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Mr. David Davis: I beg to move, That the clause be read a Second time.
Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 32 and 33.
Mr. Davis: New clause 2 deals with the audit of executive non-departmental public bodies. I am sorry to inflict such an ungainly phrase on the House, but it is a term of art in government; it means quangos. It has no statutory definition, and that is why the term does not appear in the new clause. Its practical definition is contained in the annual Cabinet Office publication, "Public Bodies"--
Mr. Deputy Speaker: Order. Would hon. Members who do not intend to participate in or listen to the debate please leave the Chamber and allow us to hear the hon. Gentleman who is addressing the House?
Mr. Davis: Thank you, Mr. Deputy Speaker. The practical definition in "Public Bodies" is:
- The set of bodies which exercise public functions of a governmental nature which might otherwise fall to be exercised by Government.
Audit arrangements for executive non-departmental public bodies are arbitrary and illogical. A substantial minority are audited by auditors other than the Comptroller and Auditor General. The decision about who will audit each newly established body is made by the individual sponsoring Department when the body is established. Consequently, there is a lack of consistency in the information that is provided to Parliament, and unnecessary waste and duplication of audit effort.
That contrasts with what happens when the Government of the day choose to reorganise or create a new Department. The Exchequer and Audit Departments Act 1866 currently provides automatically for the Comptroller and Auditor General to audit the new Department. The Bill would maintain that principle.
11.15 pm
The new clause is the first step in obtaining for public bodies the same systematic audit coverage as has been in place for Departments for over 130 years. I say that it is the first step, because it does not deal with those executive non-departmental public bodies established as companies. The Companies Acts prevent the Comptroller and Auditor General from auditing a company, even where it has been established by central Government and is responsible for the stewardship of public funds. I have been advised that it would be outside the scope of the Bill to seek to amend the Companies Acts, but I shall be pursuing that matter in the context of the Government's review of companies legislation.
Leaving aside the issue of companies, I would point out that the new clause would provide a single accountability structure, appointing the Comptroller and Auditor General as auditor of all executive non-departmental public bodies already in existence and of any new bodies of this nature created in the future.
I should make it clear that I am talking about non-devolved bodies. I do not seek to reverse the clear--
Mr. Bermingham:
May I ask the right hon. Gentleman, through you, Mr. Deputy Speaker, a simple question? He is an experienced Member of this House, as indeed I am. Does he need to read his speech?
Mr. Davis:
In fact, on this occasion I need to stay close to the notes, and there is a good reason for that. These amendments have been drafted by the National Audit Office, and it is important that the issues that I put before the House reflect accurately both the report that the Public Accounts Committee put to the House and the drafting. For that reason, I am staying close to the notes, just as the Minister will stay close to the notes. That is the reason, and I make no apology for it. I would not seek to comment on the motivation behind the hon. Gentleman's intervention.
I do not seek to reverse the clear decision of Parliament in placing accountability of certain bodies within the audit committees of the Scottish Parliament and the National Assembly for Wales. The new clause specifically excludes those bodies.
At this point, I should like to take the opportunity to congratulate the Government on their record to date in appointing the Comptroller and Auditor General to audit nearly all the non-executive departmental bodies that they have created--19 out of the 21 so far, I think. They have a good record, and I hope that it will continue.
The new clause would make that pattern systematic, rather than the subject of myriad individual decisions, and would deal with the legacy of existing anomalies. I have developed a new clause that I tabled in Committee specifically to address concerns that the Government expressed there. The Chief Secretary told the Public Accounts Committee that the Government would need a period of consultation before changing statutory arrangements that affected other bodies. I have allowed for that by deleting from the proposal that I tabled in Committee the provision that would have brought the new clause into effect immediately the Bill took effect. As a result, the Treasury can delay the implementation of the new clause to a time of its own choosing. That reflects the discussions that the Chief Secretary had with the
Committee, because he was concerned to be able to consult and seek the opinions of Departments up and down Whitehall and of the other bodies involved.
Such a statutory approach is not only right in principle but essential in practice. The Chief Secretary gave the Committee a commitment to explore the possibility of appointing the Comptroller and Auditor General as auditor when appointments came up for renewal. Such appointment would be impossible in all but a handful of cases, because statutory provisions restrict the Comptroller and Auditor General from doing just that.
The Government now appear to have acknowledged the problem. They have tabled an amendment which allows the Treasury, if it chooses at some future date, to remove the statutory bars and provide for the Comptroller and Auditor General to be appointed as auditor. The decisions would still be in the hands of Government. My amendment seeks to establish the general principle that all such bodies, both those already established and those to be established in the future, should be audited by the Parliament's own auditor, and that these decisions should not be at the whim of Government--whether the present Government or any future Government.
My new clause also allows the Government a right of veto in regard to anyone whom they identify as not appropriate for audit by the Comptroller and Auditor General. I cannot imagine what such a body would be, but the reassurance is there for the Government. Hon. Members may ask what is the point of the new clause if it allows such a veto. The point is that it would establish in statute the principle that the CAG should be the auditor, except when the Government can show that he should not be. It reverses the burden of proof. That is why I prefer my new clause to the Government's proposal.
We had a useful debate in Committee until, I believe, 9.45 pm on the occasion of the final sitting. Detailed amendments covering a representative selection of individual bodies, tabled by the right hon. Member for Swansea, West (Mr. Williams) on behalf of the PAC, gave the Economic Secretary an opportunity to explain the Government's concerns by reference to specific cases. That helped to clarify my understanding, and showed me how to draft a new clause dealing with reservations that had hitherto been difficult to pin down.
In explaining why the new clause is important, I want to alert hon. Members to the large amounts of money involved, the illogicality of the present position, and the problems that have arisen in bodies not subject to audit by the CAG. I do not want to repeat what has already been said; rather, I want to develop it. I intend to summarise some facts that show why there is a point at issue, and then deal with what I now understand more fully to be the Government's concerns.
Let me deal first with the question of money. The Housing Corporation--one of the bodies about which I am talking--receives nearly £1 billion of public money every year, while English Heritage and the Environment Agency receive about £100 million each. Those are just three of the biggest spenders outside the CAG's remit; many others escape his audit. The total comes to some £3 billion a year.
Secondly, the illogicality involved means that some bodies escape. The CAG audits the Countryside Agency and English Nature, but not the Environment Agency.
He audits the British Council and the Arts Council, but not English Heritage. As we have seen, some of the exceptions are big spenders.
Thirdly, in Committee I gave examples of bodies outside the remit of the CAG, to which he was alerted by leads from whistleblowers and others. For example, events leading to the resignation of the chief executive of English Heritage following conflicts of interest were brought to Parliament's attention by the CAG. Serious failures in management by the then National Rivers Authority, including a badly managed relocation project that cost the taxpayer millions, were also thus brought to Parliament's attention. The Merseyside development corporation lost £700,000 on the grand regatta Columbus and the fanfare for a new world concert. The chief executive of the Student Loans Company--not, unfortunately, covered by my new clause, because it is a company--was cleared of malpractice by internal and departmental investigations, but was sacked following a subsequent investigation by the CAG.
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