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Mr. Letwin: Does my right hon. Friend agree that, given the analogy that he has been drawing, he ought also to insist on the independence of standard setting for performance measures, just as he, I and others have for the standard setting for accounting?
Mr. Davis: My hon. Friend is correct. He may remember that I was provoked to rise to my feet against my prior judgment to make that point when we were considering his amendment on standard setting.
Drawing a parallel with the Comptroller and Auditor General's financial audit, I remind the House that the importance of his role is the positive assurance that he provides. Of course, he draws our attention to errors, but for most of Government his opinion is positive, providing vital reassurance each year that taxpayers' funds have been spent properly. That is why I intervened on the hon. Member for Kingston and Surbiton (Mr. Davey), to make the point about the overwhelming honesty of British public service. We take that for granted, but we should not because it is not the case world wide.
The routine, year-on-year nature of the CAG's work is important. It is an important validation and encouragement of that honesty. The same is true for performance information. Routine validation would be far less contentious than the exception reporting that can happen at the moment. There are already 2,500 performance measures planned. Given that volume, each will be of less significance. Exception reports would attract more attention and would be more likely to focus on aspects where there were real concerns about performance. Routine validation will result in routine reporting.
The Government have suggested that the CAG might not be the most appropriate person to validate performance measures. They have observed that the statistics commission that they plan to establish might have a role. They intend the commission to contribute to the integrity of the published data that fall within its purview by ensuring that they are collected in accordance with clear standards and subject to valid statistical techniques. The commission can play an important role in enhancing the quality of Departments' performance reports if they feature data prepared under its authority.
Furthermore, as I understand it, the commission will not cover all data appearing in performance reports. Information will be drawn from a wide range of systems, not all of them statistical. Indeed, I understand that it is for Departments themselves to decide what information is or is not to be classified as national statistics. So the proposals, important as they are, will not apply to all performance data.
We then turn to the question of who can validate performance information independently on behalf of Parliament. First, I find it hard to imagine circumstances in which there might be a person better suited than the CAG to provide Parliament with an independent view on performance, so my new clause specifies him. However, the Government have expressed the view that the CAG may not always be the right person. The new clause, therefore, enables the Government, by order, to modify the arrangements for performance reporting in any particular cases, including, for example, specifying a different authority to undertake validation.
Secondly, the Government thought that the CAG might have to go into local government in order to validate central Government performance measures, but in the new world of joined-up working the public auditors are already gearing up to work closely together, to take assurance from each others' work and to minimise the audit burden. They will adopt the same model for performance reporting. Indeed, the CAG already relies on the work of the Audit Commission and its appointed auditors, for example in signing off claims by local government bodies for grants paid by central Government bodies. He would similarly place reliance on the Audit Commission and its appointed auditors in validating performance information emanating from local government.
Thirdly, the Minister was concerned that the CAG would have to make judgments involving him in questioning policy matters, but that would not be the case. The policy element of performance measures would be the decision about which targets would be set. Those would always be matters for the Government. The CAG would not question them, just as in his value for money work he focuses on the implementation of policy and, by law, does not question the merits of policy objectives.
The CAG's role would be to check that the systems used to collect the data were robust and that the results had been represented fairly. He would then be in a position to assure Parliament about the integrity of performance information. He has already reported without difficulty on the performance measures of some Government Departments such as the Benefits Agency.
However, since the risk of bringing the CAG too close to policy is a real concern to the Government, I have removed all possibility of such a risk in framing the new clause. It now explicitly prohibits the CAG from questioning the merits of policy objectives. That is exactly the same statutory prohibition that applies to his value for money work set out in the National Audit Act 1983 and
which has proved effective. In effect, it is a belt and braces provision as it is a second statement of the same provision. If the Government are worried about it, it is in the new clause.
Fourthly, the Minister noted:
Aside from that inconsistency, the fact that standards are fluid is no reason to delay establishing a statutory framework for validation. Auditing standards for financial accounts are being developed and amended constantly to reflect advances in the profession, yet the statutory framework remains unaffected because it is just that--a framework. Similarly, a statutory framework for performance measure validation does not depend on standards being set in concrete. However, I have worded the new clause carefully in order to allow the evolutionary development of standards and methodologies. It simply says that the CAG may examine performance statements and report on them. That will allow him to develop his approach progressively, in consultation with the Treasury and the Public Accounts Committee. The Government also have a safeguard that under the commencement order they can bring the clause as a whole into force again at a time of their own choosing.
Furthermore, to draw any inference that we are in completely unexplored territory would be misleading. The CAG has reported several times on performance measures; the Audit Commission examines performance indicators in local government; and there has been statutory validation of performance indicators in Australia and New Zealand for some years. Therefore, the issue of standards is not a real obstacle.
I shall quote the Economic Secretary's exact words regarding the Government's final concern, rather than imposing an incorrect interpretation on them. The hon. Lady said in Committee:
There are complex issues for those developing such measures, but they are not reasons to avoid validation. Indeed, the very complexities are reasons for validation to be built in from the outset. If the Government are asking the public to take confidence from these measures, they must be capable of validation.
The Bill should put performance reports on a statutory basis and provide for the CAG to validate them. I will be very happy to discuss my proposals further with the Government before the Bill goes to the Lords, if that would be helpful.
No standards for validation have yet been established, and there are still many questions as to what form it should take.
That puzzles me because the Government have embarked on initiatives such as the local government best value initiative, which imposes statutory duties on local government auditors without any standards being in place.
There are also questions relating to the meaning of validation for measures based on data from private sector companies and international bodies, and whether bodies that might conduct validation have the necessary skills and resources to do so.--[Official Report, Standing Committee A, 13 January 2000; c. 101.]
I think that she was alluding to the trend to progress from output measures to outcome measures in assessing performance. Outputs are the immediate results of a Department's activity, usually within the Department's control. Outcomes are about the ultimate results that a Department's activities are designed to secure. Their measures tend to be beyond the Department's boundaries.
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