HL Deb 30 June 2004 vol 663 cc351-6

8.50 p.m.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

rose to move, That the draft order laid before the House on 7 June be approved [21st Report from the Joint Committee].

The noble Lord said

My Lords, with the leave of the House, I should like to speak to the second order as well, also laid on 7 June. Both orders are being made under the Government Resources and Accounts Act 2000.

It may be helpful if I put the orders in context. Last year, the Government made orders in support of their response to the report of the noble Lord, Lord Sharman, Holding to Account. One of those orders provided that the Comptroller and Auditor-General would be the auditor of all NDPBs other than those incorporated under the Companies Acts. Another order granted the Comptroller and Auditor-General access rights to certain documents for the purpose of carrying out those audits.

The Government welcomed the commitments that the Comptroller and Auditor-General made at the time. He provided assurances that his new powers would not be used in a way that would increase burdens and that the National Audit Office would put in place new arrangements to ensure a high quality of service in the absence of any competitive tendering arrangements.

The Government also made an order to rationalise the statutory responsibilities for auditing special health authorities which were previously subject to audit by both the Audit Commission and the Comptroller and Auditor-General. That order, together with a separate order discontinuing the requirement to produce summarised accounts, reduced the dual audit burden on the special health authorities and reduced Department of Health costs.

The orders being debated today are intended to continue the process that Parliament approved last year. I am grateful for the assistance we have received from the National Audit Office throughout the process of preparing these orders. I now turn to the orders themselves.

The Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2004 provides for the Comptroller and Auditor-General to be made the statutory auditor for the Hearing Aid Council. The Hearing Aid Council currently appoints its own auditors. The order also takes account of developments in respect of the Seafish Industry Authority.

The Hearing Aid Council is a statutory body established under the Hearing Aid Council Act 1968. It regulates anyone who sells hearing aids, whether in the high street, the purchaser's home or a hospital. However, it does not regulate hearing aids that are supplied free of charge by the National Health Service, through mail order nor e-commerce sales. The Hearing Aid Council sets the standards of competence and conduct towards which all hearing aid dispensers are expected to work. It was reclassified as a non-departmental public body, with effect from 1 April 2003. It is intended that in due course the Hearing Aid Council will transfer from the Department of Trade and Industry to the Department of Health.

Last year's order, the Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2003, made the Comptroller and Auditor-General responsible for auditing the Seafish Industry Authority as from the financial year 2005–06. The date was chosen to enable the contract with their auditors to run its course. Since then, the auditors have resigned, to become the Seafish Industry Authority's internal auditors. There would be a clear conflict of interest if they retained the position of external auditors. There is now no body with legal responsibility to carry out the external audit. The Government are taking the opportunity, with this new order, to bring forward the date when the Comptroller and Auditor-General becomes responsible for auditing the Seafish Industry Authority to the financial year 2003–04.

The second order, the Government Resources and Accounts Act 2000 (Audit of Health Service Bodies) Order 2004, deals with the audit of four new special health authorities, and has been prepared in consultation with the Department of Health. The special health authorities are: NHSU, known as the NHS University; NHS Direct; NHS Professionals; and the NHS Pensions Agency.

The previous arrangements required two sets of accounts to be prepared for each special health authority—one set by the special health authority and the other set by the Department of Health—and for each special health authority to be, in effect, audited twice—once by auditors appointed by the Audit Commission and secondly by the Comptroller and Auditor-General. The intention of the second order is therefore to put the new special health authorities on a par with all the others; that is, to make the Comptroller and Auditor General the statutory auditor of special health authorities in place of the Audit Commission, thus avoiding the dual-audit burden. The proposals continue the Government's commitments to improve parliamentary accountability and I commend the orders to the House. I beg to move.

Moved, That the draft order laid before the House on 7 June be approved [21st Report from the Joint Committee].—(Lord McIntosh of Haringey.)

Baroness Noakes

My Lords, I thank the Minister for introducing the orders. I shall say at the outset that we support them. They rationalise the way in which certain parts of the public sector are audited. The first audit is in line with the report of the noble Lord, Lord Sharman, which we have always supported. The second order is a logical measure to remove double audit arrangements. We find nothing to object to in the orders. The Minister may be hoping that I shall now sit down. But I have to disappoint him, because an old audit hand never misses an opportunity to talk about her specialist subject. I shall therefore crave the indulgence of the House for just a few minutes on that subject.

I would like the Minister to address the simple issue of the Government's overall policy towards public sector audit. We have adopted a patchwork approach across the country. The longest-standing element comprises the Comptroller and Auditor General and National Audit Office. We have been well served by those arrangements and I am pleased to see that the effect of the orders before us this evening is to extend the scope of the C&AG's work.

However, in the early 1980s, the then government—a Conservative government—took a look at local authority audits. They decided that they should be brought under a common framework and the Audit Commission was invented. The Audit Commission then became flavour of the month and it acquired other audits, including those of NHS bodies, which were rather unsatisfactorily audited at the time by the Department of Health. Since then, the Audit Commission has been busy acquiring all kinds of other functions such as best-value inspections, which we could debate another day.

I concede that in creating the Audit Commission, the Conservative government set the ball rolling, but we now have duplication of public audit. Is it logical and/or cost-effective to have that? Earlier this year, I had the privilege to speak on the Public Audit (Wales) Bill for these Benches. I was pleased to note that the Government had taken a firm view that audit duplication must end in Wales. The Auditor General for Wales will be responsible for audits of the whole spectrum—central government, local authorities and health bodies—and the Audit Commission will disappear in Wales.

Why have the Government taken that bold approach to public sector audit in Wales, but left England to languish under these double arrangements, which owe more to historical accident than logic? The second order creeps us a little nearer to a logical end state, but a lot more is left unchanged by the orders.

That is the overall picture. If the Government do not want to address in England what they have correctly addressed in Wales, I shall turn to the second order. It deals with some parts of the NHS—namely, special health authorities—and builds on the orders that were made last year. Those orders were rightly justified as a means of preventing the special health authorities being audited twice. If that rationale is good enough for special health authorities, why is it not good enough for the other health bodies that have been created by NHS legislation; namely, strategic health authorities, primary care trusts and NHS trusts, which are audited by the Audit Commission and then audited again for the purposes of the summarised NHS accounts? I remind the Minister that the summarised NHS accounts are a large volume which I think I am the only person to collect from the Printed Paper Office each year. That brings together the accounts of all those things that have already been audited by the Audit Commission. There is a similar, although slightly more complicated issue, in relation to foundation trusts.

What is the logic for rationalising the audit arrangements for special health authorities but not all the other bodies in the NHS? I have struggled to find what substantive difference there is between them in terms of audit arrangements. I hope that the Minister can enlighten me.

Lord Shutt of Greetland

My Lords, I, too, rise to thank the Minister for his presentation of the two orders and to say that we on these Benches support them. They seem the right way in which to go forward. I listened with great care to the noble Baroness, as I am similarly an old audit hand and as I have an interest in what the word "audit" means.

One thing that occurs to me—although in one sense I say, "sufficient to the day"—is a reservation about absolute and utter uniformity. I understand that the Comptroller and Auditor-General being placed as auditor of all sorts of things in the public sector is one thing. However, in the private sector there is encouragement from time to time for the idea that auditors should be changed. It would not do if there were only certain people with experience of auditing in the public sector.

I am happy to support the orders in relation to the relevant bodies, and see that that is a way of straightening up those matters that seemed to have a jagged edge. However, I have some reservations about the total straightening of these matters, because it is important that there should be alternatives from time to time. Indeed, there is often a need for alternatives. Having said that, I support the orders.

Lord McIntosh of Haringey

My Lords, I am grateful to both noble Lords for their support for the order, and I am glad that there is unanimity within KPMG about the need for the orders.

Baroness Noakes

My Lords, for the record, I have not been within KPMG for four years.

Lord McIntosh of Haringey

My Lords, neither has the noble Lord, Lord Sharman, I should think. One might say that there is support from KPMG graduates.

Both the noble Baroness, Lady Noakes, and the noble Lord, Lord Shutt, joined this House in 2000. I am not sure whether they were present for debates on the Government Resource and Accounts Bill, which I had the pleasure of taking through the House. If they had been, they would be aware that during the passage of that Bill there was a very strongly-held view by the Public Accounts Committee in another place that the Comptroller and Auditor-General should be the auditor of a great many more public bodies than the Government had originally proposed. Seeking as always to listen to the views of Parliament, since those were the views not particularly of the Government but were held very strongly by the main opposition party and, I believe, by the Liberal Democrat Party, we took the view that we should consider the matter. We asked the noble Lord, Lord Sharman, to conduct an inquiry into the extent to which the remit of the Comptroller and Auditor-General should be extended. We accepted his recommendations and have been implementing them. These two orders are tidying up implementation orders. We call them "Sharman orders", in fact, in honour of the noble Lord, Lord Sharman.

Baroness Noakes

My Lords, would the Minister regard the second order as a "Sharman order"? The special health authorities are not NDPBs, as I understand it. That takes us into different territory from that on which I was trying to argue.

Lord McIntosh of Haringey

My Lords, no, they are not NDPBs, but they are covered by the recommendations that the noble Lord, Lord Sharman, made. They are the logical extension of the recommendations made by the noble Lord, Lord Sharman.

Having given that piece of history, I acknowledge the points made by the noble Baroness, Lady Noakes. It is certainly the case that Wales and, although she did not say so, Scotland have merged the two bodies. It is certainly a sustainable argument that the same should be done in England. In general, the distinction that has been made in England is that the Comptroller and Auditor General audits national bodies and the Audit Commission is responsible for the audits of local bodies. I am not saying that that has to be the case for ever. The best that I can say is that we should bear in mind the points made by the noble Baroness, Lady Noakes. I thought they were well made. We should consider the balance of advantage. The Audit Commission has the capacity to audit local National Health Service organisations, just as it has the responsibility of auditing local government. It has the ability to follow up audits with value for money studies, as does the National Audit Office. I believe that local authorities and National Health Service trusts find them valuable. It may be that the local structure of the Audit Commission is more appropriate for that purpose in a larger country such as England.

It should not be thought that I am setting my face against the suggestions of the noble Baroness, Lady Noakes, and I am certainly not a devotee of uniformity, of which the noble Lord, Lord Shutt, is rightly suspicious. Let me take on board the points that have been made. Of course, they are wide of the immediate subject matter of the orders before us but I undertake that we will consider them.

On Question, Motion agreed to.