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Mr. Deputy Speaker: Order. The hon. Gentleman is making general points. He must confine his remarks to the amendment that we are considering, especially as many of his hon. Friends have made contributions on the new clause. He should get straight to the point.
4 am
Mr. Paterson: I am most grateful to you, Mr. Deputy Speaker, for keeping me on the straight and narrow. I will return to the question of access, which is the heart of the new clause.
I repeat that the CAG cannot do his job unless he has strong powers of access written into the Bill. I shall not repeat the exact examples that have been given, because I do not want you to be cross with me again, Mr. Deputy Speaker. But we have heard about housing associations, my hon. Friend the Member for Lichfield (Mr. Fabricant) mentioned the case of Camelot, and earlier we talked about the training and enterprise councils in prisons, where access--which I repeat is the heart of new clause 3--was restricted. In one particularly bad case quoted by my right hon. Friend the Member for Haltemprice and Howden, it was restricted for up to five years. I think that it was a case brought by a Member of this House. It took five years for that case to be investigated.
If the new clause goes through, the CAG will have legal powers to get real access. All that that does is to follow the advice in the ninth report of the Public Accounts Committee, which said that the powers of access must be direct. The Committee made the very good point, in paragraph 29, that currently the CAG
It is sad that Labour Members are laughing, because this is a report by an all-party Committee, and the clause is promoted by Members from the three main parties represented in the House. All that it does is to follow up the conclusion, in paragraph 38, that
Mr. Paterson:
That is certainly true. That is why we need stronger powers written into the Bill. That is the nub of the matter.
Amendment No. 21 is quite inadequate. I do not need to go into the detail that my hon. Friend the Member for Lichfield did. Of the two, there is no question which is better. New clause 3 follows the recommendations of the Public Accounts Committee. I am trying to outline for the benefit of Ministers, in case they have not had time to read the report properly, that the recommendations were extremely clear and they have not taken them up.
My right hon. Friend the Member for Haltemprice and Howden said that Ministers were using the excuse that the Bill does not concern audit. The Public Accounts Committee made the very clear point, in paragraph 41, that
Mr. Fabricant:
Does my hon. Friend agree that it is an insult to the House that the European Court of Auditors can have access, should the European Parliament wish it, whereas if the British Parliament should wish the CAG to have access to agencies or non-governmental bodies he would be unable to get it?
Mr. Paterson:
My hon. Friend is right: the current proposal is ludicrous. The PAC points out that local authorities are under stronger powers of audit than central Government, and he made the valid point that the European auditors also have stronger powers.
Now is the time to change, and this is the first piece of legislation since 1921 that has given any Government a real opportunity to make this major change. As I have
said, the PAC makes absolutely clear, in black and white, the principle that robust powers should be written into law.
Miss Melanie Johnson:
I am sorry to have disturbed the hon. Member for Arundel and South Downs (Mr. Flight) from his slumbers.
Let me run through the main points as quickly as I can. I shall not attempt to respond to a number of the contributions that have been made. It would probably have distressed Gladstone to hear some of what has been said here at 4 am; moreover, only two members of the PAC are present, and the last vote was won by 257 to 27. That does us no good in the House.
Mr. James Gray (North Wiltshire):
Will the Minister give way?
Miss Johnson:
No, I will not. The hon. Gentleman has been present for some time, but has made no contribution to this part of the debate.
Mr. Gray:
I want to do so now.
Miss Johnson:
But I am denying the hon. Gentleman the opportunity.
Amendment No. 21 is framed to give the CAG a right of access rather than imposing a duty on Departments to provide access, as the current clause does. In Committee, a number of Members expressed concern that the "duty to provide access" formulation would in some way constrain the CAG, and perhaps even reduce the access that he currently has. The Government did not agree with that argument then, and do not now.
The "rights of access" and "duty to provide access" formulations are, in legal terms, two sides of the same coin.
However, I promised in Committee to consider the matter further. Having done so, we have decided to revert to the original "right of access" formulation, on the ground that it is what hon. Members preferred. It would also bring the Bill into line with other statutes concerning audit access. I hope that that reassures hon. Members that the CAG will enjoy the same access under resource accounting as he does under the current system, and proves that the Government never had any intention of compromising the CAG's ability to do his work.
The Government recognise that access to contractors who are handling a Department's financial records is essential if the CAG is to be able to audit its accounts properly. Currently, such access is secured through the contract terms, and that has proved satisfactory; but the Government agree that putting such access on a statutory basis will give additional reassurance both to Parliament and the CAG that in such circumstances access will always be available.
Let me now deal with amendment No. 25. As we made clear at length in Committee, the CAG does not audit or, indeed, have direct access to all the bodies that are likely to be included in whole of Government accounts. The main types of body falling into that category are those in Scotland and Northern Ireland, and the local authorities in England and Wales. Strong audit frameworks are either in place or being put in place in all those areas. That picture contrasts with the inadequate or non-existent
audit arrangements that private-sector group auditors sometimes encounter in individual subsidiary companies, and which the reserve powers of access in the Companies Act were intended to address. Accordingly, we see no need to cut across the post-devolution and local government audit frameworks by giving the CAG the same reserve powers of access as Companies Act group auditors.
The Government believe that new clause 4, tabled by the right hon. Member for Haltemprice and Howden (Mr. Davis), should be rejected. It would give the NAO "matching" rights of access--that is, the same rights of access to the records of a body receiving public money as are enjoyed by a body paying public money. I see the right hon. Gentleman nodding. From what he was saying, I thought that there was perhaps some disagreement about the effect of the new clause, but we believe that it would give the CAG quite far-reaching access. An order-making power enables the Treasury to deny the NAO access to certain records that would otherwise be open to its scrutiny.
At a technical level, two points are worth noting. First, the proposal to give the NAO "matching" rights of access goes significantly further than simply giving the NAO the same rights of access as Departments. There should be no confusion about that. It gives the NAO the same rights to the records of a body receiving public money as those enjoyed by a body paying public money.
Therefore, in a case that has exercised several hon. Members in the debate and earlier, if the Department of the Environment, Transport and the Regions paid money to the Housing Corporation, which paid money to registered social landlords, who paid money to others, such as construction firms and, possibly, sub-contractors, the NAO would have access to all the bodies in the chain--providing that each body in the chain has its own rights of access to the next body in the chain--even though the NAO audited only one body in the chain: the Department. That represents a major increase in statutory rights of access.
Secondly, the new clause gives the NAO access to the books and records of private sector firms on the same basis as that enjoyed by the Inland Revenue for the purposes of examining whether tax credits have been properly calculated. The right hon. Gentleman went into how he saw that working in some detail. In Committee, several Members expressed concern about that. I, too, am unhappy about it. We still believe that it provides the NAO with powers to investigate the tax affairs of individual firms. We do not think that that is appropriate.
The new clause needs to be viewed alongside the Government amendment to clause 8. The question for the House is whether it would be right to enhance significantly the CAG's statutory rights of access on the basis set out in the new clause, or whether we should choose instead the formulation in our amendment, which seeks broadly to preserve the NAO's rights of access as set out in the Exchequer and Audit Departments Act 1866, which has been referred to extensively.
has to negotiate the terms of access on an individual basis with the bodies and their sponsoring departments. This is administratively burdensome and diminishes his independence.
The Committee noted that other public auditors have very strong independent legal rights. It says in paragraph 31:
Auditors working for the Audit Commission in England and Wales and the Accounts Commission for Scotland have a right of access to every document which they consider necessary relating to a body they audit.
Even the European Court of Auditors
has powers of access to both private and public sector bodies within Great Britain in receipt of European funds.
So it seems anomalous that the auditor for England and Wales does not have these powers in law.
it is unacceptable that the Comptroller and Auditor General must negotiate with the relevant body to obtain access to the new types of service deliverer.
The Committee made it quite clear when it said, in conclusion (xi), contained in paragraph 6:
In order to examine the accountability of departments, he needs matching statutory rights of access so he can give Parliament independent assurance that public funds have been spent properly.
Mr. Syms:
Is there not a danger that the audit may well have to be qualified if there is not proper access for the Comptroller and Auditor General?
At least a third of the Bill covers audit scrutiny and other parts cover new initiatives such as Partnerships UK and Whole of Government Accounts.
It clearly considered that the Bill could and should be used to modernise the CAG's audit and access arrangements. Its conclusion is stated in paragraph 42:
The Committee stands by the principle that robust powers of access should be written into law.
On that basis, the Government will have to come up with a very good reason for not supporting the new clause.
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