HL Deb 28 November 1990 vol 523 cc1034-7

7.40 p.m.

Viscount Astor rose to move, That the draft code laid before the House of 15th October be approved [28th Report from the Joint Committee, Session 1989–90].

The noble Viscount said: My Lords, the Audit Commission was established under the Local Government Finance Act 1982 as an independent body responsible for the appointment of external auditors for local authorities and for assisting all such authorities in securing value for money in the services which they provide. Under Section 14 of the 1982 Act the Audit Commission is required to prepare and keep under review a code of audit practice prescribing the way in which auditors are to carry out their functions under Part III of the Act. The functions of the commission were extended to cover health authorities under the provisions of the National Health Service and Community Care Act 1990.

The new code which is necessary as a result has been prepared by the commission. My role in the matter is limited to bringing the code before the House for consideration and, I hope, approval. The commission believes that the new code should be a single document covering both the audit of local and health authorities so they have revised and extended the existing version. The code must receive parliamentary approval at least every five years, although the commission can make alterations to the code in the intervals between its being approved. The present code, which came into effect on 9th February 1988, was revised by the commission on 7th July 1988 to deal with the new powers on prohibition orders and judicial review introduced by the Local Government Act 1988.

I believe that the existing code has helped to ensure that auditors' functions under Part III of the 1982 Act have been carried out effectively. The Audit Commission has now prepared this revised code which is before the House. As this revision deals with health service bodies for the first time, the commission considered that the code should be brought before Parliament for approval, even though less than five years have elapsed since the code was last approved.

The commission has consulted the bodies most directly concerned—local authority associations, the accountancy profession and for the first time organisations connected with the health service—as required by the 1982 Act. In addition, the code has been the subject of consultation with the commission's own auditors (the National Audit Office), the District Audit Service and the private accountancy firms.

The new code in essence extends the existing code which applied to local authorities so as to cover the National Health Service, with the exception of those matters where extending is simply not possible. The principles of local authority audit have been well established and the code itself is well regarded. In the circumstances, I believe that the commission is right to stick to a proven formula.

Before going any further perhaps I may remind your Lordships of the main features of the new code and outline the principal changes from the existing code, particularly those features which the commission itself regards as important. First, the introduction explains why the commission has framed the code as it has done and points out that not all aspects of code will be appropriate for the audit of what the code calls "non-principal" authorities. These authorities include parish and community councils and in the National Health Service general practice fund holders.

Perhaps I may now turn to the main body of the code. Although this is considerably rearranged compared with the existing code, much of it is effectively unchanged other than for changes necessitated by the extension of the commission's role to the health service. The code is now divided into five parts. The first part sets out the general duties of the auditor and includes a new section at paragraphs 13 and 14 dealing with audit objectives. The second part of the code contains new matters in paragraphs 17 to 23 inclusive dealing with the carrying out of the audit and identifies matters to which the auditor should pay particularly close attention; for instance, fraud, corruption and value for money. Paragraphs 24 to 39 of the second part and the whole of the third part bring together the auditor's reporting responsibilities and are for all practical purposes an unchanged rearrangement of the existing code. Part 4 is specific to the audit of local authorities and is merely a rearrangement of the existing code. Finally, Part 5 is entirely new and is headed "Audit of Health Service Bodies". In this part of the code the commission stresses that auditors of health service bodies have particular responsibilities in addition to those which are common to both local government and the health service.

Under Section 20(3) of the National Health Service and Community Care Act 1990 the auditor has a duty to report to the Secretary of State where it is believed that an authority's or officer's action would be unlawful and cause a loss or deficiency or an authority's or officer's decision would involve unlawful expenditure. The procedure differs from that in local government where the auditor faced with similar matters has to decide whether to issue a prohibition order or apply to the court for a judicial review of the decision taken.

The new code of practice, which I stress once again is the work of the commission and not of government, is simply an additional part of this process of extending the commission's role to the health service. I hope that the House will agree that the commission has performed its task in a thoroughly professional manner and produced a code which sets out a sensible and practical approach for auditors to follow. I beg to move.

Moved, That the draft code laid before the House of 15th October be approved. [28th Report from the Joint Committee, Session 1989–90]—(Viscount Astor.)

Lord Graham of Edmonton

My Lords, on behalf of Members on these Benches I do not intend to say a great deal about the code. As my honourable friend Mr. David Blunkett said in another place, it is not a matter about which we wish to divide the House because there is common agreement among all parties about the value of the Audit Commission and ipso facto its papers, documents and recommendations. The idea of the Audit Commission raises no dispute. It deals with the proper manner in which local government can be monitored and be seen to be acting correctly, and that is in order.

The Minister rightly drew attention to the possibility of fraud or corruption. Local government is no different from any other type of government or company, private or public. There is no more fraud or corruption in local government than there is in any other organisation. Indeed, there may not be as much. In our view the Government and the Audit Commission sometimes unfairly belabour a point when they find examples of cases which must be dealt with severely, although Members on this side of the House have no brief for any practice which is detrimental to the welfare, well-being or good order of the local and national populace.

We hope that those who have power in such matters will use their nous and look at the situation sensibly. We hope that they will try to understand the nexus in which local government operates in 1990. There are present in the House Members with as much experience as myself. We know that councillors and council officers have a horrendous job in keeping out of trouble—not criminal trouble—and difficulty because of the vastness of their burden and the shortage of resources—problems which have been visited upon them by the Government.

I support the views put forward by my honourable friend Mr. Blunkett, who said that following the 1988 and 1989 Acts there are whistle blowers and regulations to ensure that people do not step over the boundaries of the law. That is entirely sensible and in the circumstances based very much on his experience.

It is right and proper that there is the Audit Commission and the code of practice. However, the code needs to be operated and exercised with some understanding of the realities for the people who have a great deal of work to do for their communities in very difficult circumstances. My noble friend Lord McIntosh is not able to be here to deal with this matter but on his behalf I say that we believe that the Audit Commission and its work is to be supported and this code of practice should be approved.

Lord Donaldson of Kingsbridge

My Lords, I endorse what the noble Lord has said.

Viscount Astor

My Lords, I am grateful to the noble Lord, Lord Graham, for his support for the commission's role. The code of practice of which I have spoken reflects the Audit Commission's decision to extend the scope of the successful code supplied to local authorities to cover health service bodies. Therefore, I hope that your Lordships can accept this Motion and I commend it to the House.

On Question, Motion agreed to.