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Delegated Legislation Committee Debates

Draft Audit and Accountability (Northern Ireland) Order 2003

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Second Standing Committee on Delegated Legislation

Wednesday 29 January 2003

[Mr. Jimmy Hood in the Chair]

Draft Audit and Accountability (Northern Ireland) Order 2003

2.30 pm

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): I beg to move,

    That the Committee has considered the draft Audit and Accountability (Northern Ireland) Order 2003.

It is a pleasure to serve under your chairmanship, Mr. Hood.

The order deals with the mechanics of public audit. It is technical, but important because public audit is a key link in the chain of accountability, which gives the public confidence that their money is being properly spent.

The order has two main components. First, it reorganises the structure of public audit in Northern Ireland. Secondly, it responds to the changes recommended by the Sharman review of audit and accountability for central Government in matters requiring legislation. In many ways it mirrors the reforms that we plan to introduce in England and Wales, but there are some differences, as would be expected following devolution because devolved Administrations respond differently to issues. I shall explain those differences in a moment.

The proposals in the order were agreed by the Northern Ireland Executive before the suspension of the Assembly. They were debated by the Northern Ireland Assembly and, at the time of suspension, had completed their Second Stage, when they were unanimously welcomed by all those who spoke in the debate.

Mr. John Taylor (Solihull): For clarification, is Second Stage in the Northern Ireland Assembly closely akin to what we would call Second Reading?

Mr. Pearson: Yes, it is exactly the same process. The order had completed its Second Stage, but had not gone into Committee at the time of suspension.

Speakers in the Second Stage debate included the Chairmen of the Committee on Finance and Personnel and the Audit Committee. The Chairman of the Audit Committee also spoke in his capacity as a member of the Public Accounts Committee. All three Committees provided input to the consultation phase and all supported the legislation.

I should like to outline the proposals that restructure public audit. The Comptroller and Auditor General is responsible for most public audit in Northern Ireland. The main exceptions are local government audit and health service audit. Health service audit is carried out in the Department of

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Health, Social Services and Public Safety. To enhance the key principle of the independence of public audit, it is intended that the Comptroller and Auditor General should take over responsibility for the statutory audit of bodies in the health service. DHSSPS staff currently engaged in the health service audit will also transfer to the employment of the Northern Ireland Audit Office.

In the case of local government audit, things are a little different. District councils are directly elected and local government is funded primarily from rates, not from central Government. Independent audit is still a fundamental requirement, however, and the approach adopted by the Northern Ireland Executive is that responsibility for the audit function should remain with the Department of the Environment but that, for employment purposes, local government auditors should have the enhanced career development and training prospects available to them as part of a bigger organisation--the Northern Ireland Audit Office. In future, local government auditors will be employed by the Northern Ireland Audit Office but will continue to be appointed to local government audits by the Department of the Environment.

On right of access to information, Members of the Northern Ireland Assembly and especially its Public Accounts Committee expressed the view on several occasions that the Comptroller and Auditor General should have the fullest possible access in the course of his audits, so that he can follow public money and ensure that it is spent as intended and properly. That means that he must have proper access to documents. The Sharman review also emphasised that the CAG should have the full range of powers necessary to do his job properly, including the power to obtain relevant documents when he carries out statutory audits and value-for-money studies. Those are normally available from the public body that he is investigating, but he will occasionally need access to documents held by third parties.

At present, the Comptroller and Auditor General often obtains information from third parties on a voluntary basis. Under the order, people and bodies in a financial relationship with the Government will be required to provide access to information relevant to that relationship. The UK Government and the devolved Administrations have been reflecting on their response to Sharman on that. Our approaches are generally similar but, as I suggested earlier, there are minor differences.

The order requires the recipients not only of grants, as in England and Wales, but of other kinds of financial assistance including loans and guarantees to provide relevant documents to the CAG. The Assembly welcomed that measure. The order ensures that those powers do not impose too great a burden on those who hold relevant documents and takes account of the Human Rights Act 1998. There will also be a more detailed code of practice, to tell those likely to be affected how the CAG will use the powers.

Obviously, there are some situations in which it would be unreasonable to expect people to provide information. The most important is where a person is in receipt of social security benefit or a similar

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maintenance grant. It is reasonable to expect someone who has received a grant in order to insulate a house, for example, to provide receipts and papers—that is what they received the money for. However, it is not reasonable to expect someone on benefits to produce receipts for every item of food and clothing bought, so people on benefits will be excluded from this legislation.

To avoid duplication, bodies under the remit of the CAG, such as Westminster, will also be excluded. If the CAG for Northern Ireland requires information that is held by such bodies, he may obtain it on consultation with his Westminster counterpart.

The order also deals with the extension of the number of bodies subject to public audit. The Sharman review recommended that the CAG be the auditor of all major non-departmental public bodies. That is a sound principle of public accountability, and the Northern Ireland Executive intended that where the CAG is not already auditor of such a body, steps should be taken to appoint him as its statutory auditor. The order is a necessary step to ensuring that that happens.

Legislation is necessary only for some NDPBs. The CAG is already statutory auditor of many executive NDPBs. Others are not founded in statute, so statutory amendment is not required to change their audit regimes. Accordingly, the order lists those major NDPBs with a foundation in statute and for which the CAG is not already the appointed auditor. Legislative action is necessary for those.

It is important to recognise that some NDPBs that are advisory in nature or very small do not have enough funds to make it desirable for us to apply the full rigours of a statutory audit regime to them. Others are limited companies, set up under companies legislation. European directives govern who can audit limited companies. Currently, that does not include the CAG.

On the timetable for implementation, we intend the new proposals to apply to statutory audits and value-for-money studies taking place in the new financial year—from 1 April 2003. We also intend the transfer of audit staff to take place on that date.

The order deals with technical and complex matters, but its essential aim is simple: to ensure that the Comptroller and Auditor General for Northern Ireland has all the powers that he needs to hold those responsible for handling public money fully to account for the use of that money. By enhancing his powers, we enhance accountability to the citizens of Northern Ireland.

2.39 pm

Mr. John Taylor (Solihull): I second the Minister's words of welcome to you, Mr. Hood. The Committee may be pleased to know that I shall not trespass on its valuable time more than is necessary in making a few supportive remarks to the Minister.

Without wishing to be cryptic, you might like to know, Mr. Hood, that when I come to a Northern Ireland order—a statutory instrument on the Committee Corridor—I apply the three Taylor tests of

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approval. First, does the order make the law of Northern Ireland more convergent with the law of England and Wales? The ideal answer is yes. Secondly, does the order create a new ombudsman or commission? The ideal answer is no. Thirdly, are we being asked to ratify a measure that enjoys considerable demonstrable support from Northern Ireland's elected representatives? The ideal answer, of course, is yes.

The Minister has said that the order will not bring about an immediate convergence between the law of Northern Ireland and the law of England and Wales. However, we may expect it to do so before very long when other measures are necessarily introduced in England and Wales. As far as I am concerned, the first test is therefore satisfied.

To make a slightly cynical contribution, for which I apologise if the Committee thinks it unfunny or in poor taste, I hold the view that, whatever the travails of Northern Ireland, an absence of institutions is not one of them. All too often, the response to a perceived problem in Northern Ireland is to introduce an ombudsman or commissioner, but I am not sure that every problem is susceptible to that treatment. I always cast a critical eye over whether a statutory instrument creates a new ombudsman or commission, and I am pleased to say that the order will not do so.

The most serious and sincere test is whether there is evidence that the order has met with a salute or some form of measurable approval by the people elected by the communities of Northern Ireland to look after them. The communities of Northern Ireland have not elected me because the electors of Solihull return me to the House. I have always thought it rather presumptuous to attempt to tell directly elected representatives of the people of Northern Ireland, such as the right hon. Member for Upper Bann (Mr. Trimble), what is good for them. It is far healthier if they say what is good for them, which gives me an opportunity to approve with more or less enthusiasm.

The Minister has, however, made it clear that the order was well on the way in the Northern Ireland Assembly. He was good enough to explain that the legislation had reached the equivalent of what we would call Second Reading but had not gone in Committee. There was plenty of evidence on the Minister's file that it was going nicely and people thought that it was a good idea. Frankly, in most cases that is good enough for me.

I have two questions for the Minister, which he can answer when he replies to the debate or, if he would rather look into them a little further, on which I would be happy for him to write to me because I will not insist on an answer this afternoon. The normal convention is that if the Minister replies by letter, the letter is addressed to you, Mr. Hood, and copied to the rest of us. Question No. 1 is this: what rules will govern the Comptroller and Auditor General's access to organisations that receive public money and for what purposes will access be provided? Secondly, what wider measures are being taken to increase the general level of public scrutiny and the public's confidence in

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how their money is being spent? With those observations and two questions, my party wishes the order well.

2.44 pm


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