Government Resources and Accounts Bill

HL Deb 04 July 2000 vol 614 cc1418-42

4.53 p.m.

Consideration of amendments on Report resumed after Clause 7.

Lord Higgins moved Amendment No. 10:

After Clause 7, insert the following new clause—

NON-DEPARTMENTAL PUBLIC BODIES' ACCOUNTS: AUDIT

(" —(1) Subject to subsection (7), this section applies to any non-departmental public body, unless otherwise provided by any order made under subsection (8).

(2) On the prescribed date for each non-departmental public body to which this section applies, subsections (3) to (6) shall have effect in relation to that body.

(3) Every non-departmental public body shall prepare accounts in respect of each financial year and shall send them to the Comptroller and Auditor General.

(4) The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself—

1. (a) that the accounts present a true and fair view, and
2. (b) that any public money provided to the body has been expended for the purposes for which the money was paid.

(5) Where the Comptroller and Auditor General has conducted an examination of accounts under subsection (4) he shall—

1. (a) certify them and issue a report,
2. (b) send the certified accounts and the report to the Treasury, and
3. (c) if he is not satisfied of the matters set out in subsection (4)(a) and (b), report to the House of Commons.

(6) The Treasury shall lay accounts and reports received under subsection (5)(b) before the House of Commons.

(7) Subsections (3) to (6) do not apply to any body to the extent (but only to the extent) that any of its accounts are or become subject to audit—

1. (a) by the Auditor General for Scotland, or
2. (b) by the Auditor General for Wales.

(8) The appropriate Minister may by order designate a non-departmental public body as one in relation to which this section does not apply for so long as the designation remains in force.

(9) An order under subsection (8) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before and approved by resolution of both Houses of Parliament.

(10) In this section— the appropriate Minister" means, as regards any non-departmental public body, a minister in the department which is responsible for that body; non-departmental public body" means a body—

1. (a) which is not a government department or comprised within a government department,
2. (b) which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government, and
3. (c) an officer of which has been designated by a government department as its accounting officer in respect of the preparation of its accounts,.

but does not include any such body which is a company registered under the Companies Act 1985; and prescribed date" means, as regards each non-departmental public body, the first day of the first full financial year of that body commencing after the expiry of the term of appointment of the person who is the auditor of the body when this section comes into force.").

The noble Lord said: My Lords, this amendment, which stands in my name and that of my noble friend Lord Bridgeman, is concerned with the audit of non-departmental public bodies, which of course play a very important role in the Government's structure and which in addition have a large sum of public money allocated to them. We have debated this matter previously in the Grand Committee and I have considered very carefully the points made by the Government. This amendment seeks to take them into account.

I hope very much indeed that it is possible to persuade the Government to accept this amendment. The reality of the situation is that the present structure with regard to the audit of non-departmental public bodies is a mess. To a large extent, I think this has been recognised by the Government because, since they came into office in 1997, they have arranged for all the new non-departmental public bodies to be audited by the National Audit Office.

At Committee stage the Minister argued that we should not rule out the use of private sector auditors for these non-departmental public bodies. We have sought to accommodate that point in our amendment by enabling the Government, if they do not think it appropriate in some circumstances for the National Audit Office to audit a particular non-departmental public body, to arrange for that to be done but subject to approval by way of statutory instrument. I hope that goes some way towards meeting the point.

We have also suggested that the existing arrangements which are in operation for non-National Audit Office audits to be done by private outside auditors should be phased out gradually as the contracts come up for renewal. Overall, it seems to me that the Government themselves have accepted the situation and that by and large they have argued that there ought to be transparency and that the most appropriate way to ensure transparency for such bodies is for the National Audit Office to audit them. This is true not only as far as concerns propriety but also value for money.

The noble Lord, Lord McIntosh, said in Committee that we would in some sense be nationalising the accountancy profession—he smiles: he clearly accepts that he was overstating his case, but I am only teasing him! In that case there is no division of opinion between us and the Government should clearly accept the amendment as drafted, which seeks to take into account the serious points that the Minister was making.

The fact is that the Government should not be able to pick and choose as to who audits particular non-departmental public bodies, using public money, and the assumption should be that they will all be audited by the National Audit Office. I hope the Government will feel able to accept the amendment, having discussed the matter in Grand Committee and as we have sought to accommodate the serious points made by the Government. I beg to move.

Baroness Sharp of Guildford

My Lords, on these Benches we find this a very difficult issue. We discussed it at very considerable length in Grand Committee. At the centre of the debate, as the noble Lord, Lord Higgins, has made clear, is the issue of parliamentary scrutiny of the spending functions of the executive and the emergence in the course of the past 30 years or so of a large number of non-departmental public bodies. These bodies have escaped public audit although—and here we accept the point that has been made several times by the Government—they do not escape audit altogether. They are audited according to appropriate standards by private accountancy firms.

Equally, it is also quite clear that the Government themselves have not conceded anything at all on this issue, whereas in tabling their amendment the Opposition have sought to accommodate the issues raised by the Government in discussion in Grand Committee. What we see in the new amendment tabled here is an attempt to define non-departmental public bodies. These bodies, and those that are exempted under the Companies Act, are excluded from these provisions. Also, perhaps most importantly, Ministers are provided with an opt-out clause, subject to an affirmative resolution.

The issue then is what should and should not fall within the purview of public scrutiny. I think it is that issue which is the substance of the Sharman report. Indeed, when we did discuss it in Grand Committee one of the main objections raised by the Government to the amendment which had been put forward at that stage was that it was going to be covered by the Sharman report.

If we accept this amendment, we effectively preempt that report. Indeed in some respects with the "softening" of the amendment as it now stands, and with the "opt-out clauses" given to the Government, the amendment could be less far-reaching in its effect than the Sharman report itself.

The case for legislating now is that it provides an insurance policy. The Government claim that they do not need to legislate in order to implement the Sharman report. However, many government reports have been left to gather dust on departmental shelves. We do not want that to happen with the Sharman report. As I say, the Minister has said that there will be no need to legislate in order to implement the Sharman report. I should like to hear the Minister make a clear statement that the Government intend to take the Sharman report seriously; that they will not let it gather dust on the shelves in the Treasury; and that it will be fully implemented. If the Minister can assure me that this will be the case, it seems to me that we have no need to accept the amendment. As I say, to some extent it pre-empts the Sharman report and its effects may be rather "softer" than those of the report.

I shall listen carefully to the Minister's response to the amendment to determine how these Benches will react to it.

5 p.m.

Lord McIntosh of Haringey

My Lords, as the noble Baroness, Lady Sharp, made clear, I acknowledge that the noble Lord, Lord Higgins, has moved away from the more rigid position of the amendments on this subject that he tabled in Grand Committee, for which I am grateful. I am also grateful that he has accepted the argument that I put to him on that occasion; namely, that the policy of "one size fits all" does not work in the situation we are discussing.

I turn to the matter which the noble Baroness, Lady Sharp, identified as being the most important issue; namely, that of public scrutiny. I believe that there is a degree of misunderstanding about the relationship between responsibility for audit and the matter of public scrutiny. It is completely wrong to imply that, if the Comptroller and Auditor General does not audit certain non-departmental public bodies, Parliament does not have any oversight of those bodies. Ministers are accountable to Parliament for all such bodies and the accounts of all these bodies are laid before Parliament regardless of who carries out the audit.

It is not even true that the C&AG has no oversight of NDPBs which he does not audit. He has inspection rights at all executive NDPBs. He is therefore able to investigate matters of concern even where he is not the appointed auditor. He has in fact produced a number of reports on NDPBs for which he is not the auditor. The existence of these inspection rights means that he can carry out value for money studies—which, after all, is the real parliamentary scrutiny to which the noble Baroness, Lady Sharp, refers—at all NDPBs under the National Audit Act 1983. He has produced many such reports for Parliament.

As has been acknowledged, more generally, this Government have demonstrated their confidence in the work of the C&AG by appointing him auditor of those NDPBs created since the previous election.

Nevertheless, the Government may have good reasons—without implying any disrespect to Sir John Bourn or to his office—for not appointing him the auditor in certain circumstances. We need to take account of the clear practical advantages that departments have identified in appointing commercial auditors for some of those bodies. Our existing provisions in the Bill allow for this. Clause 23(6) and (7) provide for the Treasury to propose an order for the C&AG to be made the auditor of any NDPB where statute currently rules out his appointment. I am surprised that the proposers of this amendment do not appear to have taken account of that.

However, before proposing to Parliament that the C&AG should be appointed auditor of any particular NDPBs, the Government will need to take account of the outcome of the Sharman review. I very much appreciate the strength of the remarks of the noble Baroness, Lady Sharp, in that respect. The noble Lord, Lord Sharman, will examine a number of key issues, including the concerns of departments, which are responsible to Parliament for overseeing NDPBs.

Lord Higgins

My Lords, I am grateful to the Minister for giving way. I hope that he will clarify a point that I raised earlier with regard to the exact relationship between the Sharman group and the so-called "steering group"?

Lord McIntosh of Haringey

My Lords, the steering group is there to steer. I believe that the relationship will be worked out as the distinguished membership of these two bodies settle into their work. As they are at the stage of determining their terms of reference, I do not think that it would be appropriate for me to anticipate the way in which it will work out on the ground. Certainly it is not a matter which will be mentioned in statute.

I return to the issue of the status of the Sharman report and the concerns which the noble Baroness, Lady Sharp, has expressed. She was right to draw attention to the rule whereby if one does not like the Findings of inquiries of this kind one ensures that nothing is done to implement those findings. The normal rule is that one does not set up an inquiry of this kind unless one knows what its findings will be! I am afraid that we have broken that rule in this case in that we shall have to take the report on audit and accountability extremely seriously. By setting up a review headed by such an independent person as the noble Lord, Lord Sharman, and by ensuring that the steering group for the project is made up of highly distinguished parliamentarians and internationally renowned experts in the field of audit and accounts, we have broken this firm rule. We genuinely do not know what conclusions will be reached.

Therefore I cannot say that we shall accept every recommendation that the noble Lord, Lord Sharman, makes. However, it is in the Government's interest as much as Parliament's that we have strong, independent audit of public bodies and public expenditure. It will therefore be in the Government's interest to see implemented the proposals of the noble Lord, Lord Sharman, for improved audit, whatever they may be. I am sure that the members of the steering group would not let us get away with anything less.

As the Chief Secretary made clear, and as the noble Lord, Lord Higgins, reminded us, arrangements for audit and accountability in central government are in disarray. The noble Lord, Lord Higgins, used the words "a mess"; the Chief Secretary used the words "a hotchpotch". The Government welcome the inquiry of the noble Lord, Lord Sharman, as an opportunity to bring some coherence into this area. We are pleased to acknowledge that the Bill has acted as a catalyst for the Government in setting up the review. However, as I have already said, it is as much in the Government's interest as anyone else's to ensure that the review succeeds and has a major positive impact. The Government consider that the review will set the basis for future arrangements in audit and accountability—a basis that will satisfy the needs of both government and Parliament.

I turn now to the amendment—

Lord Shaw of Northstead

My Lords, I am most grateful to the Minister for giving way. I have not entered into the earlier discussions but my point arises from something he said today. Will he confirm that there is a completely different responsibility as between that of the Government on the one hand and that of the C&AG on the other? The C&AG is directly responsible to Parliament itself and to the Public Accounts Committee, on which I sat for a number of years.

Where a separate auditor has been appointed to a NDPB, did I understand the Minister to say that the C&AG would none the less have an automatic right, without seeking permission from the Treasury, to investigate any matter that he felt needed to be investigated from his special point of view in those organisations that have a separate audit?

Lord McIntosh of Haringey

My Lords, the simple answer is "Yes" but I had better repeat what I said a few minutes ago to ensure that I do not in any way depart from a script. I am sure that the noble Lord, Lord Shaw, will understand that point.

It is wrong to imply that, if the C&AG does not audit certain non-departmental public bodies. Parliament does not have any oversight of those, bodies. Ministers are accountable to Parliament for all such bodies and the accounts of all these bodies are laid before Parliament regardless of who carries out the audit. It is not even true that the C&AG has no oversight of NDPBs which he does not audit. He has inspection rights—I think that is the point that the noble Lord, Lord Shaw, made—at all executive NDPBs. He is able to investigate matters of concern even where he is not the appointed auditor—and, as I said, he has done so in practice on many occasions.

The differences between us in regard to this amendment are very considerably practical. First, the noble Lord, Lord Higgins, wants the Bill to refer to, and to define, "non-departmental public bodies". He has taken the point that his previous term, "public service agencies", was too vague and is bravely trying to define these bodies on the face of the Bill. But his definition would still be as problematic as the term "public service agencies" because there are simply too many potential variations in non-departmental public bodies to capture in a single, legally sound definition. It is for good reason that there has never been an attempt by any government to define "non-departmental public bodies" in statute.

The third characteristic of the definition that the noble Lord proposes—that the body has an accounting officer designated by a government department—would mean that the Government could thwart the intention by not appointing an accounting officer. There is also a recipe for confusion in the combination of, on the one hand, an imperfect definition of these bodies and, on the other, the fact that the amendment automatically makes the C&AG the auditor of the bodies within the definition. Legal challenges could arise from those who think that a body which is not included should be included, or from those who think that a body which is included should not be included.

One has to compare these difficulties with the practical approach that we have taken in Clause 23(7)(a). With our approach, the Treasury is given the power to designate bodies to be audited by the C&AG on a case by case basis. It has to have regard to one of two conditions stipulated in the Bill: that the bodies must be exercising functions of a public nature; or must be, entirely or substantially funded from public money". Most important from Parliament's point of view is the fact that the Treasury must consult the C&AG before making any designation. Surely that is a more practical approach and more equitable between Parliament and the executive.

Of course, if Sharman was to recommend that there should be a widespread take-over of audit by the C&AG—and he may do that—it can be done in an orderly way without having to be done all at once. My charge of nationalisation was teasing, but there is an element of reality behind it.

My final point is that the amendment would make the Treasury and not the sponsoring department responsible for laying the accounts of those bodies before Parliament. That is odd because it would dilute the accountability of the sponsoring department for these bodies—which is the opposite of what I think is right.

Perhaps I may recap on what the Government have provided for in the Bill. Subsections (6) and (7) of Clause 23 give the Treasury an order-making power to enable the C&AG to be appointed the auditor of those NDPBs which he does not audit at present, including those which he is currently barred in statute from auditing—apart, that is, from NDPBs established as companies. Any designation to this effect by the Treasury will need to be approved by affirmative resolution of both Houses of Parliament. In addition, the Treasury is required to consult the C&AG before proposing a designation to Parliament. The Government's order-making provision takes full account of the interests of both Parliament and department. It has the advantage of not pre-empting the outcome of the Sharman review, which is expected towards the end of this year.

I am sorry, but despite the blandishments of the noble Lord, Lord Higgins, I cannot accept the amendment.

5.15 p.m.

Lord Higgins

My Lords, we can agree on one point: that is, that the Chief Secretary's description of the present situation as a "hotchpotch" is probably more accurate than my description of it as a "mess". The reality of the situation is that the present bodies which are not audited by the Comptroller and Auditor General are an odd assortment.

Having said that, my personal feeling is that the argument about Sharman is something of a red herring. I do not think that one needs a deep study to take the argument that, by and large, one size should fit all. In that context, I think that the point made by my noble friend Lord Shaw is important. One needs to consider whether there is a distinction between Ministers reporting to Parliament when an audit has been carried out by an outside body, and Ministers reporting to Parliament in the context of the direct approach of the National Audit Office to the Public Accounts Committee.

I wish to consider very carefully what the Minister said. I feel that there is still a strong argument for taking a view on this matter in the Bill rather than waiting for Sharman—even if, as the noble Baroness suggested in her contribution from the Liberal Democrat Benches, the Sharman report may eventually gather dust. There is a case for clarifying the situation and we shall come back to it at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 11:

After Clause 7, insert the following new clause—

PERFORMANCE STATEMENTS

(" .—(1) This section applies to any government department which is required to prepare resource accounts under section 5.

(2) A department to which this section applies in any financial year shall prepare a performance statement in respect of that year analysing the performance of the department in using the resources to which the accounts relate in achieving its objectives for that financial year.

(3) A department shall send its performance statement to the Comptroller and Auditor General with the resource accounts sent to him under section 5, or at such other time as the Comptroller and Auditor General may specify in respect of that statement.

(4) The Comptroller and Auditor General may examine any performance statement which he receives from a department under subsection (2) and may report on it to the House of Commons.

(5) Subsection (4) shall not entitle the Comptroller and Auditor General to question the merits of the policy objectives of a department to which the performance statement relates.").

The noble Lord said: Amendment No. 11 is concerned with the issue of performance statements. This is a point which has been very close to my heart over a number of years, given my previous role as chairman of the Liaison Committee, which has the task of co-ordinating the work of select committees, and also as chairman of the Treasury Committee. It has been a very long battle indeed to try to improve the performance statements which are available to Parliament, and in particular to ensure that those statements are valid. This amendment seeks to ensure that performance statements are made and are valid.

The present Public Accounts Committee and its predecessors going back to the time when the system was revised at the initiative of Mr Norman St JohnStevas (as he then was) have long held the view that performance reporting should be on a statutory basis and independently validated by the National Audit Office, in particular under the auspices of the Comptroller and Auditor General.

In discussing this matter in Grand Committee the Government stated that they were already committed to reporting annually to Parliament and the public on out-turn against targets. The reality is, however, that those statements are not audited, and it raises questions about the reliability of such unaudited accounts. Indeed, I gather that the Chief Secretary has agreed with the PAC that performance measures should be legitimate, credible and objective. For those principles to be achieved, a degree of independent validation is important. In various committee reports we have seen doubt cast on the validity or relevance of particular figures. That is of course true so far as concerns some of the performance figures of the National Health Service in particular.

The Government argue that this is either unnecessary or premature. That does not appear to be the case. Under the 1983 Act—with which I was much involved—the National Audit Office gave the C&AG statutory powers to undertake value-for-money studies, and these have been developed alongside performance indicators. But it seems to me that the situation needs to be carried forward and that we have an opportunity to do so in this Bill.

It is of course the case that similar statutory performance measures are appropriate elsewhere, particularly in the field of local government. It is not clear why they should be appropriate for local government but not for national government.

At an earlier stage the Minister argued that the new statistics commission would provide independent assurance on performance data and that to involve the C&AG would lead to duplication. I do not believe that that is so. The statistics commission and the C&AG play different roles. As I understand it, the statistics commission is concerned with the integrity of issues relating to national statistics, which is a very different thing from individual departmental statements.

Perhaps the Minister can confirm that the statistics commission will not be concerned with performance measures in individual departmental reports which are then normally examined by the departmentally related Select Committees. The amendment would move the matter forward. It would alleviate pressures which have been building up over many years. The amendment would ensure that the accounts take into consideration not only inputs, which are what most government accounts tend to deal with, but also the extent to which they achieve their outputs. That is very important. I hope that the Minister can accept the amendment. I beg to move.

Lord McIntosh of Haringey

My Lords, I am grateful to the noble Lord, Lord Higgins, for explaining the amendment. His understanding of it agrees with mine.

Perhaps I may speak about what we have been doing with regard to public service agreements. PSAs have been a revolutionary step in transparency and accountability. For the first time, in March this year, the British Government published a full statement in each department's annual report of performance against a detailed set of measurable and specific targets—every one of the targets set as a result of the 1998 Comprehensive Spending Review. This innovation, which has come to fruition since the amendment was first proposed—it has been in the pipeline since the targets were published—goes further than the amendment in making information on government performance widely and regularly available.

I am glad to say that in most cases the Government are on course. But the reports published in March are full and fair. Where information was not good, this was reported. Where slippage is concerned, we owned up to it and have explained why it happened. Where a target had fallen due for completion within the reporting period, and had not been met, the reasons were stated and the remedial action in train was set out. This is a step further in openness and accountability to Parliament and the public than any previous government have been brave and confident enough to undertake. But the Government recognise that this performance reporting revolution needs to be supported by good quality information from robust measurement systems. It is in our interest, and the interests of Parliament and the public service staff, to avoid cynicism and doubt about the information we publish.

The amendment proposed seems to aim at two of the objectives that the Government have been keen to promote through the PSA process: annual reporting of information; and the quality of that information. But it misses the mark on both counts. First, putting on a statutory basis the full and open reporting we already have in place would add nothing except rigidity, which would be counter-productive, into the system. PSA targets are only rarely tied to a financial year, as the noble Lord, Lord Higgins, will recall. As everyone who has taken part in government or public life will know, one cannot measure what happens in a department by what happens in a financial year. Sometimes it will be shorter and sometimes it will be longer. Much more useful than a statement linked inflexibly to a financial year is the practice we have now of reporting progress in a reporting period, and the proper reporting period, giving fuller commentary on success and slippage, even when the target deadline falls outside the period.

Secondly, treating the PSA targets like a financial audit, which is what the amendment in effect does, misses the point on information quality too. The NAO does not presently have the expertise to perform an information quality-checking function. The new statistics commission—I acknowledge, as the noble Lord, Lord Higgins said, that it does a different job—has been set up with the express purpose of commenting on departmental systems and commissioning audits in areas of concern. It should be given a chance to get established before other forms of validation are introduced.

That is not to say that we are opposed to the idea of external validation of performance information. Far from it. Indeed, I hope I have said that we recognise the benefits for the credibility of information that an external validator could bring. That is why we have created the statistics commission and used the NAO to audit the assumptions behind fiscal forecasts. These are both instances of our commitment to finding the right external process to validate a system where it is well bedded in and there is a convincing argument for bringing in an external body. Ministers have already said that we have an open mind. In principle we are willing to see the performance information systems being subject to external validation.

However, the system has not yet been given a chance to bed down, nor has any worked-through and convincing proposal been made. The blunt instrument contained in the amendment is unsuited to the circumstances. There are several stages we need to go through before we introduce an external validator into this process. The statistics commission needs to be allowed time to find its feet. It will have an important role in quality assuring national statistics, which will be used to support many PSA targets.

The review of the noble Lord, Lord Sharman—and I am sorry to repeat the argument again, but it is still valid here—has a remit to look at these issues, among others. We need to give validation serious consideration and not prejudge that review. Many different things are meant by validation. There are many different kinds of information and systems that could be validated. Exactly the same form of quality assurance may not be appropriate for every part of government, nor all at the same time. I say this with some feeling as someone who spent a good deal of his business life in the monitoring and evaluation of public policy and who published a number of papers on the subject. Many PSA targets depend on information collected by local agents or bodies outside the public sector—bodies like my company in the past. The Treasury has been leading a group of experts, involving the NAO and Audit Commission, in working up a performance information strategy which is looking at many of these issues. That group is considering a number of options. It is not yet clear to the Government that the NAO will always be the best answer.

Finally, many departments are relatively new to the process of systematic gathering and reporting of performance information. It is sensible to give them a little time to refine their systems and improve them before deciding whether and how to check them externally. I argue therefore that it is premature to introduce a statutory requirement in that area. The Government have shown themselves open in principle and in practice. We have made a radical first step in transparency. But this is a dynamic area. The Government are willing to move towards external validation, but only on the basis of a thorough examination of the needs of departments, Parliament and the public.

Lord Higgins

My Lords, I have listened carefully to what the Minister said. I recognise the progress which has been made and to which he has referred. Having said that, I still have considerable doubts about the position of the statistics commission. The NAO has a particular relationship with Parliament and to Select Committees in general. However, taking into account everything that the Minister has said, I think that the amendment is not premature. I believe that there is a case for putting it into operation at this stage. I beg leave to ascertain the opinion of the House.

5.27 p.m.

On Question, Whether the said amendment (No. 11) shall be agreed to?

Their Lordships divided: Contents, 99; Not-Contents, 176.

Division No. 1
CONTENTS
Anelay of St Johns, B.	Hylton-Foster, B.
Astor of Hever, L.	Jopling, L.
Attlee, E.	Kelvedon, L.
Belstead, L.	Knight of Collingtree, B.
Biffen, L.	Lane of Horsell, L.
Blackwell, L.	Liverpool, E.
Blaker, L.	Mackay of Ardbrecknish, L
Blatch, B.	Marlesford, L.
Boardman, L.	Mayhew of Twysden, L.
Bowness, L.	Miller of Hendon, B.
Brabazon of Tara, L.	Monro of Langholm, L.
Bridgeman, V.	Montagu of Beaulieu, L.
Brittan of Spennithorne, L.	Mowbray and Stourton, L.
Brougham and Vaux, L.	Moynihan, L.
Burnham, L. [Teller]	Murton of Lindisfarne, L.
Byford, B.	Northbrook, L.
Campbell of Alloway, L.	Norton of Louth, L.
Carlisle of Bucklow, L.	O'Cathain, B.
Chadlington, L.	Onslow of Woking, L.
Clark of Kempston, L.	Oppenheim-Barnes, B.
	Park of Monmouth, B.
Coe, L.	Peel, E.
Colwyn, L.	Platt of Writtle, B.
Cope of Berkeley, L.	Plummer of St. Marylebone, L.
Courtown, E.	Rees, L.
Crickhowell, L.	Renfrew of Kaimsthorn, L.
Cuckney, L.	Renton, L.
Dean of Harptree, L.	Roberts of Conwy, L.
Dixon-Smith, L.	Ryder of Wensum, L.
Eden of Winton, L.	Sanderson of Bowden, L.
Elliott of Morpeth, L.	Seccombe, B.
Ferrers, E.	Sharples, B.
Flather, B.	Shaw of Northstead, L.
Fookes, B.	Skelmersdale, L.
Fraser of Carmyllie, L.	Stewartby, L.
Gardner of Parkes, B.	Stodart of Leaston, L.
Geddes, L.	Strathclyde, L.
Gilmour of Craigmillar, L.	Swinfen, L.
Glentoran, L.	Taylor of Warwick, L.
Goschen, V.	Tebbit, L.
Hanham, B.	Thatcher, B.
Hayhoe, L.	Thomas of Gwydir, L.
Henley, L. [Teller]	Trefgarne, L.
Higgins, L.	Trumpington, B.
Hodgson of Astley Abbotts, L.	Vivian, L.
Hogg, B.	Waddington, L.
Howe, E.	Wade of Chorlton, L.
Howe of Aberavon, L.	Wilcox, B.
Howell of Guildford, L.	Windlesham, L.
Hunt of Wirral, L.	Young, B.
NOT-CONTENTS
Acton, L.	Bach, L.
Addington, L.	Barker, B.
Allenby of Megiddo, V.	Barnett, L.
Alli, L.	Bassam of Brighton, L.
Amos, B.	Beaumont of Whitley, L.
Ampthill, L.	Bernstein of Craigweil, L
Andrews, B.	Billingham, B.
Archer of Sandwell, L.	Blackstone, B.
Ashley of Stoke, L.	Blease, L.
Ashton of Upholland, B.	Borrie, L.
Avebury, L.	Bragg, L.

Brennan, L.	Lovell-Davis, L.
Brett, L.	McCarthy, L.
Brooke of Alverthorpe, L.	Macdonald of Tradeston, L.
Brookman, L.	McIntosh of Haringey, L. [Teller]
Brooks of Tremorfa, L.
Bruce of Donington, L.	McIntosh of Hudnall, B.
Burlison, L,	MacKenzie of Culkein, L.
Carter, L. [Teller]	Mackenzie of Framwellgate, L
Chandos, V.	Mackie of Benshie, L.
Christopher, L.	McNally, L.
Clarke of Hampstead, L.	Marsh, L.
Clement-Jones, L.	Mason of Barnsley, L.
Cocks of Hartcliffe, L.	Massey of Darwen, B.
Craig of Radley, L.	Merlyn-Rees, L.
Crawley, B.	Milner of Leeds, L.
Currie of Marylebone, L.	Mishcon, L.
David, B.	Mitchell, L.
Davies of Coity, L.	Molloy, L.
Davies of Oldham, L.	Morris of Castle Morris, L.
Dean of Thornton-le-Fylde, B.	Morris of Manchester, L.
Desai, L.	Nicol, B.
Dholakia, L.	Palmer, L.
Diamond, L.	Parekh, L.
Dixon, L.	Patel, L.
Donoughue, L.	Patel of Blackburn, L.
Dormand of Easington, L.	Paul, L.
Dubs, L.	Peston, L.
Elder, L.	Phillips of Sudbury, L.
Evans of Parkside, L.	Plant of Highfield, L.
Evans of Temple Guiting, L.	Ponsonby of Shulbrede, L.
Evans of Watford, L.	Prys-Davies, L.
Falconer of Thoroton, L.	Puttnam, L.
Falkland, V.	Ramsay of Cartvale, B.
Farrington of Ribbleton, B.	Razzall, L.
Faulkner of Worcester, L.	Rea, L.
Filkin, L.	Redesdale, L.
Fitt, L.	Rees-Mogg, L.
Gale, B.	Rendell of Babergh, B.
Geraint, L.	Rennard, L.
Gibson of Market Rasen, B.	Richard, L.
Gladwin of Clee, L.	Rodgers of Quarry Bank, L.
Goldsmith, L.	Roper, L.
Goodhart, L.	Sainsbury of Turville, L.
Gordon of Strathblane, L.	Sawyer, L.
Gould of Potternewton, B.	Scotland of Asthal, B.
Grabiner, L.	Serota, B.
Graham of Edmonton, L.	Sharp of Guildford, B.
Grenfell, L.	Shepherd, L.
Hardy of Wath, L.	Sheppard of Liverpool, L.
Harris of Haringey, L.	Shore of Stepney, L.
Harrison, L.	Shutt of Greetland, L.
Hayman, B.	Simon, V.
Hilton of Eggardon, B.	Smith of Clifton, L.
Hogg of Cumbernauld, L.	Smith of Gilmorehill, B.
Hollis of Heigham, B.	Smith of Leigh, L.
Howells of St. Davids, B.	Stoddart of Swindon, L.
Howie of Troon, L.	Stone of Blackheath, L.
Hoyle, L.	Symons of Vernham Dean, B.
Hughes of Woodside, L.	Taverne, L.
Hunt of Kings Heath, L.	Taylor of Blackburn, L.
Islwyn, L.	Thomas of Walliswood, B.
Janner of Braunstone, L.	Thornton, B.
Jay of Paddington, B. (Lord Privy Seal)	Tomlinson, L.
	Tordoff, L.
Jeger, B.	Turnberg, L.
Jenkins of Hillhead, L.	Uddin, B.
Jenkins of Putney, L.	Varley, L.
Judd, L.	Walker of Doncaster, L.
King of West Bromwich, L.	Wallace of Saltaire, L.
Laird, L.	Walpole, L.
Lea of Crondall, L.	Watson of Richmond, L.
Lester of Herne Hill, L.	Wedderburn of Charlton, L.
Lipsey, L.	Whitaker, B.
Lockwood, B.	Whitty, L.
Lofthouse of Pontefract, L.	Wilkins, B.
Longford, E.	Williams of Crosby, B.

Williams of Elvel, L.	Winston, L.
Williams of Mostyn, L.	Woolmer of Leeds, L

Resolved in the negative, and amendment disagreed to accordingly.

5.38 p.m.

Clause 8 [Comptroller and Auditor General: access to information]:

Viscount Bridgeman moved Amendment No. 12:

Page 5, line 25, leave out ("relating to") and insert ("relevant to his examination of").

The noble Viscount said: My Lords, we have brought forward a fresh amendment because we believe that the right of access remains a fundamental issue for the Comptroller and Auditor General. That arises because of the major changes which have taken place in the way the Government now operate. The Bill as drafted confines the powers of the C&AG to access within the walls the government departments as if the machinery of government was the same as in 1866 when departments provided most of the services. But nowadays a wide variety of different bodies deliver public services, some of which the C&AG does not audit. Audit arrangements have not kept pace with the changes in the structure of government. As a result, Parliament's ability to scrutinise the use of public funds has been reduced.

The C&AG's independence is diminished by his reliance on negotiating his way into a number of bodies to provide the assurance to which Parliament is entitled. That is costly in time. One might also say that it is not consistent with the standing of the office. The noble Baroness, Lady Sharp of Guildford, cited instances where negotiations with the Housing Corporation and with Camelot dragged on for years. I could add to those similar protracted discussions with the Royal Palaces and with training and enterprise companies. I believe that there could be cases where the institutions concerned refuse to cooperate. In those circumstances, Parliament would be the loser.

By accepting that the C&AG, where he does not have statutory rights, then has to negotiate, the Minister has also accepted that, on occasions, he needs rights of access to private contractors. That has not deterred firms from coming forward to provide services for government or to negotiate PFI deals. However, negotiated rights on an individual basis require time-consuming discussions between the NAO and the relevant departments. As I have already said, they undermine the independence of the C&AG.

In Grand Committee we tabled an amendment which was supported by the Liberal Democrats. It sought to bring up to date the access rights of the C&AG. I hope that the Minister will agree that a fair summary of the Government's objections to the amendment appeared to be that it would significantly increase the access rights of the C&AG, thus allowing him to follow public money wherever it goes and that, as a result, he would duplicate the work of other bodies and would be a burden on private sector firms. The Minister went on to say that extended access for the C&AG might deter contractors from competing for PFI work—a point that I have already discounted.

I shall consider those arguments, but I should like, first, to make the point that, in our view, our previous amendment would not have extended the powers of the C&AG as much as the Minister said. He stated that the original amendment would have had the effect of giving the C&AG access to the books and records of private sector firms on the same basis as that of the Inland Revenue. However, the C&AG already has access to the records collected by the Inland Revenue because he is the auditor for the Revenue. His staff already see individual records on a confidential basis. Although those powers are rarely used—something in the order of half of 1 per cent of visits undertaken by the Inland Revenue are accompanied by the C&AG—they are available to him.

The Government have also said that giving the C&AG wider statutory powers would allow him to follow public money wherever it went. Even our original amendment would not have conferred the same powers in the United Kingdom as those possessed by the staff of the Luxembourg-based Court of Auditors or as the Audit Commission and Accounts Commission in Scotland enjoy when auditing local government accounts. Such rights of access have not brought local government to a standstill or impeded imaginative partnerships within the private sector. The Government appear to accept that the Audit Commission and the European Court of Auditors require strong statutory powers, but apparently are not happy for those powers to be matched by Parliament's own auditor.

Perhaps I may explain what the new Amendment No. 13 seeks to achieve. In so doing, perhaps I may also take account of the Minister's concerns. The amendment as tabled would confine the C&AG to statutory access to documents held or controlled by government bodies as well as documents to which those bodies have or can obtain access. It would thus give access to the same documents and information as central government bodies secure for themselves—and no more. That would enable the C&AG to undertake an independent check that government bodies are fulfilling their responsibilities to account for the proper use of taxpayers' funds entrusted to them. It gives statutory access where, in many cases, negotiated access already exists. This will help to cut back on the need for time-consuming negotiations.

It also gives statutory form to guidance already issued by the Treasury which states that the C&AG must have access to the records of PFI contractors. Placing it on the statute will ensure that clauses are not missed out of contracts by accident.

Perhaps I may briefly summarise what the amendment will not do. It will not give greater access to information and documents than accounting officers have in accounting to Parliament for the use they have made of public money. It will not allow the C&AG or his staff to go on fishing trips. The statutory right will cover only the examination of the department's accounts and will cover only documents relevant to this examination. I refer to the word "relevant" in Amendment No. 12.

The amendment will ensure that the C&AG is not provided with statutory access to the records of local government. It will not provide access to subcontractors or other bodies at a distance from local government. This addresses the Minister's comment concerning the additional burden on small businesses. Lastly, it will not allow the C&AG to follow public money wherever it goes, however desirable noble Lords and Members of another place think that power would be.

In short, powers of access will not be increased; they are simply placed on a firmer footing. Public money is not followed to small employers unless they contract with government bodies. It will not impose a regulatory burden. The C&AG will draw on the work of other bodies wherever needed, as he does already.

I should like to make one further important point. In its ninth report, the Public Accounts Committee expressed concern that it is unsatisfactory that departments regularly secure greater powers of access to service deliverers than are secured for Parliament's watchdog, the C&AG. I suggest that this amendment will address that concern.

It has been suggested that it is not appropriate for the C&AG to have the same right of access as departments because the Government have a larger range of responsibilities than has the C&AG. We believe that that argument is difficult to sustain. In some quarters it could be held strongly that the C&AG's responsibility to Parliament in itself demands all the rights of access it needs to perform its work effectively. This proposition suggests a kind of pecking order for degrees of rights of access.

If concern is felt at the additional cost to public funds of granting the C&AG these limited wider powers, I am sure that he, like everyone else, is constrained by his resources, for which he is held accountable to a parliamentary commission. It is not in the C&AG's interest to do unnecessary work, but he must have the powers necessary to carry out his work professionally and in the modern context of government. I beg to move.

5.45 p.m.

Baroness Sharp of Guildford

My Lords, as the noble Viscount, Lord Bridgeman, has already said, in Grand Committee we on these Benches supported similar amendments tabled by the official Opposition. We continue to support them. We feel that an issue of principle is at stake here. The Comptroller and Auditor General has audit responsibility, but at present he does not have all the powers necessary to fulfil that responsibility. We think that it is important that he should be given those powers.

Furthermore, we think that the Opposition has made a considerable attempt to redraft the earlier amendment so as to take account of the objections raised by the Government on this issue. For that reason, we are inclined to offer our support.

Lord McIntosh of Haringey

My Lords, I hope that I shall be able to remove the noble Baroness's inclination, because the amendments before the House do not achieve what the noble Viscount, Lord Bridgeman, seems to think that they will achieve. He believes that they will address the concerns we expressed on the previous proposed new clause, but I have to say that they do no such thing. The amendments will still increase the statutory rights of access of the Comptroller and Auditor General far beyond what is reasonable.

Perhaps I may deal principally with Amendment No. 13, which is the most substantive in this group of amendments. The amendment would give the C&AG rights of access to documents, which are held or controlled by a government department". That is perfectly reasonable. The Bill already contains those words in Clause 8(2)(a). However, the amendment goes on to say that it would give the C&AG rights of access to documents, which are held or controlled by a non-departmental body". That is where we start to have problems, because the provision again raises the problems which flow from trying to define non-departmental public bodies (NDPBs) on the face of the Bill, and to which I have already referred in connection with the amendment on the audit of NDPBs. Perhaps I may emphasis that NDPBs are an enormously varied group of bodies. There are too many potential variations of NDPBs to capture within a single legally sound definition. For that reason, they have never been defined in statute.

Of most concern, however, is the final part of the amendment. It would give the C&AG a right of access to documents, to which a government department or a relevant non-departmental public body has, or can obtain, access". This provision would allow the C&AG a much greater degree of access than at present, and far more than is necessary. First, he would have unrestricted access to all bodies, public or private, which are funded by, or are contractors to, departments and NDPBs. The amendment would give him access to bodies such as housing associations, which are private sector bodies supervised and part funded by the Housing Corporation, or to train operating companies, which are private sector companies supervised and part funded by the rail regulators, which are government departments, leading to a burdensome overlap of scrutiny and duplication of regulatory functions. Audit and regulation must be kept separate.

To the extent that a department itself has or can obtain access to its suppliers' documents, the amendment would provide access to every such supplier even if they only provided paper clips or cleaned the windows.

The amendment would also give the C&AG access to virtually every body receiving public money—including in theory those many individuals in receipt of social payments to the extent that the funding department has access.

Most alarmingly, the amendment would allow the C&AG access to the books and records of private sector firms on the same basis as the Inland Revenue in examining whether tax credits have been properly calculated or as Customs and Excise in relation to VAT. Such access would be both a duplication of oversight and unnecessarily intrusive.

The noble Viscount, Lord Bridgeman, thought that an argument in favour of the amendment was that the C&AG has access under certain circumstances, rarely used, to Inland Revenue records. Indeed, that is the case. But the amendment provides for him to have separate access to all those people who are at present vulnerable to access by the Inland Revenue and Customs and Excise.

I remind the House that at the beginning of this year, when these concerns were first raised, Accountancy Age published an article on 27th January recording the deep reservation on the part of business as regards allowing the National Audit Office to audit firms and companies handling the working families' tax credit. The British Chambers of Commerce and the Federation of Small Businesses have said that the measure would only increase the burden of red tape on small and medium-sized firms. These amendments still do that. I shudder to think what my noble friend Lord Haskins and the Better Regulation Task Force would think about the amendment if it were put forward by the Government, let alone, most extraordinarily, by the Conservative Opposition.

Moreover, there is no evidence that the C&AG needs these powers. Let us consider the facts. The C&AG has now audited the first set of "dry run" resource accounts and, although he qualified a number of accounts, he did not qualify one on the grounds of insufficient access. He has also recommended to the PAC that the move to resource accounts and budgeting should go ahead. Would he have done so if he had had serious doubts about his ability under present powers to carry out the audit?

During the PAC's hearing on 7th June on the introduction of resource accounting and budgeting, the Comptroller and Auditor General, Sir John Bourn, said in response to Question 47, that, the operation of the new system does not depend on the extension of the Comptroller and Auditor General's powers". Those words indicate that a significant extension of the Comptroller and Auditor General's access (which I assume is what the amendment means) is not actually needed for the practical purpose of auditing department accounts, which is what Clause 8 of the Bill is concerned with.

I have technical criticisms of the amendments with which I shall not weary the House. The amendments are defective. The wording in the Bill that would be changed by the amendments has been in legislation since 1866, and it seems rather strange to change it now, nearly a century and a half later. But the fundamental point is that the Bill as it stands allows the C&AG to continue to deliver his very high standard of audit. He does not need these sweeping and intrusive new powers of access in order to audit department accounts. I cannot accept the amendments, and I cannot believe that the Conservative Party, above all, will wish to press them.

Viscount Bridgeman

My Lords, I find that reply disappointing. The suggestion that the structure of government has not changed since 1866 leaves me slightly perplexed. We shall study the Minister's remarks carefully, but we shall look at them most critically. That said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 13 and 14 not moved.]

Clause 9 [Preparation]:

[Amendments Nos. 15 to 20 not moved.]

Lord McIntosh of Haringey moved Amendment No. 21:

Page 6, line 11, at end insert—

("( ) For the purpose of subsection (4)(a) and (b) the Treasury shall in particular—

1. (a) have regard to any relevant guidance issued by the Accounting Standards Board Limited or any other body prescribed for the purposes of section 256 of the Companies Act 1985 (accounting standards), and
2. (b) ensure that the accounts include, subject to paragraph (a), a statement of financial performance, a statement of financial position and a cash flow statement.").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 2. I beg to move.

Lord Higgins moved, as an amendment to Amendment No. 21, Amendment No. 22: Line 4, leave out ("have regard to") and insert ("accept").

The noble Lord said: My Lords, I beg to move, and seek the opinion of the House.

5.55 p.m.

On Question, Whether Amendment No. 22, as an amendment to Amendment No. 21, shall be agreed to?

Their Lordships divided: Contents, 94; Not-Contents, 165.

Division No. 2
CONTENTS
Allenby of Megiddo, V.	Bridgeman, V.
Alton of Liverpool, L.	Brittan of Spennithorne, L
Anelay of St Johns, B.	Brougham and Vaux, L.
Astor of Hever, L.	Burnham, L. [Teller]
Attlee, E.	Byford, B.
Belstead, L.	Campbell of Alloway, L.
Biffen, L.	Carlisle of Bucklow, L.
Blaker, L.	Chadlington, L.
Boardman, L.	Clark of Kempston, L.
Bowness, L.	Colwyn, L.
Brabazon of Tara, L.	Cope of Berkeley, L.

Courtown, E.	Mowbray and Stourton, L.
Craig of Radley, L.	Moynihan, L.
Crickhowell, L.	Murton of Lindisfarne, L.
Cuckney, L.	Northbrook, L.
Dean of Harptree, L.	Norton of Louth, L.
Dixon-Smith, L.	O'Cathain, B.
Elliott of Morpeth, L.	Onslow of Woking, L.
Feldman, L.	Oppenheim-Barnes, B.
Ferrers, E.	Palmer, L.
Fookes, B.	Park of Monmouth, B.
Fraser of Carmyllie, L.	Peel, E.
Gardner of Parkes, B.	Platt of Writtle, B.
Geddes, L.	Plummer of St. Marylebone, L
Gilmour of Craigmillar, L.	Renton, L.
Glentoran, L.	Roberts of Conwy, L.
Goschen, V.	Sanderson of Bowden, L.
Hanham, B.	Sharples, B.
Hayhoe, L.	Shaw of Northstead, L.
Henley, L. [Teller]	Skelmersdale, L.
Higgins, L.	Stewartby, L.
Hodgson of Astley Abbotts, L.	Stodart of Leaston, L.
Hogg, B.	Strathclyde, L.
Howe, E.	Swinfen, L.
Howe of Aberavon, L.	Tebbit, L.
Hunt of Wirral, L.	Thatcher, B.
Jopling, L.	Thomas of Gwydir, L.
Kelvedon, L.	Trefgarne, L.
Knight of Collingtree, B.	Trumpington, B.
Lane of Horsell, L.	Vivian, L.
Lucas, L.	Waddington, L.
Mackay of Ardbrecknish, L.	Wade of Chorlton, L.
Marlesford, L.	Walker of Worcester, L.
Masham of Ilton, B.	Weatherill, L.
Mayhew of Twysden, L.	Wilcox, B.
Monro of Langholm, L.	Windlesham, L.
Montagu of Beaulieu, L.	Young, B.
NOT-CONTENTS
Acton, L.	Desai, L.
Addington, L.	Dholakia, L.
Alli, L.	Diamond, L.
Amos, B.	Dixon, L.
Andrews, B.	Donoughue, L.
Archer of Sandwell, L.	Dormand of Easington, L.
Ashley of Stoke, L.	Dubs, L.
Ashton of Upholland, B.	Elder, L.
Avebury, L.	Evans of Parkside, L.
Bach, L.	Evans of Temple Guiting, L.
Barker, B.	Evans of Watford, L.
Barnett, L.	Falconer of Thoroton, L.
Bassam of Brighton, L.	Falkland, V.
Beaumont of Whitley, L.	Farrington of Ribbleton, B.
Bernstein of Craigweil, L.	Faulkner of Worcester, L.
Billingham, B.	Filkin, L.
Blackstone, B.	Fitt, L.
Blease, L.	Gale, B.
Borrie, L.	Geraint, L.
Bragg, L.	Gibson of Market Rasen, B.
Brennan, L.	Gladwin of Clee, L.
Brett, L.	Goldsmith, L.
Brooke of Alverthorpe, L.	Goodhart, L.
Brookman, L.	Gordon of Strathblane, L.
Brooks of Tremorfa, L.	Gould of Potternewton, B.
Burlison, L.	Grabiner, L.
Carter, L.[Teller]	Graham of Edmonton, L.
Chandos, V.	Grenfell, L.
Christopher, L.	Hardy of Wath, L.
Clarke of Hampstead, L.	Harris of Haringey, L.
Cocks of Hartcliffe, L.	Harrison, L.
Crawley, B.	Hayman, B.
Currie of Marylebone, L.	Hilton of Eggardon, B.
David, B.	Hollis of Heigham, B.
Davies of Coity, L.	Howells of St. Davids, B.
Davies of Oldham, L.	Howie of Troon, L.
Dean of Thornton-le-Fylde, B.	Hoyle, L.

Hughes of Woodside, L.	Prys-Davies, L.
Hunt of Kings Heath, L.	Puttnam, L.
Irvine of Lairg, L. (Lord Chancellor)	Ramsay of Cartvale, B.
	Razzall, L.
Islwyn, L.	Rea, L.
Janner of Braunstone, L.	Rendell of Babergh, B.
Jay of Paddington, B. (Lord Privy Seal)	Rennard, L.
	Richard, L.
Jeger, B.	Rodgers of Quarry Bank, L
Jenkins of Putney, L.	Roper, L.
Judd, L.	Sainsbury of Turville, L.
King of West Bromwich, L.	Sawyer, L.
Laird, L.	Scotland of Asthal, B.
Lea of Crondall, L.	Serota, B.
Lester of Herne Hill, L.	Sharp of Guildford, B.
Lipsey, L.	Shepherd, L.
Lockwood, B.	Sheppard of Liverpool, L.
Lofthouse of Pontefract, L.	Shutt of Greetland, L.
Longford, E.	Simon, V.
Lovell-Davis, L.	Smith of Clifton, L.
McCarthy, L.	Smith of Gilmorehill, B.
Macdonald of Tradeston, L.	Smith of Leigh, L.
McIntosh of Haringey, L. [Teller]	Stoddart of Swindon, L.
	Stone of Blackheath, L.
McIntosh of Hudnall, B.	Symons of Vernham Dean,B
MacKenzie of Culkein, L.	Taverne, L.
Mackenzie of Framwellgate, L.	Taylor of Blackburn, L.
Mackie of Benshie, L.	Thomas of Walliswood, B.
Mason of Barnsley, L.	Thornton, B.
Massey of Darwen, B.	Tomlinson, L.
Merlyn-Rees, L.	Tordoff, L.
Milner of Leeds, L.	Turnberg, L.
Mitchell, L.	Uddin, B.
Molloy, L.	Varley, L.
Morris of Castle Morris, L.	Walker of Doncaster, L.
Morris of Manchester, L.	Wallace of Saltaire, L.
Nicol, B.	Walpole, L.
Northover, B.	Watson of Richmond, L.
Parekh, L.	Wedderburn of Charlton, L
Patel, L.	Whitaker, B.
Patel of Blackburn, L.	Whitty, L.
Paul, L.	Wilkins, B.
Peston, L.	Williams of Crosby, B.
Phillips of Sudbury, L.	Williams of Elvel, L.
Pitkeathley, B.	Williams of Mostyn, L.
Plant of Highfield, L.	Winston, L.
Ponsonby of Shulbrede, L.	Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.6 p.m.

[Amendment No. 23, as an amendment to Amendment No. 21, not moved.]

On Question, Amendment No. 21 agreed to.

Clause 15 [Finance]:

Lord McIntosh of Haringey moved Amendment No. 24:

Leave out Clause 15 and insert the following new clause—

FINANCE

(".—(1) If it appears to the Secretary of State to be expedient in consequence of any of the matters specified in subsection (2), he may by order amend, repeal or make provision similar to any of the following provisions of the Government of Wales Act 1998—

1. (a) section 81 (statements by Secretary of State),
2. (b) section 85 (expenditure by National Assembly), and
3. (c) section 86 (statements by National Assembly).

(2) The matters mentioned in subsection (1) are—

1. (a) any provision of this Act,
2. (b) a change in the accounting methods used by the National Assembly,
3. (c) a change in the procedures of the House of Commons relating to public money, and
4. (d) a change in the form of Appropriation Acts.

(3) An order under this section—

1. (a) shall be made by statutory instrument,
2. (b) may include incidental or transitional provision, and
3. (c) shall not be made unless a draft has been laid before, and approved by resolution of, each House of Parliament.

(4) The Secretary of State—

1. (a) shall consult the National Assembly before making an order under this section which relates to section 81 of the Government of Wales Act 1998, and
2. (b) shall not make an order under this section which relates to section 85 or 86 of that Act unless a draft has been laid before, and approved by resolution of, the National Assembly.").

The noble Lord said: My Lords, this amendment substitutes a new clause for the existing Clause 15. It empowers the Secretary of State, which in practice means the Secretary of State for Wales, to make changes to Sections 81, 85 and 86 of the Government of Wales Act in consequence of the accounts and budget of the UK Government changing from a cash to a resources basis. The intention is that the accounts and budget of the National Assembly will, at the same time, also move to a resources basis. The power will enable the Secretary of State to make appropriate changes to those provisions in the Government of Wales Act to ensure that the National Assembly's budgetary processes can be changed to a resources basis.

The power is exercisable by order and will be made by statutory instrument. Before the Secretary of State can exercise the power he needs to consult the National Assembly in so far as he is changing Section 81, which provides for the Secretary of State to make a statement of his estimated payment for each financial year. He will be required to obtain the Assembly's agreement before he can change Sections 85 and 86, which deal respectively with expenditure by the National Assembly and its statement of proposed expenditure for each financial year. In addition, to ensure that proper parliamentary scrutiny of this power is maintained the Secretary of State will be required to lay a draft of any order before both Houses of Parliament for their approval.

We believe that this is a necessary power whose limits have been clearly defined and is subject to a high level of parliamentary scrutiny and National Assembly involvement. I am pleased to say that in its 23rd report the Select Committee on Delegated Powers and Deregulation was satisfied that the order-making power was appropriate. I beg to move

Lord Higgins: My Lords, we had noted the views of the Select Committee on Delegated Powers and Deregulation in relation to this amendment. I ask the following simple question. Can the National Assembly for Wales do anything about this if it does not like something?

Lord McIntosh of Haringey

My Lords, it can do two different things. Any amendments to Section 81 require that the National Assembly be consulted. It could happen after consultation. Amendments to Sections 85 and 86 of the Government of Wales Act require the consent of the Assembly. Section 81 is concerned with the way in which the Secretary of State for Wales reports on financial matters, whereas the other provisions require the consent of the Assembly.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 25: After Clause 19, insert the following new clause—

INVESTMENT BY DEVOLVED ADMINISTRATIONS

(".—(1) Any of the following may incur expenditure for the purpose of investing in the body mentioned in section 16—

1. (a) the Scottish Ministers,
2. (b) the Northern Ireland departments, and
3. (c) the National Assembly for Wales.

(2) Subsection (1)—

1. (a) shall have effect notwithstanding an enactment which restricts the activities of a person or body mentioned in that subsection to matters relating to a particular Part or area of the United Kingdom, and
2. (b) shall not be construed as preventing or restricting any action which a person or body has power to take without reliance on that subsection.

(3) The power under subsection (1) may be used only for the purpose of—

1. (a) the acquisition from the Treasury of shares of a kind which are required by the body's articles of association to be issued to the Treasury (and which may be transferred by the Treasury), and
2. (b) such other forms of investment (whether by the acquisition of assets, securities, rights or otherwise) as the Treasury may specify by order.

(4) An order under subsection (3)(b)—

1. (a) may relate generally to persons and bodies mentioned in subsection (1) or to one or more specified persons or bodies,
2. (b) may make different provision for different purposes,
3. (c) shall he made by statutory instrument, and
4. (d) shall be subject to annulment in pursuance of a resolution of either House of Parliament.").

The noble Lord said: My Lords, the Government are introducing this new clause to provide the devolved administrations in Scotland, Wales and Northern Ireland with the opportunity to invest in Partnerships UK. Clause 16 currently authorises the Treasury to incur expenditure for the purposes of the establishment of this body, investment in it and the making of other financial provision for it. The additional legislative provision is needed to permit the devolved authorities to invest in Partnerships UK plc because it will carry on business throughout the United Kingdom and, therefore, to an extent, beyond the legislative and executive competence of each devolved authority. Such investment by the devolved administrations will therefore be completely in keeping with the UK-wide coverage of the new company.

The Government have consulted the relevant authorities in the devolved administrations. They have all welcomed the opportunity that the new clause will provide. I hope that will be welcomed in this House also. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 26: After Clause 22, insert the following new clause—

ADVISORY BOARD

(".—(1) Before—

1. (a) issuing directions under section 5(2), or
2. (b) determining the form and content of accounts under section 9,

the Treasury shall consult a group of persons who appear to the Treasury to be appropriate to advise on financial reporting principles and standards.

(2) Before selecting a group for the purpose of subsection (1) the Treasury shall consult the Comptroller and Auditor General.

(3) Where a group is consulted under subsection (1) in a particular year, the Treasury shall arrange for the group to prepare a report for that year—

1. (a) summarising the activities of the group for the purpose of the consultation, and
2. (b) dealing with such other matters as the group consider appropriate.

(4) Where a report is prepared under subsection (3), the Treasury shall arrange for it to be laid before the House of Commons.").

The noble Lord said: My Lords, I beg to move.

[Amendment No. 27, as an amendment to Amendment No. 26, not moved.]

On Question, Amendment No. 26 agreed to.

[Amendment No. 28 not moved.]

Lord McIntosh of Haringey moved Amendment No. 29:

Page 19, line 21, at end insert— ("( ) For the purpose of subsection (5)(a) and (b) the Treasury shall in particular—

1. (a) have regard to any relevant guidance issued by the Accounting Standards Board Limited or any other body prescribed for the purposes of section 256 of the Companies Act 1985 (accounting standards), and
2. (b) require the accounts to include, subject to paragraph (a), a statement of financial performance, a statement of financial position and a cash flow statement.").

On Question, amendment agreed to.