps only one hundredth—of 1 per cent. of the regulatory burden of any Government. Moreover, such inspections would be necessary only when a problem arose. As a result, the regulatory burden would be very well directed, as I shall show.

In essence, my argument is that, where public money is paid out to achieve major public policy gains, Parliament always has the right to know what is happening. The House is a tax-raising legislature, and its first job is to raise the money. It also approves policies, so on both counts we need to know what is happening. That knowledge should not be at the behest of the Executive.

Mr. William Cash (Stone)

Does the same argument not apply to the BBC? Although it does not raise money by way of taxation through this House, it does raise money through the licence. Should there not be a degree of public audit of the corporation's activities? I understand that there is no access to the BBC's accounts. Can my right hon. Friend confirm that? If true, is that not astonishing?

Mr. Davis

I agree with my hon. Friend. He reflects the views of the Select Committee on Culture, Media and Sport on the matter, and of the report compiled by the Gavyn Davies commission. It is one of my rules of thumb that organisations that protest most about audit almost certainly are those that need it the most. I suspect that that will be true of the BBC in the coming years.

To prove that this is not a dry, theoretical matter, I shall give the House a topical example. Today, the NAO published a report entitled "Overseeing the Focus Housing Association". I remind the House that housing associations can only be accessed by the NAO after negotiation with the Housing Corporation. The report tells the story of a housing association that lost about £1.5 million of public money over four or more years at the beginning of the 1990s.

The Housing Corporation was warned about the problem, but it largely ignored the warnings. The matter was raised by the hon. Member for Birmingham, Erdington (Mr. Corbett), after which the NAO approached the association and began a study.

The fraud that was taking place involved bribes and the other apparatus of fraud. As soon as the NAO study was under way, the details of the fraud surfaced in an unavoidable manner, and the Serious Fraud Office became involved. Three of the people involved have now gone to jail.

In September 1997, the SFO told the NAO that it could resume work on the study. For six months, the Housing Corporation resisted attempts by the NAO to gain access to Focus. In explanation, it tried to maintain that the NAO had not asked before. Then it said that the NAO should tell the corporation what it wanted, and that the corporation would approach Focus and copy any relevant documents to the NAO.

When that tactic failed, the corporation suggested that the NAO should talk to the Department of the Environment, Transport and the Regions. After that, the corporation said that it would sound out the chief executive of Focus, and then asked about the exact nature of the files to be examined. Eventually, it said that the NAO could go to Focus as long as the corporation went as well. After six months, the NAO was allowed access to Focus, and today's report is the result.

So for six months the Housing Corporation resisted the NAO which, as Parliament's auditor, looks into the misuse and misappropriation of public funds. All sorts of things can happen during such a long delay, and all sorts of things can disappear. The NAO report refers to at least one meeting that was not minuted and for which no documents exist.

The Housing Corporation was irresponsible, but its behaviour is not unique. Similar incidents have taken place with regard to whistleblowers. For example, the NAO could not gain access to contractors to a technical college in the north of England. The same thing happened with contractors for what was then known as the Overseas Development Administration. For several years, because of Treasury obstruction, the NAO could not gain access to training and enterprise councils. Until the Secretary of State for Culture, Media and Sport agreed to amend a recent Bill, the NAO could not gain access to Camelot.

That demonstrates why it is ridiculous in practical terms to propose that the House should be beholden to any arm of the Executive before it can examine closely what that arm has been up to. The proposal would be crippling: it would undermine the standing of the Comptroller and Auditor General and, as a result, the standing of the House.

The proposal does not help democracy, and it does not even advance the Government's objective of getting value for money for their public policy aims. As a result, the amendment falls far short of what is needed, which is to reinstate the rights of the House as they applied half a century ago. Those same rights should apply today.

Mr. Edward Davey

I begin by associating my party with what the right hon. Member for Haltemprice and Howden (Mr. Davis) said. He has spoken powerfully at all stages of the Bill's progress through Parliament and, in his role as Chairman of the Public Accounts Committee, he has spoken for the whole House. He made a compelling case.

I have had many discussions with Liberal Democrat peers in the House of Lords. They have been persuaded that extending the institutional jurisdiction of the NAO is the right approach. They are convinced that this is a constitutional issue, involving the relationship between the legislature and the Executive. Interestingly, they also consider that, given that this is a financial matter, they need to listen to the House of Commons. After all, the House of Commons is supposed to be superior in financial matters.

The Government would do well to heed those remarks. They should be aware that people from all parties—certainly from the Liberal Democrat party and, I believe, from the Conservative party in the other place—take this matter seriously and will continue their opposition when this place and the other place start playing ping-pong with the amendments.

The Government should not be surprised at this. When we debated similar amendments in Committee, I warned them that they were getting into danger. I made particular reference to the fact that many Labour Members are extremely sympathetic to such a change. I warned the Government that it would be rather odd for the House of Commons to play ping-pong with the House of Lords over the issue when the majority of right hon. and hon. Members from all sides agreed with the proposals.

I hope that the Government are leaving room for a gracious backdown in due course, although the amendments do not seem to suggest it. Such a back-down may be forced upon them. I do not believe that the Government really want to invoke the Parliament Acts to get their way. By that time, the broadsheet editors—perhaps even the tabloid editors—would be asking what the Government had to hide.

Right hon. and hon. Members should realise the significance of the Lords amendments and of the Bill. It is very unusual for the House of Commons to debate these matters. That point was made time and again in Committee and on Report. The House of Commons does not often focus on Government accounts—we worked out that it happened about every 60 years. Therefore, this is a unique opportunity—we cannot wait another 60 years before putting this matter right. How many other non-departmental public bodies will have been dreamed up in the mean time, and how much more public money will not be open to scrutiny by the NAO? We have to move now.

The Minister has said that the Sharman review is under way and that it will consider this. There is no guarantee that the Sharman review will result in any statutory proposals. The Government have not gone on record as saying that. Even if they did, how could we believe that?

Mr. David Davis

I specifically asked the Chief Secretary whether there was a guarantee, or even a likelihood, of further legislation to carry forward any Sharman proposals, and the answer was no.

Mr. Davey

I think that the whole House is grateful for that intervention, which emphasises the importance of what we are debating. If the House does not grasp the chance before it tonight, we will not get another one for many years.

Accepting the Lords amendment would in no way jeopardise the role and significance of the Sharman review. In many ways, the review would be very timely, coming on the back of such an amendment. It could assist the NAO in discussions with the NDPBs involved, to work out how the NAO could usefully introduce the new powers. It could give guidance to the NDPBs about how the powers might be used. So the Sharman review would still play an important role in this regard and in many other aspects of the remit given to it by the Chief Secretary. In no way would accepting the amendment undermine the Sharman review—I believe that it would strengthen its relevance and purpose to those bodies which benefit from public money.

8.15 pm

I do not want to leave this matter to a taskforce or review. This is a parliamentary matter which this place should decide. We should not be leaving it to reviews led by the great and the good, even though there is distinguished parliamentary representation on the Sharman review. [Interruption.] The right hon. Member for Haltemprice and Howden says from a sedentary position that Lord Sharman is a Liberal Democrat peer. When the right hon. Gentleman was talking about other Members of this House on the review, I am sure it was just an oversight that he forgot to mention my hon. Friend the Member for Newbury (Mr. Rendel), who will, I am sure, give the review distinguished service. However, that is not the point. This House, not reviews, should be deciding these issues of parliamentary scrutiny. The Sharman review will have many other wider issues of public audit to consider.

I do not want to rehash the arguments that have already been made at some length, but the Treasury sometimes seems inconsistent in its attitude to fraud. We hear the Government announcing that they want to clamp down on fraud—to be tough on benefit cheats and those who exploit tax loopholes. The Government have accepted Lord Grabiner's report; we have seen amendments giving the tax authorities huge additional powers to tackle the fraudsters. However, when Parliament is asking the Government to give the NAO—Parliament's watchdog—powers to investigate public fraud, the Government seem to be stepping back. They want to be tough on tax and benefit cheats, but they are not so keen to clamp down on Government cheating. What sort of message does that send out?

The Government's position is absurd as well as inconsistent. They should not, and will not, be taken seriously on fraud if they step back from this. They will have a real difficulty in winning the issue, and when it appears in the newspaper editorials, they will not stand a chance. They certainly do not deserve to.

Mr. Alan Williams (Swansea, West)

I will be brief and, I hope, not too repetitive. It is rather amusing for those of us who served on the Committee considering the Bill to think back to our early sittings, right at the beginning of the parliamentary Session, when we were suggesting amendments. We were told by the Economic Secretary and her colleagues that we must not amend the Bill because the Government needed it in a hurry. However, once it left the House of Commons, they seemed to mislay it in the House of Lords. Recently, it resurfaced, and the Bill that was so urgent that it could not be amended is being brought before the House in the week before the summer recess.

This is typical of the rather inadequate reasons that the Government have given for not accepting sensible amendments to the Bill. We have heard those reasons repeated tonight I do not know how often. I despair of the ability of some Ministers to understand anything outside their brief.

It is perfectly obvious to most people that the purpose of the Bill is as defined in the long title. Yet the mantra has been repeated again today, "It is not in the purpose of the Bill." I am surprised that you did not descend on the Minister from a great height when she said that, Mr. Deputy Speaker, because she was taking over from you the power to decide what is permissible in the House of Commons. Perhaps she is after Madam Speaker's job—I had not thought of that before. Despite what you may say, Mr. Deputy Speaker, the Minister says that we cannot do it. It does not matter what you say, Mr. Deputy Speaker—the Minister has spoken.

The Minister's complaint is that we are dealing with audit. But as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) asked, who brought audit into the Bill, who incorporated it into the long title and who incorporated it into clause after clause but the Government? The arguments that have been made on certain aspects of the Bill are, to my mind, fraudulent.

Now, there is Sharman. Like the right hon. Member for Haltemprice and Howden (Mr. Davis), I am participating in the review—although with no great hope or expectation—simply because we cannot afford to be accused of not participating. However, I do not believe that anyone outside this House should have the right to determine what powers it needs. It is effrontery for the Executive to tell Parliament that we should not have the right to inspect them. For those who are being monitored to say what can be monitored would be mildly comical if we saw it in a Whitehall farce—yet that is what is being proposed.

If the Minister wants to establish confidence in the Sharman exercise, will she undertake that, as it will be a House of Commons matter, it will be decided, like other such matters, on a free vote of the House? I have no doubt that, in the spirit of good will that she professes, she will be eager to give us that reassurance. If she would like to do so in an intervention, it would shorten my speech because I would sit down immediately. She should not feel inhibited or restrained. I ask her to save the House from the rest of my speech by giving us that assurance. The Minister's silence reinforces my worst suspicions and fears, although I am sure that, ultimately, they will be unjustified. However, I am twitching slightly about the Government's intentions.

At the heart of the matter—and we must constantly return to it—is whether we have a parliamentary democracy and parliamentary accountability. Access is fundamental to that—on all Government expenditure and income. If Parliament does not have that access, it cannot exercise proper control over the Executive.

Parliament cannot carry out those duties without the work of the NAO—as the present Chairman of the PAC, its previous Chairman. my right hon. Friend the Member for Ashton-under-Lyne and other members of the Committee confirm. However, the Treasury denies the NAO the rights that it needs. Those rights will be determined by the Treasury. My right hon. Friend and I suggested to Ministers that, as a halfway house solution, such matters could be dealt with on an ad hoc basis in the short term.

As the Minister is aware, I listen carefully to everything that she says. The Treasury now tells us that we must proceed case by case, but in Committee the Minister dismissed that idea. She said that we could not deal with such matters piecemeal. However, she covered her back by saying that we could not deal with them as a whole either. That left us somewhat bemused as to whether we would find a resolution in that impasse.

Such negotiation for access is inadequate for us—for Parliament; we have to go begging to a pathetic little quango that represents no one. For six months, someone's appointee had the right to hold our auditor to account. I would have sacked the chairman and the chief executive of the Housing Corporation. They kept the NAO away from the Focus housing association. They knew that a £1.5 million fraud had been perpetrated against Focus, yet they would not let the parliamentary watchdog in.

Mr. Cash

The right hon. Gentleman makes a powerful case, as indeed did the Chairman of the PAC, my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). The matter is the essence of parliamentary democracy and parliamentary accountability. Does the right hon. Gentleman agree that, if the Treasury is obdurate and stubborn, the remedy is to mount an organised campaign on both sides of the House? Against the Whip, the House should decide that it will insist on those measures. There should be sufficient publicity that the newspapers can add their comments.

Mr. Williams

The hon. Gentleman has been a Member of the House for a considerable time. My right hon. Friend the Member for Ashton-under-Lyne and I have been Members for even longer. It is a long time since I believed that Back Benchers were likely to stage an uprising against the power of the Whips. That happens on few occasions. The patronage and power of the Whips is so great that Back Benchers live in dread of them.

Mr. David Davis

I intervene again on the right hon. Gentleman—I am tempted to refer to him as my right hon. Friend—to prevent him from travelling further into error. Before the previous intervention, he mentioned the prospect of sacking the chairman of the Housing Corporation. He could not, of course, have sacked the permanent secretary at the then Department of the Environment—Mr. Andrew Turnbull, who is now a permanent secretary at the Treasury.

Mr. Williams

We all know of the right hon. Gentleman's devotion to the cause of the PAC. I will not venture further on the point because we should not comment on civil servants who cannot speak in this place.

There is so much nonsense behind the defences that have been made. I do not know whether Lord McIntosh of Haringey, the Minister who replied to the debate in the House of Lords, was badly briefed or whether he does not understand this place. He has never been a Member of this place, so he may not understand the processes of democratic accountability. He said: The C&AG has inspection rights in respect of all non-departmental public bodies…the access needed to investigate and to report to Parliament on irregularity or impropriety…Most importantly— this point was touched on by the Chairman of the PAC— he has the right to carry out value-for-money studies at all of these bodies…the most important form of parliamentary control.—[Official Report, House of Lords, 12 July 2000; Vol. 615, c. 240-41.] I have never heard such a constitutional absurdity. It must have been in my noble Friend's brief because he could not have been daft enough to think it up himself. As he pointed out in another part of his speech, there are more than 200 executive NDPBs and they are only a third of all NDPBs. The NAO produces 50 reports a year. Does anyone seriously suggest that the most important control by Parliament is a value-for-money study? The NAO deals with individual aspects of the actions of individual organisations. If the NAO does not have the fundamental right of access where required, we neuter its role.

I do not want to delay hon. Members, because I realise that we shall not receive a reasonable response to our arguments. I merely want to record that this is far more than a debate about auditing, it is about the power of Parliament against the Executive. In this Bill, the Executive are winning.

8.30 pm
Mr. Brooke

I shall be extremely brief in this, my first contribution to the entire proceedings on the Bill. My only qualification for making a contribution at this late stage is that I hold a masters degree in business administration. During Parliament's 735 years, only two MBAs have sat in a Cabinet. After the speech of my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), I am confident—as I have been before, but it is confirmed this evening—that he will unquestionably be the third.

This debate is part of a great roll of parliamentary history, a fact that has been alluded to by several speakers in the debate. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred to the National Audit Act 1983, and that falls into the roll-call of legislation from 1866, 1921 and 1957.

Another event occurred in 1983. It was on the Monday of holy week when the then Prime Minister dined out the then permanent secretary to the Treasury and asked him over dinner whether he had any regrets. He said, "Prime Minister, if you had not asked me, I would not have dreamed of referring to any regret at all. But I do have a single regret. In all my time in the Treasury, the Board of the Treasury has never met." The Prime Minister asked for further information and learned that the board's own roll-call had been in 1677, 1827, 1856 and 1919. By the end of the meal she said, "I agree that the Board of the Treasury has not met since 1919, but it will meet before you cease to be permanent secretary." Before the election, on Maundy Thursday of holy week in 1983, the board met.

This is a great event. The fact that only 20 of us have gathered in the Chamber to take part in this debate makes the point, in a sense. If this were a lesser event in this great Parliament's history, no doubt the place would be crowded. There are only a limited number of people who take the closest possible interest in this issue, and I shall not go over all the points that my right hon. Friend the Member for Haltemprice and Howden made so admirably. Those who were not in the Chamber when he made them missed a considerable parliamentary contribution.

I listened closely to the Economic Secretary defending the Government's position on the ground that it was fundamentally founded on the Sharman review, and I heard my right hon. Friend say that if he had believed that the review was going to be used in that way, he would not have been prepared to serve on it. It is an absolute Exocet to the Government's position if the Chairman of the Public Accounts Committee was put on the review body under what must be regarded as a slightly false premise.

My judgment is that of a visitor to the debate who has taken part only at its end. The London business school has been in existence for 36 years, and it is regarded as the best business school in the world outside the United States; many American business schools go back 100 years. At all stages of the Bill's proceedings, it has been worth making the case for the London business school to examine this issue. It is a classic instance showing where the role of Government should be played out in terms of the relationship between the Executive and Parliament.

Many in the House will have listened to people reading out football results, and there is a particular tone of voice in which a result is read out, to suggest in advance that it was a draw. On the basis of what I have heard this evening, it is Haltemprice and Howden 4, Welwyn Hatfield 0. I appreciate that there will be a return match, but at the moment the Government are a long way behind.

Mr. Sheldon

As always, I was much entertained by the right hon. Member for Cities of London and Westminster (Mr. Brooke). He is right to draw attention to the House's original intention to have some control over the expenditure of public money. The right to audit Government effectively was supposed to have been settled a long time ago—back in 1861 when Gladstone set up the Public Accounts Committee. The Exchequer" and Audit Departments Act 1866, which established the Comptroller and Auditor General, followed on from that.

The purpose of that legislation was to audit, through the CAG, all the money examined by the Parliament. The long title of the 1886 Act noted that its purpose was to regulate the Receipt, Custody and Issue of Public Moneys and to provide for the audit thereof. There were no exceptions to that; it covered the lot.

As my great friend John Garrett has shown in his great work, over the years the Treasury hijacked the rights of the House of Commons. Therefore the return match, as the right hon. Gentleman called it, was brought back into focus, and the result was the National Audit Act 1983. That was essential, to re-establish control by the House.

Access by the CAG should be the result of a right, and should not involve permission. He should not have to seek the permission of the people whom he is auditing; he should have an unqualified right of access—and I should not have to ask for that.

In 1983, the argument for the need to follow public money wherever it went was put strongly. However, I understand the anxieties expressed by some people at that time, because the National Audit Office was untried and did not have a record of achievement; it had only just been set up. However, it now has 17 years' experience, and we have seen its work and that of the CAG. The NAO constantly produces splendid reports, and 50 value-for-money reports have been published, so its reputation has never been higher. Given that fact, one might have expected the Treasury to be a little more relaxed about such matters and accept the next stage in the process, which would have been to re-establish what had been decided 140 years ago.

It is sad that the Treasury reacted in such a fashion. The opportunity to consider this issue is not likely to recur for another 20 or 30 years, or even more—it is only because of the Bill that we have had the opportunity to consider it now. This is the only chance that we have to resolve the problem. I am sure that the Sharman review is splendid and will provide a fair amount of information, but it will not make the decisions. Only the House can make such decisions, and I think that we have missed a great opportunity.

Mr. David Rendel (Newbury)

We are debating an unusual issue. I begin where the right hon. Member for Swansea, West (Mr. Williams) left off when, in a powerful speech, he made the point that this is a matter between Parliament and the Executive. It is not the normal type of party political issue that we spend so much time debating in the House, usually fairly uselessly.

Parliament is on one side and the Executive are on the other. That is so much so, that before we came into the Chamber, I thought that we might find a string of those whose names have been loosely or closely associated with the forthcoming vacancy for Speaker speaking on behalf of Parliament, so as to demonstrate the strength of their feelings about the need for Parliament to control the Executive. I was therefore somewhat surprised to hear the right hon. Member for Cities of London and Westminster (Mr. Brooke) speak. I thought that it might be a comeback attempt on his behalf, but perhaps that is not the case.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I am afraid that some of us made the mistake of coming in to listen to the debate. Of course that is always a problem in the House of Commons, because some of us are frequently persuaded that we might have to protect Parliament, even if we do so silently.

Mr. Rendel

I am delighted to hear what is perhaps a hint of what we may see in the Division Lobby shortly.

I am the third member of the Public Accounts Committee to speak in the debate, and this is one of the rare issues on which there is, at least in the Committee, complete cross-party agreement on what should be done. I hope that Parliament will pay attention to the fact that the Public Accounts Committee is united and determined on this issue. After all, those of us who are members of the PAC are the watchdogs of Parliament's rights over the Executive. I hope that hon. Members who are not members of the PAC will pay attention to the fact that there are such strong feelings about the issue, which are an important pointer to their best interests, as well as ours.

It is extraordinary that the Government are taking the line that they have taken—not least because to quite a large extent they seem to understand the importance of giving the National Audit Office the right of access to areas to which it might not previously have had access. That point has been made before, but the Government deserve to have it made again. The previous Government set up many non-departmental public bodies without giving the NAO proper access. On the whole, the present Government have behaved very properly and provided the NAO with access when a new NDPB is set up.

It is therefore a particular surprise that the Government are taking the line that they appear to be taking tonight. A point that has been made already, but which needs to be emphasised, is the fact that it is important for the Government themselves that the NAO should be in a position to look into all Government accounts. There is nothing worse for a Government than discovering a long way down the track how poorly their money has been spent. First, the later they discover that the more embarrassing it is for them, and secondly, by that time that much more money—which the Executive could have spent on a vote-catching idea that might have brought them greater popularity—has been wasted. It must therefore be in the Government's best interests not to take a short-term view, but to consider the longer-term interests that would be served by giving the NAO full access to all accounts.

Finally, I wish to make a point about the Economic Secretary's arguments. She seemed to think that the NAO was in danger of acting in grossly irresponsible way and, if given the sort of powers that we are discussing, suddenly wishing to pry into every individual's financial affairs. She seemed to think that it might act as it has not acted so far, just for the hell of it, or just because it was interested in Mr. Bloggs' personal finances. Frankly, I do not think that the NAO has ever acted in that way, and the Economic Secretary's idea that it would act in an overburden some way towards small business means that she apparently thinks that if it were given such powers, its future behaviour would be totally unlike its behaviour in the past. She should not have made that assumption, because it is not realistic, and I hope that she will withdraw it when she winds up.

Mr. Cash

There is no need for me to make a long speech at this stage. The arguments have been presented well by some speakers who are extremely distinguished in this House. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon), a former chairman of the PAC, is in alliance with my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), its current chairman, and other PAC members have weighed in as well.

As a member of the House's other main Scrutiny Committee—the Select Committee on European Scrutiny—I am conscious of the fact that it is essential that Scrutiny Committees are listened to. If the juggernaut of Government can steamroller over the views of Scrutiny Committees—which is, in effect, what is happening today—one is bound to ask what on earth is going on. I do not need to go into the intricacies of the argument that has already been deployed. I think I am right in saying that the right hon. Member for Swansea, West (Mr. Williams) is the Chairman of the Select Committee on Liaison—[Interruption.] Apparently, he is not. None the less, the Liaison Committee recently produced an important report on the Whips' power, and on whether they should have their present degree of control over Committees.

Mr. Deputy Speaker

Order. We have an amendment before us. We must address our remarks to it and not go so wide as to discuss other Committees and the powers of the Whips.

8.45 pm
Mr. Cash

I accept your guidance with pleasure, Mr. Deputy Speaker. In a nutshell, the matter before us raises a question that is at the heart of our democratic system and the system of accountability. It is easy for people to make grandiose statements and then, somehow or other, for their remarks to float on the wind. The reality is that this matter raises such questions, and it is inconceivable that the amendment should not be accepted. I wait with interest to see how the Economic Secretary will handle herself, because, quite frankly, she is on the rack.

Mr. Flight

I just want to make the point that the Bill sets up Partnerships UK, with the intention of expanding considerably the private finance initiative activities in public-private partnerships. I hope that those partnerships are successful, as they are frequently the most efficient way of delivering to the public services that are now the duty of the Government. If, over the next decade, many areas of public service are to be handled on a mixed public-private basis, it is fundamental that Parliament have the power to follow by audit the money involved. It is a new, changed territory, to which, as matters currently stand, access for audit is strictly limited.

Our debate on Lords amendments does not touch on the PFI part of the Bill. However, if the Bill is passed without the National Audit Office having the ability to prod and examine in great depth what happens in public-private partnerships, Parliament will have surrendered a crucially important power.

Mr. Letwin

Our debate comes at the end of a long sequence of debates on this subject. On an earlier occasion, I was teased rather amiably by the right hon. Member for Swansea, West (Mr. Williams) for having contributed at too great a length to a previous debate. However, it is inconceivable that we can make the accusation that tonight's debate is too wordy—at least until I begin.

We heard powerful contributions from my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the right hon. Members for Swansea, West and for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Newbury (Mr. Rendel)—perhaps the four most notable members, past and present, of the Public Accounts Committee who are still Members of the House. We heard also from my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke), whose absence from our proceedings we regret. We would have liked to have heard from him endlessly on this subject. We even called forth from the depths my hon. Friend the Member for Stone (Mr. Cash), who felt compelled to come to the House, and we had a silent contribution from the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), whom some of us hope to see in another position on another occasion. We find that there is cross-party agreement.

Why is all this happening? The Economic Secretary eloquently read out yet another of the splendidly mellifluous briefs that she has been given throughout the proceedings. Why, following that, do we hear a universal chorus echoing the word "no" around the Chamber? It is because, I regret to say, the mellifluous prose read out by the Economic Secretary lacks logic, as it has on previous occasions. It also, alas, contradicts the tradition and spirit of our parliamentary democracy. Those two lacunae give rise to frustration in the House.

I shall take head on three arguments at the centre of the Economic Secretary's rhetoric. The first relates to drafting. As other contributors have said, that argument is the last refuge of the Sir Humphrey figure in Whitehall. It is being made after months of investigation in which repeated amendments and offers of redrafting of amendments have been put forward. The hon. Member for Kingston and Surbiton (Mr. Davey), the right hon. Member for Swansea, West and I—and, for all I know, my right hon. Friend the Member for Haltemprice and Howden—have produced four, if not five, variants of these amendments. In addition, the House of Lords has made its own amendments.

At each of those stages the combined might of the intellects in the Treasury, including the Treasury Solicitor, and of parliamentary draftsmen could, surely to goodness, have been brought to bear on the deficiencies about which the Economic Secretary waxed lyrical. This is not a drafting problem. Drafting is the not particularly adequate shield behind which the Economic Secretary seeks to hide from the slings and arrows of argument.

The Economic Secretary's major argument concerns intrusion. Ministers have been making this argument from the beginning of the debate. I understand the essence of the argument and it is not without merit, until one pursues it to its conclusion. Ministers argue that it would be horribly intrusive for the private sector to have the NAO coming down on it because that would be an unpremeditated additional audit and a huge regulatory burden. The hon. Member for Newbury and my right hon. Friend the Member for Haltemprice and Howden pointed out that it is unlikely that a body as small as the NAO could be highly intrusive in auditing the many thousands of recipients of public funds the length and breadth of Britain.

My right hon. Friend also pointed out that at an early stage he and his colleagues on the PAC conceded the principle that the access should reach only as far as the Government themselves seek to reach. I, personally, regret that concession because it may restrict the scope of the NAO's activities. I do not know whether this point has penetrated the ministerial or official mind, and it has never been reflected in any statement that Ministers have made to the House, but this is a killer concession for their argument.

It cannot be held by the Government that the Government are too intrusive, because the Government could do something about that; they could restrict their own access. Nor can the Government logically argue that if they have a right and, I suppose, therefore, a duty to inspect the accounts of various bodies, Parliament should not be concerned with them. That is to suggest that the scope of Parliament is intrinsically inferior to, and more reduced than that of the Government, and even in the wildest imaginings of the Leader of the House the Government could not conceivably espouse that constitutional doctrine. The intrusion argument is another shield behind which Ministers seek to hide from the slings and arrows of the House.

I turn now to the real point, which is that the Treasury wants to keep the initiative. It wants to continue to be able to decide where the PAC, the NAO and the Comptroller and Auditor General will have access and where they will not. It wants to take advice from Lord Sharman and other quarters, but in the end it wants to decide access. The Executive want to decide which parts of the Executive are open to inspection and which are not. That is the purpose of the Government's amendment in lieu, and it has been their signal purpose throughout these debates.

It is not right for the Executive to decide how far the Executive should be open to inspection any more than it would be right for any of us to decide how far we should be open to inspection by the courts or the police. These matters have to be decided by law, and not by administrative Acts of the Treasury. That is a point on which every speaker in the debate is unified, bar the Economic Secretary.

I make that point specifically to put it on record for their lordships, to affirm their decision, which I hope they will make in a few days, to send this amendment back to this House. I hope that they will send it back again and again, if necessary, until at last the Government concede the point, or see fit to use the Parliament Acts to defeat Parliament—an irony that will not escape the media or the nation—or the Lords triumph. I hope that we will find that the Lords, ironically, defend Parliament against the Executive.

Mr. Cash

Is my hon. Friend inclined to adopt the view that I expressed in a previous intervention? It is indeed incongruous that we should need to use the appointed Lords to achieve an important principle, namely, the preservation of accountability and democracy. Therefore, in the light of the clear cross-party consensus expressed by extremely distinguished members of the Public Accounts Committee, should not Government Backbenchers be encouraged to defy the whip?

Mr. Letwin

New as I am to Parliament, I share the scepticism that has been expressed by the right hon. Member for Swansea, West.

It is a sad state of affairs that, in such an important matter, because of the power of the Whips, the House of Commons has to rely on another body—one that is not so subject to the Executive—to defend its privileges. Does that not prove that we need to be extremely cautious about allowing the Executive to exercise the very powers that they seek to re-obtain through their amendment in lieu?

Miss Melanie Johnson

I shall start with a couple of general points, the first of which is that I do not seek to reduce the powers of Parliament in any way. In respect of the issues raised in the debate, especially by the right hon. Member for Haltemprice and Howden (Mr. Davis), my desire and that of the Government is to ensure that the right sort of accountability, probity and financial properness is found in the affairs of Government, and that the Public Accounts Committee is able to carry out its job with the full support of the National Audit Office.

Many of the hon. Members who have contributed to the debate have emphasised some difference between the Government and the House, but it is important to note that, as often happens, only those who disagree with the Government have spoken. They are entirely within their rights to make their points—

Mr. Brooke

Will the Economic Secretary give way?

Miss Johnson

I am trying to develop a general argument, but I shall give way on this occasion.

Mr. Brooke

Does the hon. Lady agree that it is a noticeable feature of the debate that nobody other than herself has spoken for the Government's point of view?

Miss Johnson

I am sure that I do not have to tell the right hon. Gentleman that the picture painted this evening is not an unusual one: it is often those who want to disagree with the Government who come to the Chamber to express their views, whereas those who agree are silent.

The debate has run together three main issues to an extent that the resulting elision is unacceptable. The first issue is access for audit purposes by the Comptroller and Auditor General, which provided the focus of debates during previous stages of the Bill's passage. I draw the attention of the right hon. Member for Haltemprice and Howden to his description of the problems arising from the Bill. Without dwelling on the difficulties that he explored at some length on 1 March on Report, I simply point out that he repeatedly mentioned the CAG's access rights. That was much of the focus of his comments. That issue is different from some of the others that have been raised.

My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) raised the question of value-for-money audit, which is different. Indeed, I made that point—although not in any way to usurp the rights of the Speaker. The Speaker and Deputy Speakers will always decide, quite rightly, which matters a Bill covers. Issues on access for value-for-money studies were discussed fully during the passage of the National Audit Act 1983, but have not been the subject of debates on this Bill. In fact, it has been agreed until now that the issues surrounding clause 8 concern access needed for audit of departmental accounts alone. Issues concerning access for value-for-money studies will be considered by Lord Sharman during the review.

I turn to the points made about inadequate drafting. The scepticism of the hon. Member for West Dorset (Mr. Letwin) about whether something could easily be done was unhelpful. Several attempts—unsuccessful ones—have been made to draft an amendment to define a non-departmental public body, which illustrates just how difficult it is, as I said. NDPBs form a wide and disparate group. The most sensible way in which to deal with the issue would therefore be to designate them by order, as proposed in the Government's amendments to the Lords amendments.

9 pm

Mr. Letwin

Although I appreciate the Economic Secretary giving way and the delicious irony of her idea that designating by order is justified by the difficulty of defining it in statute, which could have a far wider application, did she allow parliamentary draftsmen and the Government's legal advisers to assist those seeking to achieve this end to improve the drafting of their amendments at any stage during the passage of the Bill?

Miss Johnson

I am not aware of the contact between parliamentary draftsmen and any Opposition Member, although such contact does not normally go on. I am not aware of any approaches to the Treasury seeking direct engagement on the point, but I reiterate that the task is and has been difficult, and no one has proposed a workable definition. That is the point at issue.

Mr. David Heath (Somerton and Frome)

Will the hon. Lady give way?

Miss Johnson

The hon. Gentleman has only just arrived and has not been present during the debate to make any point or hear any of it. Therefore, I shall give way to other hon. Members, but shall develop my argument a little before I do so.

There are three issues. One is access for audit purposes. Secondly and separately, there is value for money. There is a third point about investigation of fraud, which is also entirely different and separate and not directly bound up with the question of access for audit purposes. The matters have been run together in many speeches, which has not helped the clarity of this evening's debate.

The Government of course have a role as a regulator and investigator, but, properly, we do not want to give the NAO an automatic right to similar access, thereby duplicating regulation and investigation. There must be a mechanism to achieve balance, as the Government amendment seeks to do.

On the relationship between business and regulation, I refer to an article in Accountancy Age on 27 January this year, which was headed: Business backlash over plans to give NAO powers of access. The article states: Business has reacted with deep reservation at proposals to allow the NAO to audit firms and companies handling the working families tax credit. The issue involves red tape and balance. The hon. Member for Newbury (Mr. Rendel) said that in the past, that had caused no difficulty. However, suspicion and concern exist about what might happen if the power to make decisions were given without constraint. In the same way, there may be concern about what access the NAO may have and what it may do in future.

At present, the NAO has access to the private sector by agreement. That makes it possible to ensure that the NAO achieves a balance between its access demands and the need to keep burdens to the minimum necessary. The Lords amendment would remove the need for the NAO to agree and thus to balance its demands against the legitimate concerns of business.

Mr. Letwin

I am doubly grateful to the Economic Secretary for giving way. Will she tell us whether the argument applies generally? If the Government were hypothetically to conduct their entire activities through NDPBs and the private sector in PPPs, would she argue that the Comptroller and Auditor General should have access to nothing?

Miss Johnson

The hon. Gentleman forgets, and I was disappointed that in their contributions other hon. Members did not mention, that we have given much wider access than existed before, through the changes that we have made, not only by dealing with issues such as Camelot, which was not dealt with by the previous Government, but in clause 8(2)(b), which was added to the Bill on Report—[Interruption.]

Mr. Deputy Speaker

Order. There are so many conversations going on in the Chamber that it is unfair to the hon. Lady who is replying to the debate.

Miss Johnson

Thank you, Mr. Deputy Speaker. Clause 8(2)(b) provides the Comptroller and Auditor General with a new statutory right of access in the cases covered by the clause. In some ways that access goes beyond the Government's right of access. That answers the hon. Member for West Dorset, who asked why the Comptroller and Auditor General should not have access, if the Government have access. I have given an example in which the CAG's right of access goes beyond that of Government Departments, a point that is not generally recognised.

Mr. Rendel

I am grateful to the hon. Lady for giving way. She mentioned an argument that I made a few moments ago, and claimed that there would be some concern, presumably on the part of business, if the Comptroller and Auditor General were given the increased powers that the amendment seeks. Is she saying that she would be worried that those powers might be abused, or is she saying that businesses may be worried, but that in practice that worry would be unnecessary because, in her view, the Auditor General would not abuse those powers?

Miss Johnson

I wish I had a crystal ball. I am sure that all right hon. and hon. Members would agree that a crystal ball would be very handy. I do not have one, nor does anyone else in the Chamber. Therefore none of us can say for certain how an unfettered power could be used by a future body. I am not saying that the power would be used in the way suggested, or that it would necessarily cause difficulties, but none of us can say how it would be used.

Clause 23 provides the same access to the Comptroller and Auditor General's audits of the accounts of non-departmental public bodies as clause 8 provides for his audit of departmental accounts. Clause 23 therefore provides a new power for him to be made auditor of those non-departmental public bodies, which he is prevented from auditing by current statute. That was done to tackle the many points that hon. Members made in their discussions on access. It is relevant to the debates that we have held over a long period about making right of access easier.

The right hon. Member for Haltemprice and Howden mentioned today's National Audit Office report on Focus housing association. His comments go to the heart of the third aspect that I want to consider: the investigation of fraud. The Comptroller and Auditor General will not normally be the identifier because the external auditor of accounts would not be the usual, prime means of identifying fraud, which is primarily identified—

Mr. David Davis


Miss Johnson

I shall finish my sentence before giving way to the right hon. Gentleman. Fraud is primarily identified by internal audit, whistleblowing, police serious fraud office activity as well as ordinary management controls, regulation and regulators' activities. All those matters are not the responsibility of the Comptroller and Auditor General.

Mr. Davis

Many of the Economic Secretary's comments have been wrong. However, her current remarks are the most outrageous. First, the Government's whistleblowers' measure names the Comptroller and Auditor General as an appropriate recipient of whistleblowers' information. Secondly, she is currently considering a case in which the information came from a whistleblower and the regulatory body failed to follow it up. Thirdly, she should read some National Audit Office reports. Fraud has featured in at least three in the past year. I refer her specifically to the report on further education colleges and the weaknesses of the external and internal auditors.

Miss Johnson

It is for all internal and external auditors to identify fraud. I agree with the right hon. Gentleman's comments about the failure of the regulator; I was about to make the same point. It is the reason for the conclusions to today's National Audit Office report, which states that regulators should be concerned not only with the existence of internal controls in the bodies that they regulate, but with their continued operation. The report condemns the Housing Corporation for the laxity of its regulatory grip. That is right and proper. However, it is not the Comptroller and Auditor General's role to be the regulator. The regulator is the Housing Corporation. It has apparently done its job badly. That is a valid point, but it does not relate to the extension of the powers of the Comptroller and Auditor General.

Mr. Alan Williams

Does my hon. Friend acknowledge that when the regulator, as she calls it—in this case, the Housing Corporation—fails to do its duty, it is absurd that the auditor for this House has to ask permission of that regulator before, as the report states, it has the right to examine "impropriety or irregularity"? It must negotiate with the failed regulator to do the regulator's job.

Miss Johnson

I do not believe that my right hon. Friend made an accurate summary of what happened. As I understand it, the relevant fraud took place between 1991 and 1995. The NAO undertook an initial study in the autumn of 1996 on the basis of documents held by the Housing Corporation. It did not identify the fraud because, as the right hon. Member for Haltemprice and Howden said, it had already been identified. The NAO undertook the study in autumn 1996 on the basis of documents held by the Housing Corporation, which regulates the housing associations, and had taken action against Focus.

At no point in the initial study did the NAO request access directly to Focus housing association. Indeed, it specifically stated that it would not seek such access. The NAO only requested access to Focus in September 1997, and access was agreed by February 1998. In a sense, not too much should hang on a particular example, and that is but one example, and the point is that it is about the identification of fraud, not about the prime role of the Comptroller and Auditor General—[Interruption.]

Mr. Deputy Speaker

Once again, there are too many conversations in the Chamber. That is unfair; the Economic Secretary is responding to the debate and she should be heard.

Miss Johnson

Thank you, Mr. Deputy Speaker.

The CAG's prime role is not to seek out and identify fraud, even where the CAG carries out the audit. For example, there was extensive fraud in the Metropolitan police and the CAG was the auditor, but the fraud was not identified as a result of that activity. In no way do I criticise the NAO or the CAG for that failure because the prime role of external auditors is not to identify fraud. As have I said, such matters are dealt with in many ways. In that case, one of the prime roles, which has clearly failed, is that of the regulator. That involves a different set of issues from those before this evening.

To summarise—[Interruption.] The right hon. and hon. Gentlemen who have just cheered clearly did not hear their hon. Friends argue that the primacy of Parliament over the Executive is at stake. Clearly, they are in a great hurry to reach a conclusion.

We have done much to meet the future needs of access required by the CAG. The Sharman review will provide a further opportunity fully to consider such matters. It must be remembered that the order-making power will be exercised only after consulting the CAG and that it will be subject to the affirmative procedure in both Houses of Parliament. The order-making power that we propose represents a pragmatic response to extending the CAG's rights in the knowledge of the setting up of the Sharman review.

For the reasons that I have given, the issues that have been raised about value for money are new to the Bill's consideration, which has been extensive and taken place on many evenings in Committee and in another place as well as in the Chamber. The question of fraud is outwith that consideration. We are keen that fraud should be tackled and dealt with. No Government could have any other interest than ensuring that fraud is reduced to an absolute minimum and discovered as quickly as possible, but that is not the issue here. Business must find the power workable; the CAG must be given appropriate access; and the Sharman review must have an input into what the House does in future under the order-making power that we propose.

Question put, That this House disagrees with the Lords in the said amendment:—

The House divided: Ayes 311, Noes 158.

Division No. 282] [9.19 pm
Abbott, Ms Diane Blizzard, Bob
Adams, Mrs Irene (Paisley N) Borrow, David
Ainger, Nick Bradley, Keith (Withington)
Ainsworth, Robert (Cov'try NE) Bradley, Peter (The Wrekin)
Alexander, Douglas Bradshaw, Ben
Allen, Graham Brinton, Mrs Helen
Anderson, Donald (Swansea E) Brown, Rt Hon Gordon(Dunfermline E)
Armstrong, Rt Hon Ms Hilary
Ashton, Joe Brown, Rt Hon Nick (Newcastle E)
Atherton, Ms Candy Brown, Russell (Dumfries)
Atkins, Charlotte Burden, Richard
Banks, Tony Burgon, Colin
Barnes, Harry Butler, Mrs Christine
Barron, Kevin Caborn, Rt Hon Richard
Bayley, Hugh Campbell, Mrs Anne (C'bridge)
Beard, Nigel Campbell, Ronnie (Blyth V)
Beckett, Rt Hon Mrs Margaret Campbell-Savours, Dale
Begg, Miss Anne Cann, Jamie
Bell, Stuart (Middlesbrough) Caplin, Ivor
Benn, Hilary (Leeds C) Casale, Roger
Benn, Rt Hon Tony (Chesterfield) Caton, Martin
Benton, Joe Cawsey, Ian
Bermingham, Gerald Chapman, Ben (Wirral S)
Berry, Roger Chaytor, David
Best, Harold Chisholm, Malcolm
Blears, Ms Hazel Clapham, Michael
Clark, Rt Hon Dr David (S Shields) Healey, John
Clark, Paul (Gillingham) Henderson, Ivan (Harwich)
Clarke, Charles (Norwich S) Hepburn, Stephen
Clarke, Eric (Midlothian) Heppell, John
Clarke, Rt Hon Tom (Coatbridge) Hesford, Stephen
Clarke, Tony (Northampton S) Hill, Keith
Clelland, David Hinchliffe, David
Clwyd, Ann Home Robertson, John
Coaker, Vernon Hope, Phil
Coffey, Ms Ann Hopkins, Kelvin
Cohen, Harry Howarth, Alan (Newport E)
Connarty, Michael Howarth, George (Knowsley N)
Cook, Frank (Stockton N) Howells, Dr Kim
Cooper, Yvette Hoyle, Lindsay
Corbett, Robin Hughes, Ms Beverley (Stretford)
Corbyn, Jeremy Hughes, Kevin (Doncaster N)
Corston, Jean Humble, Mrs Joan
Cranston, Ross Hurst, Alan
Crausby, David Hutton, John
Cryer, Mrs Ann (Keighley) Iddon, Dr Brian
Cryer, John (Hornchurch) Illsley, Eric
Cummings, John Jackson, Helen (Hillsborough)
Cunningham, Jim (Cov'try S) Jamieson, David
Curtis-Thomas, Mrs Claire Jenkins, Brian
Dalyell, Tam Johnson, Alan (Hull W & Hessle)
Darling, Rt Hon Alistair Johnson, Miss Melanie(Welwyn Hatfield)
Darvill, Keith
Davey, Valerie (Bristol W) Jones, Rt Hon Barry (Alyn)
Davies, Rt Hon Denzil (Llanelli) Jones, Mrs Fiona (Newark)
Davies, Geraint (Croydon C) Jones, Helen (Warrington N)
Davis, Rt Hon Terry(B'ham Hodge H) Jones, Ms Jenny(Wolverh'ton SW)
Dawson, Hilton Jones, Jon Owen (Cardiff C)
Dean, Mrs Janet Jones, Dr Lynne (Selly Oak)
Denham, John Jones, Martyn (Clwyd S)
Dismore, Andrew Jowell, Rt Hon Ms Tessa
Dobbin, Jim Keeble, Ms Sally
Dobson, Rt Hon Frank Keen, Alan (Feltham & Heston)
Donohoe, Brian H Keen, Ann (Brentford & Isleworth)
Doran, Frank Kennedy, Jane (Wavertree)
Dowd, Jim Khabra, Piara S
Drew, David Kidney, David
Eagle, Angela (Wallasey) Kilfoyle, Peter
Eagle, Maria (L'pool Garston) Kumar, Dr Ashok
Edwards, Huw Ladyman, Dr Stephen
Efford, Clive Lawrence, Mrs Jackie
Ellman, Mrs Louise Laxton, Bob
Ennis, Jeff Lepper, David
Field, Rt Hon Frank Leslie, Christopher
Fisher, Mark Levitt, Tom
Fitzpatrick, Jim Lewis, Ivan (Bury S)
Fitzsimons, Mrs Lorna Lewis, Terry (Worsley)
Flint, Caroline Lloyd, Tony (Manchester C)
Foster, Rt Hon Derek Lock, David
Foster, Michael Jabez (Hastings) Love, Andrew
Foster, Michael J (Worcester) McAllion, John
Fyfe, Maria McAvoy, Thomas
Gardiner, Barry McCabe, Steve
George, Bruce (Walsall S) McCafferty, Ms Chris
Gerrard, Neil McDonagh, Siobhain
Gibson, Dr Ian Macdonald, Calum
Godman, Dr Norman A McDonnell, John
Godsiff, Roger McGuire, Mrs Anne
Goggins, Paul McIsaac, Shona
Golding, Mrs Llin McKenna, Mrs Rosemary
Gordon, Mrs Eileen Mackinlay, Andrew
Griffiths, Jane (Reading E) McNamara, Kevin
Griffiths, Win (Bridgend) McNulty, Tony
Grocott, Bruce MacShane, Denis
Gunnell, John McWalter, Tony
Hall, Mike (Weaver Vale) McWilliam, John
Hail, Patrick (Bedford) Mahon, Mrs Alice
Hamilton, Fabian (Leeds NE) Mallaber, Judy
Hanson, David Marsden, Gordon (Blackpool S)
Harman, Rt Hon Ms Harriet Marshall, David (Shettleston)
Heal, Mrs Sylvia Marshall, Jim (Leicester S)
Marshall-Andrews, Robert Sedgemore, Brian
Maxton, John Shaw, Jonathan
Meacher, Rt Hon Michael Sheerman, Barry
Meale, Alan Short, Rt Hon Clare
Merron, Gillian Simpson, Alan (Nottingham S)
Michael, Rt Hon Alun Skinner, Dennis
Michie, Bill (Shef'ld Heeley) Smith, Rt Hon Andrew (Oxford E)
Miller, Andrew Smith, Angela (Basildon)
Moffatt, Laura Smith, Miss Geraldine (Morecambe & Lunesdale)
Moonie, Dr Lewis
Morgan, Ms Julie (Cardiff N) Smith, Jacqui (Redditch)
Morley, Elliot Smith, John (Glamorgan)
Morris, Rt Hon Ms Estelle(B'ham Yardley) Smith, Llew (Blaenau Gwent)
Southworth, Ms Helen
Morris, Rt Hon Sir John (Aberavon) Squire, Ms Rachel
Starkey, Dr Phyllis
Mountford, Kali Steinberg, Gerry
Mudie, George Stevenson, George
Mullin, Chris Stewart, David (Inverness E)
Murphy, Jim (Eastwood) Stewart, Ian (Eccles)
Naysmith, Dr Doug Stoate, Dr Howard
Norris, Dan Strang, Rt Hon Dr Gavin
O'Brien, Bill (Normanton) Stringer, Graham
O'Hara, Eddie Stuart, Ms Gisela
Olner, Bill Sutcliffe, Gerry
Osborne, Ms Sandra Taylor, Rt Hon Mrs Ann (Dewsbury)
Pearson, Ian
Perham, Ms Linda Taylor, David (NW Leics)
Pickthall, Cohn Temple-Morris, Peter
Plaskitt, James Thomas, Gareth R (Harrow W)
Pollard, Kerry Timms, Stephen
Pond, Chris Tipping, Paddy
Pound, Stephen Todd, Mark
Powell, Sir Raymond Truswell, Paul
Prentice, Ms Bridget (Lewisham E) Turner, Dennis (Wolverh'ton SE)
Prentice, Gordon (Pendle) Turner, Neil (Wigan)
Primarolo, Dawn Twigg, Stephen (Enfield)
Prosser, Gwyn Tynan, Bill
Purchase, Ken Vis, Dr Rudi
Quin, Rt Hon Ms Joyce Walley, Ms Joan
Quinn, Lawrie Ward, Ms Claire
Radice, Rt Hon Giles Wareing, Robert N
Rammell, Bill Watts, David
Rapson, Syd White, Brian
Raynsford, Nick Whitehead, Dr Alan
Reed, Andrew (Loughborough) Wicks, Malcolm
Williams, Alan W (E Carmarthen)
Reid, Rt Hon Dr John (Hamilton N) Williams, Mrs Betty (Conwy)
Roche, Mrs Barbara Wills, Michael
Rooney, Terry Winnick, David
Ross, Ernie (Dundee W) Winterton, Ms Rosie (Doncaster C)
Rowlands, Ted Woolas, Phil
Roy, Frank Worthington, Tony
Ruane, Chris Wray, James
Ruddock, Joan Wright, Anthony D (Gt Yarmouth)
Russell, Ms Christine (Chester) Wyatt, Derek
Ryan, Ms Joan
Salter, Martin Tellers for the Ayes:
Sarwar, Mohammad Mr. Don Touhig and
Savidge, Malcolm Mr. Clive Betts.
Ainsworth, Peter (E Surrey) Brady, Graham
Allan, Richard Brake, Tom
Amess, David Brand, Dr Peter
Arbuthnot, Rt Hon James Brazier, Julian
Baldry, Tony Brooke, Rt Hon Peter
Ballard, Jackie Browing, Mrs Angela
Beth, Rt Hon A J Bruce, Ian (S Dorset)
Bell, Martin (Tatton) Burnett, John
Bercow, John Burns, Simon
Beresford, Sir Paul Cash, William
Blunt, Crispin Chapman, Sir Sydney(Chipping Barnet)
Boswell, Tim
Bottomley, Peter (Worthing W) Chope, Christopher
Bottomley, Rt Hon Mrs Virginia Clappison, James
Clark, Dr Michael (Rayleigh) Maclean, Rt Hon David
Collins, Tim McLoughlin, Patrick
Cormack, Sir Patrick Madel, Sir David
Cran, James Malins, Humfrey
Curry, Rt Hon David Maples, John
Davey, Edward (Kingston) Maude, Rt Hon Francis
Davies, Quentin (Grantham) Mawhinney, Rt Hon Sir Brian
Davis, Rt Hon David (Haltemprice) Morgan, Alasdair (Galloway)
Day, Stephen Nicholls, Patrick
Dorrell, Rt Hon Stephen O'Brien, Stephen (Eddisbury)
Duncan, Alan Öpik, Lembit
Evans, Nigel Ottaway, Richard
Ewing, Mrs Margaret Paice, James
Faber, David Paterson, Owen
Fabricant, Michael Randall, John
Fallon, Michael Redwood, Rt Hon John
Fearn, Ronnie Rendel, David
Flight, Howard Robathan, Andrew
Forth, Rt Hon Eric Robertson, Laurence
Foster, Don (Bath) Roe, Mrs Marion (Broxbourne)
Fowler, Rt Hon Sir Norman Rowe, Andrew (Faversham)
Fox, Dr Liam Ruffley, David
Fraser, Christopher Russell, Bob (Colchester)
Gale, Roger St Aubyn, Nick
Garnier, Edward Sanders, Adrian
George, Andrew (St Ives) Sayeed, Jonathan
Gibb, Nick Shephard, Rt Hon Mrs Gillian
Gillan, Mrs Cheryl Shepherd, Richard
Gorman, Mrs Teresa Simpson, Keith (Mid-Norfolk)
Gorrie, Donald Smith, Sir Robert (W Ab'd'ns)
Gray, James Spelman, Mrs Caroline
Green, Damian Spicer, Sir Michael
Greenway, John Spring, Richard
Grieve, Dominic Stanley, Rt Hon Sir John
Gummer, Rt Hon John Steen, Anthony
Hague, Rt Hon William Stunell, Andrew
Hammond, Philip Swayne, Desmond
Hancock, Mike Syms, Robert
Harris, Dr Evan Tapsell, Sir Peter
Hawkins, Nick Taylor, Ian (Esher & Walton)
Hayes, John Taylor, John M (Solihull)
Heald, Oliver Taylor, Sir Teddy
Heath, David (Somerton & Frome) Thomas, Simon (Ceredigion)
Tonge, Dr Jenny
Heathcoat-Amory, Rt Hon David Townend, John
Hogg, Rt Hon Douglas Tredinnick, David
Horam, John Trend, Michael
Howard, Rt Hon Michael Tyler, Paul
Howarth, Gerald (Aldershot) Tyrie, Andrew
Hughes, Simon (Southwark N) Viggers, Peter
Jackson, Robert (Wantage) Waterson, Nigel
Jenkin, Bernard Webb, Steve
Key, Robert Wells, Bowen
King, Rt Hon Tom (Bridgwater) Whitney, Sir Raymond
Kirkbride, Miss Julie Whittingdale, John
Kirkwood, Archy Widdecombe, Rt Hon Miss Ann
Laing, Mrs Eleanor Wigley, Rt Hon Dafydd
Lait, Mrs Jacqui Wilkinson, John
Lansley, Andrew Willetts, David
Leigh, Edward Willis, Phil
Letwin, Oliver Wilshire, David
Lidington, David Winterton, Nicholas (Macclesfield)
Lilley, Rt Hon Peter Yeo, Tim
Lloyd, Rt Hon Sir Peter (Fareham) Young, Rt Hon Sir George
Lyell, Rt Hon Sir Nicholas
MacGregor, Rt Hon John Tellers for the Noes:
McIntosh, Miss Anne Mr. Peter Luff and
MacKay, Rt Hon Andrew Mr. Peter Atkinson.

Question accordingly agreed to.

Lords amendment disagreed to.

Mr. Nigel Waterson (Eastbourne)

On a point of order, Mr. Deputy Speaker. As you may be aware, the Government were heavily defeated yet again in the Lords this evening on section 28. Has a Minister requested permission to make an urgent statement to the House this evening, as would be entirely right and proper, on whether the Government intend to abandon this ill-thought-out provision so that the rest of the Bill can have a fair passage?

Mr. Deputy Speaker (Mr. Michael J. Martin)

That has nothing to do with the Chair.

Lords amendments No. 6 and 7 disagreed to.

Government amendments (a) and (b) in lieu of Lords amendments Nos. 6 and 7 agreed to.

Lords amendment No. 8 disagreed to.

Lords amendments Nos. 9 and 10 agreed to [Special Entry].

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