Select Committee on Environmental Audit First Report




127. A few clear lessons emerge from the information currently available. There are a variety of mechanisms used to monitor progress with environmental integration and sustainable development both within governments and established with more or less formal independence. It appears to us that one danger lies in getting hung up on any one. Elaborate requirements for rafts of strategies, plans and performance reports is of little use if production becomes a mechanical chore and nobody ever reads the results or acts upon them. Neither authors nor audience will then benefit and the process will be discredited. This was perhaps a trap that This Common Inheritance reporting fell into for example.

128. The creation of commissions of the good and the great, or even cabinet sub-committees, can have little lasting impact without asserting themselves and maintaining momentum over time—this can be difficult without actually meeting. Even the formal establishment of an independent auditor or commissioner with statutory status and powers of access can be effective but only in conjunction with a political will to make progress from within government.

129. Overall the important recipe for progress appears to be: political commitment from the top; cross-cutting machinery including departmental 'champions'; clear targets (& milestones) and indicators; effective reporting arrangements with benchmarking; and an independent and properly equipped audit and assessment function—all of these play a part in maintaining momentum.

130. On the reporting and audit side particularly we would regard best practice as:

Above all the process needs actors with the right constitutional position whose responsibilities and professional interests are directly engaged full-time such as with the Commissioners in Canada, New Zealand or Australia.

131. Independence is a key requirement for the audit function as recognised by the C&AG in his evidence to us. In New Zealand the Parliamentary Commissioner's most recent report points out that as the world around us becomes more complex, people increasingly accept or reject information on the basis of whether or not the conveyor or source is trusted. The perception was reported in Quality of life counts that 'government' figures are not trusted.[133] This perception needs to be addressed either by handing over the reins to another body (and the Government has done this employment statistics) or by external validation or verification of data presented.

132. Such is the perceived importance of financial probity in the private sector that a complex web of regulations on corporate governance, accounting standards, and audit has evolved precisely to guarantee the independence of auditors and provide assurance to stakeholders. Verification of environmental reporting seems to be on the upswing within the, albeit limited, numbers of private sector organisations publishing environmental reports. Even the DETR has invited consultants Enviros Aspinwall to verify its green operations report for the last two years.

133. In the public sector high standards of probity and accuracy should be demonstrable and almost all countries have appointed independent officers to audit government accounts and report on administrative efficiency. Now the same job needs to be done in the sphere of hitherto 'soft' environmental reporting and must be reflected in arrangements for monitoring and reporting on the Government's progress in this area.

134. Statutory independence would be what distinguished a non-departmental public body such as the Sustainable Development Commission, whose audience is formally the Prime Minister, from an environmental auditor whose audience would be Parliament in the form of this committee. The practical relationships we envisage are characterised below.

An environmental auditor for the UK

The National Audit Office

135. The National Audit Office (NAO) certainly has the right kind of statutory powers and constitutional independence for the conduct of audit.[134] It has long experience of verifying government data and reporting; working on the measurement of government performance; and liaising with committees of the House. We in particular are grateful for assistance from the Office so far which has included the secondment of an auditor from the NAO to the Committee staff, informal liaison and most recently the submission of a memorandum of evidence from the C&AG to us in this inquiry.

136. In evidence the Comptroller & Auditor General wrote in evidence to us that the NAO's mandate did not prevent the Office conducting environmental audits and we note his stirring words on environmental audit on the video made by INTOSAI to introduce "Green Auditing". The C&AG cited a number of reports in support of the NAO's environmental auditing record. Indeed we have used information and conclusions from reports on this list previously in our own work most particularly on energy efficiency.

137. However, it has been put to us that national audit institutions, focused as they are on financial and economic matters, do not have the right expertise to carry out environmental audits nor the right attitude to engage in the sustainable development agenda—in Canada it was suggested that a traditional auditor's "gotcha" mentality does not sit well with the risk-taking necessary for a genuinely new approach to policy across government. The Cabinet Office report Wiring it up put "using audit and external scrutiny to...encourage sensible risk­taking" as a key area for action to improve work on cross-cutting policies.[135] This reflected the response of UK public auditors to the Modernising Government White Paper which contained reassurance that public audit would adopt 'an open­minded and supportive approach to innovation' as well as 'supporting well thought through risk-taking and experimentation'.

138. We note that there are no published reports in the C&AG's list which directly addressed government or departmental performance against environmental or sustainable development targets (although we were intrigued by reference to the 'limited review' of progress towards sustainable development targets within DETR's remit). This may reflect the fact that the reports are based on work carried out in 1998 or earlier (due to the time lag in clearance and publication), but it may also reflect an uncertainty about tackling environmental performance and/or impacts in areas other than strictly environmental policy.

139. In addition, of NAO's self-avowed 'environmental' reports, only one has been published since 1998 (Vehicle Emissions Testing, May 1999). Indeed, the number of identified reports—nine over five and a half years—amounts to less than two studies a year. At an average cost of £180,000 per study (according to the NAO's Corporate Plan), this amounts to about £300,000 a year and represents about 0.5% of a total NAO spend of £55 million. We would set these figures against the increasing importance of environmental and sustainable development issues to all policy and operational issues claimed by this Government, and by implication, the House.

140. While the NAO does conduct value-for-money (VFM) studies on environmental policies a closer look at the Office's output suggests is that, like everyone else, the integration of economic, environmental and social considerations has proved a challenge as suggested above. There have been a number of NAO studies published in recent years which appear to take little or no account of the sustainable development agenda. Good practice in Performance Reporting in Executive Agencies and NDPBs for instance contains no reference to environmental or sustainable development reporting despite emphasis on departments rolling out guidance in these matters since 1997. Modernising Procurement similarly contains no mention of sustainable development or green purchasing despite recent government guidance on the matter and emphasis by Green Ministers on the issue.[136] A recent internal government survey showed that where environmental issues were unclear, green implications did not seem to have been addressed to any significant extent by departments in their purchasing decisions.[137] One option therefore might be for the NAO to address the synergy between better, and greener, procurement.[138]

141. Therefore looking at the economy, efficiency and effectiveness of the implementation of a range of policies, some of which have specific environmental objectives, seems to be one thing. Looking consistently at all policy implementation in terms of economy, efficiency, effectiveness and environmental impact is obviously quite another. This is sometimes referred to as the 'fourth E' approach—whereby environmental impact is added explicitly to the traditional "economy, efficiency and effectiveness" criteria of value-for-money analysis. This 'E' merits incorporation because the consumption of 'free' environmental resources (clean air or a stable climate) is a hallmark of virtually all economic activity. The difficulty of assessing these impacts alongside economic and financial costs is the very factor behind the present Government's stated commitment to putting the environment at the heart of government.

A new body

142. At the other end of the spectrum reform is the potential for a totally new organisation or office perhaps along the lines of the Parliamentary Commissioner for the Environment in New Zealand, the Environmental Commissioner in Ontario or the proposed Commissioner for Ecologically Sustainable Development in Victoria. Establishing a new system would allow consultation to begin with a blank sheet of paper in terms of both powers and resources and obligations upon departments in terms of reporting. A Commissioner would presumably be appointed primarily for his or her environmental expertise with a team with a mix of public sector, audit and environmental experience. However, the office could also draw upon the large bank of experience in the private sector amongst the plethora of existing environmental audit consultants many of whom have considerable experience working with public sector organisations and departments here and abroad.

143. Establishing a new structure would also allow for a new element for audit—public participation—with the Commissioner perhaps made responsible for operating the eventual access to environmental information arrangements that might derive from EU legislation as well as being empowered to receive public petitions (like in Canada) against environmental degradation caused by particular government policies and programmes. We note the existing rights of petition of the House of Commons for any citizen and that the C&AG also receives many letters directly from members of the public containing requests for him to look at particular issues.

144. The disadvantages of such an approach are threefold. First there is the question of time and the likely need for significant primary legislation. Establishing a body from scratch will take an appreciable period of time especially given the need for consultation. Secondly, there is the danger of multiplying the burden of scrutiny upon departments through the introduction of a new body and new obligations upon departments to report to that body and relate to it in other ways. Finally there is a question of the duplication of effort. An additional body may plug the audit gap but this may not be cost-effective if it has to be done from the foundations up.

145. On balance, therefore, we advocate a middle course. A new audit unit with particular expertise and responsibility for the environment and for sustainable development should be created but it should be located within the NAO. This approach is similar to that adopted by the Canadian Federal Government which we have examined in detail.[139]

The way forward

146. We recommend that the Government should now set in motion completing the environmental audit initiative as outlined in In trust for tomorrow. An environmental auditor general should be established within the National Audit Office (NAO) mirroring arrangements for performance audit of public spending.

147. The main task of this office to examine departmental performance against sustainable development targets and report to this Committee. The execution of our remit would therefore be divided in character between its two tasks—on policies and on targets—with support coming from the NAO on the latter without violence being done to the time-honoured separation of policy merits and policy implementation. This would give the Committee a distinctive audit role in the measurement of Government's performance against its sustainable development targets whilst also being free to assess the Government's wider contributions to environmental protection and sustainable development.

148. The House of Commons will benefit from an increased ability to hold the Government to account for its performance against environmental and sustainable development targets by the operation of an auditor channelling reports through this Committee.

149. We believe that the NAO and the House would also benefit from an increase in the NAO's capacity to integrate the environmental impacts of government activity in all its work—looking at significant consumption of so-called 'free' environmental goods alongside the use of more traditional resources such as people and money.

150. We do not wish to set out a full recipe here in every particular but the following key points are important, representing a package rather than a menu.

151. We have noted the announcement of the review of public audit by the Chief Secretary to the Treasury, Rt Hon Andrew Smith MP, in February 2000. Seeing that "the modernising government agenda" and the "audit/validation of performance measures" were two of the issues specifically mentioned, the Chairman of the Committee wrote to the Chief Secretary in April to ask him whether environmental and sustainable development issues would be taken into account. Mr Smith replied in June that the process was in its early stages and that, once Lord Sharman and the Steering Group had looked at the scope of the review, he would write again. We await further news from the Chief Secretary. In the meantime we note that the Steering Group does not contain anyone with expertise in environmental audit nor sustainable development matters more generally.[140] The terms of reference, which were issued to specific parties on 4 September, did not refer to sustainable development directly although the review is enjoined to have regard to "the mechanics of change" and the "importance of Parliamentary scrutiny and accountability in the round".

152. Lord Sharman's review is the ideal opportunity for Government, the Comptroller and Auditor General and the Chairman of the Public Accounts Committee to consider the appointment that we have proposed. In the spirit of Mr Smith's statement that the process offers a "great opportunity for Government and Parliament to work together to promote transparency and accountability alongside the modernising Government agenda" we hope that the Steering Group will be able to take our conclusions into account.

153. We recommend this Report for consideration by the Chief Secretary to the Treasury and Lord Sharman, Chairman of the Steering Group for the current review of the audit and accountability of central government.

133  Op cit p288 Back

134  National Audit Act 1983 Back

135  Op cit p7 Back

136  The report did refer to criticisms of official "risk-aversion" and the balance between least initial cost & whole life costs but without reference to environmental impacts Back

137  DETR circular Back

138  Equally a range of other reports such as Examining the Value for Money of Deals Under the Private Finance Initiative; Office of Gas Supply: Giving Customers a Choice and English Partnerships: Assisting Local Regeneration likewise do not seem to take the opportunity to address significant environmental and sustainable development issues in these important areas. Back

139  http://www.oag­ Back

140  HC Deb, 26 July 2000, col 695, wa Back

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