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2.30 am
I want to progress the debate by considering the Government's concerns about granting the CAG the type of access rights that we seek through the new clause. I have studied the Committee Hansard as before, and it reveals five issues that are of serious concern to the Government. First, they are anxious that the new clause
would allow the CAG a right of access to anywhere that public money was spent, down to the last paper clip, and that anybody entering a contractual relationship with the Government would be subject to that inspection. Quite simply, that would not be the effect of the new clause. It would grant the CAG access only where the Government or funding bodies considered that they themselves needed access. In those terms, we might call it a piggyback provision.
The logic of that approach is that the CAG would need access for the same reason that the Government need it--that is, when the only way to ascertain that a service is being delivered is to examine it at the service deliverer's site. Thus, contracts under the new deal give the Employment Service access to bodies that provide training and employment opportunities funded by the initiative. The Employment Service quite properly needs access to ensure that claims are bona fide. The CAG also needs access to satisfy himself on behalf of Parliament that payments under the new deal are regularly made for services that have been delivered. The Government accept that the CAG needs access and secured that through administrative means. That is welcome and essential, but, as I said when we debated a previous amendment, the administrative approach is inherently deficient. I shall return to that.
In contrast with the new deal example, I doubt whether the Employment Service has secured rights of access to its stationery supplier. It can monitor the quality and price of supplies without going into the supplier's manufacturing process, can test the price in an open market and, most important, can see that it is getting what it pays for as the goods are delivered to its premises. For exactly the same reasons, the CAG does not need access there. The new clause would not give him such access and the provision, therefore, is in no way an unfettered right to roam.
Secondly, the Government are concerned about the potential constraining effect on others of widening the CAG's access. They consider that wider access in general may stifle innovation and risk taking, and that access specifically in respect of tax credit payments made by employers on behalf of the Government may be a burden on business. The Minister said in his comment on the review that those matters would be taken up.
On the PFI and in the context of the "Modernising Government" agenda, the CAG has already said publicly that he supports
The proof is provided by experience. The CAG has negotiated access to the private sector in many cases, and the arrangements have worked well. The very changes encouraged under the "Modernising Government" agenda show the need for more flexible arrangements for the CAG. Cross-departmental initiatives and public-private partnerships require civil servants to work outside the traditional rigidities of Departments, and defining the CAG's access in terms of those Departments is out of kilter with such modernisation.
Mr. Rendel:
Does the right hon. Gentleman know, or has he heard from any Government source, of any occasion when the Government have felt that the CAG's access has proved in any way oppressive?
Mr. Davis:
That is an extraordinarily interesting question because we often hear the general argument that such access suppresses risk taking but we have never been given an example, so the answer is no. If there has been such an occurrence, I would be interested to hear about it. Perhaps the review will pick up some of those points.
On tax credits, access is necessary because they replace benefits that are currently delivered through Government agencies that are already subject to the CAG's inspection. Those credits are, in effect, payments from the state. In recognition of the concern about the burden on business, I have made the new clause clearer, to show that it allows access only for examining tax credits, which involve payments, and does not apply to the tax system as a whole because that is largely about receipts rather than payments.
I can assure, and reassure, the Government that the CAG's access would impose no burden beyond that already inherent in the tax credits system. The CAG has informed me that his staff would conduct examinations of tax credits by accompanying Inland Revenue staff on the visits that they make to check compliance, so the new clause will not, in any event, add any new burden.
The CAG estimates that, unless specific weaknesses become apparent and require further work, his staff would need to attend 0.5 per cent. of the Inland Revenue's visits. Based on the Revenue's latest figures, that would mean attendance by the CAG's staff at about 200 out of just under 40,000 visits. Access for the CAG would mean no additional visits to employers, but simply one or two extra people on a tiny proportion of visits that would take place in any case, so the additional burden argument does not stand up.
Thirdly, the Government have said that the existing arrangements to provide access work well and are preferable to a statutory provision. However, the Chief Secretary, in giving evidence to the Committee, recognised that the arrangements that stem from that approach are
The existing arrangements raise the further constitutional issue that the Government, and in practice the civil service, decide what Parliament may scrutinise. A statutory approach would bring administrative savings in negotiating access, avoid accidental omissions and ensure that Departments do not dictate the extent of parliamentary scrutiny. My reassurance to the
Government in this matter, as with the previous point, is that wider access is not new--it is already in place in many parts of the public sector. We merely want the mechanism for securing wider access to be more consistent and robust. As an additional benefit, the statutory approach will be cheaper to operate.
Fourthly, the Government are concerned about duplication of audit. That stems from a misunderstanding about audit. There will never be more than one auditor who audits the accounts, and the CAG will not conduct a duplicate audit of the accounts of bodies in question. To continue with an earlier example, the CAG would examine the records of the new deal provider organisations, not to audit their accounts but to audit those of the Employment Service and ensure that the training and employment opportunities for which the service has paid have been delivered.
The Government are keen for the CAG to place reliance on work that other auditors have undertaken in auditing the accounts of bodies in which he has an interest. Sometimes that is appropriate and it is for the CAG to judge when it is. Unless specifically contracted to do so, other auditors will not examine whether funds provided to the body have been used as Parliament intended, because their responsibility is to the body itself, not to Parliament. Two cases illustrate the different remit and the role of auditors working on behalf of the bodies that they audit, rather than on behalf of Parliament, as in the case of the CAG.
Halton college claimed £6.4 million from the Further Education Funding Council, with no support from college records. That happened over several years, despite the fact that the college's auditors had been required to certify funding claims. The funding council subsequently reviewed the quality of work undertaken by private firms auditing colleges, and identified concerns in 11 of the 26 cases reviewed.
In the second case, Gwent tertiary college was taken to the brink of collapse by incurring a deficit of £6.8 million through significant weaknesses in the controls of claims for European funding. The college's auditors had repeatedly certified that all grants and income had been used for the purpose for which they were received, but had not taken any detailed testing of expenditure to primary records to support their audit opinion. Neither of the matters is new to the Minister, as both have been related in Public Accounts Committee reports, which the Treasury has received.
well thought through risk taking and experimentation,
the emphasis being on well thought through. The Government have welcomed that comment and have stated that they recognise that
people will no longer be able to use audit as an excuse for not delivering more co-ordinated and efficient services.
A statutory right of access for the CAG will not impact on risk taking in any case. The CAG already has full access to Departments, which might be risk averse. The purpose of the new clause is to extend his access beyond Whitehall to, for example, the private sector bodies delivering public services. Such bodies have innovation and risk taking at their core and will not be inhibited by the CAG, but public sector standards and expectations may be less familiar to them, and there may be a correspondingly greater need for the CAG to have access.
a bit of a hotch-potch.
They have often required lengthy and costly negotiations, illustrated by the examples that I cited earlier.
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