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Mr. Deputy Speaker: Order. Regardless of the time, the debate will not be helped by sedentary interventions from hon. Members.
Mr. Letwin: In our prolonged Committee discussion of the matter incorporated in new clause 2, the Financial Secretary and the Economic Secretary objected to the previous versions of the new clause. Their objections included the proposition that the remit of the Comptroller and Auditor General could not be extended to a wide range of non-departmental public bodies because those bodies were governed by statutes that barred the CAG.
It is with some surprise, therefore, that we find that the Government have come forward with their own amendment allowing them to circumvent a problem that they claimed in Committee to be insuperable. The amendment would permit the operation of what is in effect a Henry VIII clause by order. There is nothing wrong with that mechanism--there never was, apart from some constitutional implications. However, there was certainly something wrong with the Government's argument that the statutory consideration rendered it impossible to extend the remit.
That much was clear--to Conservative and Liberal Democrat Members, and to members of the Public Accounts Committee, at least. We were passing a piece of primary legislation that would undo previous legislation. Our view was that that could be better done by positive enactment, but we joined my right hon. Friend the Member for Haltemprice and Howden in welcoming the Government's conversion to the evident truth that the CAG's remit could be extended.
That is important. In Committee, the problem was that the Government's objections were based on arguments rather than real reasons. They have now admitted that those arguments were specious, so I hope that Ministers will tell the House the real reason why the Government persist in their objections to the gist of new clause 2. The problem cannot be technical, as I am sure that Conservative and Liberal Democrat Members would all accept that the new clause could be revised and tabled in an amended version, without technical deficiency, in another place.
What is the difference between the Government's amendment and my right hon. Friend's new clause? As my right hon. Friend identified, it is a difference in the position of the burden of proof. The Government's amendment allows the Government to decide to introduce the Comptroller and Auditor General. The new clause would allow the Government to come forward with reasons why, in a particular case, the Comptroller and Auditor General should not be introduced. The presumption in the new clause is that the Comptroller and Auditor General will have general oversight. We must therefore ask what is the real reason for the Government's belief that it is advantageous for the burden of proof to rest on Parliament. Why do the Government believe that Parliament ought to show the Government the need to extend the remit of the CAG case by case? Why is it not clear to the Government that there is a presumption, a prima facie case, for having the CAG oversee the whole of government, non-departmental public bodies and the rest? Why are the Government resisting the reversal of the burden of proof?
In Committee, hon. Members from all parties, including members of the Public Accounts Committee, were involved in the common endeavour of identifying the advantages--I think that they came into clearer focus in my mind--of having the CAG as an auditor. We identified in particular the great advantage that the CAG is the platonic ideal of an auditor. He does not suffer from the problem that all auditors in the private sector suffer from necessarily, because they are employed by the people whose accounts they are auditing. While many auditors in the private sector struggle heroically with that problem and overcome it, offering honest and sometimes damning verdicts on their own clients, it is asking a lot of them to rat on the company that employs them. It is remarkable, in fact, that so often the system works. It is an inevitable feature of private sector auditing. One cannot think of anyone who would employ the auditors rather than the directors, but it is the directors that the auditors are ultimately auditing.
The CAG has the inestimable advantage of not being in that position. My right hon. Friend exposed, in very great detail, the huge array of measures that the previous Government had the wisdom to implement which protect
the CAG from any accusation that he is an employee of the Executive that he is auditing. Nor is he employed by the particular Department or non-departmental public body that he is auditing in a particular case, by the Treasury or by the Government--he is employed by Parliament. He is employed by Parliament in a real sense because the parliamentary body, the Public Accounts Committee, which has put forward the amendment is, in effect, his employer. The CAG is in the unique position, not available in the private sector, of carrying out the auditing without there being the slightest conflict of interest.
Mr. Wardle:
I hesitate to correct my hon. Friend, so knowledgeable is he. But surely in the private sector the shareholders appoint the auditor. Are not the shareholders in exactly the same position as Parliament? Is it not Parliament that is calling for the CAG to play that role so far as public sector enterprises are concerned?
Mr. Letwin:
My hon. Friend amusingly describes me as the expert, whereas, through his long service on the PAC and in other respects, he is the expert. Technically, he is right--the shareholders appoint the auditors. However, he will know as well as I do that de facto in the private sector, the directors act for the shareholders. [Interruption.] As my hon. Friend says from a sedentary position, they stand in the position of the Executive or the Government. The difference is that in the public sector we have the great luck--not available in the private sector--that the shareholders meet constantly in Parliament. They are thus genuinely able to act--through the PAC--in a capacity that is not available to shareholders in a normal private company. Of course, those shareholders have the right to approve or disapprove the auditor, but they will almost always act on the recommendation of the directors.
However, in the case of the PAC and Parliament, the Comptroller and Auditor General is genuinely distanced from the Executive. I believe that my right hon. Friend--or whoever holds his office as Chairman of the PAC--and the Prime Minister share the appointment. It is unique that the Executive should consciously have given a veto power to an agent of Parliament--by convention, an Opposition Member.
We have a perfect system for avoiding conflict of interest in audit. I return to the question: why, in the light of that, should the burden of proof lie with those who want to extend the remit of the CAG to additional agencies?
Mr. John Hayes (South Holland and The Deepings):
Before my hon. Friend moves away from the relationship between the CAG and the House, as opposed to the relationship between that person and the Government, may I refer him to the Exchequer and Audit Departments Act 1866, which established that relationship? It states that every relevant account shall be examined by the Comptroller and Auditor General on behalf of the House of Commons.
It is clear that the relationship was direct, as my hon. Friend points out, and that we must not breach it by extending the ability of the Government to interfere in it and sully it.
Mr. Letwin:
I entirely agree with my hon. Friend. He is right to take us back to Gladstone. Part of the essence
If that were to be read as the precedent, it is possible that the Government amendment--as opposed to the new clause proposed by my right hon. Friend--would be deleterious. I do not think that is the Government's intention. They have tried to make a move towards the PAC and both the Opposition parties, but, as my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) acutely points out, they may have succeeded in making matters slightly worse.
However, why should the Government prefer their amendment? What is the real reason that they do not want Parliament to have the presumption that the CAG has a universal remit in the public sector? After all, the CAG does not have the problem that he is barred by statute, because the Government have accepted that they can alter that at the whim of an order. Furthermore, we established in Committee--I have tried to re-expose the matter during the debate--that the CAG has a unique position as a perfect audit system, without the inherent conflicts of interest in such systems.
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