HL Deb 09 December 2003 vol 655 cc708-30

7.25 p.m.

Lord Evans of Temple Guiting

My Lords, I beg to move that this Bill be now read a second time.

The purpose of this Bill is to create a unitary public audit structure for Wales. Its provisions have been subject to pre-legislative scrutiny and public consultation. Both exercises demonstrated that the Bill has widespread support. The Welsh Affairs Select Committee gave consideration to it as did an ad hoc National Assembly scrutiny committee. The Welsh Grand Committee and the National Assembly in plenary have debated it. The Government want the Bill to be as robust as possible and I can assure noble Lords that very careful consideration will be given to their views and concerns expressed in this debate and in further stages of the Bill in this House.

The Bill seeks to achieve a unitary audit framework by extending the functions conferred on the Auditor General for Wales. Most importantly, the Auditor General will take on the majority of the functions in Wales of the Audit Commission for local government and the NHS in England and Wales. The Auditor General and his staff will be known as the Wales Audit Office in English or Y Swyddfa Archwilio Cymru in Welsh.

The Audit Commission will, however, retain its powers to undertake cross-border economy, efficiency, and effectiveness studies relating to local government on an England and Wales basis. In bringing forward this Bill the Government are supporting the National Assembly in establishing a transparent public audit framework in Wales with a single thread of accountability. It is a framework that can be readily understood by the people of Wales and that can best protect their interests in terms of the effective stewardship of public money.

The Government of Wales Act 1998 provides that the Auditor General has or can be given statutory responsibility for undertaking the statutory audit of the financial accounts of the National Assembly for Wales, the Assembly's sponsored public bodies, and certain other bodies the Assembly funds. It also gives the Auditor General statutory responsibility for undertaking examinations into the economy, efficiency and effectiveness with which these bodies have used their resources. These examinations are more commonly known as value-for-money examinations or studies.

The Auditor General's power to undertake value-for-money examinations extends to the National Health Service in Wales but the Auditor General does not currently have statutory responsibility for the financial audit of individual NHS bodies' accounts. Responsibility for arranging these audits currently rests with the Audit Commission.

Under the provisions of the Public Audit (Wales) Bill the Wales Audit Office will have a duty to: carry out the audit of NHS bodies' accounts in Wales—this will sit alongside the Auditor General's existing function of carrying out value-for-money examinations on such bodies; appoint auditors to audit the accounts of local government bodies in Wales—the Auditor General will not be able to appoint himself or herself in a personal capacity as auditor of a local government body; undertake or promote value-for- money studies on local government bodies in Wales; and finally, undertake the audit of Welsh local government "programme for improvement" plans and inspections under best value legislation in the Local Government Act 1999.

Clause 1 will enable the National Assembly by order to transfer to, or to ask the Auditor General to exercise on its behalf, its supervisory functions in respect of public bodies or registered social landlords in Wales. Such an order may only be made with the consent of the Auditor General, and any such order would be subject to scrutiny under the National Assembly's subordinate legislative scrutiny procedures. Examples of such functions would be the regulatory and monitoring functions the Assembly has in respect of the governance of registered social landlords and its functions of monitoring compliance with terms and conditions of grant funding by grant recipient organisations.

The Bill will also enable the Welsh audit office to undertake cross-sectoral and forward-looking value-for-money studies and studies into the provision of public sector services which can help to inform Assembly policy development. The Auditor General's existing value-for-money powers are largely retrospective in nature. They relate, first, to how a body or office has used resources and, secondly, how it has undertaken value-for-money examinations and studies into higher and further education corporations, other educational bodies and local government bodies in Wales at their request. They enable the Auditor General to appoint a member of his staff to audit the accounts of a higher or further education corporation in Wales, on request. Finally, it is agreed with the National Assembly to undertake programmes of economy, efficiency and effectiveness studies in respect of registered social landlords in Wales. Those functions are at present exercised in relation to Wales by the Audit Commission.

The Bill is a natural extension of the devolutionary process. The National Assembly has forged a distinctive way of developing and undertaking its work. The Assembly has been progressively formulating its policy and pursuing delivery of its strategic objectives through partnership working with other areas of the public sector—both local government and non-local government—the voluntary sector and the private sector in Wales.

Innovative programmes such as Communities First and the Wales waste strategy are excellent examples of initiatives entailing close cross-sectoral co-operation in achieving strategic goals. Such partnership working can create complex accounting arrangements that are more conducive to a single public audit framework than the existing arrangements, where responsibility is split between the Auditor General and the Audit Commission.

A unitary arrangement, with expertise "under one roof will also help the development and implementation of audit best practice across the public sector in Wales.

The Bill was first published in draft form on 3rd April this year and has been subject to both pre-legislative scrutiny by the House of Commons and the National Assembly. It has also been subject to a 12-week period of public consultation. The Parliamentary Under-Secretary of State for Wales and I have met with noble Lords to discuss and brief them on its provisions.

As I have mentioned, neither the pre-legislative scrutiny process nor public consultation revealed any significant concerns over the policy of the Bill. More than 200 organisations were consulted on the draft Bill and 15 responses were received. In all, 41 recommendations for change or clarification were made. Of these, 19 have been accepted. They improve consistency of practice between non-local government and local government audit arrangements; strengthen the ability of audit and regulatory bodies to co-operate; and clarify certain existing powers. I can search later documents showing the 22 points not accepted if that would be of interest to your Lordships.

A key change that has been made as a result of pre-legislative scrutiny is an alignment of the provisions in Clauses 11, 18 and 52 to ensure that auditors in both the local government and the non-local government sectors have common powers of access to documents and information. The access provisions also ensure that auditors have the right to follow the audit trail of documents to the end recipient of public sector funding.

That is consistent with the recommendations made by the noble Lord, Lord Sharman, in his report, Holding to Account: The Review of Audit and Accountability for Central Government, published in February 2001.

At pre-legislative scrutiny stage there was significant discussion on whether Clause 54 of the Bill should be deleted. Clause 54 restricts the disclosure of information obtained by an auditor of a local government body except in specified circumstances. The clause mirrors Section 49 of the Audit Commission Act 1998. Both impose criminal sanctions on a person who releases information in contravention of the legislation.

The purpose of the clause is to prevent the premature release of information that is still subject to verification and potentially prejudicial in nature. There is no such restriction on the Auditor General for Wales in relation to information concerning the Assembly or any other public body in Wales, outside the local government sector. In these cases verification and release of information is subject to protocol arrangements. The accounting officer of the National Assembly or an Assembly-sponsored public body is given an opportunity to sign off draft reports prepared by the Auditor General, to indicate that he or she is content with the factual accuracy of the text prior to publication. The Assembly's audit committee can therefore be satisfied that in taking evidence on reports there is agreement on the factual content.

The Government's view is that Clause 54 should be retained. If it were deleted from the Bill, Section 49 of the Audit Commission Act would remain in force in England and there would be potential for inconsistency in the application of the criminal law between England and Wales. The Government consider that, for this reason, further consideration of disclosure matters should be on an England/Wales basis. The criminal law is not a field in which powers have been generally devolved in respect of Wales.

Against that background, the Government consider that it would be a nonsense to allow a situation in which the same conduct if committed in England would be regarded as so blameworthy as to be potentially punishable with two years' imprisonment, but if committed in Wales would not be a criminal offence.

There has been some concern expressed that the opportunity has not been taken to update certain audit and accounting terminology and practice. The Government consider that the Bill delivers significant improvements; for instance, common and enhanced access rights for auditors across the central and local government sectors in Wales; the opportunity it presents for greater co-operation and joint working; and the ability for a non-local government auditor to publish a public interest report.

The Public Audit (Wales) Bill is, however, a Wales-only Bill with the primary purpose of establishing unitary audit arrangements for Wales. The Government have been careful to avoid any changes to audit terminology that may cause confusion or uncertainty on a cross-border basis. Changes in such issues should, in the Government's view, be considered over a wider canvas.

The Government are very mindful of the importance of preserving the constitutional independence of local government in the changes they propose. I have already mentioned that the Bill does not enable the Auditor General to appoint himself or herself in a personal capacity as auditor of a local government body.

In addition, the National Assembly audit committee, which has responsibility for considering the Auditor General's annual estimate of income and expenditure, will have no power to consider or modify his or her estimates regarding local government. These will be a matter for the Auditor General and local government in Wales.

Clause 21 includes a provision for the National Assembly to set the scales of audit fees for local government bodies in Wales, but this is very much a failsafe power to be exercised only in the event of a failure to agree between the Auditor General and Welsh local government. Clause 21, in any event, mirrors a power already available to the Assembly under Section 7 of the Audit Commission Act by virtue of the National Assembly for Wales (Transfer of Functions) Order 1999.

Likewise, the Auditor General will not be required to lay any financial reports relating to local government before the Assembly. This will not affect the Assembly's ability to consider reports on local government matters that may be published by the Auditor General, in the same way that the Assembly can currently consider reports published by the Audit Commission.

The Welsh Local Government Association in both its evidence at pre-legislative scrutiny stage and in its response to public consultation expressed itself content with the safeguards that have been built into the Bill.

Effective public audit is essential to ensuring that the highest standards of probity and regard for obtaining value for money are observed in the spending of taxpayers' money. Improvement of public audit standards requires co-operation between audit and regulatory organisations and the free-flow of ideas and best practice. The Public Audit Forum, upon which all the major public audit bodies in the United Kingdom are represented, does extremely valuable work in this area.

It is essential that a single audit body for Wales is firmly within the mainstream of public audit development and inter-body co-operation. To this end, a key feature of the Bill is provisions that will allow the Auditor General to co-operate freely with other audit and regulatory bodies.

As I have mentioned, the Audit Commission will retain its powers under the Audit Commission Act to undertake cross-border value-for-money studies on an England and Wales basis in the local government context. The Health and Social Care (Community Health and Standards) Act 2003 empowers the Commission for Healthcare, Audit and Inspection to undertake parallel cross-border studies on an England and Wales basis in the health sector.

As we see from the Bill, the Audit Commission, the Commission for Healthcare, Audit and Inspection and the Auditor General would be linked by a network of duties of consultation and co-operation designed to ensure that such work is undertaken in the most efficient and effective discharge of their respective functions. The Audit Commission and the Commission for Healthcare, Audit and Inspection would also be required to take account of relevant work undertaken by the Auditor General in undertaking such work.

Within Wales, the National Assembly and the Auditor General would also be under a mutual duty to co-operate where appropriate in the planning of social services and healthcare studies and inspection work. Clause 2 of the Bill also gives the Auditor General, a wide range of accountancy bodies, public bodies and certain auditors the power to co-operate and provide assistance to each other in the exercise of their particular functions. This power would extend, for instance, to Audit Scotland and the Comptroller and Auditor General for Northern Ireland.

Clause 2 also enables the Auditor General to enter into arrangements with any government department, any local or other public authority or the holder of any public office to exercise the functions of that body or office or to provide services to it. Furthermore, such bodies may provide services to the Auditor General. The types of services that may be provided are administrative, professional or technical services.

The consultative and co-operative provisions included in the Bill will ensure consistency of audit practice and standards across geographical boundaries and a continued basis for cross-border comparison with regard to value for money in the provision of services.

They will also ensure a more co-ordinated and focused approach to the programming and undertaking of audit work. This should reduce the administrative burden on the client organisations without diminishing the rigour of audit and inspection standards.

Joint reviews are already a feature of such works in Wales and the Government are confident that the provisions they have put in place will promote further joint working.

In conclusion, the proposals in the Public Audit (Wales) Bill have widespread support within the public sector. The principles of the Bill have the support of the Auditor General, the Audit Commission and the Welsh Local Government Association.

A single audit body will provide a straightforward, accessible and largely all-embracing public audit framework that is best suited to the inclusive nature of policy development and delivery in Wales. It will be at the forefront of the wider development and implementation of best audit practice. It will also be best equipped to assist the National Assembly in continuing to strive to maintain the highest standards of financial accountability. I commend the Bill to the House.

Moved, That the Bill be now read a second time.— (Lord Evans of Temple Guiting.)

7.46 p.m.

Lord Roberts of Conwy

My Lords, the whole House will be grateful to the noble Lord for taking us through the contents of the Bill with the thoroughness that we have come to expect from him and, indeed, for the preliminary discussion he arranged for interested Peers, together with his colleague, Mr. Don Touhig, the Minister responsible for the Bill in another place.

I also thank the Select Committee on Welsh Affairs in the other place for its helpful work on the draft Bill during the previous Session. I understand that the Government have yet to reply in full to its report but it has already culminated in a useful discussion in the Welsh Grand Committee on 15th July and a promise by the Government to consider some of its recommendations.

The Government may have considered but, as far as I can see, they have not changed very much in the Bill. The controversial draft Clause 50 restricting public disclosure is still in the Bill—now as Clause 54—but we shall come to that issue again at a later stage.

None of your Lordships would deny the importance of audit in the public and private sectors. An auditor's approval of accounts is always gratifying; an adverse qualification can strike terror in the stoutest heart. I therefore take great pride in the fact that my noble friend Lady Noakes, who reached the top of the accounting profession, is sitting beside me and will wind up the debate for the Opposition.

As we have heard from the Minister, the Bill provides, in effect, that there will be a single audit body for Wales, headed by the Auditor General for Wales, currently Sir John Bourn, who fulfils a similar role for the United Kingdom. It is a Crown appointment. The ad hoc committee established by the National Assembly to consider the draft Bill recommended that the appointment should be made after consultation with the Assembly, but I understand that that would run counter to the rule that public corporate bodies cannot appoint their own auditors.

The new Wales audit office—Swyddfa Archwilio Cymru—will be responsible for the financial and value-for-money audit of the National Assembly and the bodies that it sponsors, commonly referred to as quangos, and bodies concerned with health and local government, currently the province of the Audit Commission, and registered social housing providers.

In one sense, the Bill concentrates enormous power in the Auditor General and his new office. But it is also a consolidation measure; it replicates existing powers in earlier legislation and brings them together under the Auditor General and his Wales audit office. This makes good sense and, in principle, the Bill is to be welcomed. It will have a fair wind as far as we on this side are concerned.

I had occasion recently to read the Auditor General's report to the National Assembly on Financial Management of Partnership and Innovation and Development Projects by the National Council for Education and Training for Wales, better known by its acronym, ELWa, which in Welsh means to benefit or to profit. The report might have been alternatively titled, "The misfortunes of ELWa", because it is a sorry tale of inadequacies, deficiencies and weaknesses in the biggest quango in the Principality. I shall not rehearse the detail of what has become a public scandal, but simply assert that the whole saga proves the need for and the value of sound, independent audit examination in such circumstances.

The high quality and worth of that report was, I am sure, appreciated by the Assembly and the public. It was prepared by the Wales team of the National Audit Office for the Auditor General to present to the Assembly. I am glad to read that the Auditor General's statutory authority to report to the Assembly on the economy, efficiency and effectiveness with which bodies have used their resources in discharging their functions continues and is incorporated at various points in the Bill. That is an all-important authority and carries important duties.

The Auditor General's remit has, as the Minister said, been greatly widened in the Bill and he has been given an extensive range of new functions, especially in connection with health and local government. One cannot but contrast the puzzling restraints on him in the local government field with his freedom to act directly in the health sphere. For example, he cannot audit local government bodies himself: he must appoint others to audit, after consultation with the bodies concerned. Health trusts he can audit direct. We shall consider that more closely in Committee.

However, the amalgamation of powers is right, because, as the Minister said, under the devolved government arrangements in Wales and the strategies being pursued, there is considerable interplay and collaboration between the Assembly Government, its quangos, local authorities and health service bodies. Audit arrangements, including best value and performance studies, are wide in their scope and likely to widen further.

Audit must be able to follow partnership arrangements and trace the warp and weft of interactivity between authorities and beyond to contractors and sub-contractors. The Auditor General must be able to have an overall view and to cross different authority boundaries within Wales as well as outside.

Audit arrangements for local government and the health service have already been spelt out in great detail in past legislation. The Bill in effect transfers responsibility from the Audit Commission to the Auditor General. Of course, local authorities' accountability to their local electorates must be respected and preserved, but that does not mean that they must be protected if malpractice—intended or unintended—is uncovered. There have been plenty of examples of such deficiencies in the past.

Your Lordships would therefore be fully justified in revisiting past enactments relating to local government as transposed into the Bill. The same is true of legislation relating to the audit of health bodies. There is a plethora of such bodies in the NHS in Wales; that is promising territory for audit studies. We have a duty to ensure that the Auditor General and his office are not hindered or unnecessarily restricted in their ability to do such work.

The new office, headed by the Auditor General, has great potential to improve the quality of public services and government in Wales and secure better use of resources. There is currently a lot of loose talk about giving the Assembly its own tax-raising powers, but that will never be acceptable to the Welsh electorate until people are convinced that the very best use is being made of the money that it already has. The Bill will help to ensure that that objective is achieved.

Of course, there will be questions about the costs of bringing together the 45 staff of the National Audit Office and the 200 staff of the Audit Commission. We hope that that can be achieved within the Assembly's estimated—to my mind, somewhat optimistic—figure of £500,000 without building an ultra-grand Taj Mahal to house the new office. We also hope that the running costs can be paid for by fees and charges, with a minimal subvention from the Assembly. There will also be questions about the precise relationship between the new office and the Assembly, its audit committee, the Commission for Healthcare Audit and Inspection and other bodies with whom the Auditor General is obliged to co-operate and they with him.

Finally, there is more to the Bill than meets the eye, but the key to its success lies in the Auditor General's independence from unacceptable political pressures rigorously to pursue his clearly defined functions and ensure that taxpayers' money is not only properly applied but used to best advantage, within the limitations imposed by the policies themselves. There, of course, lies the rub but if the policies are wrong, audit studies will help to reveal their shortcomings. We welcome the Bill's Second Reading in the firm belief that it will benefit the people of Wales and, indeed, the United Kingdom.

7.56 p.m.

Lord Morris of Aberavon

My Lords, I thank my noble friend Lord Evans for his characteristically careful exposition of this modest piece of legislation. 1 welcome the creation of a single public audit body for Wales. My noble friend summed it up as a natural extension of the devolution process—indeed, as the widening of the remit and independence of the Auditor General. I am also grateful for the Explanatory Notes provided.

I happen to possess a most interesting print of the building on the eastern side of New Palace Yard, dated 1808, with part of its caption stating: the first entrance from the Water Gate leads to the Auditor of Wales's office". So we are today building on old foundations, although the Auditor General is housed nearer to Cardiff Bay than to the ancient Water Gate on the Thames. However, this useful measure is unlikely to set either the Thames or the Taff on fire.

Although Parliament is presently solely entrusted with enacting primary legislation for Wales, I believe that our role is severely limited—or should be. If the Assembly wants it, and the Government, as sponsors of a Bill, agree with it, the Assembly should have it. Parliament should not strain unduly—better still, not at all—to amend a Bill if it is properly prepared. Whatever our strengths on individual matters, we should not second-guess the Assembly if we can possibly help it.

We are not privy to the discussions between the two Governments, but I very much welcome my noble friend's promise that, if necessary, he will circulate the 22 points that were not accepted. That is of fundamental importance, because I wanted to ask him to what extent the measure was totally acceptable to the Welsh Assembly Government: was anything left out that they desired or put in with which they were unhappy? My noble friend most helpfully dealt with what were my concerns. Such a paper should be placed in the Library, so that all should see it.

The greatest service that the Government can provide is to ensure transparency, because if there are fundamental points of difference that calls into question the efficacy and validity of the present constitutional arrangements. Of importance also is the acceptability of the proposals to the other organisations affected. I welcome very much the noble Lord's remarks regarding the Welsh Local Government Association. Similarly, to what extent are the health bodies and publicly funded bodies as content as the Welsh Local Government Association? A general memorandum of understanding on transparency would be of considerable help to the House in its role of judging future legislation.

My disappointment is that the gracious Speech contains only one measure directed specifically and solely to Wales—and a modest one at that. I know the pressures on the Government's business managers. I have attended, for my sins, Cabinet legislation committees since 1964—slightly after the ark; some would say before it—and seen many Ministers' worthy legislative proposals thrown aside for lack of time. But that is the purpose of the Secretary of State for Wales—to fight for Wales in Cabinet; he has hardly any other real functions. By any standards, this is a pretty poor reward for his efforts. The Secretary of State, in Committee discussions on the Government of Wales Bill as far back as 1998, said that the problem of the Auditor General was "not a great crowd-puller". As I am sure both Houses will confirm, this Bill is not a great crowd-puller either. The Secretary of State certainly had foresight in that respect.

My noble friend Lord Richard has provided me with a list of Welsh government Bills put in as bids for the 2003–04 legislative programme. They include an education Bill, an ombudsman Bill, a tourism registration Bill, a transport Bill and a Bill to prohibit smoking in public places. Professor Hazell, in his evidence to the Richard commission, stated that only a quarter of Welsh Bills found their place in the Government's legislative programme.

It is no good, on this issue, the Secretary of State saying that the Westminster Government prefer voluntary smoking bans to legislation. That is a failure on his part to comprehend what devolution is about. Health is a devolved matter, as the noble Lord, Lord Warner, advised the House last week. Smoking is a vital component of health. Until Primary legislation is passed, that vital part of health is outwith the powers of the Welsh Assembly. It is a quirk of the agreement that it is not within its province.

History in the long term does not seem to be the First Ministers strong point. To boast that before devolution we had only one all-Wales Bill every 10 years, and to go on to spin that the present offer is either a 1000 per cent improvement or a 500 per cent improvement, is not a particularly intellectually challenging assertion. He should take a longer view. In my five years as Secretary of State, we had a Welsh Development Agency Bill, the Development of Rural Wales Bill, a substantial part of a general Bill to create the Land Authority for Wales and the two ill-fated devolution Bills. Those were the kind of primary legislation that I believed was needed in my five years of office. However, the Welsh Assembly and the Government are to be congratulated on making good use of piggybacking by putting specific Welsh proposals into England/Wales legislation in recent years. Can my noble friend tell us whether, in addition to this modest Bill, we can expect further piggybacking in this Session?

In my recent speech to Welsh lawyers in Cardiff, without in any way entering into the argument of whether there should be more powers to the Welsh Assembly, I pointed out that the greater the activity of the Assembly leading to demands for primary legislation, the greater the embarrassment when legislative slots are not found in Westminster under the present system. I went on to say that, if the position is not easy now, how much more difficult it will be should there be a colour of government in Westminster different from that in Cardiff. It may be optimistic to expect to hear tonight the Government's thoughts on that, but we should be told something of their thoughts on tackling what I regard as a legislative log jam.

8.6 p.m.

Baroness Finlay of Llandaff

My Lords, I thank the noble Lord, Lord Evans of Temple Guiting, for a comprehensive and meticulous introduction to the Bill, which appears slightly dry on first reading. The noble Lord delivered his speech with his characteristic clarity, which has been helpful. Consultation on the Bill has been wide and comprehensive, so I do not wish to detain the House for long.

As eloquently expounded by the noble and learned Lord, Lord Morris of Aberavon, this is one of five Bills requested by the Assembly but the only one to feature in Her Majesty's gracious Speech. As the noble Lord, Lord Roberts of Conwy, said, the estimated set-up cost for the changes under this Bill is half a million pounds. I hope that the Minister can give accurate information on that and on any hidden costs, as well as accurate predictions of running costs.

The Auditor General will report to the Assembly. I hope that the report will be debated in the Assembly in plenary, prior to approval by resolution. It is important that the Auditor General is a Crown appointment to ensure independence. The Institute of Welsh Affairs has pointed out that the House of Commons has a role in vetting the Prime Minister's nomination for the post of Comptroller and Auditor General. Will the Minister clarify whether the Assembly will have the opportunity to debate the suitability of the Government's appointee, so that the Assembly may have ownership of the process from the beginning?

The Auditor General will face a huge task. Will the Minister reassure us that the office is adequately resourced with access to appropriate expertise as required? I was glad to hear the Minister say that the new office will liaise closely over cross-border issues with English and Scottish counterparts to ensure consistency of methodology and standards throughout the UK.

The noble and learned Lord, Lord Morris of Aberavon, referred to the importance of attention to detail in the relationship between government in England and Wales, and, I would like to add, attention to governance issues between England and Wales as well. If there is variation in the way data are collected, interpreted and communicated, wide misinterpretation will occur throughout the UK. Such misinterpretations and unfounded perceptions may either conceal or exaggerate inequalities. The Bill has been generally welcomed. I add my welcome to it and look forward to seeing the list of points that were not accepted during the consultation.

8.9 p.m.

Lord Thomas of Gresford

My Lords, I add my thanks to the Minister for the painstaking way in which he introduced the Bill. Boring the Bill may be, but it is not modest, I respectfully say to the noble and learned Lord, Lord Morris of Aberavon, because it covers an important and vital function in government. To take up the noble and learned Lord's theme, this is only the third specific piece of primary legislation since the creation of the National Assembly. We have had the Children's Commissioner for Wales Act 2001 and the Health (Wales) Act 2003, which do not amount to a quarter of the Bills that have been bid for. Only three out of 16 potential measures, which have been debated in plenary sessions in March of each of the three years from 2001 to 2003, have been introduced. Those Bills cover education, land use, housing, passenger transport, tourism, an ombudsman and other areas.

The Minister himself referred to all the initiatives— such as those for community first and a Wales waste strategy —that should have a legislative framework surrounding them; crowd-pulling those initiatives are. They may not be the crowds that we can expect when Wales wins the World Cup, but those initiatives require legislative measures.

The process whereby the National Assembly secures the primary legislation that it wants is slow, cumbersome, inefficient and not particularly effective. Therefore, it is no surprise that Wales has trailed behind Scotland and Northern Ireland in unifying its audit functions.

Another aspect of this matter is that, in draft form, the Bill has been scrutinised—very fully—by the Welsh Affairs Committee, the Welsh Grand Committee and the Welsh Assembly ad hoc committee. It will now go through all of the parliamentary stages at Westminster. It reminds me of my pupil master, the brother of the noble Lord, Lord Roberts of Conwy, his honour Judge Eifion Roberts, who told me that, in his first three or four weeks at the Bar, he had no work and neither did anyone else in his Chambers. At the very end of that period, a brief for a guilty plea came in and was subjected to the most incredible scrutiny by four anxious, young and concerned barristers that any guilty plea has ever received. It is rather like that with the legislation that finally gets here.

How much simpler it would be if a Welsh Bill were presented to the Assembly and then, after its preliminary stages, were referred to a Joint Committee of both Houses at Parliament here in Westminster for debate and comment—although not for amendment—and then returned to the Assembly for enactment. That would be a far simpler way of dealing with the legislative processes and primary legislation than we have at the moment. I have said in this House before, and I agree with the noble and learned Lord, Lord Morris, that the National Assembly should have the Bill it wants. It is not our job to start bringing in other considerations. I look forward to hearing from the Richard commission about proposals for granting further legislative powers to the Assembly.

The noble and learned Lord, Lord Morris, also referred to the piggy-backing way in which we try to introduce measures at the moment. I prefer to think of it differently. My grandson was born at about the time that the National Assembly came into being. A month or two ago, I was very pleased and proud to see him throw away his stabilisers and ride his bicycle on two wheels. Within a fortnight, he rode four miles along the river Dee just to show what he could do. It is time that the National Assembly threw away the stabilisers that have been imposed on it and locked on to it. It should be given its head.

We give the Bill a broad welcome. In particular, we welcome the powers in Clause 11 to extend the Auditor General's right of access to documents and the benefit of assistance, information and explanation in respect of any of these transactions. It will apply to all bodies, including local government bodies. I believe that the Bill did not initially extend to local government, so that is one of the results of the scrutiny of the draft Bill. It follows the recommendations made by my noble friend Lord Sharman of Redlynch in his report, Holding to Account, to which the Minister referred.

As the purpose of the Bill is to create a single public audit body for Wales, it is inconsistent to apply different standards of transparency. Why have the Government not followed the recommendation made by the Welsh Affairs Committee in paragraphs 33 to 35 of its report and by the Auditor General that what was Clause 50—now Clause 54—should be deleted? Why should there be a distinction between the position of the National Assembly and public bodies accountable to it and local government in the way in which a report should be publicised? Has the lobbying by the Labour dinosaurs on the Welsh Local Government Association persuaded the Government to stick with the clause? Was it a desire, as the Minister suggested, to conform to the existing provisions, which will continue to apply to England? I shall come back to that point.

Clause 54 places restrictions on the disclosure of information relating to a particular body or other person, if an audit study or inspection relating to a local authority is being carried out. I have tried to find out the rationale behind that, apart from the fact that it has been that way since 1972 in England and Wales. The rationale was set out in the evidence given to the Welsh Affairs Committee on behalf of the Welsh Local Government Association in questions 15 to 17 of the committee's report. I glean from it that the restriction on the disclosure of information is of constitutional significance. It is a special provision, which recognises that local government has a separate institutional mandate—in other words, local government members are elected separately.

The association argued that it was for the electorate, not an auditor, to decide whether it was satisfied with the services provided. It pointed to the tendency of the Audit Commission to condemn local councils and said that, therefore, it should be open to a local authority to refuse to consent to the publication of condemnatory reports, as a constitutional right. That is muddled thinking. The Auditor General is the guardian of the public interest, not the institution that is being inspected. It is for him to decide when and how he should publish his conclusions. Certainly, he should adopt the sort of protocol that applies to national government, which will require him to ensure that bodies or persons criticised have a right to comment on the factual accuracy of a report prior to publication, but an institution such as a local authority should not have a right to suppress publication of the details.

From time to time, there has been evidence of fraud and corruption. One can think of specific local authorities that it is not necessary to name. I agree with everything that the noble Lord, Lord Roberts of Conwy, said about the matter: fraud should be rooted out and exposed at the earliest opportunity, to protect public funds and as a warning to others. The matter was put to Professor Colin Talbot, who gave evidence to the Welsh Affairs Committee. He said that he did not think that there should be a difference between the two tiers of government—the National Assembly and local government. He said: My general reaction to these things is we should have disclosure rather than not. Unless there is a very good reason why information should not be disclosed it ought to be in the public domain". Professor Colin Talbot advises the Public Administration Committee. He went on: For far too long in the UK we have had standards operating at national and central government levels and local government which are different from one another and in my view there is no justification for that. In my view, historically most of those have been Whitehall trying to cover its back and make sure that it is not exposed to various things. In this particular case it is a restriction on information at local government level and I do not think either should be availing themselves of those sorts of protections. If it is public money, the public ought to have a right to know where it is going". We on these Benches fully endorse that.

When the honourable Mr Touhig spoke at the Welsh Grand Committee on 15th July, we had hoped that he would take that on board. He said: Local government auditors have particular responsibility to local electors. We wanted to debate the matter before considering the proper way forward … I certainly intend to consider the matter further in light of the comments made this morning and in the report".—[Official Report, Commons Welsh Grand Committee, 15/7/03; col. 17.] We had hoped that he would take on board this consensus of view.

However, just now we heard from the Minister that the purpose of the clause is to prevent premature release of information that may be of a prejudicial nature and that it is inconsistent with what is happening in England. I rejoice that it is inconsistent with what is happening in England. If it is a good public policy for Wales, it should be adopted.

Perhaps I may also underline the call from the noble Lord, Lord Roberts of Conwy, for the absolute independence of the Auditor General. One can understand from where the Welsh Local Government Association came; it expressed the view that the Auditor General as an individual would be too powerful. Mr Sandy Blair, who gave evidence to the Welsh Affairs Committee on question 7, said: the legislation should require there to be a body to which the Auditor General pays attention in terms of developing the scope and culture of the organisation and the direction of activity which he or she can consult when being asked to examine new approaches and a body which itself is representative to a certain extent of the stakeholders interested in the activities of the Auditor General". In other words, put a clamp on the Auditor General with a committee of interested parties. Rightly, that has not been adopted by the Government; I commend them for it. Nor have they adopted Councillor Russell Goodway's call for an elected Auditor General based on the American model. I can just imagine the excitement in Gresford at an election between two auditors for the Auditor General of the whole of Wales; how we would clear out the Griffin pub to ensure that everyone voted before the polls closed. What a ludicrous idea!

Perhaps I may make one final comment. I welcome the fact that the responsibility for best value compliance inspections—or "whole authority analyses", as they are called in the jargon—passes in Wales to the Auditor General. I hope that such inspections will promote the Welsh procurement initiative that has won the prestigious 2003 public sector award for procurement excellence from the Chartered Institute of Purchasing and Supply. There was, of course, a partnership government in being when that award was gained; namely, the partnership between those opposite and my party. The judges commented: The scale and innovation of the Welsh procurement initiative project, with its vision of change for the whole public sector in Wales, won over the judges in this category. The initiative's work on collaborative procurement brings together, for the first time in the UK, the procurement activities of a country's public sector". The public sector must place its contracts in the bigger, wider context of the local economy—the Welsh economy—in which it operates. The Auditor General must see his role in best-value inspections as promoting the interests of the Welsh economy in the broadest sense. I hope that the Minister will confirm that this will be within his remit.

8.25 p.m.

Baroness Noakes

My Lords, this has been a small debate in terms of the numbers contributing but that is in no way an indication of the level of the debate, which has been high throughout. I find myself a lone English person among these Welsh wizards. Certainly, I shall not attempt to say anything in Welsh, like my noble friend Lord Roberts and the Minister.

We were privileged to hear from the noble and learned Lord, Lord Morris of Aberavon, who was a former Secretary of State for Wales. He spoke with considerable authority. In particular, we support his call for transparency. In that context, we look forward to receiving the details of the points that were not taken on the board by the Government and incorporated in the Bill. We are grateful for the offer made by the Minister.

As my noble friend said, my experience lies in audit, in particular from a private sector professional perspective. However, I want to make it clear that I do not feel that I have any interest to declare because my professional involvement is now Firmly in the past. Indeed, nowadays I tend to see auditors from the vantage point of chairing or serving on audit committees. I can assure the House that no longer do I feel that I represent the auditor side of the table.

Let me restate the position set out so elegantly by my noble friend Lord Roberts of Conwy. We welcome the Bill and shall not oppose its general direction. In particular, we support the concentration of audit resource so that when considering public money in Wales, we are clear that one supreme audit institution is involved. We believe that this is a solution which will avoid gaps and overlaps and will promote efficiency.

I have often felt that the audit arrangements for England have a rather Heath Robinson quality to them. When in government, my party invented the Audit Commission to tackle issues regarding local government finances. I have forgotten why, at that stage, a separate body was set up rather than an extension of the remit of the Comptroller and Auditor General. We then added to that by passing health audit over to the Audit Commission, despite the fact that the Comptroller and Auditor General both had and retains responsibility for reporting on the NHS overall. Since then, the current Government have both extended the remit of the Audit Commission by making it the inspection body for local government, and then cut it down again by making the Commission for Healthcare Audit and Inspection the body responsible for national value for money studies in the NHS.

I do not believe that the end result in England is rational. It leaves the Audit Commission as a somewhat ambiguous body—so ambiguous that, while it talks at length about "strategic regulation", the first page of its website contains not a single reference to its core function of audit. By contrast, the Comptroller and Auditor General still stands proudly on his platform of public audit, which is why it is particularly appropriate that the model which has been selected for Wales focuses in on what has been achieved for the Auditor General for Wales by the Comptroller and Auditor General. I hope that the Government will take time from their rather crowded legislative timetable to look again at the end result in terms of English public sector audit. There is much of value in the proposals set out in this Bill which could be carried over to England.

Having given the Bill that welcome, I have to say that we feel that some areas of the Bill would benefit from the detailed scrutiny for which your Lordships' House is renowned. I have listened carefully to the remarks of the noble and learned Lord, Lord Morris of Aberavon, and the noble Lord, Lord Thomas of Gresford, about Welsh legislation, broadly to the effect that we should keep our sticky hands off legislation that comes from the Assembly. I should say that we believe that we are sticking to the current rules; that is, that a Bill in this House will be subject to the conventional levels of scrutiny. That is certainly what we plan to do.

I shall not go through today all the areas that we shall raise in Committee, but I should like to touch on one or two issues that we shall want to pursue further. The first area is that of the independence of the Auditor General for Wales. Under Clause 2, the Auditor General for Wales can enter into arrangements to carry out the functions of or to provide services to a "relevant authority". Such relevant authorities are a government department or a local or public authority. Clause 9 removes the current prohibition in relation to the Assembly. So the Bill will empower the Auditor General for Wales to become intimately involved with the bodies that he will audit.

However, that is potentially dangerous. There is a basic principle which should apply to all auditors, whether in the public or private sectors—that auditor independence must not be impaired. Auditor independence can be impaired by the provision of non-audit services, but that is what this Bill will allow. Independence can be impaired if the auditor has to judge his own work, which the Bill will also permit. So the Bill is potentially deficient because it does not limit the powers created by Clauses 2 and 9 to those situations that do not compromise auditor independence. The Explanatory Notes indicate in relation to Clause 9, and working with the Assembly, that there will be protocols that will counteract the provisions of the Bill. However, we would take some convincing that protocols would be sufficient to counteract the Bill, which potentially drives a coach and horses through auditor independence.

The second area of concern is why the Government have taken a minimalist route to transferring audit functions in relation to health and local government to the Auditor General for Wales. The noble Lord, Lord Thomas of Gresford, touched on some of these points. The Bill preserves the rather idiosyncratic differences between the way in which public audit is practised in relation to central and local government and health, thus embedding rather than improving the differences. The Welsh Affairs Committee in another place expressed disappointment that the opportunity had been missed to make Welsh audit a beacon of good audit practice, and we echo that sentiment.

A detailed aspect of the slavish adherence to bolting on the Audit Commission model can be found in the way in which the Auditor General must appoint persons as auditors to local government bodies and cannot himself be appointed. My noble friend Lord Roberts has already referred to that. I would be interested to hear from the Minister whether there is any rational explanation for that.

Another issue to which the noble Lord, Lord Thomas of Gresford, referred is the mirror image of the Audit Commission arrangements in Clause 54, which for local government audits alone sets up criminal sanctions in respect of the disclosure of information obtained during the audit of a local authority. I have heard no convincing explanation why that is required or why it has been carried over into the new Welsh public sector audit arrangements. I should have thought that was something that the Welsh would have happily left behind to the English.

The Bill contains access rights under various clauses, which represents a welcome move to the principle set out in the report of the noble Lord, Lord Sharman. I am sorry that the noble Lord, who has done much to promote public sector audit, is not able to be in his place today. We believe that the access rights are extremely important and want to ensure that they are appropriately drafted in conjunction with Clause 54, as this is a golden opportunity to get access rights right in public sector audit. We will not let that opportunity be missed.

My final topic today is the regulatory impact assessment. I often find that I am one of the few Members of your Lordships' House who reads the regulatory impact assessments in detail. However, I have been deprived of that pleasure with this Bill, because the regulatory impact assessment is far from detailed. In fact, as far as I can ascertain, there is no regulatory impact assessment on this Bill.

If one follows the Internet link referred to on page 33 of the Explanatory Notes, it reveals nothing more than the draft Bill and a regulatory assessment that was last updated on 12th April 2003. Yet Mr Touhig, the Minister in another place, said to the Welsh Grand Committee on 15th July 2003 that, in relation to the regulatory impact assessment: A considerable amount of work has been done and it is ongoing".—[Official Report, Commons, Welsh Grand Committee, 15/7/03; col. 5.] It is surprising, therefore, that we do not have an updated regulatory impact assessment to accompany the Bill.

Paragraph 145 of the Explanatory Notes says that there will be set-up costs of £500,000, but it seems to assume that there will be no other additional costs from the Wales Audit Office having to set up its own administrative functions. The new body will be small relative to its former parent bodies, and it seems odd that there will be no extra costs—in particular because it will have no scale economies. Curiously, we are told in paragraph 148 that the Assembly considers that there will be no additional budgetary costs. If the £500,000 is not a budgetary cost, I am mystified as to what it is. The noble Baroness, Lady Finlay, also pressed the Minister on those costs and I hope that he will be able to reply.

I have laboured my point not because £500,000 is a massive sum, but because the Government have not fully complied with their obligations to provide Parliament with a coherent and accurate account of the impact of their proposed measures. I hope that the Minister will be able to provide a better explanation, if not today, then in correspondence before Committee.

Let me not end on a carping note. We do indeed welcome the thrust of the Bill and look forward to tackling the detail in Committee.

8.35 p.m.

Lord Evans of Temple Guiting

My Lords, we have had a short but interesting debate on the Bill. Let me assure your Lordships that, given that the Bill has been welcomed by everybody, we will take away and consider all the points that have been raised, particularly those raised by the noble Baroness, Lady Noakes, because of her lifetime's experience and expertise in this very area. Although party politics quite often enter our deliberations, our intention to get this particular Bill absolutely right is genuine and we will look carefully at Hansard and consider all the points that have been raised before Committee.

A single audit body approach is a logical extension of devolution in Wales. Unitary arrangements have already been put in place in Scotland and Northern Ireland. Before closing our debate, I pay tribute to both the Audit Commission in Wales and to the Auditor General and the staff of the National Audit Office for the excellent work that they have done, and continue to do, in upholding and improving the high standards of public accountability in Wales.

I also welcome the way in which the National Audit Office and the Audit Commission have already worked together in helping to formulate the provisions of the Bill. It bodes well for the shared sense of identity and belonging that the Government are confident will underpin any unitary arrangements.

The Wales audit office would comprise a wide pool of expertise and experience in different aspects of public audit that could only benefit auditing standards and practice in Wales. Accountability for public audit scrutiny in Wales will be clearly ascribed by the Bill. It will rest with a single head, the Auditor General. The Bill confers on the Auditor General accounting officer responsibilities for ensuring regularity and propriety in the work of the Wales audit office and for ensuring that it represents value for money in the way in which it is structured and operates.

A number of bodies that responded to public consultation on the Bill expressed concern at what they perceive as the growing burden on them of successive audit, examination and inspection exercises. The co-operative and consultative provisions in the Bill will encourage a more strategic and inclusive approach to the forward planning and undertaking of audit, examination and inspection work.

The Bill provides the opportunity for co-ordinating the programming of such work to reduce the burden on client organisations, without in any way diminishing the standards of financial accountability and governance that are expected of them. In its report on the draft Bill, the Welsh Affairs Select Committee recommended that the Auditor General and the Audit Commission be required in all cases to co-operate in the planning and undertaking of cross-border studies relating to local government. It also recommended that the resulting reports be produced jointly by both organisations.

The Government have not fully accepted that recommendation because it could potentially reduce the flexibility of either body to initiate and progress work when appropriate. A duty to work jointly in all cases could have a restrictive, rather than a facilitative, effect.

However, the Bill has been amended to require the Auditor General to co-operate with the Audit Commission on cross-border value-for-money studies and statutory impact studies undertaken under Clauses 41 and 42 where appropriate for the efficient and effective discharge of his functions. The Audit Commission Act has also been amended to require the commission to co-operate with the Auditor General on the same basis.

The ancillary powers conferred on the Auditor General under Clause 2 of the Bill will enable the Wales audit office and a wide range of other bodies to collaborate and assist each other in joint working and the development of work in respect of corporate governance, better risk management and work on the consolidation of accounts. They will also enable the Auditor General to provide or receive professional, administrative and technical support; for example, payroll or personnel services or more specialist professional services such as database interrogation.

Schedule 3 of the Bill fully accepts the principle that staff of the Audit Commission and the National Audit Office who transfer to the Wales audit office should do so on terms and conditions that are no less favourable, taken as a whole, than the terms and conditions on which they were employed immediately before the transfer. The detail of the staff transfer arrangements, along with the arrangements for the transfer of property, rights and liabilities involved in the merger will be set out in statutory transfer schemes made by order. The order-making power will be exercisable by statutory instrument that will be subject to annulment in pursuance of a resolution by either House of Parliament.

Clarification was also sought during consultation on whether the scope of the references to "documents" in the Bill include material in digital or electronic form. The Government intend the word "documents", as used in the Bill, to include material produced in any form technologically possible at the relevant time. Very careful consideration was given in the course of the preparation of the Bill to whether further words were necessary to make this intention express. The Government decided, after that very careful consideration, that they were not, and indeed that including some form of definition of documents in the Bill could cast doubt on the scope of such terms in other audit-related legislation in which no such definition has been inserted.

I should like to deal briefly with some of the very interesting points raised in the debate, while recognising that I am not qualified or briefed to talk in great detail about some of the fascinating general points made on the legislative capability of the Welsh Assembly. It is, nevertheless, a very interesting subject.

In welcoming the legislation, the noble Lord, Lord Roberts, asked about the Welsh Affairs Committee. On Thursday, at two o'clock, the Parliamentary Under-Secretary of State will publish his reply, which will be available on the web at three o'clock. The noble Lord also mentioned the Auditor General's report on ELWa. That report was considered by the Assembly's Audit Committee on 25th September. I gather that the Audit Committee's report is expected to be published shortly. It would therefore be inappropriate for me to comment on it. However, it was a point well made. I repeat my thanks to the noble Lord, Lord Roberts, for his genuine welcome for the Bill.

My noble and learned friend Lord Morris of Aberavon raised a number of interesting points. He wished to know which other organisations welcome the Bill. The Audit Commission, the Welsh Local Government Association and the Auditor General for Wales have all welcomed the Bill, as did all respondents to the consultation. The 22 recommendations which the Government did not accept are an absolutely crucial point. Those will be made available to everyone who took part in this debate and will be placed in the Library.

The noble and learned Lord, Lord Morris of Aberavon, wished to know which recommendations of the Assembly committee had not been accepted. I refer to three significant points. First, the committee wants Clause 54 of the Bill to be removed. I shall discuss that in a moment. The committee wants the Bill to be gender neutral in terminology and for the Assembly to have more rights than it has been given regarding the appointment of the Auditor General.

The noble and learned Lord, Lord Morris, and the noble Lord, Lord Thomas of Gresford, wished to know what piggy-back Bills were expected in this Session. As in previous Sessions, a number of Bills will be brought before your Lordships in which separate provision will be made for Wales as a result of partnership between the UK Government and the National Assembly. A few examples of that are the Planning and Compulsory Purchase Bill, which was introduced in the previous Session, the higher education Bill, the children's Bill, the civil contingencies Bill, the fire and reserve rescue services Bill and the housing Bill.

The noble Baroness, Lady Finlay of Llandaff, asked three very interesting questions. She asked whether a Wales only code of audit practice would be debated and approved by the Assembly. Clause 16 of the Bill has been amended as a result of consultation to ensure that a draft code of practice is not introduced until it has been approved by a resolution of the Assembly. The code will also be subject to annulment in pursuance of a resolution by either House of Parliament. The Auditor General's annual report and accounts are published by the Auditor General. Reports on accounts and audit and value for money studies that he undertakes can be, and usually are, published, and can be considered by the Assembly audit committee.

The noble Baroness also asked whether the Assembly would be able to debate the appointment of the Auditor General. The Auditor General will be appointed by Her Majesty. In practice the National Assembly is asked for its view on the appointment of the Auditor General. It will be open to the Assembly to debate the appointment in plenary session on a Motion as recommended as part of that process without an amendment to the Government of Wales Act.

The noble Baroness, Lady Finlay, and a number of other noble Lords asked about the set-up costs and whether they were still £500,000, as estimated. That is still the estimated cost that is being worked to. The National Audit Office, the Audit Commission and the National Assembly are at this moment working on costings. In October the Auditor General submitted a paper to the National Assembly audit committee estimating, on a provisional basis, transitional costs of £400,000, not £500,000, for the financial year 2004–05.

The noble Lord, Lord Thomas of Gresford, raised extremely interesting points, many of which we shall have to look at, and no doubt come back to, at the next stage of the Bill. He asked about the public procurement initiative. That initiative is to be welcomed. The work of the Auditor General has focused, and will continue to focus, on securing value for money through effective procurement. The Auditor General has recently published a report on procurement in the further education sector.

The noble Lord, Lord Thomas of Gresford, and a number of other noble Lords returned to the matter of Clause 54 which I dealt with in my opening speech. Can it be deleted? Should it be deleted? Clearly, this is a matter to which we shall return. As I explained in my opening remarks, the key to the Government's decision to retain Clause 54 is their concern to preserve consistency on the criminal law between England and Wales. However, I refer noble Lords to a sentence in my opening speech; namely, that, The Government consider, for this reason, that further consideration of disclosure matters should be on an England and Wales basis". That makes it fairly clear that the Government are arguing that the Bill is not the place to focus on the problem, so perhaps it should be looked at elsewhere.

I have already paid tribute to the great knowledge of the noble Baroness, Lady Noakes, in the area. She raised the question of whether Clause 2 left the Auditor General open to conflicts of interest. We think that Clause 2 does not inevitably lead to conflicts of interests. It will be for the Auditor General and his staff to ensure that a conflict of interest will not arise. It is not necessary to limit Clause 2 to situations that would not give rise to conflicts of interest, as that may be too restrictive.

The noble Baroness raised other issues that we would like to consider before Committee. I am very grateful for the support given to the principles of the Bill, although I see interesting discussions taking place in Committee on various aspects of it. It has been a very constructive debate, and I thank all noble Lords who have spoken.

On Question, Bill read a second time, and committed to a Grand Committee.