§ 8.31 p.m.
§ Lord Renton
My Lords, I beg to move that this Bill be now read a second time. It started as a Private Member's Bill in another place, where it was introduced and piloted by my right honourable friend Mr. Norman St. John-Stevas—an experienced and respected parliamentarian, a constitutional expert and formerly Leader of another place. The Bill concerns the House of Commons and its control over money voted in taxation. Its purpose is to ensure that the money voted by Parliament is properly and efficiently spent. It is, as your Lordships will appreciate, essentially a House of Commons matter, but it is not a Money Bill so it requires your Lordships' approval.
The Bill is now wholly uncontroversial in party political or any other terms, and it has the support of all parties and of the Government so far as another place is concerned, and I believe in your Lordships' House as well. The drafting was ultimately carried out with the help of the Treasury. I think it is proper for me to mention that it has the support of the Comptroller and Auditor General—that eminent official who is most affected by the Bill.
Earlier controversy, when the Bill was first introduced, centred on the inclusion of nationalised industries and public companies owned by the Government, bringing them within the scope of the control by the Comptroller and Auditor General and the House of Commons commission which is mentioned in the Bill. But those two categories were removed from the Bill at the Committee stage, and that is what has rendered the Bill uncontroversial. The Bill received an unopposed Second Reading after no less than five hours' debate on the Floor of the House, and there was a long Committee stage, with seven sittings of two-and-a-half hours each. The noble Lord, Lord Bruce of Donington, who shares with me experience of having served in another place, will know that that is very thorough consideration in Standing Committee, and it was there that the Bill was substantially amended.
I should point out that with, of course, the co-operation of my right honourable friend Mr. Norman St. John-Stevas, it was Treasury Ministers who made the running in the Standing Committee and got the Bill into a shape which was found to be generally acceptable to all concerned. It was originally called the Parliamentary Control of Expenditure (Reform) Bill—if I may say so, a very apt description, because that is just about what the Bill does, although it is a rather long Short Title. However, in Committee it was 684 restyled the National Audit Bill, and that is what comes before us this evening.
I think I can quickly explain its terms and effect by simply running through the first eight clauses quite briefly. Clause 1 provides that the Comptroller and Auditor General shall be an officer of the House of Commons, instead of being appointed by the Crown on the advice of the Prime Minister as a result of the proposal made in 1866 by Mr. Gladstone when he was Chancellor of the Exchequer. In future, the Comptroller and Auditor General will be appointed by the House of Commons on a Motion moved by the Prime Minister, with the agreement of the Chairman of the Committee of Public Accounts, who will, no doubt, consult the committee. In this way the interests of all parties should have been taken into account. I understand that Her Majesty has signified her assent to the modification of the Royal Prerogative, and my noble friend the Chief Whip will no doubt indicate that at a later stage.
Clause 2 establishes the House of Commons commission, including the Chairman of the Committee of Public Accounts. The function of this commission is to approve an estimate of expenses for the National Audit Office and lay it before the House. Clause 4 is also relevant to that, as I shall show. Clause 3 sets up the National Audit Office and gives the Comptroller and Auditor General power to appoint the staff and to determine their conditions and salaries, which will be in line with Civil Service scales.
Clause 4 lays down how the expenses of the Comptroller and Auditor General shall be defrayed and accounted for, and also points to the way in which his duties shall be discharged. In addition, it arranges for the appointment of an accounting officer, who will be appointed by the commission. Clause 5 introduces something quite fresh, and I hope that your Lordships will find it welcome. It enables audit fees to be charged when the Comptroller and Auditor General is asked to undertake a scrutiny outside the main purpose of his work. Audit fees are something which cannot, in theory, be charged at the moment but which, I understand, are in fact paid in practice when appropriate.
Clause 6 gives statutory backing to what are best described as "value for money" audits, although if your Lordships will look at the Bill it will be seen that they are described in somewhat more technical and wide terms. The Comptroller and Auditor General, as we all well know, does this at present, but does so by convention rather than by statute. The authority given by Clause 6 applies to those departments and bodies which he does at present audit. Clause 7 provides that bodies which are mainly supported by public funds—and the definition of "supported by public funds" is the provision of over half their income—shall be subject to audit by the Comptroller and Auditor General. Of course, he has no power to question the merits of policy objectives. I should mention, in passing, that that condition applies also to his "value for money" audits under Clause 6. The point to bear in mind here is that the Government should remain responsible for broad decisions of policy, and that there should be no overlap between the Government's decisions and the work of the Comptroller and Auditor General, who is concerned 685 only with the finances and the way in which those decisions are implemented.
I should mention subsection (4) of Clause 7, which excludes the nationalised industries and certain public bodies from the jurisdiction of the Comptroller and Auditor General. Those bodies are listed in Schedule 4. As your Lordships know, those bodies have, under statute, their own arrangements for the carrying out of their financial responsibilities. Clause 8 gives to the Comptroller and Auditor General access to documents under the objective test of reasonableness. I hope that will cause no trouble about disclosure in the courts.
Part III of the Bill is technical and consequential, and the schedules are consequential upon the first eight clauses which I have outlined; but again I should draw attention to the fact that the nationalised industries are specifically listed under Schedule 4, which derives its authority from subsection (4) of Clause 7.
I hope your Lordships will find that explanation, brief though it is, acceptable. Accordingly, I beg to move.
§ Moved, That the Bill be now read a second time.— (Lord Renton.)
Lord Bruce of Donington
My Lords, we on this side of the House are grateful to the noble Lord, Lord Renton, for having moved the Second Reading of the Bill. As the noble Lord has indicated, this is not a money Bill. Therefore it is a little unfortunate that the Bill is not to receive detailed and adequate consideration by this House. We regret that it has come here at such short notice and that the emergency conditions which have arisen, through no fault of the Opposition, have resulted in agreements and arrangements being made through the usual channels for the speedy expedition of the Bill. During earlier debates today one would have thought, listening to other noble Lords, that this emergency had been thrust on the country by the Opposition, not by the Government. It is the Government's entire responsibility that our proceedings have been truncated. The Opposition did not precipitate the alleged "emergency" with which Parliament is confronted. Initially we should have liked to give further and more detailed consideration to the Bill.
Nevertheless, I say immediately that we are grateful to the right honourable gentleman, Mr. Norman St. John-Stevas, whose sense of public duty transcends purely party considerations and whose persistence has resulted in the Bill passing ultimately through another place with the aid of his colleagues, my right honourable friend Mr. Joel Barnett and Member of all parties. Therefore we are very grateful to the right honourable gentleman, Mr. Norman St. John-Stevas, for having persisted so far and so fast in bringing this measure towards the statute book.
A number of technical considerations arise which in the ordinary way would have required a good deal more consideration than we are able to give them today under the arrangements which have been agreed 686 between the parties. Perhaps I can best explain my own misgivings by referring to the Long Title of the Bill. Among other things, it refers to,making new provision for promoting economy, efficiency and effectiveness in the use of such money by government departments and other authorities and bodies.The Long Title refers to money within the context of the promotion of efficiency, but if one refers to Part II of the Bill, Clause 6(1) reads as follows:The Comptroller and Auditor General may carry out examinations into the economy, efficiency and effectiveness with which any department, authority or other body to which this section applies has used its resources in discharging its functions".The reason I raise this point is because there is a world of difference between money and resources. One of the unfortunate afflictions of the British public financial system and its method of bookkeeping and accounts is that it presents its accounts in the form of a receipts and payments account only. Under the existing legislation it is not required to present an account to the public of how it uses its resources, in the largest sense. And the use of resources includes its non-monetary assets. These may include buildings, plant and machinery, and many other items.
If one is going to determine economy, efficiency and effectiveness, one needs to look not only at the receipts and payments account but also at the resources as a whole. For that reason, I am very sorry indeed that we in this House were unable to obtain longer notice for discussion of the Bill. Had it come within the normal time tolerance of the schedule of business of the House, there is no doubt that the noble Lord, Lord Benson, a distinguished chartered accountant, and the noble Lord, Lord Diamond, another distinguished accountant, as well as the noble Lord, Lord Lyell, who is also in the profession, would have had an opportunity to discuss the Bill in much greater detail.
I hope that in due course the right honourable gentleman, Mr. Norman St. John-Stevas, and the Public Accounts Committee will read the report of our debate and that they may feel disposed to take account of these observations. As an accountant myself, I aver and insist that one cannot judge efficiency, economy and effectiveness without reviewing the position of any concern as a whole, including the utilisation of its assets. This in itself will mean, if it is to be effective, a very considerable reform of the manner by which Governments of any party—I make no party point about it—keep their accounts and present them to the public. It might act as a deterrent to Governments who wish to flog off assets, which have been purchased out of taxpayers' money at prices far below their cost, without the losses resulting from those transactions being disclosed to the British taxpayer. The noble Lord may think that is a partisan point. I agree that it has party overtones. Nevertheless, it remains quite true.
It is, I believe, within your Lordships' knowledge that the Netherlands adopt a far more comprehensive system of accounting, not only in the accounts of their national Government but also in the accounts of their local authorities. As the noble Lord knows very well if he has read the Layfield report, local authorities in this country are not required to account to the ratepayers or to the public as to what happens to the assets which they own. Once again on a partisan note, had the local ratepayers been aware of the loss of ratepayers' money 687 which had been incurred by flogging off houses at a fraction of their cost, they might have thought again about it.
Those are only markers which ought to have been laid down and discussed at some length in this House, because they do presuppose that Part II of the Bill, to become really effective in the sense that the public is being led to presume they will be effective, will need some considerable changes in the whole system of Government accounting—whichever party is in power. In parenthesis, by previous consultation with my colleagues in my own party, I have no reason to presume that I would not have to persuade them just as hard as I am persuading the present Government in this particular direction.
Reform is indicated in that respect, and ancillary to that, a fundamental change is required in the Civil Service itself—I am talking about the general administrative grades in the Civil Service—to stop resisting (as they have so far successfully resisted) the engagement of more professional accountants to be involved in the machinery of government itself. I sincerely hope that the Public Accounts Committee will take account of that also in due course, and the comptroller too.
Having delivered myself of those homilies, which I believe are of importance and which are fortunately within the professional competence of the noble Lord, Lord Lyell, who occupies a distinguished position in my own profession, I sincerely hope that we may have an indication from the Government that the word "resources" included in Clause 6 (1) goes far beyond money and includes all the physical and other assets. Subject to that, we on this side of the House are quite willing, in the light of the arrangements which have been made between the parties, to facilitate the passage of this Bill.
§ 8.52 p.m.
§ Lord Lyell
My Lords, from this position the Government would only wish me to congratulate my noble friend Lord Renton who has introduced the purpose of this Bill. I am sure your Lordships would wish the encomiums which have been passed on to my noble friend to be passed on to our right honourable friend in another place. Indeed, he tends to have a foot in two places because he is fortunately able to be present, albeit unofficially, at our deliberations this evening.
The Government's view is that we approve of parts of this Bill and the spirit behind it. Your Lordships have noted that the comptroller will continue to be appointed by the Crown. But the Bill also provides that, in future, the Crown will exercise this power on an Address presented by another place. No Motion shall be made for such an address except by the Prime Minister acting with the agreement of the chairman of the Public Accounts Committee. These arrangements reflect the shared interest of Parliament and the Executive in this very important appointment.
Under the existing and long standing legislation the comptroller conducts basic financial and regularity audits. I will not go into an exact definition of the word "resources" in Clause 6 (1) because we could be here quite some time if we went into an exact definition of that word. But my noble friend Lord Renton and even 688 the noble Lord, Lord Bruce of Donington, would agree that the important work of the comptroller in the area of value for money has had no specific statutory authority. This Bill will give to the comptroller such authority because, in broad terms, the effect of this part of the Bill will be to provide a specific statutory basis for the value for money examinations which the comptroller and his staff already carry out in departments and certain other bodies in receipt of public funds.
The Government have consistently supported the provisions which now make up this Bill. We regret that the proposals for value for money examinations of the nationalised industries which were put forward by my right honourable friend the Chief Secretary have not been incorporated in the Bill, because they would have provided a valuable means of improving parliamentary accountability and increasing the efficiency of those industries. The Government will now consider what can be done on a non-statutory basis in consultation with those industries. Despite the omission of these important provisions, the Government support this Bill in its present form.
Lord Bruce of Donington
My Lords, before the noble Lord, Lord Lyell, sits down will he please confirm that it is the Government's attitude at the moment that they cannot define the word "resources" within this Bill?
§ Lord Lyell
My Lords, I do not see the word "resources" in any of the definitions in the Bill. The noble Lord tempted me and I sparred with the word "resources". The noble Lord thought it would be all-encompassing but we do not wish to go any further in defining the noble Lord's wide spectrum of what these "resources" might be.
§ Lord Renton
My Lords, may I say that I am grateful to the noble Lord, Lord Bruce of Donington, and to my noble friend Lord Lyell, for their contributions to this debate. We all regret short discussion on matters about which we could go on talking for a very long time. I resist the temptation to answer the noble Lord, Lord Bruce of Donington, about the exigencies of our timetable, except to say that nothing unconstitutional has occurred and that the decision to hold a general election is part of the sound working of our democracy.
I was interested by the contrast that the noble Lord, Lord Bruce of Donington, drew between receipts and payments in public expenditure and, on the other hand, the accounting or lack of accounting for resources. No doubt all concerned will take note of the noble Lord's comments, which illustrate the value of scrutiny by your Lordships even in matters which mainly concern another place.
The noble Lord mentioned also local government audits, but they are not within the scope of this Bill. He also spoke about this question of the engagement of staff by Government departments so far as accountants are concerned. I must point out that the Bill does not deal with that. The National Audit Office—and one should stress this—will not be a Government department; it will be part of the structure of Parliament. Indeed, the Comptroller and Auditor General 689 will be an officer of the House of Commons. It may be that I misheard my noble friend Lord Lyell. If I did mishear him, he must forgive me. But I think I should stress that the Comptroller and Auditor General will not be appointed by the Crown but by the House of Commons. With those few further comments, I trust this Bill will receive a Second Reading.
§ On Question, Bill read a second time; Committee negatived.
§ Lord Denham
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the National Audit Bill, is contented to place her prerogative and interest so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.
§ Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 10th May):
§ Moved, That the Bill be now read a third time.—(Lord Renton.)
§ 8.59 p.m.
§ Lord Houghton of Sowerby
My Lords, we are now on the Third Reading of this Bill, and may I therefore take up a moment or two to comment upon it? I rather missed my opportunity on Second Reading because matters seemed to go back to the noble Lord, Lord Renton, rather quickly. It is a great pity that we have to deal with this Bill in this way. I know it is an extraordinary situation, but when important Bills get dropped in bundles of 10, the Finance Bill gets mauled about because the Opposition will not swallow it, and we have other Bills that are to be sent through your Lordships' House at high speed, it is not a very satisfactory way of dealing with the nation's affairs and not a very dignified way in which to end a Parliament. I am concerned about this on those grounds.
This Bill has been quite a controversial one in another place and in the country, and noble Lords know that we have listened to and received representations from chairmen of nationalised industries about the provisions of this Bill. I think it has implications here which are of considerable importance. I can only speak as a one-time chairman of the Public Accounts Committee, and I saw something of its working and something of the working of the office of the Comptroller and Auditor General. My worry about this is that it seems to create a new bureaucracy, or an additional bureaucracy, to audit business enterprise. If nationalised industries are going to remain the institutions that some of them have become, that would be a bad thing for the future of nationalised industries, but I rather fear that the audit of nationalised industries by bureaucracy is the wrong way round.
I think that private consulting accountants particularly should be auditing bureaucracy. I am not at all sure that this Bill is going to do the nationalised industries any good. I am not at all sure that it is going to produce any satisfactory result for Parliament to consider. What the nationalised industries require are 690 not so much auditors as consulting accountants, as my noble friend said, to see the business enterprise as a whole and not just be grubbing around with the routine of auditing, which comprises a good deal of the job of the office of the Comptroller and Auditor General. Those are my worries about this.
I can understand Members of another place wanting to reassure themselves of the way in which nationalised industries use public money. After all, a good deal of public money goes into them. A great many of them have huge deficits, which are made good out of public funds, and one naturally wonders whether they are running their affairs in a proper manner. But I think there is a big difference between state enterprises which are in business, which should be observing some of the conditions of profit and loss, should be conscious of how they are satisfying their customers, should have an idea, where they are not monopolies, how they are going to compete with rival services and all that kind of thing. But that is a very different job from the Board of Inland Revenue or the Department of Health and Social Security, or the Home Office and other departments, where the staff of the Comptroller and Auditor General are very largely employed.
That is not to say for a single moment that they do not do very good work or make some very important discoveries. When I was chairman of the Public Accounts Committee and we had to look into serious misgivings about the production of Blue Streak by the Ferranti company, it was an executive officer in the Comptroller and Auditor General's Department who had discovered the flaws in the costing arrangements in the firm that undertook the job, which eventually led to some very substantial refunds by the manufacturers of that particular missile.
That is all I have to say. I do not think the Bill should just be allowed to go through, as it were, on the nod when it has these implications. One is bound to submit to the view of Members of another place who looked at this from their point of view. One is bound to acknowledge that the Government have given it some scrutiny, and I believe the Bill has been amended a number of times to meet objections and suggestions that have been made from the Government side. I merely conclude by saying that I do not think in this particular respect this Bill is the right way of doing it. I think to some extent it represents the natural instincts of Members of another place to get their fingers on anything in the range of state enterprise, institutionalised or otherwise, but whether it produces either satisfactory results for the enterprise or reassurance to the public, I very much doubt. That is my view for what it is worth, and my experience at least qualifies me to add my opinion to those of others, including my noble friend, who looks at it more from a professional accountancy point of view than I do.
§ On Question, Bill read a third time, and passed.