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Mr. Letwin: Does my right hon. Friend agree that the Government cannot have much confidence in the arguments that they have advanced? If they did, they would accept his reversal of the burden of proof, and would be willing to demonstrate, case by case, why particular bodies should not be audited by the CAG.

Mr. Davis: My hon. Friend is right. That was the logic behind the analysis. What I had in mind was that the Government would come to the House with an affirmative resolution procedure to demonstrate whatever good reason there was. That struck me as a perfectly good filter.

In Committee, the Economic Secretary referred to 22 specific bodies. She identified three categories into which they fell: those which no logical reason prevents the CAG from auditing; those that he "probably should not audit"--her words--because they are levy funded; and those that he should not audit because they are subject to competitive pressures.

I thank the Economic Secretary for her frankness in identifying the first category and for agreeing that, in some cases at least, there is no logical reason why the CAG does not audit certain bodies. I counted eight entries in that category, more than a third of the sample, including two large bodies that I have already mentioned: English Heritage and the Environment Agency.

Of those two, the Minister said:

I cannot say why the Comptroller and Auditor General does not audit those NDPBs . . . We accept that there is no apparent rationale to some of the anomalies.

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The other bodies in the category were the Football Licensing Authority, the Gas Consumers Council, the British Hallmarking Council, the Museum of London, the Oil and Pipelines Agency and Food from Britain. It is clear that progress must be made to bring at least those eight executive non-departmental public bodies under the CAG's remit.

I turn to the second category: levy-funded bodies, which had nine entries, according to my count. Six related to agriculture and fisheries: the Meat and Livestock Commission, the Sea Fish Industry Authority, the British Potato Council, the Horticultural Development Council, the Milk Development Council and the Home-Grown Cereals Authority. The other three were the Construction Industry Training Board, the Engineering Construction Industry Training Board and the Policyholders Protection Board.

On that category, the Minister was equivocal. She said:

We can debate whether it would be right to appoint the Comptroller and Auditor General as auditor of such bodies.--[Official Report, Standing Committee A, 20 January 2000; c. 288.]

The hon. Member for Newbury (Mr. Rendel), who is my colleague on the PAC, took up the offer of debate. I can do no better than to quote him:

A case has already been made for saying that although some bodies may be funded by levy, it is nevertheless money from the public and it is Parliament's job to decide on the amount. It is a good reason for supposing that it is also Parliament's job to ensure that that money is being properly used; how do we know at what level the levy should be set in the following year if we are not sure that the levy set in the previous year was properly used?--[Official Report, Standing Committee A, 20 January 2000; c. 309.]

That is an insuperable argument. Those who pay statutory levies have no choice about whether and how much to pay. In those cases, levies are raised not in a commercial environment, subject to competitive pressures, but under the authority of Parliament. The CAG audits Departments' expenditure of money that is raised under Parliament's authority through the taxation system. It is clearly appropriate for him to audit the expenditure of money raised under Parliament's authority through levy.

In any event, the CAG already audits several levy-funded bodies--the Data Protection Registrar, the Land Registry, the Pensions Compensation Board and the Trinity House Lighthouse Board--as well as the gas levy account and the industrial organisation levy account.

Mr. Edward Davey: Does the right hon. Gentleman understand the term "levy" to cover the television licence fee? According to his argument, should the BBC fall under the NAO's jurisdiction?

Mr. Davis: The hon. Gentleman is ingenious in returning to the point that was ruled out of order. I recognise that in those terms. There are special considerations about maintaining the BBC's independence. The NAO has been effective at maintaining the independence of, for example, universities and academic freedom, where precisely the same pressures are involved, but he is right.

Mr. Letwin: Does my right hon. Friend agree that the independence that is treasured is independence of the Executive and that the CAG is not an arm of the Executive and does not compromise independence?

Mr. Davis: That is right. That is one of the reasons. The CAG is in a peculiar position. He is incapable of

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being dismissed by the Executive because he is appointed, effectively, by the PAC Chairman, in conjunction with the Prime Minister. He is funded separately. All the protections that he has mean that he cannot be influenced by the Executive. As such, he is appropriate to do the job that the hon. Member for Kingston and Surbiton (Mr. Davey) suggested.

11.30 pm

The House may have noted that many of the bodies that I mentioned were Ministry of Agriculture bodies. Recently, we had in front of the PAC Richard Packer, who was having his valedictory meeting with us. We asked him whether he thought that the National Audit Office should audit all of those agricultural bodies. He not only thought that there was no argument whatever against doing so, but was entirely in favour of them being audited.

I started my comments on this category by saying that the Economic Secretary was equivocal about whether the Comptroller and Auditor General should audit levy-funded bodies. I hope that she, or at least the Financial Secretary, has now heard enough evidence to conclude that, without doubt, the Comptroller and Auditor General should audit them. Those further nine executive non-departmental bodies must be brought under the Comptroller and Auditor General's remit.

The Minister's third category comprised bodies that operate in a competitive or commercial environment. She identified five bodies in the category: Remploy, the Student Loans Company, the Housing Corporation, housing action trusts and English Partnerships. The first two were not the subject of tabled amendments, because they are companies and, therefore, are excluded. However, it was helpful for the Minister to mention them, as it enabled us to debate more thoroughly the Government's concerns about the third category.

The Minister stated that the first two bodies operate "in a competitive environment". My hon. Friend the Member for West Dorset (Mr. Letwin) challenged the idea that those two bodies were subject to competitive pressures in the sense that most of us understand them. The Student Loans Company has the characteristics of a monopoly, being organised in such a way that it is the only body in England that is able to offer subsidised loans to students. Remploy would not be sustained by public money if its market niche was well occupied by competitors. Therefore, it, too, must be close to being a monopoly.

The arguments about the absence of true competitive pressure apply also to the other bodies that the Minister placed in the third category. To be fair to her, she did not claim competition in relation to them, referring to the Housing Corporation simply as "a commercially focused organisation" and to English Partnerships as operating "in a commercial environment".

Those bodies are not normal commercial organisations that are subject to regulation by the demands of a competitive market, and the Minister, to be fair to her, did not claim that they were.

Mr. Letwin: Is not my right hon. Friend slightly understating the case on the Housing Corporation? Is it

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not true that no aspect of its activities bears the remotest resemblance to anything commercial, as it is essentially a regulatory body for housing associations?

Mr. Davis: It is more than regulatory, as it handles quite a lot of funds, too, but I am trying not to overstate the case. To make the point rather more directly, all those bodies are public bodies delivering against a serious public social policy objective and using public funds to do so.

Why is it not only appropriate but essential for the Comptroller and Auditor General to audit those bodies?

Mr. Wardle: I have been listening carefully to my right hon. Friend's comments. He has been talking very persuasively about extending the CAG's audit responsibilities, but, these days, does not the CAG also have a wider responsibility in value for money assessments? Is not that role of growing importance in ensuring accountability of taxpayers' money?

Mr. Davis: My hon. Friend, who is a colleague on the Public Accounts Committee, is exactly right. To put it crudely, the audit function very often serves as an intelligence-gathering function in much of the value for money work that is done, and also carries with it a function that commercial auditors often do not test: the function of regularity, which is concerned with the proper expenditure of public money. The function deals not only with whether the sums add up and money is not stolen, but with whether the money is spent on the right things.

That brings me to why it is essential for the Comptroller and Auditor General to audit those bodies. If a body is funded by money provided by Parliament to deliver on behalf of a sponsoring Department public policies approved by Parliament, the question of regularity comes to the fore. If the money has been used other than to pursue the policy objectives laid down for it, its use is irregular. Regularity is an issue on which the CAG frequently reports to Parliament, but it is a concern with which commercial auditors are less familiar.

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