Public Audit (Wales) Bill [H.L.]

HL Deb 25 February 2004 vol 658 cc115-48GC

(Second Day)

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Tordoff) in the Chair.]

Clause 20 [Fees for Audit]

Baroness Noakes moved Amendment No. 37: Page 16, line 32. at end insert— ( ) The scale or scales of fees must be calculated to recover no more than the cost of the audits to which the scale relates.

The noble Baroness said: Amendment No. 37 would insert a new subsection into Clause 20, which sets up fee scales for local government audits in Wales. The amendment says that the fees must not exceed the profit of the audit. This is a probing amendment, designed to find out how the system will work in practice.

As I understand the Audit Commission arrangements, there is a scale of audit fees that applies for all audits. The bodies pay the audit fees into the centre, after which they are passed on to individual auditors, whether in the private sector or in the Audit Commission. A margin is kept at the centre to fund and effect the technical support costs of dealing with local government audits. Will that situation apply in Wales, with a surplus over the costs of the individual auditors going towards funding the central technical costs? How will the level of that compare with English audits, given that the scale of operation in Wales will be much smaller and there will probably not be a different size of technical function? Will there be a higher level of cost in Wales because of the new arrangements involving separate audit? Have any calculations yet been made of the costs under the new arrangements compared with those under the existing arrangements? I hope the Minister will be able to shed some light on these matters. I beg to move.

Lord Davies of Oldham

I recognise the probing nature of this amendment. The Auditor General for Wales, as now, will broadly seek to balance income and expenditure. The reason why we would not be able to accept the amendment is that it would ensure that the Auditor General resets fees calculated to recover no more than the actual costs of the audit. I think the noble Baroness will recognise that there are other costs which are legitimate.

The proportion of the fee income derived from the scale of fees would be used to fund the undertaking and promotion of economy, efficiency and effectiveness studies. Other studies are to be undertaken under Clauses 41 and 42.

Fee income would also be needed to make the Auditor General's central administrative costs relevant to his local government audit function, including the costs of negotiating and maintaining contractual arrangements.

The clause represents a continuation of the fee-setting arrangements already in place in respect of local government audit in England and Wales. The arrangements, as the noble Baroness knows rather better than I do, are tried and tested, and the clause ensures that they will continue to be subject to full consultation with local government and other interested parties.

At present, I understand that the Audit Commission retains a percentage of its gross audit and inspection fee income to cover its central administrative costs and its economy, efficiency and effectiveness study costs. The charging arrangements are tried and tested, and Welsh local government did not raise any concerns over the intention to preserve them during the process of consultation in pre-legislative scrutiny.

Baroness Noakes

Can the Minister say anything about any calculations to be made about the cost levels that might apply under the new arrangements, given that they are in a new organisational structure?

Lord Davies of Oldham

I am grateful to the noble Baroness for making that additional point. This will be a matter for the Auditor General to decide in terms of the margin. I believe that, at present, the margin is about 9 per cent in respect of the Audit Commission. Although costings have not yet been fully carried out, we would expect it to be within a similar range.

Baroness Noakes

I thank the Minister for that reply and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 agreed to.

Clause 21 [Fees prescribed by Assembly]:

On Question, Whether Clause 21 shall stand part of the Bill?

Baroness Noakes

Clause 21 is curious and, I suggest, possibly unnecessary. Clause 20 provides that the Auditor General will prescribe the scale or scales of fees payable following consultation. I should have thought that that consultation, which involves both local authorities and bodies of accountants, would be sufficient. Subsection (4) states that they must pay, although it is probably inconceivable that they would refuse to do so.

However, Clause 21 contains provision for the Assembly to prescribe alternative or substitute scales—again, following consultation. What is the point of this clause? No real reason is given for this formulation. We believe that the clause may not be wholly innocuous because it may encourage dissension and make agreement under Clause 20 more difficult because of the reserve power under Clause 21 which can be brought into effect.

The Explanatory Notes talk about the Assembly considering the scales to be excessive or about there being a conflict of views. But, if that is the case, it cannot seriously be suggested that the Auditor General should, in effect, be compelled to carry out work for less than the costs that he thinks he should recover. Therefore, we find it difficult to see what proper place Clause 21 has in the Bill.

Lord Davies of Oldham

This is not a new power that is being conferred on the Assembly. The Assembly already has the power to prescribe fees under Section 7 of the Audit Commission Act 1998, together with the National Assembly for Wales (Transfer of Functions) Order 1999. Clause 21 preserves the status quo. It would be open to the Assembly to exercise the power if, for example, it considered the scale of fees set by the Auditor General for Wales to be excessive or if there were an impasse between the Auditor General and local government on this issue. In doing so, the Assembly would be required to consult the Auditor General, associations of local government in Wales and any bodies of accountants which appeared to be appropriate.

Exercise of the power would not in any way compromise the constitutional independence of local government. The fact that it is a failsafe provision and has not as yet, in practice, been used by the Assembly should not devalue it as a safeguard.

Apart from eliminating that safeguard, deletion of the clause would remove an important mechanism for dispute resolution. It would not be appropriate to take away a statutory power already conferred on the National Assembly. The Welsh Local Government Association did not raise any concerns on this clause during the periods of pre-legislative scrutiny or public consultation. Therefore, on that basis, I can reassure the noble Baroness with regard to her concern.

Baroness Noakes

Perhaps I may raise one question with the Minister. My concern was not the constitutional position of local government but the position of the Auditor General for Wales and whether or not he would, in effect, be compelled to do the work for less than the costs that he would incur, including the central cost to which the noble Lord referred earlier.

If the Assembly sets a lower fee-scale for local authorities, does that mean that the residual costs will be within the budget for the Auditor General for Wales and will therefore, in any event, be picked up by the Assembly? What happens to the costs that are not recovered on local authority audits? That is my question.

Lord Davies of Oldham

The National Assembly could not set the fees too low. Under Section 93 of the Government of Wales Act it must make up any shortfall between the Auditor General's fee income and his expenditure.

Baroness Noakes

That is, indeed, the assurance I sought. I shall not oppose the Question that Clause 21 stand part.

Clause 21 agreed to.

Clauses 22 and 23 agreed to.

Clause 24 [Consideration of reports in public interest]:

Baroness Noakes moved Amendment No. 38: Page 18, line 24, leave out paragraphs (a) to (d) and insert "those listed in section 12(1)

The noble Baroness said: In moving Amendment No. 38 I shall speak also to Amendments Nos. 39 and 51. These amendments concern the various lists of bodies that appear in the Bill. Amendment No. 38 applies to Clause 24 and public interest reports. It deletes the four bodies currently listed in subsection (3) and replaces them with the nine bodies listed in Clause 12(1).

When a Clause 24 report in the public interest is made, the body concerned must consider the report as soon as possible, but that refers to only the four kinds of bodies in subsection (3). The additional bodies are covered by the procedure in Clause 25. The real point of tabling the amendment is to ask why we have that differentiation. Given the replies that we have received in the past, I suspect that that is more to do with previous legislation than with any point of principle and may, indeed, represent a further area where rationalisation of the Bill could usefully be carried out.

Amendment No. 39 is the obverse of Amendment No. 38 and poses in another way the question why there is different treatment for the four types of bodies. Amendment No. 51 is on the same theme. It proposes to add the four bodies in Clause 24(3) to the relevant bodies whose performance standards are covered by Sections 47 and 49. We are probing why those bodies are excluded from the list at this stage. I beg to move.

Lord Davies of Oldham

First, the one-month deadline is consistent with the existing position. It is a tougher provision than "as soon as practicable". It is imposed on the larger bodies because we think we have the right to make those demands upon them. They have the administrative support to enable them to meet such requirements in ways in which it might be thought possible for the smaller local government bodies, for example, port health authorities, internal drainage boards and so forth. For those bodies, "as soon as practicable" will apply because one month might be too rigorous a deadline for them to meet. The one-month deadline for the larger bodies is consistent with the tighter timescale introduced on an England and Wales basis by the Local Government Act 2003. Prior to that it had been four months but that Act reduced it to one month. We are enforcing this rigour in Wales consistent with that position.

Amendment No. 51 would also impact on the smaller local government bodies set out in Clause 12(1). The amendment would extend to them the requirement to comply with the provisions in respect of the publication of information relating to performance standards set out in Clauses 47 to 49. We believe that this would risk imposing an unnecessary burden on bodies with a very limited range of functions and where comparison may in any event be difficult and not particularly informative as to performance.

We contend that extending the scope of the performance standards provisions in the Bill should be at the discretion of the National Assembly. As currently drafted, the clause gives the Assembly the power to add to the list of bodies not currently within the provisions of Clauses 47 to 49. On that basis I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Noakes

I thank the Minister for that reply, which certainly explains how the current Bill has been drafted. I shall confine myself at this stage merely to remark again that it is a pity that an opportunity has not been taken to consider all these areas afresh instead of copying the existing legislative pattern. Just because a body is small does not mean that it should be excused from responding on a rapid basis where a public interest report is concerned. So, I am not sure that a less stringent regime is necessarily desirable for smaller bodies. However, this is part of a general regime that we have debated and doubtless will debate again in the context of the Bill. For today, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 24 agreed to.

Clause 25 [Procedure for consideration of reports and recommendations]:

[Amendment No. 39 not moved.]

Clause 25 agreed to.

Clauses 26 to 29 agreed to.

Clause 30 [Inspection of documents and questions at audit]:

3.45 p.m.

Baroness Noakes moved Amendment No. 40: Page 22, line 25, leave out "an interested" and insert "a

The noble Baroness said: In moving Amendment No. 40, I wish to speak also to Amendment No. 41. Both of these amendments are probing amendments in relation to Clause 30, which deals with certain inspection rights which apply during audits of local government bodies.

Subsection (1) allows what is referred to as "an interested person" to inspect the accounts to be audited and related documents. My amendment would delete "an interested person" on a probing basis and replace it with "a person". The amendment seeks to probe who the "interested person" is. Subsection (2) refers to local government electors and so the "interested person" is presumably someone other than a local government elector for the area. I hope that the Minister will explain who these people are and why Clause 30 has the rights of apparently different groups embedded in it.

The rights to information and documents in Clause 30 do not apply to "personal information" which is defined in subsection (4) in a very restrictive way. Basically, personal information is the fact that a person is employed by the body and/or paid by the body in respect of an employment by someone else. I paraphrase but that is the drift. My Amendment No. 42 says that personal information includes but is not restricted to that information.

I am quite sure that electors and others should not have unrestricted access to personal information but this definition seems to allow them to have access to all kinds of personal data such as age or marital status, home addresses and so on. Being restricted to employees, it appears to allow access to personal data about applicants for council tax benefit or grants, including means tested data. I could go on.

The Explanatory Notes at paragraph 76 note that the right to information may also be restricted by the Data Protection Act. If that is the case—and, of course, that Act would cover the information that I have mentioned—it seems to me to be unsatisfactory that this Bill makes no reference to that Act and appears on the face of it as if there were very considerable access rights available to electors and others. I am trying to find out why the Bill has been drafted in this way. It appears to raise hopes regarding obtaining information but you find out only by referring to the Data Protection Act—which is not mentioned in the clause—that that information may be restricted. I hope that the Minister will deal with those points. I beg to move.

Lord Davies of Oldham

I approach this amendment with a certain circumspection. I remember a certain police authority getting into difficulties interpreting what information needed to be passed on. I am conscious of the fact—as I think we all are—that we need to tread carefully with regard to the provisions of the Data Protection Act. The noble Baroness will forgive me if I stick fairly closely to the brief which I have, which I hope will deal with the points she made.

The intention is to exclude vexatious persons who are making trivial and frivolous approaches for information, but not to cut out anyone who has an interest, including an individual elector. The Bill does not exclude a local taxpayer or a local resident because they clearly are likely to have an interest in the information. The clause as drafted enables such persons to inspect or make copies of documents relating to the accounts at an audit of a local government body. It also gives a local elector or his representative the right to question the auditor about the accounts.

In practice, the reference to an "interested person" is very unlikely to represent a practical impediment to a person wishing to exercise a reasonable right of inspection. However, the terminology in the Bill would entitle the local government body auditor to withstand the entreaties of an individual or body whose requests were of a vexatious or frivolous nature.

Amendment No. 41 would widen the definition of "personal information" to which a person is not entitled in an inspection of the accounts or related documents or in questions to the auditor. We are not quite clear that the amendment would give an accurate definition of who was included and who was not, and we believe that it could lead to confusion and misunderstanding. Much of what a lay person would consider "personal information" will be protected by the Data Protection Act 1998. I do not believe that additional protection by third parties is necessary in the context of the Bill.

I hope that on that basis, the noble Baroness will feel that I have covered the issues on Amendment No. 40. On Amendment No. 41, the Data Protection Act 1998 relates mainly to information held electronically. Subsection (5) goes wider to cover information held in manual form also.

Baroness Noakes

I thank the Minister for that reply and will consider it carefully. I accept that the Data Protection Act 1998 is limited in scope in that respect. I was questioning whether the way in which the measure was drawn was adequate to alert people to the information that they could or could not have.

I shall consider what the Minister said on the question of "vexatious" requests. I find it rather curious drafting that to eliminate a vexatious person one drafts the other way around to allow an "interested person"—the implication being that almost anyone could apply, but to be deemed not interested is equivalent to being vexatious. That is a rather curious way in which to approach the construction of a statute.

Lord Davies of Oldham

I have listened closely to the remarks of the noble Baroness. I can only plead the obvious point in defence that she may not be entirely happy with the drafting, but the effect is to go as wide as possible—wider than the individual elector. If the person came in with serious and proper intent, the obligation would be to provide that information. If we are erring, the error is in being as open and accountable as possible. I shall just have to accept the fact that the noble Baroness is not entirely happy with the drafting.

Baroness Noakes

I shall consider those points further and shall read carefully in Hansard what the Minister has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 41 not moved.]

Clause 30 agreed to.

Clauses 31 and 32 agreed to.

Clause 33 [Advisory notices]:

Baroness Noakes moved Amendment No. 42: Page 24, line 14, leave out "(an "advisory" and insert "(a "warning

The noble Baroness said: The amendment will not take long to debate. It amends subsection (1) so that an advisory notice is called a "warning notice". The description "advisory notice" for what is, after all, a rather dire warning that the body is about to incur unlawful expenditure or commit some other unlawful act, as set out in subsection (2), is, to say the least, euphemistic. I know that it derives from other legislation; that is one of the problems that we have had in considering the Bill. However, surely it is time that we changed nomenclature and called a spade a spade. Warning notices might even make the authorities more alert. Is there any reason for the retention of the coy "advisory" language? Would the Government consider changing it? I beg to move.

Lord Davies of Oldham

Clause 33 enables an auditor of a local government body to issue an advisory notice if he has reason to believe that the body or an officer of the body is about to take or has taken a decision or course of action that is or would be illegal, or is about to enter an unlawful item of account. Amendment No. 42 would seek to change the name of such a notice from advisory to warning. In all other respects we would have the same provision.

I think that "advisory" is the most appropriate description of the notice and its purpose. A notice can be issued, if circumstances dictate, to inform a body that it has acted illegally. In this context, to describe it as a warning when the event has already happened might not be entirely appropriate.

From the wider standpoint I am of the view that the word "advisory" probably more accurately reflects the relationship between auditor and client, where the former is a source of advice and assistance to the latter rather than providing the scrutiny function.

The word "advisory" is a more fitting description of the nature of the notice and I believe reflects the positive nature of the relationship that exists between most auditors and the bodies to which they are appointed. Therefore, I prefer "advisory" to "warning".

Baroness Noakes

The Minister was almost persuasive until he got on to auditors being advisers, which they most certainly are not. They are not there to be advisers; they are there to carry out the rigours of public audit. But I take the earlier part of what the Minister said and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 33 agreed to.

Clauses 34 to 36 agreed to.

Clause 37 [Extraordinary audit]:

Baroness Noakes moved Amendment No. 43: Page 27, line 9, leave out "a local government elector" and insert "five or more local government electors

The noble Baroness said: Amendment No. 43 is a probing amendment to Clause 37, which deals with the situation when an extraordinary audit may be called. That can be done by the Auditor General or if he has had an application from a single local government elector which he would have to consider.

Application by a solitary elector is all very well and could be genuine, but this provision could result in vexatious or time wasting applications. If an elector thought that an extraordinary audit was required, it seems that that elector would be more carefully listened to and could be entitled to more airtime if he or she was supported by four others of the same opinion, which is what this probing amendment proposes.

Perhaps the Minister could explain the rationale for exposing the Auditor General to the opinions of single electors which could be on single-issue matters of no concern to the wider community. Will he say whether this single elector ability has proved necessary in England or, indeed, Wales prior to the Bill, to allow the right kinds of issues to be raised, or whether it has proved to be vexatious? We want to get this issue right for Wales. I beg to move.

4 p.m.

Lord Davies of Oldham

While it could be argued that the increase in threshold may eliminate applications of a frivolous or vexatious nature, it could of course equally deprive one or two people who have a genuine case of the right to apply. There have been instances where one or two individuals requested an extraordinary audit with the result of illegal expenditure being identified. I am looking for a precise instance to give to the noble Baroness. I do not have one immediately to hand, but I may have one shortly. If so, I shall of course quote it. But we contend that it has been used. On one or two occasions there have been instances where two people have presented a proper case.

The danger of course is that the amendment would limit this right. The power to direct an extraordinary audit is after all a discretionary one, so the Auditor General could decline an application from whatever number of people, if he thought it was not soundly based. In principle, I feel that the amendment would limit the public's right to make legitimate representations. I had hoped to consolidate my case with a dramatic and significantly —

Baroness Noakes

The Minister may be in luck.

Lord Davies of Oldham

I have one to hand: the Blaenau Gwent Council. Two local government electors made a request for an audit and their request was found to be entirely legitimate and their position upheld.

Lord Thomas of Gresford

Perhaps I may intervene briefly in this dialogue. I am not surprised that that resulted in an audit. It seems that the Bill as drafted is sensible. It does not require the Auditor General to conduct the audit; it is discretionary. If he exercises that discretion improperly there is always the remedy of judicial review of which the noble Baroness, Lady Noakes, does not think very much, but which we think is a very important safeguard, particularly in other legislation that is about to come before the House.

Baroness Noakes

I am not sure what that final barbed comment was about. Let me say that I recognise entirely that the audit is at the discretion of the Auditor General. The purpose of the amendment was to avoid the Auditor General having to consider vexatious claims. But I am reassured by the Minister's provision of a real live example that the provision is needed in practice. I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 37 agreed to.

Clause 38 agreed to.

Clause 39 [Accounts and audit regulations]:

Baroness Noakes moved Amendment No. 44: Page 28, line 18, at end insert— ( ) Any regulations which are within subsection (3)(b) shall not be made unless a draft of the regulation has been laid before and approved by a resolution of each House of Parliament

The noble Baroness said: Amendment No. 44 adds a new subsection to Clause 39, so that any regulations made under the clause which create an offence must be subject to the affirmative procedure requiring the approval of each House of Parliament.

Clause 39 deals with accounting regulations. Noble Lords will be pleased to know that I shall not be delving into the intricacies of local government accounting. My concern is that the regulations can create a criminal offence of non-compliance with the regulations, and that this creation of a criminal offence is made only by regulations made by the Assembly without any parliamentary procedure.

I could argue that criminal sanctions are inappropriate for the infringement of accounting regulations; and I hope that the regulations when brought forward do not create many such offences. But I feel that criminal offences should have a proper parliamentary scrutiny.

We have been told several times throughout our consideration of the Bill that the local government arrangements are designed to mirror the equivalent arrangements under the Audit Commission Act; and Clause 39 indeed mirrors Section 27 of that Act. But my point is that the regulations themselves may differ and the Assembly could create a criminal offence where none exists in England. One of the principles the Minister told us about on Monday was that there should be equivalence—especially as regards the criminal law—between England and Wales. That is an additional reason why we believe that Parliament has a positive duty to be involved in the regulations made under this section.

I believe in general that we should be wary of allowing criminal offences to be created by way of subordinate legislation. In this particular case, with the Assembly creating offences where none might exist in England, I hope that the Government might he prepared to reconsider. I beg to move.

Lord Thomas of Gresford

I am waiting with some relish to hear the Minister declare in principle that there should be a different criminal offence in Wales from the one in England. Having said that, I strongly oppose the amendment. The power to make regulations has been devolved to the Assembly, and it is the Assembly's business to make such regulations as it thinks fit following the consultations that are provided Our position is that, if the amendment were agreed to, the powers would be taken away from the Assembly and there is no justification for that.

Lord Davies of Oldham

I am grateful to both Members of the Committee but I am more grateful to the noble Lord, Lord Thomas, for his critical argument. The simple fact is that, as he said, the amendment would restrict a power which the National Assembly already has by virtue of Section 27 of the Audit Commission Act and the National Assembly for Wales (Transfer of Functions) Order 1999. Accounts and audit regulations allow for a different approach between England and Wales in interpreting noncompliance as an offence between England and Wales. To date, the approach has been consistent on a cross-border basis.

Before making any such regulations, the Assembly would be required to consult the Auditor General, local government and the accountancy bodies. Like the noble Lord, Lord Thomas, I believe that it would be extraordinary if, in this fairly modest Bill, we ripped away from the National Assembly a power which it already has, and I wonder whether the noble Baroness will press matters that far.

The key principle here is that the Assembly's existing ability to make regulations should not be restricted by the Bill. The Assembly has wide powers in relation to local government finance in Wales and it is appropriate that they should include the power to decide what is and is not an offence in the context of the preparation of local government accounts.

If there was a hint in what the noble Baroness said that my stance on this amendment might be contrary to my stance on other criminal provisions in the Bill, perhaps I should take up the kind invitation of the noble Lord, Lord Thomas, and seek to clarify that as best as I can.

The subject matter of the Bill is not a devolved issue. Therefore, the decision on what conduct should constitute a criminal offence in that context is for the UK Government. The UK Government are not prepared to create an inconsistency in the Bill by decriminalising for Wales conduct which would constitute a criminal offence in England. That is the basis of our position.

Baroness Noakes

I am mystified by that response—

Lord Thomas of Gresford

Speechless.

Baroness Noakes

For the first time. I am mystified by that response because it seems to me that Clause 39 allows precisely for the result that the Minister said the Government were not prepared to allow, but perhaps I missed something.

Lord Thomas of Gresford

I believe that the word which the Minister should emphasise is "conduct"—that is, conduct which is criminalised in England should be criminalised in Wales. A certain criminal offence is created, as I pointed out on Monday, but it means that the same sort of conduct will be criminal in both jurisdictions.

Baroness Noakes

But would it not be the case that the Assembly could pass regulations which do not create criminal offences for certain conduct—for example, non-compliance with certain accounting regulations—which, in England, could constitute a criminal offence? In relation to Wales, the Assembly could do things differently. That is my point and that was the source of my mystification. It seems to me that the clause allows precisely the result that the Minister said he was not prepared to allow.

Lord Davies of Oldham

I am grateful to both Members of the Committee. Once again, I was seeking to identify an underlying principle in the Bill. The Bill is concerned with the role of the National Assembly and the role of the Auditor General in relation to their respective functions. But the constant theme throughout the Bill is that, so far as concerns conduct, there should be a consistency of treatment on either side of the border.

Lord Thomas of Gresford

The noble Baroness is quite right in saying that the regulations may not make the same provision in England and Wales. Breach of the regulations in England would be a criminal offence as would breach of the regulations in Wales, but it does not mean to say that the conduct will he the same under the regulations. It depends upon the way in which the regulations are structured.

Lord Davies of Oldham

I have no direct legal expertise and certainly nothing remotely like that of the noble Lord, Lord Thomas. I am grateful to him for clarifying something which I was obfuscating. I hope the noble Baroness will recognise that the way in which this has just been expressed is exactly the intention behind the Bill.

Baroness Noakes

I shall have to take this away and think about it very carefully in a quiet room somewhere.

Lord Davies of Oldham

With a towel!

Baroness Noakes

Yes, with a towel around my head, to try to understand what both noble Lords have said on this point. I confess that I remain troubled by the answers I have received thus far. However, I shall not delay the Committee further today and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 39 agreed to.

Clause 40 [Documents relating to police authorities]:

Baroness Noakes moved Amendment No. 45: Page 28, line 34, leave out "for a police" and insert "or a fire authority for a combined

The noble Baroness said: Amendment No. 45 amends Clause 40 and seeks to bring fire authorities into the same bracket as the police in the event of a report in the public interest being issued by an auditor. I am not sure that the wording of the amendment is correct. I think that my noble friend Lord Roberts was trying to insert the words of the amendment after the words "for a police area in Wales", not trying to delete those words. I hope that that has not confused the Minister as it did me when I came to prepare for the amendment.

The point is that the amendment seeks to anticipate the effect of the Bill yet to be passed that will change the organisation of the fire services and increase their scope and importance. It seems to us to be important that the powers of the Auditor General properly reflect that. I beg to move.

Lord Davies of Oldham

We consider that there is a clear distinction of some import between police authorities and fire authorities and that is why there is a difference in the clause.

The membership of police authorities is only partially made up of elected members from their constituent local authorities. Half the membership of police authorities comprise magistrates and independent members, as I am sure the noble Baroness is aware. Police authorities also have their own separate funding arrangements within the annual Welsh local government revenue settlement and they receive revenue funding through Home Office police grant.

On the other hand, fire authorities wholly comprise elected members from their constituent local authorities. They also precept on their constituent local authorities for funding. There is therefore no reason why the procedure for dealing with public interest reports should differ from that set out in the Bill for any other wholly elected local government body set out in the Bill. Fire authorities, like their constituent local authorities, are responsible to their local electorate.

Baroness Noakes

I am grateful to the Minister and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 agreed to.

Clause 41 [Studies for improving economy etc in services]:

4.15 p.m.

Baroness Noakes moved Amendment No. 46: Page 29, line 12, at end insert— ( ) for improving the quality of performance in the discharge of these functions and the provision of services by local authorities in Wales

The noble Baroness said: I rise to move Amendment No. 46, which adds to the studies that the Auditor General may undertake under Clause 41—those for improving the quality of performance by local authorities. The existing clause talks about economy, efficiency and effectiveness and about financial or other management. Those are fine, but it is quality that matters ultimately to the local recipients of services.

It may be argued that "quality" is already included under Clause 41, but it does not mention the word—that is particularly important regarding the way that local services are used. Our amendment gives a direct expression to the need to focus on quality of performance. I hope that the Government will think that is a good idea. I beg to move.

Lord Davies of Oldham

The amendment is constructive, but we are not convinced that it is necessary. The studies envisaged by the amendment could already be undertaken under Clause 41(3) which enables the Auditor General to undertake or promote studies, other than those set out in Clause 41(1) and (2), relating to the provision of services by local government bodies in Wales.

We have already stated in the Bill the scope for the Auditor General to undertake and promote studies of such a significant and wide-ranging nature. We do not see that anything is added by the amendment at this stage.

Baroness Noakes

I am grateful to the Minister for that. We would prefer to see "quality" on the face of the Bill. This formulation is time-honoured. I accept that and the emphasis has shifted in today's world to looking much more at quality issues. However, I am prepared to take the Minister's assurance that the quality of performance is unambiguously covered by Clause 41 and on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 41 agreed to.

Clause 42 agreed to

Baroness Noakes moved Amendment No. 47: After Clause 42, insert the following new clause—

"COMPARATIVE STUDIES

(1) Studies carried out under section 41 or 42 may include comparative studies involving local government bodies in England if the Auditor General for Wales considers it desirable to do so for the purposes of his analysis of local government bodies in Wales.

(2) If local government bodies in England are to he included in any study under section 41 or 42, the consultation mentioned in sections 41(5) and 42(3) shall also include the Secretary of State and the Audit Commission."

The noble Baroness said: I rise to move Amendment No. 47, which inserts a new clause after Clause 42—and I will also speak to Amendment No. 71. The new clause inserted by the amendment would allow the Auditor General for Wales to extend his value for money studies to English local government bodies, provided that he consults the Secretary of State and the Audit Commission. That is to ensure that the Auditor General for Wales can harness the full power of comparative studies when it appears to him that confining himself to Welsh local government bodies would not give a comprehensive analysis.

The effect of various amendments in Schedule 2 to the Audit Commission Act is that the Audit Commission in England will be able to include Welsh bodies in its studies. That seems eminently sensible provided that the inspection burden on Welsh bodies is not excessive. But there is no corresponding power for the Auditor General and so he must look only at Welsh bodies when carrying out comparative studies.

In practice, much will be capable of being achieved by co-operation between the Auditor General and the Audit Commission, but the Bill is ambiguous on co-operation. Under Clause 43 the Auditor General must co-operate with the Audit Commission when carrying out value for money functions under Clauses 41 and 42. The corresponding co-operation duty on the Audit Commission applies to the Audit Commission's equivalent functions. But neither requires one to co-operate with the other to assist with the other's value for money functions. So, Wales co-operates with England on Welsh studies and England co-operates with Wales on English studies, but England does not have to co-operate with Wales on Welsh studies—or vice versa.

The Audit Commission does not really need that co-operation from the Auditor General because it has power to cover Welsh bodies itself. But the Auditor General does not have the equivalent power, which is why I have tabled the amendment. If the Auditor General does not have that power, the quality of his value for money work in Wales may well be constrained by the willingness of the Audit Commission to give sufficient priority to concerns that exist in Wales, but which perhaps do not exist in England. I do not believe that that is a sound basis for proceeding.

Amendment No. 71 is an alternative amendment to ensure that if the Auditor General does not have powers to include English bodies in his studies, then at least the Audit Commission must have a positive duty to co-operate in respect of the Auditor General's functions under Clauses 41 and 42. I beg to move.

Lord Davies of Oldham

We do not consider Amendment No. 47 to be necessary because there is nothing in the Bill to prevent the Auditor General for Wales incorporating into his studies for comparative purposes data collected by the Audit Commission on English authorities. The information will be readily available. The Act requires the commission to publish the results of its studies. Equally, the commission will value data collected and held by the Auditor General on local government bodies in Wales for comparative purposes.

The Audit Commission retains the power under the Audit Commission Act to undertake cross-border studies in respect of local government bodies in England and Wales. In doing so it has to consult the Auditor General and take account of any relevant work done or being done by the Auditor General.

The expectation is that the cross-border work will involve joint working between the Auditor General for Wales and the commission. The co-operative provisions in the Bill are designed to achieve that. But the Bill does not make cross-border working mandatory because we do not wish unnecessarily to fetter the Auditor General and other audit and inspection bodies in progressing work and, as a result, have a restrictive rather than a facilitative effect.

Under the arrangements in the Bill I believe that the Auditor General will have access to information which the noble Baroness identified; namely, information relating to English local government bodies, without specifically undertaking studies in respect of them. It is because we think we have provided for cross-border working without making it mandatory but where it would suit the purposes of the Auditor General in his work that we consider it is not necessary to accept an amendment that would change that basis.

Baroness Noakes

I thank the Minister for that reply. However, that presumes that data already exist, as collected by the Audit Commission. I am sure that the Auditor General will have access to data that exist. However, my point is that the Auditor General for Wales may well wish to examine things which the Audit Commission has not examined in relation to English bodies. Without either the power to examine English bodies or the ability to require the co-operation of the Audit Commission, audits in Wales could be impoverished compared with audits in England. In England, if the Audit Commission wants to carry out studies which include comparative data from Wales, including, I assume, data which do not already exist, it can do so. It is wrong in principle that we should create in the Bill essentially a lower quality examination for Wales.

In practice I accept that with good will and co-operation the Audit Commission and the Auditor General will work together harmoniously. But we should not preclude the possibility that what would be a high agenda item for Wales would he a very low agenda item for England. There could be instances where, to produce a quality result for Wales, we would need to go further. I do not believe that this is one of the issues where we are wedded to existing legislation. I think that the Government even have a little wriggle room. I hope that the Minister will consider this further. I do not think that the answers he has given today have been adequate. I do not know whether he wants to say any more at present.

Lord Davies of Oldham

I am grateful to the noble Baroness for giving me the opportunity to extend my remarks briefly. The main purpose of the duties in Clause 43 is to produce a regulatory burden on the bodies' studies. We consider that the duties as drafted achieve that. As to co-operation for the purpose of assisting a fellow audit body—the Auditor General for Wales or the Audit Commission, as the case may be—which I believe was the burden of the remarks of the noble Baroness, we do not think it is necessary to make that a statutory duty. The power to co-operate for the benefit of either is contained in Clause 2 but it is on the basis of a framework in which co-operation can take place. We do not think that we need to make this statutory, which would be the effect of the amendment.

Baroness Noakes

I shall consider carefully what the Minister has said, but, looking briefly at Clause 2, I do not believe that it adds anything to what we have already said. I remain of the opinion that the Auditor General for Wales will be in a worse position than his counterpart in England as regards his ability to carry out studies that are relevant to Wales; and that he, unlike the Audit Commission, is reliant on the good will of the other party. The Audit Commission has greater powers to extend its scope of review. I shall, as I said, consider carefully what the Minister said, but I think that I shall want to return to this on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 agreed to.

Clause 44 [Studies at request of local government bodies in Wales]:

Baroness Noakes moved Amendment No. 48: Page 30. line 28, leave out subsection (2).

The noble Baroness said: Amendment No. 48 would delete subsection (2) from Clause 44. This clause deals with studies made at the request of local government bodies with a view to making recommendations to improve economy, efficiency and effectiveness. Subsection (2) states that before making the request, the local authority must consult "associations of employees"—which I assume means the local trade union. My question is whether or not that is premature. I would understand if employees were consulted after the results of the study were known or if their job prospects were affected—indeed, that is what both labour law and good labour relations would require—but to consult the unions before a study, and to consult them regardless of whether the study potentially affects employees, seems to me both unnecessary and potentially harmful, not least to employees who might be needlessly worried and disturbed.

It seems that the provision makes it unlikely that a local authority would seek the help of the Auditor General in improving its value for money. If the choice is between private sector consultants whose work can be carried out without prior consultation and the Auditor General, whose work has to be consulted upon, there clearly is an unlevel playing field. I am surprised if the Government's policy is to favour the use of private sector consultants over the Auditor General. I shall be interested in the Minister's response. I beg to move.

Lord Davies of Oldham

We think that, as drafted, the Bill seeks merely to continue existing practice. The amendment therefore seems to be a step backwards. It could seriously impede the conduct of a study and consequently devalue the results. Any absence in the Bill of any requirement to consult would be in stark contrast to existing practice in England. I think that that would give rise to some concern in Wales. The measure gives employee organisations the opportunity to express views that would be valuable to the conduct of the study even if the association, whatever it was, had concerns over its conduct. After all, such concerns may themselves be informative to the study being conducted.

I say to the noble Baroness that consultation with an association even when it may not necessarily agree with what is going on is rather more positive than no consultation at all. All we are doing in this clause is to seek to continue existing practice.

4.30 pm

Baroness Noakes

Existing practice favours using outside consultants rather than the Audit Commission at present and the Auditor General in future. The clause seems to be there for political correctness more than anything else. We should be removing barriers to using the expertise of the Auditor General to wider effect. However, if it is the Government's policy to discriminate against the Auditor General, we will not stand in their way. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 44 agreed to.

Clause 45 [Benefit administration studies for Secretary of State]:

Baroness Noakes moved Amendment No. 49: Page 31, line 7, leave out "may" and insert "must

The noble Baroness said: Amendment No. 49 replaces the word "may" with "must" in Clause 45(6). It would require the Secretary of State to publish a benefit administration study which is to be carried out under the clause.

We do not understand in what circumstances the Auditor General might carry out a benefit administration study which was not published. It goes without saying—although I regret saying it—that the Explanatory Notes are completely silent on this matter.

It seems to me that if the Secretary of State asked for a study into benefit administration, there could be no valid reason for not publishing the outcome. Or, if the Secretary of State did not want to publish, it would be more likely that he would be influenced by political considerations in deciding whether to publish. That is why we think that obligatory publication would be better than some form of discretion. Alternatively, if there were good reasons for publication, we would be content to leave the discretion with the Auditor General. However, we do not think that the discretion on publication should be left with the Secretary of State. I beg to move.

Lord Davies of Oldham

As the noble Baroness indicated, the amendment would remove any discretion about whether a report should be published. I put it to the Committee that there is need to consider the contents and circumstances of any study which might be undertaken. A report might, for instance, include information that might be helpful to those bent upon fraud in highlighting a weakness in the benefit system. It might contain highly confidential information or it might actually identify individuals.

We recognise that it is most likely, in practice, that such reports will be published, and, indeed, they are. The Benefit Fraud Inspectorate publishes reports, although there is no requirement on it to do so. To accept the amendment would make it an absolute requirement to publish any report. Given the rather more detailed nature of the studies that may be undertaken in Clause 45, the potentially sensitive content to which I referred, and the fact that the study could relate to a single individual authority, we are merely seeking to preserve some element of discretion where the norm would certainly be that such reports were published.

Baroness Noakes

I thank the Minister for saying that the norm would be for such reports to be published. I shall reflect on what he has said and on whether between now and Report we should consider an alternative formulation involving discretion to the Auditor General. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 50 not moved.]

Clause 45 agreed to.

Clause 46 [Performance standards relevant bodies]:

[Amendment No. 51 not moved.]

Clause 46 agreed to.

Clause 47 [Publication of information as to standards of performance]:

Baroness Noakes moved Amendment No. 52: Page 31, line 42, at end insert "and may include references to standards of performance achieved by similar authorities outside Wales

The noble Baroness said: Amendment No. 52 deals with the publication of standards of performance by local authorities under Clause 47. It would enable comparisons to be made between the standards prevailing among Welsh authorities and similar authorities elsewhere in the UK. We believe that that would be desirable because it would give access to a greater pool of comparative data. I am not sure that the Auditor General is prevented from doing this under the Bill, but the amendment would put the matter beyond doubt. I beg to move.

Lord Davies of Oldham

The normal position of the Committee thus far is for the noble Baroness to make a slightly longer speech and for my response to be somewhat briefer. On this occasion, however, she gets full marks for brevity and I shall have to give a slightly extended response as this is, as she will recognise, quite an important issue.

After wide-ranging consultation, the Audit Commission concluded that it would not exercise its powers under Sections 44 and 46 of the Audit Commission Act 1998 to require the publication of performance indicators. That was in recognition of the fact that it would be best to focus on the development of statutory best value performance indicators set by the National Assembly under the Local Government Act 1999. The commission has worked with the Assembly in developing a robust performance management framework for best value. The commission retains the power to require publication, however, and I understand that it will keep the position under review. It is appropriate to retain the powers for the Auditor General under the Bill in order not to close off future options.

Amendment No. 52 could oblige local government bodies in Wales to publish information that would facilitate a comparison between their performance and the performance of similar authorities outside the Principality. It could also raise ambiguities over what a particular local government body regards as being a similar authority.

It would be open to the Auditor General for Wales to publish his own comparison in the form of Section 41 studies. That could certainly include comparative information available on English or other local authorities which, on an objective basis, are considered to have similar profiles.

Under Clause 6 of the Local Government Act, best value authorities must publish an annual performance plan—now known in Wales as an improvement plan. The same requirement applies in England. The publication of such plans would allow cross-border comparison if authorities chose so to do. For that reason, I do not consider that the amendment would achieve what I believe to be its intended objective of facilitating objective and meaningful comparison of information relating to standards of performance.

I have spoken at some length, but, I hope, to good effect. I hope that the noble Baroness will accept the position as identified in this contribution.

Baroness Noakes

I thank the Minister for that comprehensive reply, which will benefit from greater study on our part. What he said sounded extremely interesting and seemed to cover the substance of the amendment, but I should like to consider it carefully. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 agreed to.

Clause 48 [Permitted methods of publishing information under section 47]:

Baroness Noakes moved Amendment No. 53: Page 32, line 33, at end insert— ( ) The relevant body may publish the information electronically in any way which is accessible by local government electors of the body.

Te noble Baroness said: Amendment No. 53 deals with Clause 48, which concerns the methods of publishing information about standards and performance under Clause 47. I hear what the Minister says about this provision not being used at present, but since it will be held in reserve, it is important that we get it right.

Amendment No. 53 would insert a new subsection to allow local authorities to publish the information electronically. I find it curious that Clause 48 is drafted without regard to the electronic age. I am aware that it is modelled on the Audit Commission Act. It is surprising that that Act, which is only about five years old, does not refer to electronic publishing. We are often told by the Government of their commitment to the electronic age, e-government and so on. Yet in a Bill which should pass into law in 2004, the Government are drafting legislation as if we had not moved on from the printing presses.

For the purposes of today's debate this is a probing amendment, but I feel that the underlying subject matter merits very serious consideration. I beg to move.

Lord Davies of Oldham

We are in danger of being at crossed purposes. We agree about the objectives. We believe that within the framework of the Bill the amendment is not necessary because electronic publication is permitted.

The danger with the amendment is that it appears that it rules out other forms of communication. We certainly would not want to have electronically transmitted information at the exclusion of all other forms. I am sure that the noble Baroness does not intend that, but the amendment would have that effect. Even if I have misinterpreted the noble Baroness's amendment, I assure her that I am on her side. I assure her that the Bill provides the opportunity for e-mail and the Internet to be used. We do not need an amendment to this clause in order to do that.

Baroness Noakes

I shall accept the Minister's assurance that electronic methods are covered by Clause 48. I confess that, after looking again briefly at Clause 48, I still see it drafted wholly in terms of the written word and not the electronically published word. Because the Minister seems so certain, I shall take the issue away and look at it again to see how my amendment sits alongside what he has said. I record for today that I am mystified by his response and may well want to return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 48 agreed to.

Clause 49 [Directions under section 47]:

Baroness Noakes moved Amendment No. 54: Page 33. line 24, at end insert— ( ) the Assembly,

The noble Baroness said: In moving Amendment No. 54, I shall speak also to Amendment No. 55. Under Clause 47, the Auditor General will give directions to local authorities in Wales about publishing their performance standards. Before issuing a direction imposing a new requirement, under Clause 49(3) the Auditor General must consult associations of relevant bodies and any other persons that he thinks fit.

Amendment No. 54 requires the Auditor General to consult the Assembly. The Auditor General may well conclude that he wants to consult the Assembly—I hope that he would do so—because it has a clear interest in the publication of performance data. We believe that there should be no ambiguity about this and that the Assembly should be consulted.

Similarly, when the Auditor General publishes his direction under Clause 49(6), Amendment No. 55 will ensure that a copy is laid before the Assembly.

I do not consider that these amendments violate the constitutional position of local government in Wales. They are designed to recognise that the Assembly will have legitimate interests in the performance of local government in Wales and therefore should be explicitly within the processes that are envisaged under the Bill. On that basis, I beg to move.

Lord Davies of Oldham

The publication of performance standards information is essentially a matter for the Auditor General and local government in Wales. There is no requirement on the Audit Commission to consult the National Assembly for Wales under the present arrangements. Local government might consider it an encroachment on its constitutional independence if, in fact, such a report were given to the Assembly.

The information which the Auditor General considers should be the subject of a direction can be informed by studies that he is required to undertake or promote under Clause 41. As the noble Baroness said, under Clause 49(3) the Auditor General would be required to consult any persons he thinks fit, other than the associations of relevant bodies, before imposing a new publication requirement. This could, of course, include the Assembly but there is no cause to impose a specific duty for him to do so.

A requirement to lay a copy of any direction before the Assembly would run counter to other measures relating to the Bill that underpin local government's independent democratic accountability, which we discussed extensively on a previous occasion. There is no requirement on the Auditor General, for instance, to lay a report on the financial audit of a local government body before the Assembly. Under Clause 49(6) the Auditor General is in any event required to publish a direction in order to bring it to the public attention. Therefore, I believe that the issues of public awareness and public information are covered so far as the work of the Auditor General is concerned. However, to include the Assembly in the measure would have significant implications so far as local authorities are concerned. On that basis I do not feel able to accept the amendment.

4.45 p.m.

Baroness Noakes

I thank the Minister for giving the Government's reasons for resisting the amendment. We consider that the Assembly has a legitimate interest in local government, local government performance and perhaps even local government financial audit too. The Minister raised the interesting question of whether or not there ought to be a different information stream to the Assembly. However, on the basis that nothing would prevent the Auditor General consulting the Assembly—we can trust the good sense of the Auditor General in that regard—and that nothing would prevent him, in interpreting his requirement to publish the direction, ensuring that that was drawn to the attention of appropriate members of the Assembly, we are content with the Minister's response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 55 not moved.]

Clause 49 agreed to.

Clause 50 agreed to.

Schedule 1 [Best value audit and inspections]:

Baroness Noakes moved Amendment No. 63: Page 43, leave out lines 26 to 32.

The noble Baroness said: I shall be extremely brief. Paragraph 3 of Schedule I inserts a new Section 2A into the Local Government Act 1999 to deal with the Welsh dimension of best value audit. Our Amendment No. 63 proposes the deletion of subsection (4) of new Section 2A.

This is a probing amendment to find out exactly what the Government have in mind. Clearly, they intend to disapply or exempt from a functional duty certain best value authorities. The probing amendment is designed to ask the Minister to give us an example of how that might work in practice in Wales. I beg to move.

Lord Davies of Oldham

As the noble Baroness said, the measure would limit the powers of the Assembly in a certain way. She will not be surprised if I therefore resist the amendment. Its effect would be to take away a power which the Assembly already has under the Local Government Act 1999. This is not, as I understand it, an exemption in the context of a relaxation of the best value authority's responsibilities. The power would be exercised if the Assembly had fundamental doubts about the exercise of a function by a best value authority and was contemplating making alternative arrangements. The Assembly has not used the power but that does not detract from its validity. We want to retain the power and we do not think that we should remove a power which the Assembly already has.

Baroness Noakes

I thank the Minister for that reply. I had understood that subsection (4) would have the effect of taking a body outside the ambit of best value. My probing amendment is to find out why that would happen in relation to a particular function or functions. I am not sure I understood what the Minister said in response to that.

Lord Davies of Oldham

I was indicating that the power which would be taken away by the amendment would be exercised only if the Assembly had fundamental doubts about the exercise of the functions by a best value authority. The power has not been used, so I cannot quote an example to her. However, we want to preserve that power—it is one which the Assembly already enjoys under the Local Government Act. That "reserve" power has validity and might be used in exceptional circumstances in respect of a best value authority when the Assembly has fundamental doubts about what is happening.

Baroness Noakes

I will need to consider carefully the Minister's comments. It seems that having doubts about performance would be more likely to leave an authority within the best value framework, so that all that could be exposed and explored through the best value process. Having doubts about performance would seem more likely to leave a body within that process. So, I am unsure about the Minister's response, which I will carefully consider between now and Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Davies of Oldham moved Amendment No. 64: Page 45. line 15, leave out "and (3)" and insert "to (9)

The noble Lord said: On behalf of my noble friend, who is again unavoidably absent through illness, I move the amendment standing in his name. The amendments correct the fact that the draft Bill inadvertently resulted in the full provisions for consultation, approval and revision set out in Clause 16 not being applied to the code of practice in respect of best value audit. I can see from the amendments that have been tabled that our weaknesses were about to be exposed by Opposition amendments, and the government amendments have been tabled to recognise our weakness. The amendment reflects the fact that approval of, and consultation on, a draft code are dealt with in the full provisions of Clause 16. I beg to move.

Baroness Noakes

Amendment No. 65, standing in the names of my noble friend Lord Roberts and myself, is substantially the same as Amendment No. 64 and we therefore support the Government's amendment. We believe that we tabled ours first and the Government followed us. However, we will not dispute that—we welcome it.

On Question, amendment agreed to.

[Amendment No. 65 not moved.]

Lord Davies of Oldham moved Amendment No. 66: Page 45, line 24. leave out from "Before" to end of line.

On Question, amendment agreed to.

Baroness Noakes moved Amendment No. 67: Page 46, line 1, leave out "Secretary of State" and insert "Assembly

The noble Baroness said: In moving Amendment No. 67, I shall also speak to Amendments Nos. 68 and 70, which are probing amendments. Paragraph 9 of Schedule 1 inserts a new Section 10A into the Local Government Act 1999 to deal with best value compliance work by the Auditor General for Wales. But the new section talks in terms of the Secretary of State giving directions to the Auditor General. The simple question posed by my amendments asks why the new section refers to the Secretary of State and not the Assembly. Is the Assembly to have no say in those best value inspections? What role does the Secretary of State have, and which Secretary of State is it?

I have tabled the amendments in relation to paragraph 9 of Schedule 1 They also apply to other paragraphs in the schedule—for example paragraphs 13 and 16. But, for the sake of simplicity in our Grand Committee debate, I have confined myself to paragraph 9 alone. I beg to move.

Lord Davies of Oldham

Once again, we are of one mind in terms of intent. In her amendment, the noble Baroness seeks to replace the Secretary of State with the Assembly in respect of a direction for the Auditor General to conduct a compliance inspection on best value, a consultation with the Auditor General in advance of giving such a direction and the issue of guidance on best value. The amendments are not necessary as Section 29 of the Local Government Act 1999 already substitutes the National Assembly for the Secretary of State in respect of Part 1 best-value provisions. Therefore, the responsibility lies with the National Assembly and not with the Secretary of State.

Baroness Noakes

I thank the Minister for that reply. I shall merely remark that it is an extraordinarily convoluted way of drafting into the Bill that the Assembly and not the Secretary of State has power in this respect. That is part of the complexity of amending prior legislation. However, I am grateful for the explanation and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 68 not moved.]

Baroness Noakes moved Amendment No. 69: Page 46, line 8, leave out ", and in deciding whether to do so,

The noble Baroness said: Amendment No 69 would delete the words, and in deciding whether to do so",

from subsection (4) of new Section 10A of the Local Government Act 1999, as inserted by paragraph 9 of Schedule 1.

The subsection reads oddly in this context, probably because the Auditor General has a dual role. Under subsection (2), he may be subject to a direction from the Secretary of State, who has consulted him under subsection (3) about the appropriateness of it. The direction, with which he must comply, will be to carry out an inspection of a best-value authority in relation to specified functions.

Subsection (4) deals with the inspection itself, and it is strange to read that the Auditor General still has the choice implied by the phrase, in deciding whether to do so"—

that is, to carry out an inspection. How can he have such a choice when he is under a compulsory direction? I beg to move.

Lord Davies of Oldham

Amendment No. 69 would mean that the Auditor General would not be required to have regard to a recommendation by a best-value authority's auditor or Assembly guidance in coming to a decision on whether to undertake an inspection of a best-value authority's compliance with the best-value requirements set out in the Local Government Act 1999. He would, however, be required to have regard to them in undertaking an inspection. I believe that it is equally appropriate for him to take account of an auditor's recommendation and guidance in coming to a decision on whether to undertake an inspection, as is currently the case. That is why we do not consider the amendment to be appropriate.

Baroness Noakes

I had anticipated that the Minister would say that. I refer to the dual role whereby the Auditor General can choose whether or not to carry out an inspection under subsection (1) or be directed under subsection (2). I should like to leave the Minister with the thought that in subsection (4) the word "and" would be better replaced with the word "or" so that the subsection would read: In carrying out an inspection, or in deciding whether to do so". That would reflect the fact that different things are being carried out under different parts of this new subsection. I believe that the drafting is ambiguous because of the way in which the issue is constructed. However, this is a matter for parliamentary counsel. I hope that the Minister's officials will put that point to parliamentary counsel and perhaps we shall be able to return to it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 70 not moved.]

Schedule 1, as amended, agreed to.

Clauses 51 to 53 agreed to.

Clause 54 [Restriction on disclosure of information]:

On Question, Whether Clause 54 shall stand part of the Bill?

5 p.m.

Baroness Noakes

The Minister will see that we have plenty of time left in Grand Committee to debate Clause 54 stand part, as we have reached this point well ahead of my target time—which I am sure he will be pleased about.

This is probably the most contentious part of the Bill. We believe that the clause, with its presumption against disclosure of information and criminal sanctions for non-compliance has no part in a civilised audit regime. We are not alone in this—the clause was disliked by the Welsh Affairs Committee in another place and the Assembly committee in its pre-legislative scrutiny of the Bill. The committee in another place recommended its deletion and the substitution of a protocol for the clearance of the factual contents of local authority reports in consultation with those involved. That is the kind of procedure that the Auditor General is well versed in using.

We have since had the Government's response to the committee's report, to the effect that they have given careful consideration to the recommendation and come to the conclusion that the clause should be retained, with the only reason given being consistency with the Audit Commission arrangements in England. We have debated that rationale—or non-rationale—on several occasions in our Committee, and I believe that the Government's arguments have got thinner and less convincing as we have gone through the Bill.

The Government's position runs counter to devolution, which I believed—although I am not an expert on devolution—was supposed to allow Scottish and Welsh people to do their own thing, even if that means that there is a difference between them and the rest of the UK. The general practice has been to allow such differences to emerge—but not in this case.

Much has been made of the criminal sanctions in the clause and the potential inconsistency in criminal law between England and Wales, which we have already discussed. The same point could not be made in respect of Scotland, because there are already inconsistencies between Scottish and English criminal law. We have already exposed in Committee the fact that the Bill itself, in Clause 39, opens up the possibility that criminal sanctions will diverge between Wales and England. Therefore, we do not regard it as an argument of principle.

The thrust of the clause is to restrict disclosure of information; indeed, that is its title. We are here dealing with local democratically elected authorities that are accountable to their electorate. The instinctive reaction is that the conduct of their affairs should be open and above board. Of course, there are items such as personal and social security data and criminal investigation material that should be handled with great care. However, common sense and the Freedom of Information Act 2000 should see to that. Those matters do not warrant the inclusion of a blanket restriction on an auditor. Such a restriction implies that the body has something to hide from the public and must be protected. That is why the press and the unions have such an interest in the clause, as they see it as a way of silencing whistle blowers. I understand that the Auditor General himself has no desire for the clause, and I urge the Government to accept its deletion. I beg to move.

Lord Thomas of Gresford

We fully support the noble Baroness, Lady Noakes, and her party in seeking the deletion of Clause 50—or Clause 54, as it now is. I called it Clause 50 because that is how it was originally drafted, and I am looking at the Government's response to the fifth report of the Welsh Affairs Committee, in which the Government set out their reasoning for retaining it. We were told about that at Second Reading, when I made a very long speech on this point, which I do not propose to repeat today.

In giving their reason for not deleting the clause, the Government said: As a consequence there would be potential for the disclosure of the same information being treated inconsistently for the purposes of the criminal law in Wales and England. The Government is of the view that such a situation would be inappropriate and that any future consideration of the disclosure issue should be on an England and Wales basis. For this reason it does not propose to delete the provision from the draft Bill". Earlier this afternoon we debated a situation in which there will be different criminal laws in England and Wales. As soon as we pass regulations—as the National Assembly is fully entitled to do—and apply criminal sanctions in breach of those regulations, we create a separate body of criminal law in Wales. The Government do that consistently in the Bill and do it also in the National Assembly, where their own party is in power. Therefore, it is no principle on which to base a Bill that effectively squashes the Auditor General's reports relating to local government issues. The measure gives an opportunity to a local government that is embarrassed by the contents of a report to withhold those contents from the public. That is absolutely unacceptable.

I hope that the Government will take this opportunity to lead the way in getting rid of these provisions, which were introduced via another party's government in 1972—the rationale for which I have not yet been able to discover—and introduce a modern system of auditing which allows the public to know what is going on in local government.

I have received correspondence from people in Flintshire and in the Rhondda, Cynon, Taff area who are concerned with matters within their authority area, which I do not propose to go into. They feel that this clause provides an opportunity for squashing full public discussion on contentious issues in those areas. Accordingly, we hope that the Government will give the Committee some comfort on this matter before we reach Report, when, if necessary, we shall do all within our power as a party to remove it from the Bill.

Lord Davies of Oldham

It is clear that this issue presents probably the greatest controversy in the Bill. I want to set out the Government's position. I am happy to indicate both to the noble Baroness and to the noble Lord, Lord Thomas, that I hope to conclude on a reasonably constructive note while, at the same time, making clear why we have taken this position in the Bill.

There is no new bar on disclosure of information in respect of Wales, although some have portrayed the issues in those terms. Clause 54 is equivalent in its effect to Section 49 of the Audit Commission Act 1998. In Clause 54 the Bill simply preserves the existing arrangements in both England and Wales.

The noble Lord commented on opportunities for a different approach in legislation and indicated a more modern system of auditing for local government. However, at this point I reflect that the Bill should not tread on any corns because it merely consolidates the existing position.

A person—an auditor, a member of staff of the Auditor General for Wales or anyone else who had managed to get hold of the information—in either England or Wales who disclosed without good reason information in contravention of the exceptions set out in Section 49 (2) would be guilty of an offence that could result in a term of imprisonment. If the Bill were to be enacted without this clause, the same action in Wales would not be an offence.

I am aware of the extent of opposition to Clause 54. That was identified by the noble Baroness and, indeed, by the noble Lord. However, it would be incongruous for the same act of disclosure to result in a prison sentence of up to two years in England and not be an offence in Wales. As I said in debates on earlier amendments, the Government are not prepared to create such an inconsistency in primary legislation. It is the Government's view that any consideration of the appropriateness of criminal sanctions in primary legislation should be undertaken on an England and Wales basis and should not be dealt with piecemeal.

Section 49 of the Audit Commission Act is one of a large number of statutory bars to the release of information that is being reviewed at present by the Department for Constitutional Affairs under the Freedom of Information Act 2000. My understanding is that the recommendations of that review are likely to be published in the autumn and implementation of the recommendations would be likely to begin next year.

I have listened very carefully to the strength of feeling expressed by noble Lords both today and, as has been indicated, on Second Reading. I remain of the view that consistency in the application of the criminal sanctions is the key issue. However, I shall give further consideration to the matter within the context of the review to which I alluded and report back to the House.

Lord Thomas of Gresford

If I may, I shall respond first. The Minister said that this is no new bar. It is a discredited bar. It is discredited in Wales. It is for that reason that this section has been condemned by the Welsh Grand Committee, the Welsh Affairs Committee, the Auditor General himself and, most importantly, by the National Assembly. I refer specifically to local authority in Wales. We have had our problems. A bar of this kind cannot remain any longer. I should like to quote what was said by the Assembly Member from Montgomeryshire, Mick Bates, in the debates in the National Assembly. He said: Deleting Clause 54 will enhance our ability to govern in the sunshine rather than in the shade". In Wales, in certain local government areas, there has been far too much shade.

We will maintain our opposition to this clause throughout these proceedings. While we thank the Minister for his generous words at the end, we hope that that will be very productive at Report stage.

Baroness Noakes

We sympathise with the Minister for trying to defend the indefensible. Had he not concluded with the words that he did, we should be leaving this Grand Committee with a rather unpleasant end to our debate. The Minister said that he will report back to the House and I hope that he will do so at Report stage. We shall certainly want to debate this again then.

There is probably little more that we can do today. We are quite prepared to leave a difference between England and Wales. However, if the Government want to find a way of removing England from this ludicrous provision, we would fully support them. This provision does not sit alongside a proper audit regime for today. As far as I am aware, the Government have no support from anywhere for so doing. For today, however, we will not press the issue.

Clause 54 agreed to.

Clauses 55 and 56 agreed to.

Clause 57 [Orders and regulations]:

Lord Davies of Oldham moved Amendment No. 56: Page 37, line 28, leave out "the Secretary of State or

The noble Lord said: I am moving Amendment No. 56 and speaking to the other government amendments in this group on behalf of my noble friend. These are minor and technical amendments, which address a point identified by this House's Select Committee on Delegated Powers and Regulatory Reform, although it was not noted in its report. As originally drafted, the clause contained unnecessary references to order and regulation-making powers conferred on the Secretary of State in respect of Part 2 of the Bill. Part 2 comprises provisions relating to local government in Wales and does not confer any order or regulation-making power on the Secretary of State. The amendments are intended to clarify that position. I beg to move.

5.15 p.m.

Baroness Noakes

I have just one question for the Minister, on taking the Secretary of State out of this part of the Bill. It relates to Clause 16, which sets up the audit code of practice, which will still be subject to an annulment by either House. We debated that matter on our first Committee day, when the Minister said: It is appropriate that … Parliament, should it wish, also has the opportunity to scrutinise the code and comment on it".—[Official Report, 23/02/04; col. GC53.] I should be grateful if the Minister could explain whether the effect of the noble Lord's amendment to Clause 57 is in conflict with the provisions in Clause 16.

Lord Davies of Oldham

I am not sure that I can explain, but I can certainly state that it is not in conflict. It does not have any effect on Clause 16.

On Question, amendment agreed to

Lord Davies of Oldham moved Amendments Nos. 57 and 58: Page 37, line 30, leave out subsection (2). Page 37, line 35, leave out "the Secretary of State or

On Question, amendments agreed to.

Clause 57, as amended, agreed to.

Baroness Noakes moved Amendment No. 59: After Clause 60, insert the following new clause—

"PREVENTION OF UNLAWFUL EXPENDITURE

If the Auditor General for Wales has reason to believe that a Welsh NHS body or an officer of such a body—

1. (a) is about to make, or has made, a decision which involves or would involve the incurring of expenditure which is unlawful;
2. (b) is about to take, or has taken, a course of action which, if pursued to a conclusion, would be unlawful and likely to cause a loss or deficiency,

he shall refer the matter forthwith to the Assembly."

The noble Baroness said: In moving Amendment No. 59, I shall speak also to Amendment No. 60, which is grouped with it. Both amendments concern the audit regime for NHS bodies in Wales and add new clauses to the Bill.

The scheme of the Bill is to mimic the existing English local authority audit provisions for Wales, albeit under the control of the Auditor General rather than the Audit Commission. But for health bodies the new regime is to give audit responsibility more fully to the Auditor General and not to mimic the existing arrangements. We have no problem with that.

However, in achieving that, the purpose of the amendments is to question whether the baby has been thrown out with the bath water. Under the existing audit regime there are provisions which allow the health body auditor to act if he believes that unlawful expenditure is about to be incurred; and the auditor can carry out extraordinary audits if he thinks that something needs to be looked at. The Secretary of State can also call for an extraordinary audit. These provisions allow the auditor to act outside the cycle of the annual financial audit and he can stop problems before they get out of hand. They are useful provisions to be held in reserve but they do not feature in the Bill for health bodies, so we are setting up differences, not only between England and Wales—the Minister might like to note that—but between health bodies and local authority bodies in Wales.

Therefore, Amendment No. 59 is a version of Section 19 of the Audit Commission Act and Amendment No. 60 is a version of Section 25 of that Act. There are equivalent provisions for local government in Clauses 33 and 37 of the Bill. My amendments would restore the current position for health bodies. I beg to move.

Lord Davies of Oldham

We do not consider that Amendment No. 59 is necessary, but I shall give, I hope, significant reasons for making that bold statement. Clause 60 gives the Auditor General statutory responsibility for the financial audit of Welsh National Health Service bodies. His statutory responsibility would be the same as it now is for the National Assembly and its sponsored bodies. The audit process that applies would also be the same.

An item of unlawful expenditure would result in a qualification to an NHS body's accounts, as it does now to the other bodies for which the Auditor General has statutory audit responsibilities. He would publish a report in respect of the qualification and lay the report before the National Assembly. In accordance with its standing orders the National Assembly Audit Committee would meet to consider the qualification. In doing so it would take evidence from relevant officials with financial accountability responsibilities. The committee would issue a report with its conclusions and recommendations to which the Assembly government, in liaison with the NHS body concerned, would be required to respond within a set timescale—currently 30 days.

Any potential unlawful expenditure or unlawful decision would as a matter of course be brought to the attention of the NHS body's accounting officer and the National Assembly's accounting officer for the National Health Service in Wales.

Amendment No. 60 is also unnecessary, because the Bill gives the Auditor General statutory responsibility for the financial audit of Welsh National Health Service bodies. As such, he could have access to an NHS body at any time. I heard what the noble Baroness said—that the problem was that he might be constrained. But he would have access to an NHS body at any time for the purpose of undertaking a financial audit or an economy, efficiency and effectiveness examination. If his audit or examination resulted in his having concerns over financial accountability or value for money issues, it would be open to the Auditor General to publish a public interest report under new Section 96A of the Government of Wales Act 1998, as provided for in Clause 2 of this Bill. He could lay a copy of the report before the National Assembly.

The Assembly Audit Committee proceedings I described with regard to Amendment No. 59 would then be followed. The proposal that the National Assembly should have the power to require that the Auditor General undertake an extraordinary audit would not he consistent with the convention that the National Assembly should not have the power to require the Auditor General to do anything, or indeed to refrain from doing anything, in respect of bodies for which he is the statutory auditor and for which the Assembly has funding responsibilities. This convention is a cornerstone of the Auditor General's statutory independence. It is on that basis that I ask the noble Baroness to withdraw her amendment.

Baroness Noakes

I am grateful for the Minister's response, and I shall carefully consider what he has said.

The purpose of Amendment No. 59 was to avoid the possibility of having to rely on the ex-post nature of a financial audit—the qualification of a set of accounts many months after the end of the financial year, which could put about 18 months between an unlawful act and a report. That is too long.

I shall consider carefully what the Minister said about Clause 2, and whether that creates a sufficient platform for the Auditor General on which to work. I shall also consider carefully the Minister's comments about whether the Auditor General's independence would be impaired by the Assembly being able to require him to carry out an extraordinary audit within the terms of my Amendment No. 60. I am not convinced that that impact impairs the independence, because there are other requirements in the Bill which allow the Assembly to require certain matters to take place—for example, in relation to local authorities, which we have been debating for most of the afternoon. While I thank the Minister for his reply, I am not 100 per cent convinced that his reply deals with the points that I raised. However, I shall consider the matter carefully between now and Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 60 not moved.]

Clauses 61 to 64 agreed to.

Schedule 2 [Minor and consequential amendments]:

[Amendment No. 71 not moved.]

Schedule 2 agreed to.

Clauses 65 and 66 agreed to.

Schedule 3 agreed to.

Clause 67 [Local government bodies in Wales]:

Baroness Noakes moved Amendment No. 61: Page 40, line 30, leave out subsection (2).

The noble Baroness said: We come to the end. In moving Amendment No. 61, I shall speak also to Amendment No. 62. These are probing amendments. Amendment No. 61 would delete subsection (2) from Clause 67. which deals with transitional provisions.

The purpose of the amendment is to discover how long the current appointments of auditors of local authorities under the Audit Commission Act will run before new appointments are made under Section 13. I understand that some appointments run until 2007. My question to the Minister is whether steps are being taken to ensure that those appointments cannot be extended still further and so frustrate the purpose of the Bill, which is to put the Auditor General in the driving seat on local authority audits in Wales.

Amendment No. 62 is a mirror amendment dealing with the appointment of NHS auditors under Clause 68. Here, the concern is even greater, given the apparent desire to move more wholeheartedly into a new model for the audit of NHS bodies in Wales under the Bill. I beg to move.

Lord Davies of Oldham

The noble Baroness is right to look at transitional arrangements to see how long they are meant to obtain and to consider their impact. Clauses 67 and 68 make provision for arrangements made by the Audit Commission for the appointment of auditors for local government bodies and NHS bodies in Wales to remain in force when the Public Audit (Wales) Bill comes into force. They would continue in force until the terms of appointment expired. With regard to the crucial question which the noble Baroness addressed to me, the current framework contracts extend to 2007 and would end then.

Baroness Noakes

The crucial words being "and would end then.

Lord Davies of Oldham

Yes. I am grateful to the noble Baroness. I have been grateful to her for two days during this Committee stage and I shall end on a note of gratitude. It would be for the Auditor General for Wales to decide whether to extend the contracts, but he would have to make a decision in 2007. The arrangements are meant to end at that time and he will then be involved in making the decision. As ever, I stand corrected by the noble Baroness's sotto voce intervention.

We believe that this is a sensible and pragmatic arrangement. It provides the client bodies with some continuity and avoids contractual difficulties, which may arise through early termination of appointments. I understand that the noble Baroness tabled these amendments, quite properly, in order to test where we stood and to see whether we had thought through these issues. She has certainly tested me on where I am and whether I had thought these matters through. I hope that I have given her some assurance at this late stage.

Baroness Noakes

We finish this Grand Committee on the best of notes. I am perfectly satisfied with what the Minister said in response to the amendment.

Lord Thomas of Gresford

Before the noble Baroness withdraws the amendment, perhaps I may congratulate her on the hard work that she has put into the consideration of the Bill. I have been a silent spectator for much of the time but an admiring one.

Lord Davies of Oldham

I imagine that such sentiments can be expressed only from the Opposition Benches but I rise, too.

Baroness Noakes

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 67 agreed to.

Clause 68 [Welsh NHS bodies]:

[Amendment No. 62 not moved.]

Clause 68 agreed to.

Remaining clauses and schedule agreed to.

Bill reported with amendments.

The Committee adjourned at half past five o'clock.