§ The Chief Secretary to the Treasury (Mr. Andrew Smith)
With permission, Mr. Speaker, I should like to make a statement on the Government's response to Lord Sharman's report, "Holding to Account", which made recommendations about audit and accountability in central Government. Copies of our response are available in the Vote Office.
The structure of audit and accountability, springing from the Gladstonian reforms, is an important matter. The House and the country have benefited enormously from the work of the Comptroller and Auditor General and the National Audit Office. While they are accountable to the House, they have a remit that is independent of both Government and Parliament.
Over the years, Members of the House, and particularly the Public Accounts Committee, have expressed concern that the remit of the Comptroller and Auditor General has become artificially restricted. It has been the policy of the Government to appoint the CAG to audit each non-departmental public body set up since 1997, but despite that commitment to openness, there are still significant areas of central Government where the CAG is not the auditor, including about 50 non-departmental public bodies that had been established previously with auditors appointed by individual Secretaries of State. In a number of areas, the CAG is also dependent on negotiated administrative access.
In debates on the Government Resources and Accounts Bill, the subject of the CAG's remit was raised and I undertook to review the position. Accordingly, I set up an independent review of audit and accountability in central Government to look at all areas of the accountability framework and to take evidence from interested parties. I am grateful to Lord Sharman for leading that review, and to all members of the steering committee, including, when he was Chairman of the Public Accounts Committee, the right hon. Member for Haltemprice and Howden (David Davis), my right hon. Friend the Member for Swansea, West (Mr. Williams) and the hon. Member for Newbury (Mr. Rendel).
Lord Sharman reached independent conclusions and made recommendations that were addressed to the Government, the Comptroller and Auditor General, the Public Accounts Committee and the Public Accounts Commission. The response that I am publishing today sets out the Government's position on Lord Sharman's report. In considering Lord Sharman's recommendations, I have been mindful that reforms need to command confidence on both sides of the House. They also need to be workable, and I am very grateful for the constructive discussions that have taken place with the CAG and his staff and which are reflected in the response.
I am pleased to inform the House that the Government have accepted the main recommendations that Lord Sharman directed to the Government and that we support those addressed to others. There are five central recommendations. First, the Government agree that the Comptroller and Auditor General should audit all non-departmental public bodies. That will make him the auditor of bodies such as the Environment Agency, English Partnerships, English Heritage and the Housing 890 Corporation. Secondly, subject to legislation, that extension to non-departmental public bodies will include those that are established as companies, for example the Student Loans Company, the Film Council and the National Consumer Council. Thirdly, the Government agree that the Comptroller and Auditor General should have statutory access to the documents needed for his audit work in place of the current non-statutory arrangements. We welcome arrangements to ensure that that right of access is exercised to minimise any additional burdens on either public or private sector bodies.
Access by the Comptroller and Auditor General to documents will be extended by right, for example, to registered social landlords, train operating companies and contractors, including those in private finance initiative contracts. Fourthly, the Government accept that information underpinning reports on progress against targets on public service agreements must be reliable. We therefore propose the extension of external validation of departmental data systems relating to those targets. The Government intend to invite the Comptroller and Auditor General to take responsibility for the validation of such data systems, usually on the basis of a three-yearly review.
Finally, the Government welcome Lord Sharman's acknowledgement of the steps being taken to promote strong management and innovation across government in the delivery of public services. Before implementing those proposals, the Government will consult bodies affected by the changes. I am confident that the proposals that we are setting out today will strengthen audit and accountability and improve transparency in the interests of this House and all those we represent. I commend the new arrangements to the House.
§ Mr. John Bercow (Buckingham)
May I begin by thanking the Chief Secretary to the Treasury for his statement and for allowing me advance sight of it? I warmly welcome, as I suspect do many right hon. and hon. Members on both sides of the House, the initial establishment of the Sharman committee which, the right hon. Gentleman will acknowledge, followed insistent pressure during the passage of the Government Resources and Accounts Bill from my immediate predecessor as shadow Chief Secretary, my hon. Friend the Member for West Dorset (Mr. Letwin) and, importantly, my right hon. Friend the Member for Haltemprice and Howden (David Davis), now the chairman of the Conservative party but then, of course, the respected Chairman of the Public Accounts Committee.
The Chief Secretary was right to acknowledge the importance of the work of the steering committee, to congratulate my right hon. Friend the Member for Haltemprice and Howden and, in addition, to acknowledge the important contributions of the right hon. Member for Swansea, West (Mr. Williams) and the hon. Member for Newbury (Mr. Rendel). I cannot help wondering whether the Chief Secretary should be subjected to a little independent audit himself. After all, Lord Sharman reported on 13 February 2001. 393 days ago. There has been justifiable consternation at the inordinate delay in the Government's reply. Lord Sharman has complained, as has the Chairman of the Public Accounts Commission, the right hon. Member for Swansea, West, bemoaning a delay which he described as "abnormally long". Baroness Noakes, a distinguished 891 former president of the Institute of Chartered Accountants in England and Wales, lamented Ministers sitting on their hands. Lord McIntosh of Haringey, as recently as 26 February, was under the misapprehension in a debate in the other place that the report had been published; he said that he was "completely astonished" to discover that it had not been.
As for the substance of this important issue, no one can overstate the importance of strong and independent audit of public expenditure or, indeed, of accountability for the way in which public money is used. The Chief Secretary was right to pay warm tribute to the Comptroller and Auditor General and to the National Audit Office. I echo that tribute. Their work is invaluable, and so is the important report of Lord Sharman.
I shall pose a number of questions to the Chief Secretary. We welcome the extension of the power of audit to all non-departmental public bodies. Does the right hon. Gentleman agree that as there are 1,025 such bodies the length and breadth of the United Kingdom, which employ 30,000 people and spend approximately £25,000 million, it is right that they should be comprehensively audited and investigated? Transparency is of the essence.
Does the Chief Secretary agree that there are other routes to effective scrutiny? For example, my right hon. Friend the Leader of the Opposition has urged that the heads of such non-departmental public bodies should appear before Select Committees for confirmation hearings. Does the Chief Secretary agree, or will he at least undertake to consider the suggestion?
Does the right hon. Gentleman agree that the suggestion that the National Audit Office should audit companies, which are established by public bodies, could usefully have been applied to the New Millennium Experience Company? That is a striking example of a body which, if so scrutinised, would itself have benefited and hugely relieved the overburdened and long-suffering taxpayer.
We endorse the call for external validation of performance information for central Government. Such validation should be progressively developed, not least in relation to public service agreement targets, of which there are about 160 covering key areas of government. Those targets are intended, as the report says,to be a clear commitment to the public on what they can expect for their money".Does the Chief Secretary agree, therefore, that so far as is possible, the agreement on the credibility of their measurement is of the utmost importance?
Both the report and the new Chairman of the Public Accounts Committee, my hon. Friend the Member for Gainsborough (Mr. Leigh), have argued that access rights of the CAG should he extended to the BBC. After all, in 2000–01, it spent £2,425 million. Gavyn Davies, a very distinguished figure in our national life, having reviewed the funding of the BBC in 1999 and before he became its chairman, recommended thatthe Government should amend the Royal Charter to give the National Audit Office inspection rights to carry out periodic financial audits of the BBC's accounts and its fair trading arrangements".Why are the Government ignoring that recommendation? Does not the Chief Secretary recognise that there will be widespread disquiet? Has he cooked up a cosy deal with the director-general of the BBC at the expense of licence payers and taxpayers alike?
892 We would suggest that the Financial Services Authority should be included in extended audit. Will the Chief Secretary consider extending the Comptroller and Auditor General's access rights to the FSA? Although it is a company limited by guarantee, the FSA is funded by a compulsory levy on firms in its sector and in many ways it resembles a public body. Does the Chief Secretary therefore agree that the grievous distress suffered by many of our constituents as a result of the Equitable Life saga makes a compelling case for greater transparency?
Of course there should be consultation, but can the right hon. Gentleman offer us some reassurance that the consultation will begin at once and that it will be conducted expeditiously?
The Sharman report is a step towards greater transparency in public sector accounting, but does the Chief Secretary agree that there is a great deal further to go? Can he undertake to look at the presentation of Government liabilities under private finance initiative and public-private partnership contracts, so that it is clear what the scale of liabilities is? Is he aware that the Government accounts do not always make it perfectly clear how much is spent on what, particularly when responsibility for a function is divided between different levels of government, and that the public have a right to expect greater transparency?
Does the Chief Secretary agree that the Government have a liability in the form of pensions to be paid in the future that are not reflected in the Government accounts? Has not the Chancellor obscured the presentation of the tax burden through his treatment of the working families tax credit as a tax cut rather than benefit expenditure?
The report and the Government's largely sensible response to it herald an advance in the scope of audit and in the capacity of the legislature to hold the Executive to account. Nevertheless, more needs to be done. The debate will continue. The Opposition will participate in it with the seriousness and resolve that it merits.
§ Mr. Smith
I thank the hon. Gentleman for his comments on what he describes as largely sensible action by the Government. In setting up Lord Sharman's inquiry, we were responding to concerns expressed not merely by Conservative Members, but by Members of all parties on the Public Accounts Committee. Today, following Lord Sharman's report, we have taken action where the Conservatives in government did not do so for more than 18 years.
The hon. Gentleman referred to the time that it has taken to publish our response. It would have been nice if we could have done so sooner; I genuinely believe that it is a good-news statement for the House. However, we faced a choice. We could have replied earlier on the principle, leaving much of the detail and the matters set out in section 3—the protocols for access and so on—to be negotiated later. In such circumstances, many hon. Members, including the hon. Gentleman, would have had a lot of questions about how the detail would work. However, we have come back with a comprehensive and detailed response and he should have welcomed that.
I noted that it took the hon. Gentleman a long time to get to the substance of the statement; indeed, his remarks were considerably longer than the statement itself. He asked a number of questions. He referred to the New Millennium Experience Company and asked whether it 893 was a good example of a body that would have benefited from access by the Comptroller and Auditor General. The answer is yes. Subject to the points that I made, precisely that access will be provided by our proposals.
The hon. Gentleman also referred to the position of the BBC. In considering both the original Davies report and that of Lord Sharman, the Government have weighed the matter very seriously. We believe that the editorial independence of the BBC, even in terms of the impression that it could be compromised in any way, should not be risked. That is why we have decided not to proceed with the specific recommendation in question.
The Financial Services Authority was established relatively recently and its audit arrangements were extensively debated, along with other matters, in the House. The Government have not ruled out the possibility of the Comptroller and Auditor General undertaking a value-for-money study of the FSA in future. Subject to implementation of our proposals, we will consider that possibility.
The hon. Gentleman asked about the credibility of PSA targets, on which I agree with him. That is why we are taking measures that add to the substantial external validation that is already carried out by the Office for National Statistics and the Audit Commission, the ability of the Comptroller and Auditor General to oversee the data systems as a whole. That should build confidence on all sides in the reliability of the measures that we are taking and help us to not only reform public services, but deliver on our targets.
§ Mr. Alan Williams (Swansea, West)
May I congratulate my right hon. Friend on his statement? As he said, it represents a victory for the Public Accounts Committee in a battle that it has fought for well over 10 years. His remarks about quangos, companies and validation represent a notable addition to parliamentary accountability, for which I thank him.
I hope that my right hon. Friend will not think me churlish if I echo one of the points made by the hon. Member for Buckingham (Mr. Bercow) about the BBC. It is unfortunate that he has not seen his way to agreeing with Sharman, who was himself echoing the recommendations of the current chairman of the BBC before he suffered his conversion on the way back from Damascus. I hope that if we advance further arguments in support of the recommendations, he will at least indicate that he is willing to listen to them as positively as he listened to previous arguments.
§ Mr. Smith
I thank my right hon. Friend for his welcome for our proposals. I should like to place on record my appreciation and that of the House for all his work on this agenda over the years.
I would never consider any of my right hon. Friend's remarks churlish. I clarified the position on the BBC in my earlier response. The fact that we have made these proposals proves that we are listening. At an early stage of the procedure, I was the only Minister in living memory to appear before the Public Accounts Committee, where I 894 said that with goodwill and co-operation on all sides we could make substantial progress on these matters of mutual concern. That is exactly what we have done today.
§ Mr. Edward Davey (Kingston and Surbiton)
I wholeheartedly welcome almost all the Chief Secretary's statement. In effect, he has announced the Government's complete acceptance of the arguments that I and hon. Members on both sides of the House raised two years ago during the passage of the Government Resources and Accounts Act 2000.
I join the Chief Secretary in congratulating my noble Friend Lord Sharman. Does he agree that his announcement is an important victory for Parliament, and that he should therefore continue to work closely with hon. Members as he implements the new regime as speedily as possible?
As for the detail, will the Chief Secretary say more about the Government's proposals for auditing performance measures? Sharman and the Government both favour a step-by-step approach to introducing the external validation of performance information. Will he give a more detailed timetable for full implementation? His statement suggests that the Government are limiting the definition of performance measures to public service agreements, yet surely external validation should cover all relevant public performance measures if we are to have confidence in such figures.
Finally, does the Chief Secretary realise that there is extreme disappointment and anger about the Government's decision not to extend the Comptroller and Auditor General's remit to the BBC? Does not he realise that his arguments against that are so weak as to be ridiculous and fly in the face of the logic of the rest of his statement? We all share his desire to protect the BBC's independence and editorial freedom, but that is completely irrelevant to financial audit. The NAO has audited universities. Universities have academic freedom, but the NAO's remit nevertheless applies to them. It is ironic that Gavyn Davies, before he became chairman of the BBC, recommended that the NAO should audit the BBC. Will the Chief Secretary explain why on earth the BBC should be exempt from NAO audit given that all other bodies, including private finance initiative contractors, are to be included?
§ Mr. Smith
I thank the hon. Gentleman for welcoming my statement. As he says, it is a victory for Parliament and for parliamentary accountability. The Government's performance in delivering public services and our other objectives is strengthened by the effectiveness of parliamentary scrutiny. That is the important philosophy that underpins the proposal.
We have made a huge step by inviting the Comptroller and Auditor General to take overall responsibility for external validation. As regards areas that are already validated by the Office for National Statistics or the Audit Commission, we would not normally expect them to have much more work to do. Ultimately the Comptroller and Auditor General will make decisions on the reliability of the systems in instances that are drawn to his attention.
It is wise to take a step-by-step approach to these matters. The hon. Gentleman has a point when he says that there are other measures of performance that are not included in public service agreements. It would be 895 sensible to concentrate on those PSAs that are quantifiable. Most importantly, we must accept the responsibility of ensuring that the underlying systems are independently validated.
I do not intend to repeat what I have said about the BBC. It would be a grave error even to give the impression that its editorial independence was in any sense being called into question.
§ Mr. John McFall (Dumbarton)
As Chairman of the Select Committee on the Treasury, I welcome my right hon. Friend's proposals. I can do no better than to echo the words of the official Opposition spokesman, who said that the proposals were hugely sensible. Putting the auditing of all non-departmental public bodies on a statutory basis is extremely welcome.
In the words of Sharman,Audit arrangements should not discourage innovation, change and well-managed risk taking.Will my right hon. Friend ensure that that process still goes on?
Finally, has my right hon. Friend given any thought to merging the National Audit Office and the Audit Commission?
§ Mr. Smith
I thank my hon. Friend for his comments, and I pay tribute to his work in this area. The answer to his last question is no, I have not given further consideration to that matter. His comments on innovation and risk management are entirely right, and we welcomed the way in which the report of the Comptroller and Auditor General and the National Audit Office showed how properly judged risk and risk evaluation were perfectly compatible with proper accountability for financial probity. As the former Chairman of the Public Accounts Committee said, there is a world of difference between well judged risk and its management, and gambling. We are in favour of the former in these matters, but not the latter.
§ Mr. Edward Leigh (Gainsborough)
I thank the Chief Secretary for his important statement, and pay tribute to his officials for the constructive way in which they have worked with officials from the National Audit Office. We have made a great deal of progress today. We have ensured that the Public Accounts Committee—recognised by the Sharman report as the senior Committee in the House of Commons—can continue the work that it has carried out since 1861 on directing the harsh light of parliamentary scrutiny into all the nooks and crannies of waste and incompetence inside government. I am, therefore, very pleased with the statement.
I want, however, to echo comments made by others, particularly the right hon. Member for Swansea, West (Mr. Williams), about the BBC. The Public Accounts Committee feels strongly that, as the BBC levies the equivalent of a poll tax on virtually every household in the kingdom, and as it is a vital national resource, Parliament should not be denied its right to hold this body up to public scrutiny through the National Audit Office. My Committee is fully cognisant of the importance of preserving the editorial independence of the BBC. The NAO already looks after the World Service, and there is no question of its interfering in the independence of its programming. My Committee would never get involved 896 in questions of what programmes should be shown, but we are talking about very large sums of public money, and we want Parliament to be involved.
My Committee also feels that the civil list should be open to scrutiny by Parliament. The system has worked well with regard to royal palaces and royal travel; there have been no complaints there. We recognise that this is a sensitive area, but the Committee believes that Parliament has a right to hold the civil list to account in the way that other public expenditure is held to account. Having said that, I thank the right hon. Gentleman for his statement, and I pay tribute to my predecessor, my right hon. Friend the Member for Haltemprice and Howden (David Davis), for the work that he has done in this area.
§ Mr. Smith
I am grateful for the hon. Gentleman's kind remarks, and I join him in congratulating officials not only from the Treasury but from the National Audit Office and the office of the Comptroller and Auditor General. As the hon. Gentleman said, this is a model of how working sensibly, often in sensitive areas, can lead to a sensible way forward being found. I also acknowledge the contribution of his predecessor as Chairman of the Public Accounts Committee, and the contribution that the hon. Gentleman himself is making.
The hon. Gentleman reminds us of the importance of the constitutional legacy of probity and regularity, and of shining the light of audit and accountability on to affairs for which we have a responsibility. I note what he says about the BBC; I do not intend to repeat my previous remarks on that. He acknowledges that the civil list is a sensitive area. There has been a longstanding bipartisan agreement that Ministers should stand between the civil list—the royal family—and accountability to Parliament, except when there are grant-in-aid issues, as in the examples that the hon. Gentleman mentioned. I think it wise to leave those arrangements in place.
§ Roger Casale (Wimbledon)
I welcome these reforms, which will bring greater accountability and transparency to the public finances. As we move to spend more on public services, it is clearly in the public interest that there should be independent external validation of how that money is spent. Do not these reforms mark a real break with the past, as we give substance to our determination deeply to entrench the reforms we are making to the public finances? Opposition Members tend to emphasise that we must stamp out waste, and of course that is right, but greater transparency will also help to identify areas in which we need to spend more. An audit, for example, might have helped the Opposition realise that the capital funding of schools in my constituency fell to £15 per pupil in 1996–97. It is more than £200 per pupil per annum today.
§ Mr. Smith
My hon. Friend is right. There is a break with the past that is a great step forward in terms of accountability and security of value for money. Value for money does not imply spending as little as possible. Instead, it implies spending for the best possible effect. Without being drawn into my hon. Friend's invitation to make party political points, the Government are keen to engage in that spending.
§ Mr. Nick Gibb (Bognor Regis and Littlehampton)
The Chief Secretary's statement is extremely welcome, 897 and especially his acceptance of the importance of strong management across government. To that end, he will be aware that one of the greatest achievements of the NAO in recent years has been the exposure of the level of social security fraud, with about £3 billion being lost every year in terms of both jobseeker's allowance and income support. There are more than 300,000 cases of fraud every year, but only 5 per cent. of those cases are prosecuted. I am not making a party political point. The situation has been the same for more than a decade, during which the accounts of the Department have been qualified by the NAO.
Will the Minister enter into discussions with his colleague, the Secretary of State for Work and Pensions, with a view to increasing the proportion of prosecutions in an attempt to introduce strong management in this area and to reduce the level of fraud?
§ Mr. Smith
Not only will I do so, but the Government are already acting on that agenda. We are identifying and bearing down on fraud in social security as in other areas. That did not always happen until quite recently. Performance was not even measured by previous Governments. Further strong management to cut fraud will be brought to bear.
§ Mr. Tam Dalyell (Linlithgow)
My question is churlish and ill tempered. As one who was rebuked and chastised by the late Donald Dewar, in 1998, for daring to suggest that the Scottish Parliament's costs would rise a penny above £40 million, will my hon. Friend ask either the Paymaster General or the Financial Secretary to examine carefully the assertions in today's edition of The Scotsman that consultant's fees alone are now £40 million? The cost of the project has increased by at least eightfold on what was originally envisaged. Is my right hon. Friend able to draw any lessons from a giddy escalation in costs?
§ Mr. John Burnett (Torridge and West Devon)
It is important that the full audited accounts of the bodies concerned be put in the public domain. Does the Minister agree that these accounts, and district auditors' full accounts on local authorities, should always be put in the public domain in unabridged form, with names and details provided in respect of all major contracts?
§ Geraint Davies (Croydon, Central)
My right hon. Friend will know that for a cost of about £50 million a year, the NAO and the Public Accounts Committee save billions of pounds of public money during a Parliament. Does he agree that the recent extension of their franchise to be the auditor of the Housing Corporation, English Heritage, the 898 Environment Agency and other non-departmental bodies, and access to social landlords, the train operating companies and PFIs, for example, will enormously increase the savings by multi-million pound figures?
Will my hon. Friend continue to have an open mind on further access to other bodies that have already been mentioned? Will he extend his thoughts also to international contributions that we make to various bodies to ensure that, through the help of the Comptroller and Auditor General, we can deliver value for money to the taxpayer?
§ Mr. Smith
My hon. Friend is undoubtedly right about the enormous savings made through proper scrutiny of public expenditure, and through the Government's acting on the recommendation of the Comptroller and Auditor General and the Public Accounts Committee. Contributions to international bodies are already scrutinised, but the accounts of the bodies themselves fall outwith the arrangements for domestic audit and accountability.
Although, as my hon. Friend says, the proposals will involve the Comptroller and Auditor General in a good many additional responsibilities, he has made a clear commitment—as the proposals show—to contracting out a significant proportion of his work. Indeed, he has already done that.
Where the audit is being taken over by the CAG, money to pay for it will be paid to him rather than to a private sector auditor. Any additional net costs should arise principally in relation to the external validation of public service agreement systems, rather than the rest of the CAG's audit and accountability.
§ Mr. Michael Fallon (Sevenoaks)
Proper external validation of public service agreement targets will be a big step forward, but will the Chief Secretary say a little more about the new access to bodies involved in the private finance initiative? Will the CAG be able, for example, to investigate the increasingly opaque nature of some of the special-purpose vehicles that are being established for PFI schemes, and will he be able to comment on the extent to which some longer-term liabilities are now being kept off the public balance sheet?
§ Mr. Smith
Access for the CAG will depend on the status of the vehicle, company or organisation concerned. In general his rights of access follow the money, whether it be by grant or by contract. The big step forward that today's proposals represent is that whereas in the past the CAG has had to negotiate access or agree it by administrative means, which has not always been easy—there have been delays, and so on—he will now have a statutory right.
§ Adam Price (East Carmarthen and Dinefwr)
I too welcome the Chief Secretary's proposals, particularly the proposal to extend access to PFI contractors. Will that include access to documents pertaining to pre-contractual negotiations between Departments and preferred bidders appointed at the outline bidding stage? Concerns have been raised over why the final agreed contracted price for PFI projects is sometimes as much as two or three times that envisaged at the outline bidding stage.
899 Does the Chief Secretary agree that that is a legitimate area of inquiry for the CAG, especially as preferred bidders have never been deselected, so effectively this is a single-tender process?
§ Mr. Brian Jenkins (Tam worth)
As my right hon. Friend knows, the Audit Commission and the National Audit Office have areas of responsibility that abut one another and sometimes almost overlap. That causes difficulties with certain arrangements. When my hon. Friend the Member for Dumbarton (Mr. McFall) asked whether he and his Department had even considered the possibility of a merger, he said no. Why?
§ Mr. Smith
I was asked whether I had given the matter further consideration. That was the question to which I answered no.
It is important for there to be effective collaboration between the respective bodies that are responsible for public audit. There is, in fact, a public audit forum. When my hon. Friend has a chance to read the proposals, he will see what steps are being taken to continue that work. I did not want to set hares running, and I do not want to do so now, by suggesting that such an amalgamation is on the agenda.
§ Mr. David Rendel (Newbury)
I am grateful to the Chief Secretary for his response and for his kind words about my small part in the Sharman steering committee. I welcome the Government's response, particularly because almost all the recommendations of the Public Accounts Committee have been adopted—better late than never.
There are two outstanding matters. First, the Chief Secretary said that all non-departmental public bodies that currently exist and are not audited by the NAO will be audited by it when their contracts come up for renewal. Can he assure us that, at least under his Government when he still has responsibility, any new NDPBs that come into existence will be audited by the NAO?
Secondly, the BBC is undoubtedly the one real weakness in the Government's response. People throughout the country pay tax of over £100 a year towards Government funding for the BBC. That is a huge sum and needs to come under parliamentary scrutiny. The important point about what the Chief Secretary said about editorial independence is that the NAO is Parliament's auditor, not the Government's auditor. We would all be worried about editorial independence if the auditor were to report directly to the Government. If it reports to Parliament, it reports to all the people of this country. Surely in those circumstances, there should not be a problem about editorial independence.
§ Mr. Smith
I thank the hon. Gentleman for his contribution to the Sharman steering committee. Any future NDPBs that are set up will be audited by the 900 Comptroller and Auditor General. Should any of those be companies, amendments to legislation will ensure that he can audit companies—that is our clear intention.
I have already dealt with the BBC. I take the opportunity to underline that the BBC is fully and properly audited. What is more, the Comptroller and Auditor General already has the opportunity to access the funding department in following the application of the licence fee.
§ Mr. Richard Bacon (South Norfolk)
The Chief Secretary said that he had already dealt with the BBC. Many hon. Members on both sides of the House may beg to differ. Concern and disappointment have been expressed from both sides about the fact that the Government have excluded the BBC from the remit of the NAO. The Chief Secretary's justification appears to be that it would be a "grave error" if even the impression were created that the BBC's editorial independence could be compromised. As the hon. Member for Newbury (Mr. Rendel) pointed out, it is hard to see how that could be the case when the NAO is itself independent of Government. Does the Chief Secretary recognise that he has not advanced a sufficient argument, and that he will therefore need to start to explain why anyone should begin to think that the independence of the BBC should be compromised by the fact that it was audited by the NAO?
§ Mr. Smith
The BBC has a special status, set down in its charter. As I said, there would have to be very careful thought before even the impression of any infringement of editorial independence were given. While I have absolute confidence in the independence and impartiality of the Comptroller and Auditor General and the National Audit Office, one does not need a great imagination to see how some of the issues that may arise may become the subject of quite heated political speculation and debate that could give the impression of editorial independence being put at risk.
§ Mr. William Cash (Stone)
Does the Minister accept, with respect to the BBC, that in the public interest it is essential that full accountability be achieved? The answers that he has given have so far been, if not evasive, then somewhat lacking in clarity. Would he be good enough to ensure that he writes to me and indeed to the Chairman of the Public Accounts Committee to explain the reasoning behind the arguments that he has advanced? Many licence payers regard the amount of money that they have to pay as warranting proper analysis. Furthermore, it is a matter of great public importance. Can he give any other example of a chartered body that has the right to charge a licence fee and manages to avoid the full accountability that he seems to be avoiding at the moment with respect to the BBC?
§ Mr. Smith
The hon. Gentleman is one of those hon. Members with a special interest in this matter, and he asks whether I will write to him about it. Later on, I shall be the second Minister to make an appearance before the Public Accounts Committee. I am sure that there will be an opportunity to discuss these matters further. My answers will, of course, be on the record.