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authority organisations were created and their accounts were gradually made subject to district audit as their functions increased. Some parts of the accounts of boroughs and county boroughs were subject to elective audit : in 1933 those authorities were given the right to appoint either the district auditor or other qualified auditors. It was not until the Local Government Act 1972 that a common system of audit was put in place across all local authorities.The 1972 Act introduced a right for each local authority to choose whether its accounts should be audited by a private firm of accountants--subject to ministerial approval--or by the district auditors.
In its first special report for 1980-81 the Public Accounts Committee recommended setting up a National Audit Office in which the district audit service and the Exchequer and Audit Department would be amalgamated under the control of the Comptroller and Auditor General. The Government rejected that recommendation as inconsistent with the constitutional position of local authorities, but accepted the need for improvement in the arrangements for local authority audit and for greater attention to value- for-money work. Value for money is important and often misunderstood. Value for money implies and means "value for people". The better the value for money that local authorities and central Government can achieve, the better the value for the people they are serving. As my hon. Friend the Member for Gedling said, the Audit Commission's statutory responsibility, including helping local authorities achieve better value for money, was an innovative measure which has been of great significance in improving the performance of local authorities for the benefit of their local public.
The most recent development in the role of the Audit Commission was the extension of its remit to cover health service organisations, brought about under the provisions of the National Health Service and Community Care Act 1990. I thank my hon. Friend for his remarks about the amendment to the National Health Service and Community Care Bill. Although the Government could not agree completely with the full force of the initial suggestions he supported, there was no doubt that the revision, which was fully included in the Act with his support, was most helpful. It allows the Audit Commission to set out clearly the national framework within which the NHS operates as it undertakes its value-for-money studies under section 26 of the Local Government Finance Act 1982.
My hon. Friend also mentioned the work undertaken by the commission on day surgery in the national health service. That was the first report that it published on NHS matters, although this week it has been joined by further work on pathology services. He is right to congratulate the commission on pursuing the prospect for further value-for-money opportunities in those areas and we look forward to the results of the local audits now being undertaken which will establish what can be done in each local area to contribute to cost-improvement programmes, and what the scope for development nationally is likely to be.
I agree with my hon. Friend's assessment of the importance of the Audit Commission report "Making A Reality of Community Care". Sir Roy Griffiths's report "Community Care : Agenda for Action" contained proposals largely accepted by this Government in formulating the community care policy outlined in the
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White Paper "Caring for People". Indeed, Sir Roy Griffiths acknowledged the Audit Commission report as containing"the essential facts on which this review is based".
My hon. Friend has rightly emphasised the value-for-money work undertaken by the Audit Commission, but that is only one part of its responsibilities. It is worth reminding ourselves also that much of the Audit Commission's work is performed or given effect by the auditor appointed to each body.
Mr. Andrew Mitchell : My hon. Friend has made an extremely important point which bears underlining. When the Audit Commission commissions a report it does not take on the staff itself. It employs third parties and other bodies to carry out that work. I believe that that is one of the most cost-effective ways of achieving the result that we all seek.
Mr. Key : My hon. Friend is right. The Audit Commission appoints auditors. It also prepares and keeps under review a code of audit practice and it prescribes the scale of audit fees. It can also direct an extraordinary audit in appropriate circumstances. The main statutory responsibilities and powers of the auditors are to check that the authority's accounts have been prepared in accordance with statutes and regulations in force, and that proper practices have been observed ; to satisfy themselves that the authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources ; and to comply with the code of audit practice.
I had the duty of moving the adoption of the code when it was considered by the Second Standing Committee on Statutory Instruments on 21 November last. That was the Audit Commission's code and it duly met with approval. It was noteworthy that the hon. Member for Sheffield, Brightside (Mr. Blunkett) supported the Audit Commission's role and the auditors whom it appoints. He said :
"There has been no conflict between the Government and the Opposition about the role of the audit service. There is no contention between us It has never been an issue between the Government and ourselves that the audit service is a vital part of the propriety that we expect from local government".
The hon. Member for Brightside went on to consider, as my hon. Friend the Member for Gedling did, one aspect of the future role of the Audit Commission. The hon. Member for Brightside said that he believed that
"quality, efficiency and effectiveness should replace economy, efficiency and effectiveness ; as quality rather than cheapness should be the benchmark by which we judge what we are getting for our money."--[ Official Report, Second Standing Committee on Statutory Instruments , 21 November 1990 ; c. 6-7.]
The same idea of seeking quality was made one of the themes of a lecture that the hon. Member for Copeland (Dr. Cunningham) gave on 2 July 1990 as the second in the series of lectures on management of public services. He said :
"Quality cannot be had on the cheap. That we need a sustained period of more effective financial investment in our public services and the people employed therein is self evident. Recognising that cash will always be limited we accept the essential drive for greater financial rigour and regard that rather than cheapness for its own sake as a far better approach. If quality is our goal then efficiency is essential."
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I do not disagree with the intention behind those remarks, but I believe that quality can be achieved and is being achieved within the present framework. The code of audit practice is perfectly clear about that. It states :"It is not the auditor's function to question policy. There is, however, a responsibility, particularly in the audit of local authorities, to consider the effects of policy and to examine the arrangements by which policy decisions are reached".
My interpretation of the guidelines, which I was pleased to bring before the Committee, is that a local authority may quite properly decide what levels or quality of service to provide, but it is up to the auditor to ensure that the decision was taken in full knowledge of the financial and other consequences. I do not see that the role of the Audit Commission and the auditors that it appoints needs to be widened by legislative means. The ideas of my hon. Friend and the two hon. Members whom I have quoted can be accommodated in the present framework and I think that such ideas on quality are already being accommodated. My hon. Friend referred to the report entitled "Managing Social Services for the Elderly More Effectively" as a report which shows how a chosen level of service can be targeted to deliver the right service to the right people.
I shall now say a word about evenness and quality across the country and the spread of best practice. The quality exchange is an Audit Commission initiative to establish voluntary "comparison levels" for local authorities. The commission's first reports, which covered the seven services of refuse collection, waste disposal, highway maintenance, street cleaning, verge cutting, street lighting and gully cleaning, showed that many councils were already doing a lot to monitor and promote service quality. Nearly 200 local authorities participated in the survey. The Audit Commission's report on it highlighted the importance of four factors-- management arrangements, specifications, quality control and customer satisfaction.
Some of the commission's findings may come as no surprise--many local authorities could do much more to keep their tenants' rent arrears under control, for example. Nevertheless, those points need to be made and I am sure that the objective and practical advice offered by the commission is of help to many authorities. The Audit Commission's recent report on managing sickness absence, to which my hon. Friend referred, revealed the alarming statistics of sickness absence in certain local authorities in London. The report stated that if the six authorities with the worst sickness record in London could reduce levels of such absence to the CBI average for industry, they could save as much as £26 million, or £27 per head on the community charge. The loss to other authorities through that source is not, thankfully, quite as great, but the problem is severe and cannot be measured in financial terms alone. High levels of sickness absence can also lead to poorer services and breakdowns in management systems.
On the police aspects of the commission's work, in which, of course, my right hon. Friend the Home Secretary has the major Government interest, the commission's responsibilities for appointing auditors for local authorities extend to provincial police authorities and the commission is as concerned with recommending ways of improving the economy, efficiency and effectiveness of police forces as any of the other organisations. The remit does not extend to the Metropolitan police, because they are subject to audit by the National Audit Office.
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In preparation for local audits of police forces, the commission has been conducting a special study based on fieldwork in several provincial forces. That study began three years ago and the commission has so far published eight papers, to some of which my hon. Friend has referred. I understand that the work continues and that a further two papers, one on management structure and resource allocation in provincial police forces and the other on devolved financial management, are due for publication within the next few months. The commission has also published two audit guides for use by the auditors whom it appoints.Most of the recommendations are properly the province of chief constables and their police authorities, but the commission's work in this matter is, of course, of great interest to my right hon. Friend the Home Secretary.
My hon. Friend suggests that the Home Secretary should open up the Met to the commission's scrutiny. The Met is different from provincial forces because the Home Secretary, rather than a local authority, is its police authority. Its auditing arrangements are different, too, being linked to those for central Government, with the National Audit Office appointing external auditors and publishing value-for-money reports.
Although I have explained the structural position, it is equally clear that the Metropolitan police benefit from the Audit Commission inquiries into provincial forces. The Metropolitan police force is not ignored, nor does it ignore the work of the Audit Commission.
Mr. Andrew Mitchell : My hon. Friend the Minister has outlined the current structural position. As he will know, many hon. Members feel that the skills of the Audit Commission, which are not the same as those of the National Audit Office, are well deployed on all other provincial forces and would benefit the Met if they were deployed in there. My hon. Friend cannot give me a full answer today, but I hope that he and his colleagues in government will keep that point under active consideration because much public money would be saved if the Audit Commission were deployed in the Met.
Mr. Key : I undertake to draw my hon. Friend's remarks to the attention of my right hon. Friend the Home Secretary.
The scrutiny into the magistrates courts service, published in 1989, did point to weaknesses in the current arrangements for audit of expenditure on magistrates courts. Detailed consultation has taken place with the service and other interested parties on the main scrutiny
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proposal on the reorganisation of the service. I understand that my right hon. Friend the Home Secretary is now considering the results of the consultation and those of a recent costing exercise carried out by consultants.My hon. Friend suggested also that the Audit Commission might extend its best practice and value-for-money role into the world of subsidised rented housing run by housing associations. I share my hon. Friend's view that effective management and value for money in that area are very important.
Housing associations already manage more than half a million homes in England and the Government are channelling an increasing amount of new investment through them. However, I am not sure that this is an area where an additional input from the commission is needed, certainly at the present time when there are many other priorities for its attention. However, I shall bear that point seriously in mind.
I come now to grant-maintained schools. My right hon. and learned Friend the Secretary of State for Education and Science has now approved, or is minded to approve, 59 applications for
grant-maintained status. It is proving popular with parents. Many of the first grant-maintained schools have seen dramatic increases in applications. I am sure that local education authorities and others will have much to learn from the success of the grant-maintained schools sector. The Audit Commission does not have the rights of access to grant-maintained schools, but I will draw to the attention of my right hon. and learned Friend the sort of points that my hon. Friend has made.
My hon. Friend has drawn attention to the many aspects of the work of the Audit Commission, which, because of its great variety, impinges on the responsibilities of a number of Departments. He has also praised the excellence of that work and I am happy to concur with him. As I said, the history of the service is one of steady evolution, which leads me to think that we should allow the Audit Commission to expand into its new role in regard to the national health service before thrusting new burdens on it. My hon. Friend has presented many important ideas, which it may be correct to adopt. For the moment I shall draw my hon. Friend's remarks to the attention of my colleagues. I intend actively to encourage the Audit Commission in its existing areas of operation, including the development of new ideas on standards and quality of service.
Question put and agreed to.
Adjourned accordingly at two minutes past Three o'clock.
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