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9 pm

Mr. Letwin: Although I appreciate the Economic Secretary giving way and the delicious irony of her idea that designating by order is justified by the difficulty of defining it in statute, which could have a far wider application, did she allow parliamentary draftsmen and the Government's legal advisers to assist those seeking to achieve this end to improve the drafting of their amendments at any stage during the passage of the Bill?

Miss Johnson: I am not aware of the contact between parliamentary draftsmen and any Opposition Member, although such contact does not normally go on. I am not aware of any approaches to the Treasury seeking direct engagement on the point, but I reiterate that the task is and has been difficult, and no one has proposed a workable definition. That is the point at issue.

Mr. David Heath (Somerton and Frome): Will the hon. Lady give way?

Miss Johnson: The hon. Gentleman has only just arrived and has not been present during the debate to

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make any point or hear any of it. Therefore, I shall give way to other hon. Members, but shall develop my argument a little before I do so.

There are three issues. One is access for audit purposes. Secondly and separately, there is value for money. There is a third point about investigation of fraud, which is also entirely different and separate and not directly bound up with the question of access for audit purposes. The matters have been run together in many speeches, which has not helped the clarity of this evening's debate.

The Government of course have a role as a regulator and investigator, but, properly, we do not want to give the NAO an automatic right to similar access, thereby duplicating regulation and investigation. There must be a mechanism to achieve balance, as the Government amendment seeks to do.

On the relationship between business and regulation, I refer to an article in Accountancy Age on 27 January this year, which was headed:


The article states:


The issue involves red tape and balance. The hon. Member for Newbury (Mr. Rendel) said that in the past, that had caused no difficulty. However, suspicion and concern exist about what might happen if the power to make decisions were given without constraint. In the same way, there may be concern about what access the NAO may have and what it may do in future.

At present, the NAO has access to the private sector by agreement. That makes it possible to ensure that the NAO achieves a balance between its access demands and the need to keep burdens to the minimum necessary. The Lords amendment would remove the need for the NAO to agree and thus to balance its demands against the legitimate concerns of business.

Mr. Letwin: I am doubly grateful to the Economic Secretary for giving way. Will she tell us whether the argument applies generally? If the Government were hypothetically to conduct their entire activities through NDPBs and the private sector in PPPs, would she argue that the Comptroller and Auditor General should have access to nothing?

Miss Johnson: The hon. Gentleman forgets, and I was disappointed that in their contributions other hon. Members did not mention, that we have given much wider access than existed before, through the changes that we have made, not only by dealing with issues such as Camelot, which was not dealt with by the previous Government, but in clause 8(2)(b), which was added to the Bill on Report--[Interruption.]

Mr. Deputy Speaker: Order. There are so many conversations going on in the Chamber that it is unfair to the hon. Lady who is replying to the debate.

Miss Johnson: Thank you, Mr. Deputy Speaker. Clause 8(2)(b) provides the Comptroller and Auditor General with a new statutory right of access in the cases covered by the clause. In some ways that access goes beyond the Government's right of access. That answers

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the hon. Member for West Dorset, who asked why the Comptroller and Auditor General should not have access, if the Government have access. I have given an example in which the CAG's right of access goes beyond that of Government Departments, a point that is not generally recognised.

Mr. Rendel: I am grateful to the hon. Lady for giving way. She mentioned an argument that I made a few moments ago, and claimed that there would be some concern, presumably on the part of business, if the Comptroller and Auditor General were given the increased powers that the amendment seeks. Is she saying that she would be worried that those powers might be abused, or is she saying that businesses may be worried, but that in practice that worry would be unnecessary because, in her view, the Auditor General would not abuse those powers?

Miss Johnson: I wish I had a crystal ball. I am sure that all right hon. and hon. Members would agree that a crystal ball would be very handy. I do not have one, nor does anyone else in the Chamber. Therefore none of us can say for certain how an unfettered power could be used by a future body. I am not saying that the power would be used in the way suggested, or that it would necessarily cause difficulties, but none of us can say how it would be used.

Clause 23 provides the same access to the Comptroller and Auditor General's audits of the accounts of non-departmental public bodies as clause 8 provides for his audit of departmental accounts. Clause 23 therefore provides a new power for him to be made auditor of those non-departmental public bodies, which he is prevented from auditing by current statute. That was done to tackle the many points that hon. Members made in their discussions on access. It is relevant to the debates that we have held over a long period about making right of access easier.

The right hon. Member for Haltemprice and Howden mentioned today's National Audit Office report on Focus housing association. His comments go to the heart of the third aspect that I want to consider: the investigation of fraud. The Comptroller and Auditor General will not normally be the identifier because the external auditor of accounts would not be the usual, prime means of identifying fraud, which is primarily identified--

Mr. David Davis rose--

Miss Johnson: I shall finish my sentence before giving way to the right hon. Gentleman. Fraud is primarily identified by internal audit, whistleblowing, police serious fraud office activity as well as ordinary management controls, regulation and regulators' activities. All those matters are not the responsibility of the Comptroller and Auditor General.

Mr. Davis: Many of the Economic Secretary's comments have been wrong. However, her current remarks are the most outrageous. First, the Government's whistleblowers' measure names the Comptroller and Auditor General as an appropriate recipient of

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whistleblowers' information. Secondly, she is currently considering a case in which the information came from a whistleblower and the regulatory body failed to follow it up. Thirdly, she should read some National Audit Office reports. Fraud has featured in at least three in the past year. I refer her specifically to the report on further education colleges and the weaknesses of the external and internal auditors.

Miss Johnson: It is for all internal and external auditors to identify fraud. I agree with the right hon. Gentleman's comments about the failure of the regulator; I was about to make the same point. It is the reason for the conclusions to today's National Audit Office report, which states that regulators should be concerned not only with the existence of internal controls in the bodies that they regulate, but with their continued operation. The report condemns the Housing Corporation for the laxity of its regulatory grip. That is right and proper. However, it is not the Comptroller and Auditor General's role to be the regulator. The regulator is the Housing Corporation. It has apparently done its job badly. That is a valid point, but it does not relate to the extension of the powers of the Comptroller and Auditor General.

Mr. Alan Williams: Does my hon. Friend acknowledge that when the regulator, as she calls it--in this case, the Housing Corporation--fails to do its duty, it is absurd that the auditor for this House has to ask permission of that regulator before, as the report states, it has the right to examine "impropriety or irregularity"? It must negotiate with the failed regulator to do the regulator's job.

Miss Johnson: I do not believe that my right hon. Friend made an accurate summary of what happened. As I understand it, the relevant fraud took place between 1991 and 1995. The NAO undertook an initial study in the autumn of 1996 on the basis of documents held by the Housing Corporation. It did not identify the fraud because, as the right hon. Member for Haltemprice and Howden said, it had already been identified. The NAO undertook the study in autumn 1996 on the basis of documents held by the Housing Corporation, which regulates the housing associations, and had taken action against Focus.

At no point in the initial study did the NAO request access directly to Focus housing association. Indeed, it specifically stated that it would not seek such access. The NAO only requested access to Focus in September 1997, and access was agreed by February 1998. In a sense, not too much should hang on a particular example, and that is but one example, and the point is that it is about the identification of fraud, not about the prime role of the Comptroller and Auditor General--[Interruption.]


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