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.
— The C&AG
has existing statutory powers of access, is highly regarded, and
has experience of working with departments. Departments in turn,
are used to working with the NAO. It seems sensible and pragmatic
to augment existing arrangements rather than develop a whole new
infrastructure with uncertain burdens and where implementation
may prove drawn out and unwieldy. The establishment of an environmental
auditor general (perhaps at deputy C&AG level), as head of
a distinct unit, would seem appropriate.
— Consideration should be given to amending
the National Audit Office Act 1983 to provide for this new office,
a new strand of work and the relationship with this Committee,
and we commend the draft Bill annexed to this Report to the House.
— Adding to the NAO's armoury will clearly
involve a further call on resources. This call must be answered.
It is vital that any change serves to heighten the ability of
the C&AG to meet the needs of the House rather than simply
adding further pressure. We ask that the Public Accounts Commission
consider our Report and address the resource implications of the
enhancement we are seeking for the NAO.
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.oagbvg.gc.ca/domino/cesd_cedd.nsf/html/menu_e.html Back
140 HC
Deb, 26 July 2000, col 695, wa Back
