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

HL Deb 01 April 2004 vol 659 cc1457-83

Report received.

Clause 3 [Studies for improving economy etc in services]:

Baroness Noakes moved Amendment No. 1:

Page 4, line 41, leave out "(other than a registered social landlord in Wales)"

The noble Baroness said

My Lords, I am disappointed to see a mass exodus from the Chamber because we have one of the most interesting Bills that the House will consider.

Amendment No. 1 deals with whether the Auditor General for Wales may carry out value for money studies of registered social landlords when he thinks it appropriate or whether he must have permission to do so. The amendment deletes the words, other than a registered social landlord in Wales", from subsection (4)(c) of new Section 145A of the Government of Wales Act which is inserted by Clause 3 of the Bill. New Section 145A is important because it gives the Auditor General wide powers to conduct value for money studies but it explicitly excludes from its ambit registered social landlords. Our amendment is designed to remove that exclusion.

We debated the issue in Grand Committee in connection with different amendments to Clause 5. The Government were unconvincing in their response to those amendments, which is why we have returned to the fray.

One of the Government's arguments was that it is an important principle that an existing Assembly power should not be taken away. Our earlier amendments were to Clause 5, which gives the Auditor General power, with the Assembly's agreement, to carry out value for money studies of registered social landlords. We have not touched that clause. It will remain possible for the Auditor General to agree studies with the Assembly on the terms provided by Clause 5; namely, that the Assembly agrees to meet the full costs.

Our amendment to Clause 3 thus adds to the ability of the Auditor General for Wales without touching the Assembly's existing power to agree a programme of value for money studies. If the Government do not accept our amendment, it is tantamount to saying that the Assembly has a veto on the work that the Auditor General may carry out. I do not believe that the Government can seriously defend that as a sound principle of public audit.

Another argument deployed by the noble Lord, Lord Davies of Oldham, was that, it would not be appropriate to give the Auditor General a free hand in undertaking studies related to bodies for which he does not have wider statutory audit functions".—[Official Report, 23/2/04: col. GC 27.] I respectfully submit that that is not a valid argument either. Under new Section 145A the Auditor General may carry out studies of various bodies within new Section 146A, which is inserted by Clause 1. We debated the scope of the clause in Grand Committee, and while it is by no means clear precisely which bodies it covers, it is clear that it extends beyond registered social landlords. So, if the Government were consistent, they would say that value for money studies under new Section 145A should not extend to any bodies within new Section 146A. But that is not what they have done. They have singled out registered social landlords.

The Government's position is illogical. Of course illogicality is not a fatal objection to the provisions of Bills—if that were so we would have precious little legislation. Much more importantly, the Bill as drafted adds an unnecessary restriction on the role of the Auditor General, who should be able on an unrestricted basis to follow public money for audit purposes. Large amounts of public money go into registered social landlords. To fetter the Auditor General would be a grievous mistake. I beg to move.

Lord Evans of Temple Guiting

My Lords, Amendment No. 1 would give the Auditor General discretion to undertake economy, efficiency and effectiveness studies—known as 3Es studies—in respect of registered social landlords under Clause 3 of the Bill. The Auditor General could undertake the registered social landlord studies if at some future stage the Assembly were to transfer to him, or ask him to exercise on its behalf under Clause I, supervisory functions in respect of them.

Clause 3 as currently drafted excludes registered social landlords. There is a more appropriate power for undertaking comparative studies on social landlords in Clause 5. Clause 5 enables the National Assembly and the Auditor General to agree on a programme or programmes of study designed to enable the former to make recommendations for improving the economy, efficiency and effectiveness in the sector.

There are sound reasons why agreement between the National Assembly and the Auditor General is the most effective way to progress 3Es studies in this sector. There are more than 100 registered social landlords in Wales. The Assembly provides more than £50 million in social housing grants a year to the sector. At any one time, however, the majority of these organisations—around 75 per cent—do not receive funding from the National Assembly in respect of new building development. They meet their administration costs, including maintenance costs, from rental income and other sources independently of the Assembly.

The differing, and potentially changing, financial relationship of registered social landlords in relation to the Assembly should be taken into account in planning participation in such studies. The Assembly has statutory responsibilities which mirror those of the Housing Corporation in England to fund and regulate the registered social landlord sector in Wales, and in particular to ensure that registered social landlords in Wales are financially viable, properly governed and properly managed.

The exercise of those responsibilities includes the determination of standards of performance, the issue of guidance on the management of housing, the approval of the constitutions and rules of the registered social landlords, and powers of intervention to ensure that regulatory requirements are complied with.

The work can inform in a positive way the direction and emphasis of the programme of studies which can be agreed between the Auditor General and the Assembly. The programme of studies agreed would complement and inform the Assembly's statutory responsibilities. Agreement would give focus and direction to the studies in a sector where the financial relationship between individual bodies and the Assembly differ.

The noble Baroness, Lady Noakes, raised the question of whether the Assembly has a veto over the Auditor General. What would happen if there was a disagreement, or no agreement? This question is predicated on the presumption that the Assembly would in some way be resistant to the Auditor General's ability to undertake such studies. The contrary is in fact the case. Such study programmes are already agreed with the Audit Commission under the Audit Commission Act, and they are valued by the Assembly as a means of informing policy. Clause 5 makes provision for the results of such a study and the Auditor General's recommendations to be laid before the Assembly. In the extremely unlikely event that agreement could not be reached between the Auditor General and the Assembly, the Auditor General would be free to report this fact and the reasons for it in his annual report, which is laid before the Assembly and published. I hope that in the light of what I have said, the noble Baroness, Lady Noakes, will withdraw her amendment.

Baroness Noakes

My Lords, I thank the Minister for that comprehensive reply and for explaining the financial context of registered social landlords and the relative financial contribution made by the Assembly. My main concern was to ensure that the Auditor General was not fettered. I do not accuse the current Assembly of wishing to withhold consent for such studies at the moment, but supposing they became politically inconvenient for some reason, we would have to rely on the Auditor General being able to report ex post facto. That is, I suppose, some form of backstop ability to air the issue. On that basis, I am content with what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 [Studies at request of educational bodies]:

Lord Evans of Temple Guiting moved Amendment No. 2:

Page 5, leave out lines 22 and 23.

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendment No. 3, which stands in my name. Amendment No. 2 is the first of 19 government amendments tabled as a direct result of the discussions in Committee. I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Thomas of Gresford, for airing these issues in Committee, which have now resulted in amendments which, in the Government's view, will improve the Bill.

The effect of Amendments Nos. 2 and 3 is that the National Council for Education and Training for Wales and the Higher Education Funding Council for Wales will not be able under Clause 4 to ask the Auditor General for Wales to undertake an economy, efficiency and effectiveness study into themselves. The Government are of the view that their inclusion in Clause 4 is not needed. The National Council for Education and Training for Wales and the Higher Education Funding Council for Wales are both Assembly-sponsored public bodies. The Auditor General has statutory responsibility for their audit. He is already able to undertake economy, efficiency and effectiveness examinations into the way they have used their resources under Section 145 of the Government of Wales Act. In addition, the proposed new Section 145A of the Government of Wales Act—in Clause 3 of the Bill—will enable the Auditor General to undertake forward-looking economy, efficiency and effectiveness studies in respect of them. I beg to move.

Baroness Noakes

My Lords, I recognise that the Government have tabled many amendments in response to our discussions in Grand Committee, for which I thank the Minister.

On Question, amendment agreed to.

Lord Evans of Temple Guiting moved Amendment No. 3:

Page 5, leave out lines 28 and 29.

On Question, amendment agreed to.

12.45 p.m.

Clause 5 [Studies relating to registered social landlords]:

Baroness Noakes moved Amendment No. 4:

Page 7, leave out lines 1 to 5.

The noble Baroness said

My Lords, in moving the amendment, I shall speak also to the other amendments in this group. At one level, these amendments concern the sanctions that are attached to non-compliance with the Auditor General's access rights, but on another level these amendments highlight inconsistencies that still permeate the Bill.

Some of these amendments are alternatives. Amendment No. 4 takes out the criminal sanctions that attach to non-compliance with access rights for registered social landlords. The criminal law is a blunt instrument for a public audit regime, and the amendment is along the right lines. I am reinforced in this by the absence of criminal sanctions attaching to Clause 11, which is the substantive clause dealing with the Auditor General's access rights for bodies other than local authorities within the new arrangement for public audit in Wales.

The other side of Amendment No. 4 is Amendment No. 12, which would create criminal sanctions for a breach of the Clause 11 access rights, so that if the Government stick to their guns in respect of Clause 5, there will at least be consistency across the Bill. In Grand Committee, the Minister told us that criminal sanctions were not appropriate to bodies that were covered by the accounting officer conventions. I hope that the Minister does not repeat that argument, because I do not think that it is valid. First, Clause 11 already goes beyond the bodies that are covered by the accounting officer conventions. That is the effect of paragraphs (b) and (c) in new Section 95(1) introduced by Clause 11. Secondly, the Audit Commission audit regime for the NHS, which currently applies in Wales and will continue to apply in England, has criminal sanctions attached to access rights, despite the fact that accounting officer conventions apply throughout the NHS.

In Grand Committee, the Minister also told us that Clause 11 was all right, because the Auditor General could use judicial review or apply for a mandatory injunction. Why is that good enough for Clause 11, but not good enough for Clause 5? Since Clause 11 applies to many public audits, including that of registered social landlords by virtue of paragraph (b), can the Minister explain the purpose of the Clause 5 provisions?

It is also the case that where the Bill includes criminal sanctions, it has different versions in different parts of the Bill. Clause 5 has one version, while extended versions of the sanctions exist in Clause 18 and Clause 53, which deal with local authority access rights. So, Amendments Nos. 5 and 6 in this group largely replicate the Clause 18 and Clause 53 provisions, again to try to achieve consistency.

In Grand Committee, the Minister made much of the Bill's consistency with England. He elevated this to a grand principle underlying the Bill, so as to justify the patchwork nature of the Bill. The audit regime in England is not exactly a shining light of consistency. The way in which it has grown up, with different bodies and sporadic legislative reform, has resulted in something that is not coherent. This principle of keeping Wales the same as England is just another way of saying that the Government are ignoring an opportunity to create a coherent public audit regime for Wales. We think that is the more important principle.

In Grand Committee, the Minister also talked about consistency between criminal law in England and Wales. That is an irrelevance. The Assembly already has power to create criminal sanctions in different circumstances by order and, under Clause 39, this Bill creates another such opportunity.

The amendments offer the Government the chance to repent of their apparent determination to create an illogical public audit regime in Wales. I hope that the Government will seize the opportunity. I beg to move.

The Deputy Speaker (Lord Tordoff)

My Lords, I should point out to the House that were this amendment to be carried, I should not be able to call Amendments Nos. 5 and 6, because of pre-emption.

Lord Thomas of Gresford

My Lords, we support the amendments. They set out a series of options so as to achieve consistency in the Bill, as the noble Baroness, Lady Noakes, has said. It is for the Government to choose which option they wish to follow and whether they wish to create new criminal sanctions in Wales that do not exist in England, or vice versa. It is for them to achieve internal consistency in order to have an effective regime.

Lord Evans of Temple Guiting

My Lords, the noble Baroness, Lady Noakes, asks the Government to repent. Given the number of government amendments in my speaking notes today, I think that we have shown a great deal of repentance. I am afraid that we shall not be able to repent on this amendment.

Amendments Nos. 4 to 6 reinforce the views expressed by the noble Baroness, Lady Noakes, and the noble Lord, Lord Thomas of Gresford. in Grand Committee that the Bill should provide an opportunity to rationalise audit-related criminal sanctions in Wales. Amendment No. 4 would remove the existing criminal sanctions set out in Clause 5. Those relate to failure to comply with certain of the Auditor General's access requirements in respect of undertaking a study programme.

As an alternative, opposition Amendments Nos. 5 and 6 would align these criminal sanctions with those on the access rights relating to local government bodies in Wales—Part 2 of the Bill. Following Grand Committee, officials checked with the Audit Commission, which has indicated that it cannot recall an instance where those criminal sanctions have been invoked. However, it is difficult to assess the efficacy of a sanction until such time as it is no longer in place.

The level of the penalty in respect of registered social landlords in Wales is the same as that which currently applies to the sector in England and Wales under the Audit Commission Act 1998. The Government continue to consider that to be the most appropriate approach.

I fully acknowledge that where functions have been devolved to the Assembly there is scope for secondary legislation in respect of criminal offences to diverge. The provision in Clause 39 for Welsh accounts and audit regulations, currently made under the Audit Commission Act 1998, is an example, although in practice the provisions in the respective regulations are consistent.

The Government believe that it is right that there should be consistent sanctions in England and Wales, an issue that we have discussed in debating this clause and others. Should those sanctions be subject to future review, it would be on a consistent, cross-border basis.

Amendment No. 12, if accepted, would apply criminal sanctions to non-compliance with Clause 11 access rights. That would apply to the National Assembly, its sponsored public bodies, NHS bodies in Wales, and other public bodies funded by the Assembly. It would also apply to those who hold documents or information relating to the exercise of the Auditor General's functions.

The noble Lord, Lord Davies of Oldham, in Grand Committee set out the accounting officer conventions that exist in relation to governmental bodies for which the Auditor General has statutory audit responsibilities and which would apply to any instance of non-compliance with the access provisions of Clause 11. In the first instance, the matter would be brought to the attention of the relevant body's accounting officer, then to the National Assembly's audit committee. The committee could call witnesses to seek an explanation and could issue and publish a report on the matter.

Ultimately, an instance of non-compliance could result in the removal of accounting officer status. Withdrawal of accounting officer status could well result in the individual concerned not being able to continue in his or her job. There is no equivalent to accounting officer conventions in the local government sector.

I am not aware of any instance in Wales where the imposition of criminal sanctions would have led to a more satisfactory resolution of access difficulties in the context of Clause 11 bodies. Criminal sanction provisions were not incorporated into the Auditor General's original access right provisions in the Government of Wales Act 1998. The noble Lord. Lord Sharman, also did not recommend the creation of criminal offence provisions in that context.

The Government are satisfied that the extended rights of access to documents and information under Clause 11 could be secured either under the accounting officer conventions or by way of an application for judicial review, where available—for example, by way of a mandatory order compelling the person or body to comply. Alternatively, the Auditor General could apply in the ordinary civil courts for a mandatory injunction to compel the performance of the duty to provide access. These remedies have teeth.

The Government are of the view that those are formidable weapons in the Auditor General's armoury, should it be needed. A person, for instance a subcontractor, would think twice about refusing to comply with the Auditor General's rights of access if faced with the prospect of litigation and the costs that would inevitably ensue. On that basis, the Government remain of the view that it would not be appropriate or necessary to apply criminal sanctions generally in respect of the provisions in Clause 11.

I was asked what were the circumstances in which the Auditor General would invoke criminal sanctions in Clause 5. Even when faced with difficulties about access to documents and information in the registered social landlord sector, the Auditor General will also have the option of going to the courts to seek a mandatory injunction requiring the recalcitrant landlord to comply with the duty to provide the information and documents.

Under the Bill, the accounting officer of the NHS in Wales would be subject to the accounting officer conventions. The Auditor General would be the statutory auditor for the NHS bodies in Wales. They would be subject to Assembly audit committee procedures.

In the light of that explanation, I invite the noble Baroness, Lady Noakes, to withdraw the amendment.

Baroness Noakes

My Lords, I thank the Minister for that reply, which I found disappointing. So far as these Benches are concerned, there is never too much repentance from government Benches. We shall continue to raise such points.

The Minister repeated largely what we covered in Grand Committee. In particular, he repeated the issue about accounting officer conventions, whereas I had tried to point out in my introductory remarks that Clause 11 goes beyond those bodies to which the accounting officer convention applies. I think that I can understand why the Government may not want criminal sanctions attached to those where accounting officer conventions apply, although I can see no harm in it, if that is the consistency that they want to achieve. However, the clause already goes beyond that, so that does not seem a knockdown argument.

I am glad that the Minister has ascertained the position on the use of criminal sanctions, and that none has been involved. That was the position that we thought had existed.

I remain troubled by the Government's approach to the Bill, which is to ignore opportunities for consistency. The explanations that we have received do no more than try to cover up the inconsistency rather than explain it. I shall want to reflect further on what the Minister has said when I have read it in Hansard. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 5 and 6 not moved.]

Clause 7 [Fees]:

Baroness Noakes moved Amendment No. 7:

Page 7, line 37, at end insert "and any such fee shad cover the full cost of providing the audit"

The noble Baroness said

My Lords, in moving this amendment, I shall speak also to Amendment No. 9 in this group. Both amendments deal with Clause 7. which inserts a new Section 93A into the Government of Wales Act 1998. The purpose of' the amendment is to clarify the relationship between the fees that the Auditor General charges and his costs.

We shall not oppose governments Amendment No. 8, which is in the group. It seeks to delete subsection (2), which we did not understand when we debated it in Grand Committee. However, a consequence of that amendment will be to focus more attention on the basic approach taken by the Auditor General to charging, so we have tabled Amendment No. 7, which would ensure that all fees charged by the Auditor General covered his costs.

If the Auditor General does not cover his costs for an audit, it means either that other audits will have to bear more cost or that the Assembly will have to pick up the tab, under Section 93 of the Government of Wales Act 1998. I accept that there can be valid policy reasons for charging less than cost, but complete freedom such as that given to the Auditor General by the Bill means that the policy is not open and transparent. Under the Bill, he can do what he likes, and we are concerned about that.

I also have a specific concern that the Bill will allow the Auditor General to indulge in unfair competition with the private sector. The Minister wrote to me on 24 March—I thank him for that letter and for his comprehensive letter of 23 March—explaining government Amendment No. 8 in terms of the need to cover audits of bodies such as charities or voluntary organisations. That set alarm bells ringing. If the Auditor General has the power to set whatever fees he likes for the bodies who might chose to be audited either by the Auditor General or by private sector auditors, that could allow him to gain work by unfairly depressing fees below cost. That is not acceptable. Can the Minister give any assurances that the Auditor General will not use the power to undercut the market? I do not suggest that the current Auditor General would dream of such a thing, but the Bill must be proof against the actions of future Auditors General.

Amendment No. 9 deals with fees charged for certain services. Under subsection (3) of new Section 93A, the Auditor General has to set fees that do not exceed the full cost of the services. That contrasts with the formulation in the soon-to-disappear subsection (2) and the surviving subsection (4). We have focused our amendments on the use of the latter formulation for subsection (3).

Under subsection (3), there are two sorts of work that can be charged at less than cost. The first is value for money audits with the agreement of the Assembly. That is not a problem, because, if the Auditor General charges the Assembly less, it will have to pick up the tab. The second kind of audit is one done under new Section 145A, requested not by the Assembly but by some other person. The Minister's letter of 23 March said that that would allow the Auditor General to take the view that such a study could contribute to, a wider programme of forward-looking cross-sectoral studies". My answer to that is that it would be open to him to allocate some of the costs not to that study but to other studies. The ability to charge less than costs is not a real issue; it must relate to giving some other power to make sure that costs are not covered in circumstances in which they cannot realistically be allocated to other sorts of work. As the consequence of not charging the people who have requested the study will be that the cost will fall on the Assembly, the Assembly ought, as a minimum, to have a say. I beg to move.

1 p.m.

Lord Evans of Temple Guiting

My Lords, I shall speak to Amendment No. 8 and respond to Amendments Nos. 7 and 9. I will deal first with Amendments Nos. 7 and 9.

Amendment No. 7 would seriously and unacceptably reduce the flexibility available to the Auditor General. The effect would be that if he decided to charge a fee for auditing he would have to charge the full cost. He would not have the power to charge, if he considered it appropriate, less than the full cost. The result would be that the Auditor General would either decide not to charge at all or decide to charge but be required to charge the full cost. There would be no flexibility, and we think that a bad thing.

In practice, the Auditor General charges full cost for audit work. That includes the direct cost of the work plus a reasonable attribution of central overheads. I hope that that statement will reassure the noble Baroness, Lady Noakes, that the Auditor General will not undercharge to depress market rates. If an audit involves more work than originally envisaged, his original cost estimate may have to be amended. If a small surplus occurs, it is taken into account in subsequent audit work. That does not affect, however, the general principle that the Auditor General charges full cost and only full cost. He is subject to audit by external auditors appointed by the Assembly. His practice on fee charging can also he considered by the Assembly's Audit Committee. Flexibility, as I said, is essential and was considered desirable when the Government of Wales Act 1998 was drafted.

There may be circumstances in which the Auditor General may wish to charge less than the full cost for the audit of a body or a person's accounts. Amendment No. 9 would arguably mean that the Auditor General could charge only a fee that covered the full cost of the service. The only alternative would be for him to charge no fee. As drafted, the proposed Section 93A(3) of the Government of Wales Act, to be inserted by Clause 7, would not prevent the Auditor General from charging full cost but allows him to charge less than full cost, if he wishes to do so.

Section 96(3)(b) of the Government of Wales Act 1998 relates to economy, efficiency and effectiveness examinations undertaken by way of an agreement between a person who is the subject of the examination and the Assembly or a Minister for the Crown. In such circumstances, it may be appropriate for the Assembly or relevant Minister to meet some or even all of the cost of the examination, rather than the person to whom the examination relates. In the case of a study requested under the proposed new Section 145A, to be inserted by Clause 3, the Auditor General may take the view that the study would contribute to a wider programme of forward-looking cross-sectoral studies that he may be undertaking or contemplating. For that reason, he may consider that the recovery of full costs may not be appropriate.

On the Section 145A studies and adding cost to other studies, where, in relation to previous studies, he has done the work at less than full cost, it must be remembered that the Auditor General is a public body and must act reasonably, or he may be subject to legal challenge. In addition, the studies would be by agreement; the later body could not agree to meet the fees, if the body felt that the fees were excessive.

With that explanation, I hope that the noble Baroness will withdraw the amendment.

Baroness Noakes

My Lords, I thank the Minister for that reply. I had not intended my amendment to mean that the Auditor General would charge either nothing or full cost. I merely sought to prevent the Auditor General charging less than full cost.

I think that I still have a concern about the Auditor General undercutting the market. The Minister said that the allocation of overheads would mean that he would not undercut the market, but the point is that he has the power to charge a fee at less than cost. Having ascertained costs through the normal cost allocation methods, he might then say that he wanted to charge less. I do not believe that there is any remedy for that, except that the Audit Committee of the Assembly might realise that that was an issue, if it amounted cumulatively to quite a high overall cost.

Much will ultimately depend on the degree of scrutiny that the Auditor General receives from his external auditors, who would not normally cover costing systems and cost recovery, and—and therefore more importantly—the scrutiny that the Assembly's audit committee can provide. I hope that the Assembly's audit Committee will read the proceedings of your Lordships' House in considering the clause and therefore be alert to the possibility that costs are perhaps not being allocated correctly. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Evans of Temple Guiting moved Amendment No. 8:

Page 7, line 38, leave out from beginning to end of line 4 on page 8.

On Question, amendment agreed to.

[Amendment No. 9 not moved.]

Clause 11 [Access to information, etc by Auditor General]:

The Deputy Speaker

My Lords, before calling Amendment No. 10, I should draw the attention of the House to the fact that were it to be carried, it would pre-empt Amendment No. 11, which I should not therefore he able to call.

Lord Evans of Temple Guiting moved Amendment No. 10:

Page 10, line 38, leave out from beginning to end of line 10 on page 11 and insert—

"(3) The Auditor General for Wales may require a person whom he thinks has information of the kind mentioned in subsection (3A)—

1. (a) to give him any assistance, information and explanation which the Auditor General for Wales thinks necessary for any of the purposes mentioned in paragraphs (a) to (c) of subsection (1);
2. (b) to attend before him in person to—
1. (i) give the assistance, information or explanation, or
2. (ii) produce any document which is held or controlled by the person and to which the right conferred by subsection (1) applies;
3. (c) to provide any facility which the Auditor General for Wales may reasonably require for any of the purposes mentioned in paragraphs (a) to (c) of subsection (1).

(3A) The information is information which relates to—

1. (a) a relevant person;
2. (b) a document to which the right conferred by subiect ion (1) applies; or
3. (c) a person who holds or controls such a document.

(3B) The Auditor General for Wales may, for the purposes of his examination of any auditable accounts, require a relevant person to provide him, at times specified by him, with accounts of such of the person's transactions as he may specify."

The noble Lord said: My Lords, I shall speak also to Amendments Nos. 22 to 27.

Amendment No. 10 fulfils the commitment in respect of the Auditor General's access rights given at Grand Committee. It extends the Auditor General's powers of access to information, and so on, by enabling him to obtain information and the provision of facilities from a person regardless of whether that person holds or controls, or had held or controlled, a document covered by the clause. His principal right of access to every document relating to a relevant person remains.

The extended right of access to information will apply where the Auditor General thinks that any person has information about a relevant person. The right of access is to information relating to a relevant person: that is, a person being audited or subject to a study or examination; persons who hold or control a document relating to a relevant person; or about the documents themselves. The Auditor General can require from that person any assistance, information or explanation that he thinks necessary. He may also require personal attendance before him for that purpose.

The Government clearly wish to ensure that the exercise of the extended powers does not impose any unnecessary new burden on bodies to which they may relate. The Auditor General has confirmed that he will ensure that that is the case through the use of appropriate protocol arrangements.

Amendments Nos. 22 and 25 have been tabled to ensure consistency and achieve the same purpose in respect of a local authority-appointed auditor's power of access under Clause 18 and the Auditor General's powers of access in respect of a local government body under Clause 52.

Amendments Nos. 23, 24, 26 and 27 are consequential amendments to the provisions of Clauses 19 and 53 that reflect the changes in access provisions to Clauses 18 and 52. I beg to move.

Baroness Noakes

My Lords, I thank the Minister for fulfilling the undertaking given in Grand Committee by the noble Lord, Lord Davies of Oldham, in response to my amendment to Clause 11. I tabled Amendment No. 11 for Report to ensure that the Minister did not forget the undertaking, and I am pleased to confirm that I shall be supporting the Government amendments and withdrawing mine. I regard the government amendments as a more than satisfactory replacement. I merely remark in passing that it is curious that whenever a meritorious amendment is proposed by the Opposition, Parliamentary Counsel must always at least double it with a version of his own.

I also welcome the fact that the Government have dealt with Clauses 18 and 52, which I invited them to do when we debated the matter in Grand Committee. I have just one question for the Minister. When I was preparing for Report stage, I realised that Clause 18 was not on all fours with Section 6 of the Audit Commission Act. After other government amendments, it is made even more different.

The Government have made much during our discussion of the Bill of their desire to keep the English and Welsh audit regimes in step. Now we have an instance where the Government are making the Welsh local authority audit arrangements different from those in England—and sensibly so; we fully support that. But that leaves England and the Audit Commission trailing behind. My main concern in the Bill is obviously the Auditor General's powers. I shall weep no tears for the Audit Commission, but I hope that the Minister can explain what is the Government's approach to the corresponding powers for the Audit Commission in England and Wales and whether they have any plans to change them to bring them up to date with the new, modern formulation, which we would all agree is much better.

Lord Elis-Thomas

My Lords, I declare an interest as the Presiding Officer of the National Assembly for Wales. I welcome the amendments and assure the noble Baroness that my colleague, Janet Davies AM, the chair of the Audit Committee, is certainly reading our proceedings; she may be listening to them as we debate.

This set of amendments is a fine example of the effectiveness of pre-legislative scrutiny—and, indeed, of legislative scrutiny in this House. There is a series of stages. The Assembly's own ad hoc committee, which has been referred to in previous debates on the Bill, recommended in its report the extension of the provisions of Clause 11, to enable the Auditor General to track public money passing from local government to end users, such as contractors and grant recipients, to ensure that it has been properly and appropriately spent". That was the subject of a full debate in the Assembly. which I shall not quote at length, on 24 September 2003, when several colleagues—I cite Ann Jones AM in particular—emphasised the importance of strengthening Clause 11. The Welsh Affairs Select Committee in another place, in a particularly fine turn of phrase, referred in one of its recommendations which the Government subsequently accepted to making Welsh audit a beacon of good audit practice. I suppose that that is the style of the other place.

The point of the amendments, and the reason I welcome them, is that they will ensure a proper public sector trail to follow public money to end recipients and that the basic principles of propriety, regularity and value for money can be effectively pursued. I know that I speak on behalf of the Audit Committee of the Assembly and the potential members of the new body in very much welcoming the strength to their arm that the amendments will provide. I am grateful to the Government.

Lord Thomas of Gresford

We on these Benches also welcome the amendments and are grateful to the Government for listening in Grand Committee and tabling the amendments accordingly.

Lord Evans of Temple Guiting

My Lords, I am delighted that our amendments have met such approval. I am especially grateful to the noble Lord, Lord Elis-Thomas, for his words. I have received advice on the question asked by the noble Baroness, Lady Noakes. The feeling is that the question is not really within the purview of the Bill. and the suggestion, which is made with great sincerity, is that she may want to table a parliamentary Question, so that we can discuss it in that context rather than this one.

On Question, amendment agreed to.

[Amendments Nos. 11 and 12 not moved.]

Clause 14 [Appointment of auditors]:

Baroness Noakes moved Amendment No. 13:

Page 12, line 32, leave out subsection (3).

The noble Baroness said

My Lords, I start by saying that I hope that the Minister will not respond to all my questions in future by inviting me to table parliamentary Questions, because he may not get such a calm response next time.

In moving the amendment, I shall speak also to Amendments Nos. 16 and 17, all of which amend Clause 14, which deals with the appointment of auditors to local authorities. Amendment No. 13 is important because it would remove subsection (3) and, with it. the prohibition on appointing the Auditor General for Wales as the auditor to a Welsh local authority. That prohibition is a curious one because on the one hand the Government are setting up a new public audit regime for bodies in Wales. including transferring the audits of NHS bodies from the Audit Commission to the Auditor General, but on the other hand they have drawn back from the logic of the new audit regime to make the Auditor General only the appointer for auditors to local authorities.

The Auditor General will be able to appoint his own staff to the auditors to local authorities—I believe that is implicit in the transfer of significant numbers of Audit Commission staff to the new office in Wales—but he cannot appoint himself. The logic of that defeats me. I am sure that local authorities will see there is no difference of substance between having a member of the Auditor General's staff as the auditor rather than the Auditor General himself because the Auditor General will be able to direct his staff and it would be a fiction to think otherwise. It is also rather insulting to the Auditor General to say that he is not up to being a local authority auditor.

In Committee the Minister put forward an argument about conflict of interest. However, I do not believe that argument stands up to close examination. If the Auditor General is conflicted in the case of a local authority audit, he is also potentially conflicted in any other non-Assembly audit he carries out, including the NHS in Wales and other bodies that receive significant amounts of Assembly funding. I do not think that it has ever been suggested that the Auditor General is conflicted in any of his work at present. Indeed, as I have argued separately, "conflict of interest" is an odd term to use for a public auditor. The real issue is whether his independence would be impaired. I cannot believe that anyone would suggest that.

The Minister also put up a practical argument about how the Auditor General could not issue codes of practice he would then have to comply with. However, there is little of substance in those points that a little drafting would not sort out. I argued in Grand Committee that some of these convoluted issues of codes and so forth arise in the local authority sector only because the Auditor General is not the appointed auditor. I do not think that we should be hidebound by the English Audit Commission model because we have an opportunity to break away and create a new model for Wales.

I turn to the other two amendments in this group, Amendments Nos. 16 and 17. I had rather hoped that they would attract the Minister's name as he wrote to me on 23 March saying that the paragraphs that it was proposed would be deleted were not needed. Both the noble Lord, Lord Thomas of Gresford, and I challenged the Minister in Grand Committee to say what practical effect the paragraphs had. In light of the Minister's letter, I hope that when we reach those amendments, the Government will not oppose them as that would be perverse. I beg to move.

Lord Evans of Temple Guiting

My Lords, I have made a note never to invite the noble Baroness, Lady Noakes, to table a Parliamentary Question.

Amendment No. 13 tabled by the noble Baroness, Lady Noakes, and debated previously in Grand Committee would, if agreed, enable the Auditor General to appoint himself in a personal capacity as the auditor of a local government body. I am very sorry that the noble Baroness was not persuaded by the Government's view on this. That view is that, given the Auditor General is already the statutory external auditor of the National Assembly. there would be the potential for a very real or perceived conflict of interest if the Auditor General could appoint himself.

For example, suppose an issue arose concerning financial management where the Assembly government and a local authority took opposing views. Would it be fair to put the Auditor General into a position where he could arguably be pulled in two directions? In such circumstances, local government could take the view that the Auditor General was an instrument of the Assembly. Such a perception would damage the Auditor General's reputation for impartiality. Also, a key role of the Auditor General would be to monitor the performance of the auditors he appoints. Who would monitor his performance as an auditor?

Local government is constitutionally independent of the National Assembly. Although it receives very considerable funding from the National Assembly, it also raises a significant proportion of its revenue from local electorates to which it is responsible. The Bill sets out to safeguard the constitutional independence and democratic accountability of local government. That was made clear when the Bill was published for pre-legislative scrutiny last April. The Government's intention that the Auditor General would not be able to appoint himself as the auditor was given as one important means of demonstrating that. The principle was not questioned during the extensive pre-legislative scrutiny that the Bill enjoyed.

The Government, therefore, remain firmly of the view that there is a compelling argument for ensuring that the Auditor General cannot fulfil the dual role that this amendment would permit. I therefore invite the noble Baroness, Lady Noakes, to withdraw the amendment.

Amendments Nos. 16 and 17 would delete two of the criteria listed for being eligible to be appointed as a local government auditor. Both relate to approvals given by the Secretary of State under the Audit Commission Act 1998 and the Local Government Finance Act 1982 respectively. The criteria were included in the Bill as a failsafe to ensure that no person was inadvertently debarred from continuing as an appointed auditor.

During the debate in Grand Committee the noble Baroness, Lady Noakes, questioned whether any appointed auditors were still practising solely by virtue of the "approval" criteria.

Since Grand Committee the position has been considered further and the Audit Commission has been able to confirm that no appointed auditor is now operating under these approvals and that no auditor would be appointed for the future if they did not have an appropriate professional qualification. On this basis, and having reflected on the views of the noble Baroness, the Government have concluded that paragraphs (c) and (d) of Clause 14(4) could be safely deleted from the Bill. We thank noble Lords opposite for their very helpful amendments that the Government have great pleasure in accepting.

Lord Elis-Thomas

My Lords, I support the Government, not that they need any support, in opposing the amendment which would delete Clause 14(3).

I emphasise something that I mentioned in Grand Committee; that is, the special relationship which has developed—it is a statutory one—in terms of the Government of Wales Act, our constitution and the standing orders of the Assembly, between the Auditor General, his staff and the Audit Committee. Linked to that is the whole issue of the scrutiny of local government spend and local government activity on the part of the Assembly. These are very sensitive areas. One of the matters that we continually try to protect in our proceedings is the recognition that local authorities are independent elected democratic representations in their own right in the same way as the Assembly is. We have arrived, as it were, as a "new kid on the block" at the intervening level of intermediate government. This is an issue that could apply in the regions of England but I shall not go down that line today. However, if there were assemblies in England, the same issue would arise. How does an intervening level of government—in this case a national Assembly—relate to other existing levels of democratic governance, especially when funding issues are involved? The independence of local authority operation is clearly an important principle here. Related to that is the independence of the Auditor General both as regards local government and as regards his position as a statutory authority alongside the Assembly's Audit Committee. Anything that would upset those delicate balances would not be helpful when the new public audit structure for Wales is established. I oppose the amendment.

Baroness Noakes

My Lords, I thank the noble Lord, Lord Elis-Thomas, for that contribution. I wish to ask the Minister one question before I decide what to do with the amendments. Why is it not right, or constitutes a conflict of interest, or the upsetting of a special delicate relationship, if the Auditor General audits a conventional financial audit when he is the named person who carries out value for money studies under Clauses 41 and 42 and best value studies under Chapter 3? I am struggling with the logic of how the Auditor General can be the named person who carries out all of that work in relation to local government but is not able to carry out financial audits. Can the Minister explain?

1.30 p.m.

Lord Evans of Temple Guiting

My Lords, at the moment. I cannot explain that inconsistency. If I do not obtain an answer within five or 10 seconds, I shall write to the noble Baroness within the next two or three days—well before Third Reading.

Baroness Noakes

My Lords, I shall have to accept that. The Minister will therefore see that I am still a trifle concerned about the Government's response to my Amendment No. 13. For today, I beg leave to withdraw the amendment.

Amendment. by leave, withdrawn.

Lord Evans of Temple Guiting moved Amendment No. 14:

Page 12. line 33, leave out "An individual" and insert "A person"

The noble Lord said: My Lords, in moving Amendment No. 14, I shall speak also to Amendments Nos. 15, 18 and 19, which are a direct consequence of the Government's acceptance of Amendments Nos. 16 and 17, which were tabled by the noble Lord, Lord Roberts, and the noble Baroness, Lady Noakes, after Grand Committee. The deletion of paragraphs (c) and (d) of Clause 14(4) has the practical effect of making the eligibility requirements for individuals to be appointed as auditors the same as those for a firm. Government Amendments Nos. 14 and 15 replace the reference to "individual" in subsection (4) with a reference to "person"; a word that covers both individuals and firms. As a result the separate definition of eligibility for the appointment of firms in subsection (5) is not required, nor is the definition of "firm" in subsection (10). Government Amendments Nos. 18 and 19 seek to address that. The amendments simplify further Clause 14.

On Question, amendment agreed to.

Lord Evans of Temple Guiting moved Amendment No. 15:

Page 12, line 34, leave out "individual" and insert "person"

On Question, amendment agreed to.

Baroness Noakes moved Amendments Nos. 16 and 17:

Page 12. line 40, leave out paragraph (c).

Page 13, line 1, leave out paragraph (d).

On Question, amendments agreed to.

Lord Evans of Temple Guiting moved Amendments Nos. 18 and 19:

Page 13 line 4, leave out subsection (5).

Page 13, leave out line 29.

On Question, amendments agreed to.

Clause 17 [General duties of auditors]:

The Deputy Speaker (Viscount Allenby of Megiddo)

My Lords, I have to advise the House that if Amendment No. 20 is agreed to, under the pre-emption rules, I shall not be able to call Amendment No. 21.

Lord Evans of Temple Guiting moved Amendment No. 20:

Page 14, line 41, leave out subsections (3) and (4) and insert— (3) An auditor must comply with any provisions of a code of audit practice issued under section 16 which—

1. (a) are applicable to the audit of the accounts being audited. and
2. (b) are in force.

(4) At any time before there arc provisions of a code of audit practice with which an auditor is required to comply under subsection (3), the auditor must comply with any provisions of a code of audit practice issued under section 4 of the Audit Commission Act 1998 (c. 18) which—

1. (a) are applicable to the audit under that Act of the accounts of bodies of a corresponding description to the body, and
2. (b) are in force."

The noble Lord said: My Lords, in moving Amendment No. 20, I shall speak also to Amendment No. 32. In response to the helpful comments made by the noble Baroness, Lady Noakes, in Grand Committee, the Government have given further consideration to Clause 17. We have identified the need for an amendment to clarify that the Audit Commission's code of practice, issued under Section 4 of the Audit Commission Act 1998, will continue to apply to Wales in the transitional period until the Auditor General for Wales issues his own code under Clause 16. That was the intention of the clause, but parliamentary counsel has confirmed that it would benefit from greater clarity on that point. Amendment No. 20 achieves that.

Amendment No. 32 in respect of Schedule 1 provides a comparable clarification in relation to the code of practice for the audit of best value performance plans under the Local Government Act 1999. Section 8 of the Local Government Act 1999 requires the Audit Commission to prepare such a code. Section 8A, to be inserted under Schedule 1 of the Bill, enables the Auditor General to prepare a code of practice for Wales. Amendment No. 32 provides that, until the Auditor General does so, auditors of best value authorities in Wales must still have regard to the Audit Commission code. I beg to move.

Baroness Noakes

My Lords, I am grateful to the Minister and his officials for considering this matter. When I tabled my modest probing amendments in Grand Committee, little did I know that the issue eventually would be dealt with by six new subsections and 34 lines of amendment. But I am glad, and I am sure that the Bill is much improved.

On Question, amendment agreed to.

[Amendment No. 21 not moved.]

Clause 18 [Auditors' rights to documents and information]:

Lord Evans of Temple Guiting moved Amendment No. 22:

Page 15, line 22, leave out subsections (4) and (5) and insert— (4) An auditor may require a person whom he thinks has information of the kind mentioned in subsection (4A)—

1. (a) to give him any assistance, information and explanation which the auditor thinks necessary for the purposes of his functions under this Chapter;
2. (b) to attend before him in person to—
1. (i) give the assistance, information or explanation, or
2. (ii) produce any document which is held or controlled by the person and to which the right conferred by subsection (1) applies.

(4A) The information is information which relates to—

1. (a) a local government body in Wales in relation to which the auditor has functions under this Chapter;
2. (b) a document to which the right conferred by subsection (1) applies;
3. (c) a person who holds or controls such a document.".

On Question, amendment agreed to.

Clause 19 [Auditors' rights to documents and information: offences]:

Lord Evans of Temple Guiting moved Amendments Nos. 23 and 24:

Page 15, line 45, leave out "or (5)"

Page 16, line 12, leave out subsection (5) and insert— (5) An appropriate person is a person who controlled the document referred to in section 18(4A) at the time the requirement was imposed.

On Question, amendments agreed to.

Clause 52 [Rights of the Auditor General for Wales to documents and information]:

Lord Evans of Temple Guiting moved Amendment No. 25:

Page 34, line 41, leave out subsections (4) and (5) and insert— (4) The Auditor General for Wales may require a person whom he thinks has information of the kind mentioned in subsection (4A)—

1. (a) to give him any assistance, information and explanation which the Auditor General for Wales thinks necessary for the purposes of his functions under this Part;
2. (b) to attend before him in person to—
1. (i) give the assistance, information or explanation, or
2. (ii) produce any document which is held or controlled by the person and to which the right conferred by subsection (1) applies.

(4A) The information is information which relates to—

1. (a) a local government body in Wales;
2. (b) a document to which the right conferred by subsection (1) applies;
3. (c) a person who holds or controls such a document."

On Question, amendment agreed to.

Clause 53 [Rights of Auditor General for Wales to documents and information: offences]:

Lord Evans of Temple Guiting moved Amendments Nos. 26 and 27:

Page 35, line 32, leave out "or (5)"

Page 35, line 44, leave out subsection (5) and insert— (5) An appropriate person is a person who controlled the document referred to in section 52(4A) at the time the requirement was imposed.

On Question, amendments agreed to.

Clause 54 [Restriction on disclosure of information]:

Lord Evans of Temple Guiting moved Amendment No. 28:

Page 36, line 47, at end insert— (6) The Secretary of State may by order made by statutory instrument amend or repeal the preceding provisions of this section. (7) An order under subsection (6) may be made only if—

1. (a) section 49 of the Audit Commission Act 1998 (c. 18) (restriction on disclosure of information) has been amended or repealed in the same Session as that in which this Act is passed or in any later Session;
2. (b) the Secretary of State thinks that the amendments or repeals to be made by the order under subsection (6) will (subject to paragraph (c)) have the same effect as the amendments to or repeal of section 49 of that Act;
3. (c) the order would not have the effect of imposing any further restriction on the disclosure of information under this section.

(8) An order under subsection (6) may not be made unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.

The noble Lord said: My Lords, government Amendment No. 28 has been tabled in fulfilment of the commitment given by my noble friend Lord Davies of Oldham in Grand Committee. Noble Lords will also know that the Government laid a ministerial Written Statement in the Libraries of this House and another place on 24 March setting out their intentions with regard to Section 49 of the Audit Commission Act—the current disclosure provision that applies to England and Wales—and Clause 54.

Government Amendment No. 28 incorporates an order-making power in the clause which enables the Government to repeal or relax the restriction on the disclosure of information in Clause 54 in the light of the outcome of the DCA review. The amendment makes clear that the order-making power can be used only for the purpose of repeal or relaxation: it cannot be used to impose any further restriction. An order could not be made unless a draft has been laid before and approved by a resolution of each House of Parliament.

The Statement tabled on 24 March explains that Section 49 is already within the remit of the DCA Review. The DCA currently plans to publish a final report on its review in the autumn. It also intends to bring forward the first order to be made under Section 75 of the Freedom of Information Act implementing its findings before the end of December this year. Following preliminary consideration and consultation, the Government's preferred treatment for Section 49 is to amend it so that it is consistent with the freedom of information legislation, which has an overall presumption in favour of disclosure. The Government will include the proposed amendment to Section 49 in the first order.

When Section 49 is amended, the Government amendment to Clause 54 will allow the relaxation of the restriction on disclosure to apply to Wales as well as to England. When this Bill is enacted, the Auditor General for Wales's action will be governed by Clause 54 as amended. The noble Baroness, Lady Noakes, and the noble Lord, Lord Thomas of Gresford, were concerned to know what exceptions to disclosure will be included in the amended Section 49 of the Audit Commission Act. The detailed work on amending Section 49 has not started yet. However, the Auditor General for Wales's office has indicated that he may envisage exceptions to the presumption of disclosure in two areas first, the ad hoc leaking of personal information about individuals by auditors, where it is only right and proper that such delicate information is treated with respect; and, secondly, the premature leaking of information contained in reports that are intended for publication but being circulated in draft for the agreement of factual information.

Section 49 has been used very rarely in the past and the Auditor General for Wales has no expectation that he would increase the frequency of its usage. Nor can he, at the moment, envisage needing to apply it in any situations other than the two I have explained.

Of course the Government cannot, and would not wish to, fetter the discretion of the Auditor General for Wales to act as he might consider appropriate and necessary, but we understand that he would take account of the changes being proposed to Section 49 of the Audit Commission Act and the consequent changes intended for Clause 54 of the Bill, as amended by government Amendment No. 28, in the extremely unlikely event that a situation arose in which he might have to consider prosecuting under the powers granted by the clause.

If the Auditor General for Wales or an appointed auditor considers that it is necessary to his or her functions for him or her to publish an audit report. they should have an unfettered ability to do so. It is not the intent, nor could it be the effect, that Clause 54, as amended, could be used in any way to prevent this from occurring. This is fully in line with the principles of public audit which the new Wales Audit Office being created by the Bill will seek to uphold. I should like to affirm that an auditor of a local government body will have the power to issue a public interest report under the Bill, and Clause 54 does not make the issue of such a report conditional on the consent of the local government body concerned.

The Government have listened very carefully to the many concerns expressed with regard to Clause 54. They have done, and will do, their utmost to address and to take account of those concerns properly, in a consistent and responsible way, and in the light of the wider work that they are currently undertaking to introduce the freedom of information legislation.

Government Amendments Nos. 30 and 31 to Clause 57 are technical amendments and are consequential on the amendment to Clause 54. I beg to move.

1.45 p.m.

Baroness Noakes

My Lords, the Minister is aware, I know, that this is the most contentious area of the Bill. I thank him and his honourable friend in another place, Mr Don Touhig, for the efforts that they have made to move the issue forward since Grand Committee.

The Minister has proposed an amendment to Clause 54 which would allow, but not require, the Secretary of State to amend Clause 54, but only if Section 49 of the Audit Commission Act is amended, and then only in the same way. The question that we on these Benches have to ask ourselves is whether that is sufficient to allay the widespread concerns about Clause 54 and its potential use against whistle-blowers.

The Minister will be aware that the deletion of Clause 54 is the aim of Amendment No. 29, which is to be considered after this group of amendments. It would be helpful if the Minister would regard this debate as covering both groups of amendments.

Let me restate our position, which is line with all who have looked at the Bill, other than the Government. We believe that applying criminal sanctions in the wide-ranging prohibitions on the disclosure of information in Clause 54 is wrong in principle. The Assembly committee which considered the draft Bill came to that conclusion, as did the Welsh Affairs Committee of another place, and the Auditor General has not requested these provisions.

We were pleased to see the Minister's written statement on 24 March to the effect that the Government recognised the concerns about Clause 54. That was a significant improvement on their position of denial when they responded in December of last year to the report of the Welsh Affairs Committee of another place. The solution proposed is to amend Section 49 of the Audit Commission Act in the first of the Freedom of Information Act orders—which is a helpful indication of timing—and then to proceed to amend the Act which will result from the Bill.

We are still being invited to take a great deal on trust. I accept that the Government intend to amend the Audit Commission Act and then what will become the Welsh audit Act, but we do not know in what ways these Acts will be amended. We are in the unfortunate position in relation to the Bill of being apparently dependent on the decisions of those who guard the interests of the Audit Commission. I believe that the Audit Commission has in the past expressed a wish to keep Section 49, or at least as much of it as possible.

The Minister outlined what the Auditor General for Wales would expect to see in an amended Clause 54 but, as I have just analysed, it is not the Auditor General for Wales who will be in the driving seat on this; as I understand it, the Office of the Deputy Prime Minister will consider what amendments should be brought forward in respect of Clause 49. I understood the Minister to say that it has not started on that process.

So it is one thing to say that the sections will be amended, but the nature of the amendments is crucial. We have a real concern that we are being invited to leave an unacceptable clause in the Bill against a promise of unspecified amendments in the future. It will be left on the statute book against a promise that the Auditor General will take account of potential changes—none of which we know—in deciding whether or not to use that power until such time as an amendment is brought forward by order under the Freedom of Information Act.

I hope the Minister understands that we are still struggling with whether or not the substance of what the Government are putting forward will turn out to be adequate to meet the real concerns that exist among a number of sources in respect of Clause 54. Can the Minister say any more about how these concerns might be resolved?

Lord Elis-Thomas

My Lords, to be even handed, as I supported the Government previously, I now take the opportunity to support the noble Baroness who leads for the Opposition on this matter. As she has emphasised, all who have been involved in the scrutiny of the Bill have expressed concern about this clause, its impact and the powers within it. I should like to add one other comment on the government amendments. This seems to me a very strange way to proceed in the making of primary legislation in relation to Wales.

I obviously accept that there has to be consistency in freedom of information legislation—I am not arguing on that issue—but it is not a satisfactory way to proceed where, on the one hand, we are creating a new public audit regime for Wales but, on the other hand, we are not able to establish a coherent primary legislative base on which to do so. Of course. I would say this, would I not, after the publication of the report of the Richard Commission yesterday?

Lord Thomas of Gresford

My Lords, the Government are still following English precedent whereas we were hoping that they would create something new in the Bill. I pay tribute to the Minister and to his colleague, Mr Don Touhig, for seeing us and for discussing our concerns. I hope that the noble Baroness, Lady Noakes, and myself have been able to emphasise that the concerns go much wider than ourselves and include the National Assembly and all those who have scrutinised the Bill.

At the moment, fitting for the season, I see some flowering, some blossoming, but I do not see the fruit. Before we leave this topic we ought to have a little more of the fruit in view before we decide what we should do.

Lord Evans of Temple Caking

My Lords, I thank the House for that short, interesting debate. In an otherwise good-natured discussion, and for the first time, the noble Baroness, Lady Noakes, made a point that was unfair. She said that everyone dislikes the clause with the exception of the Government. I had hoped that, following her meetings with Don Touhig and myself, as well as with others, she would know that the Government are worried about the clause and wish to solve the problem. As I described, the only way to solve it is to place before both Houses towards the end of the year an order that gives us, we hope, the result that I suspect that we all want. However, it is perfectly fair for the noble Baroness, Lady Noakes, to say, "You can't give me an absolute guarantee that what will be in the order will be what we want". As we are all heading in the same direction and all trying to find the "fruit" that the noble Lord, Lord Thomas of Gresford, mentioned, it is perhaps best for us to continue to think about the problem and come back to it at Third Reading. I cannot guarantee that we will be able to give a different response, because we are talking about the drafting of all order. It is not surprising that, on the first day of April, work has not started on an order that is due to be tabled at the latest by the end of December. However, we understand the problem and we will return to it at a later stage, but, as I said, I cannot give any guarantees that we will be able to go any further than I have today.

On Question, amendment agreed to.

Baroness Noakes had given notice of her intention to move Amendment No. 29:

Leave out Clause 54.

The noble Baroness said

My Lords, I shall speak briefly to Amendment No. 29, which would delete Clause 54, in light of the generous remarks of the Minister. He said that he would continue dialogue with the noble Lord, Lord Thomas of Gresford, and me between now and Third Reading. I hope that he is in no doubt that we are very concerned about the clause. We are concerned that we will be left with an English model that we do not like. We are trying to create a model for Wales. That is why we shall try hard to make some progress in finding out what the Government's intentions really are for Clause 54. That is also true for Section 49 if the Government wish to proceed with it, but our concern is Clause 54. I intended no disrespect to the Minister and to Mr Touhig, but it is true that the Government as a whole are clinging on to Clause 54. However, I recognise the considerable effort that the Minister and his colleagues have made.

[Amendment No. 29 not moved.]

Clause 57 [Orders and regulations]:

Lord Evans of Temple Guiting moved Amendments Nos. 30 and 31:

Page 37, line 30, leave out "The power" and insert "Any power conferred on the Assembly or the Secretary of State"

Page 37, line 32, after "Assembly" insert "or the Secretary of State"

On Question, amendments agreed to.

Schedule 1 [Best value audit and inspections]:

Lord Evans of Temple Guiting moved Amendment No. 32:

Page 45, leave out lines 30 to 32 and insert— (1) An auditor appointed by the Audit Commission who is carrying out an audit of an authority's performance plan under section 7 shall have regard to any provisions of a code of practice under section 8 which—

1. (a) are applicable to the audit, and
2. (b) are in force.

(2) An auditor appointed by the Auditor General for Wales who is carrying out an audit of an authority's performance plan under section 7 shall have regard to any provisions of a code of practice under section 8A which—

1. (a) are applicable to the audit, and
2. (b) are in force.

(3) Subsection (4) applies at any time before there are provisions of a code of practice under section 8A to which an auditor appointed by the Auditor General for Wales is required under subsection (2) to have regard in carrying out an audit of an authority's performance plan under section 7. (4) The auditor shall have regard to any provisions of a code of practice under section 8 which—

1. (a) are applicable to an audit of a performance plan published by an authority of a corresponding description to the authority, and
2. (b) are in force."

On Question, amendment agreed to.

Schedule 2 [Minor and consequential amendments]:

Baroness Noakes moved Amendment No. 33:

Page 55, line 32, at end insert ", or ( ) the functions of the Auditor General for Wales under sections 41 and 42 of the Public Audit (Wales) Act 2004

The noble Baroness said

My Lords, I have the privilege of moving the final amendment on Report. In Grand Committee, I tabled both the equivalent of this amendment and one that would have given the Auditor General much wider powers to extend his examinations into England. I hope that the Minister will be pleased that I have chosen to take forward only the more modest of the two amendments on Report.

Amendment No. 33 would amend paragraph 34 of Schedule 2, which, in turn, amends the Audit Commission Act 1998. Specifically, it would confer an extra duty of co-operation on the Audit Commission. It would have to co-operate with the Auditor General in his value-for-money studies of Welsh local authorities under Clauses 41 and 42.

I explained in Grand Committee that the Auditor General will be the poor relation when it comes to local authority value-for-money audits. He has no right to examine English authorities, in contrast to the Audit Commission's right to examine Welsh authorities. Nor has the Audit Commission any duty to co-operate with him in respect of his functions in Wales. He can of course have access to data that the Audit Commission has published, but he has no right to unpublished data and the Audit Commission needs to make no effort to assist the Auditor General in his Welsh value-for-money studies.

I am concerned that that will weaken value-for-money studies in Wales. There may well be many issues that are important in Wales, but that are low on the priority list in England. If the Government will not give the Auditor General powers to investigate matters that go wider than Wales, they must surely ensure that he has sufficient access to data and other forms of co-operation that are relevant to his Welsh studies. The most natural source of that co-operation is of course the Audit Commission. I hope that the Government will be prepared to strengthen the regime for the Auditor General for Wales. I beg to move.

Lord Evans of Temple Gaffing

My Lords, Amendment No. 33, which affects the Audit Commission Act 1998, would require the Audit Commission to co-operate with the Auditor General, where appropriate, for the efficient and effective discharge of the latter's functions in undertaking studies under Clauses 41 and 42 of the Bill.

As drafted, the Bill places a reciprocal duty to co-operate on both the Auditor General and the commission for the efficient and effective discharge of their own—I emphasise that it will be their own—functions in respect of those kinds of studies. The requirement to co-operate is placed on the initiator of the study. Our intention is to minimise the burden on the bodies subject to the study and to rationalise the efforts of the commission and the Auditor General. The duties are intended to ensure that, in proposing a study, each would consult and co-operate with the other on timing and exchange of relevant information, as well as explore the potential for joint working. That seems to be common sense.

The amendment would extend the duty placed on the Audit Commission. It would be obliged to co-operate with the Auditor General in studies initiated by him. It would not, however, extend a reciprocal duty to the Auditor General in respect of the commission's cross-border studies.

The Government have not sought to impose a duty on the Audit Commission or the Auditor General to co-operate with each other's studies. The firm expectation of the Government is that regulatory and audit bodies such as the commission and the Auditor General will collaborate closely on work of cross-border interest. The Bill encourages them to do so and pre-legislative scrutiny of the draft Bill demonstrated a clear willingness of both parties to do so. A duty could create operational difficulties in areas such as forward work planning. Ultimately, it may have a restrictive effect.

The Government agree, however, that there could be a benefit in a mutual duty, but it would need to be drawn more tightly than that proposed by the noble Baroness, Lady Noakes. For instance, a duty to provide relevant information to the other body for comparative use could be beneficial. The Government will give further consideration to that in discussion with the Auditor General and the Audit Commission. It will also look again at other co-operation duties in the Bill in the same light, such as those linking the Auditor General and the Commission for Healthcare Audit and Inspection. After that explanation, I hope that the noble Baroness will withdraw her amendment.

Baroness Noakes

My Lords, I am extremely grateful to the Minister for that very constructive response. I look forward to debating the issue again at Third Reading. I might perhaps point the Minister to the Health and Social Care (Community Health and Standards) Act 2003, which deals with mutual duties of co-operation between CHAI—the Commission for Healthcare Audit and Inspection—and the equivalent in Wales, which is the Health Inspection Unit for Wales, which is part of the Assembly. That may well provide a model for what we are seeking to achieve here. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.