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Draft Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2008



The Committee consisted of the following Members:

Chairman: Mrs. Janet Dean
Blizzard, Mr. Bob (Waveney) (Lab)
Breed, Mr. Colin (South-East Cornwall) (LD)
Browne, Mr. Jeremy (Taunton) (LD)
Chapman, Ben (Wirral, South) (Lab)
Chaytor, Mr. David (Bury, North) (Lab)
Clarke, Mr. Kenneth (Rushcliffe) (Con)
Coffey, Ann (Stockport) (Lab)
Eagle, Angela (Exchequer Secretary to the Treasury)
Field, Mr. Frank (Birkenhead) (Lab)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Griffiths, Nigel (Edinburgh, South) (Lab)
Heathcoat-Amory, Mr. David (Wells) (Con)
Holloway, Mr. Adam (Gravesham) (Con)
Marshall-Andrews, Mr. Robert (Medway) (Lab)
Newmark, Mr. Brooks (Braintree) (Con)
Sheridan, Jim (Paisley and Renfrewshire, North) (Lab)
Simpson, Alan (Nottingham, South) (Lab)
Mark Etherton, Committee Clerk
† attended the Committee

Fifth Delegated Legislation Committee

Tuesday 18 March 2008

[Mrs. Janet Dean in the Chair]

Draft Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2008

4.30 pm
The Exchequer Secretary to the Treasury (Angela Eagle): I beg to move,
That the Committee has considered the draft Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2008.
It is a pleasure to welcome you to the Chair, Mrs. Dean. I hope that the order will not detain the Committee too long and that it is not controversial.
The order is made under the Government Resources and Accounts Act 2000 and is intended to make the Comptroller and Auditor General the statutory auditor of the non-departmental public bodies before us and the NHS Direct NHS Trust. I am grateful for the assistance that we received from the National Audit Office in preparing the provisions.
This is the fourth time since 2003 that we have taken such an order through Parliament, but it is the first time that we have used the order-making power in the 2000 Act to give the Comptroller and Auditor General statutory audit responsibility for an NHS trust.
In 2003, the Government implemented key recommendations made by Lord Sharman on audit and accountability in central Government. In particular, we responded to concerns that had been expressed in Parliament by strengthening the Comptroller and Auditor General’s statutory powers in two ways. First, we made the Comptroller and Auditor General the statutory auditor of certain non-departmental public bodies. Secondly, we gave him greater powers to access documents held by bodies in receipt of grants or in relation to contracts with organisations for which the Comptroller and Auditor General is the statutory auditor.
Since the policy was established, new primary legislation setting up a non-departmental public body will usually include provision for that body to be audited by the Comptroller and Auditor General. The four non-departmental public bodies in the order were either recently reclassified as such or were established under arrangements or legislation that included no provision for audit by the Comptroller and Auditor General.
The Treasury has worked with the affected bodies to prepare them for the CAG audit. In line with policy, current audit contracts need to run their course before the Comptroller and Auditor General begins auditing the new non-departmental public bodies. The order is intended to continue the process that Parliament approved in 2003 and in subsequent orders in 2004 and 2005.
The order provides for the Comptroller and Auditor General to be made the statutory auditor of the Royal Ulster Constabulary George Cross Foundation, the independent living fund 2006, the ombudsman for the board of the Pension Protection Fund and the pensions ombudsman. In doing so, the order applies a long-standing policy, which has been endorsed by both sides of the House, that non-departmental public bodies are to be audited by the Comptroller and Auditor General.
The order also provides for the Comptroller and Auditor General to retain statutory audit responsibility for NHS Direct, even though it has become an NHS trust. It would be helpful to explain the reasoning behind that, given that the body is not specifically a non-departmental public body.
NHS Direct was formerly a special health authority. As such, it was made subject to audits by the Comptroller and Auditor General under an earlier order under the 2000 Act. However, it became an NHS trust on 1 April 2007 as part of the implementation of the review of the Department of Health’s arm’s length bodies. The National Health Service Act 2006 provides, however, that all NHS trusts are to be audited by the Audit Commission.
In the Government’s view, however, NHS Direct remains a national body, unlike all other NHS trusts, which provide services locally. We believe that it is right that NHS bodies that provide services locally should remain subject to audit by auditors appointed by the Audit Commission. However, NHS Direct NHS Trust provides national services and should therefore continue to be audited by the Comptroller and Auditor General, like other similar bodies. With those brief comments, I commend the order to the Committee.
4.34 pm
Mr. David Gauke (South-West Hertfordshire) (Con): It is a pleasure to serve under your chairmanship, Mrs. Dean. The Minister said that the measure was not controversial and should not detain the Committee long, and I suspect that I will please hon. Members when I say that I agree. If I may, however, I would like to ask the Minister some questions about the order.
First, on the five entities that will be audited by the Comptroller and Auditor General, the question is “Why now?” I take the Exchequer Secretary’s point that the non-departmental public bodies that we are debating have not previously been audited by the Comptroller and Auditor General because they have only recently been classified as NDPBs, or they were set up under legislation or other arrangements that did not provide for such an audit. For example, the pensions ombudsman has been in place since the Pension Schemes Act 1993, so is there a particular reason why it is being moved under a different regime now?
Secondly, on NHS Direct, as the Exchequer Secretary said, this is the first time that the Comptroller and Auditor General will have responsibility for an NHS trust. I appreciate that there are reasons why NHS Direct of all NHS trusts should be audited by the Comptroller and Auditor General; namely, it is a national trust, as it were, and its predecessor was a special health authority. I should like to know whether consideration was given to any other NHS trusts being audited by the Comptroller and Auditor General. Why was the issue not picked up when NHS Direct was originally formed?
I note that there is no impact assessment on the proposals because there is no policy change or financial implications of more than £5 million. In 2003, a number of non-departmental public bodies were moved so that they were audited by the Comptroller and Auditor General. In the debate on that order, there was no impact assessment because it was thought that there would be no financial implications above the relevant threshold. With the benefit of hindsight, five years on, will the Exchequer Secretary say whether the consequence of the 25 or 26 NDPBs involved being audited by the Comptroller and Auditor General has caused concern for any of the bodies or whether they have incurred any additional costs? I assume that those things have not happened, but I would be grateful to know whether recent experience confirms the Treasury position that there is no need for an impact assessment.
What impact will the measure have on the Comptroller and Auditor General? I know that in the great scheme of things an additional five bodies will probably not stretch him unnecessarily, but I would be grateful for an assurance from the Exchequer Secretary that she believes the Comptroller and the National Audit Office are capable of undertaking the additional work load and that it will not create any unnecessary strains.
Are there any other NDPBs in the pipeline, as it were, to be audited by the Comptroller? Does the Exchequer Secretary think that any other organisations should be treated in that way? Under section 25 of the Government Resources and Accounts Act 2000, the Treasury has the power to bring in an order to say that the Comptroller and Auditor General will audit a body. The criteria are that
“the body exercises functions of a public nature or is entirely or substantially funded from public money”.
Given the second criterion, have the Government given any consideration to the Comptroller and Auditor General auditing Northern Rock, for example? I suspect not, but I would be grateful for confirmation.
We welcome the order in principle and the fact that the Comptroller and Auditor General will audit those non-departmental public bodies will enable Parliament to scrutinise them to a greater extent, which will involve the Public Accounts Committee. I know that the Chairman of that Committee welcomes the proposals. We have no intention of standing in their way, but we would be grateful for clarification on the points that I have raised.
4.40 pm
Mr. Colin Breed (South-East Cornwall) (LD): It is a pleasure to see you in the Chair, Mrs. Dean. I have only a few points, because I agree that the order is fairly non-controversial.
Will the NDPBs have to change any of their current methods of accounting, thereby making a comparison of figures rather more difficult? I suspect not, but it would be interesting to know. I echo the question about how many NDPBs are not currently being audited by the Comptroller and Auditor General.
Finally, the explanatory memorandum states, under the heading “Extent”, that the order affects the whole of the UK but does not affect the powers of the Auditor Generals for Scotland or Wales or of the Comptroller and Auditor General for Northern Ireland. I do not quite understand that, because one of the order’s proposals is to bring the Royal Ulster Constabulary George Cross Foundation into the provisions. Will that responsibility be undertaken by the Comptroller and Auditor General here or in Northern Ireland? If it is not to be done in Northern Ireland, why not?
4.41 pm
Angela Eagle: I shall endeavour to answer the questions that have been asked as we have considered this rather modest proposal. The hon. Member for South-West Hertfordshire asked “Why now?”, and then sort of answered his own question: it is simply because the bodies in question have recently been reclassified as non-departmental public bodies, or are in a small tranche of bodies for which it was not specified in law when they were set up that they had to be audited by the CAG. To that extent, the order is a tidying-up exercise.
NHS Direct is unique for a foundation trust, which it has now become, because it is operates nationally. Considering the fact that all other NHS trusts are local, it seemed appropriate to us for NHS Direct to be audited by the CAG, as it has been since it was created, rather than shifted to the Audit Commission.
The hon. Gentleman asked about the Pension Protection Fund. It is now a grant-in-aid body and has accounts for the first time. That is why it qualifies for audit. He also mentioned the impact assessment and asked whether, as a consequence of the 25 previous NDPBs being audited by the CAG, any additional costs or burdens had emerged. There has been no evidence that the NAO is more expensive as an auditor than private audit firms.
In fact, last year the Treasury carried out a survey of the NDPBs covered by the previous statutory instrument, which the hon. Gentleman mentioned. Many were previously audited by private audit firms, and the survey asked whether they had experienced difficulty. I am delighted to say to the hon. Gentleman and the Committee that almost all of them said that they would remain with the CAG and that the NAO provided good value for money. Many wanted the NAO to audit their trading subsidiaries as well, as it was more expensive to have two audits than one. Hopefully that answers the hon. Gentleman’s question to his satisfaction—so far, so good.
I was asked whether any more non-departmental public bodies are in the pipeline. We are currently preparing a draft order that will subject between 40 and 50 non-departmental public body companies—or company subsidiaries—to audit, as was requested when we did the survey. The order will come before the House at some stage in the future. That is what is in the pipeline from that point of view, and it will prevent such organisations having to have two audits, which is a silly duplication of resources for them and for the auditors themselves.
The hon. Member for South-East Cornwall asked whether those subject to this switch need to change their methods of accounting. As he hinted, the answer is they do not because international accounting standards cover both private and Comptroller and Auditor General audits. The hon. Gentleman asked about the Royal Ulster Constabulary George Cross Foundation not being bound by the Northern Ireland Office. That is simply because criminal justice and policing are not devolved to Northern Ireland, so we deal with those matters here. I hope that answers the questions of Opposition Members satisfactorily. With those reassurances I hope that the order will be passed by the Committee.
The Chairman: I think that the right hon. Member for Birkenhead wishes to intervene.
Mr. Frank Field (Birkenhead) (Lab): I wish to add a point of thanks and in doing so I shall declare an interest. Until recently, I was chairman of the Churches Conservation Trust and, in the wonderful sweep-up in Whitehall to tidy up arrangements, the trust was to be included in the order.
The trust was set up by both Parliament and the General Synod to look after churches that are redundant from normal parish use, but are of outstanding historical or architectural importance to the country. When I was chairman, I was concerned that we had not been consulted about the order. One could perhaps see the rationale in relation to the operation of other bodies, but that reasoning did not apply to us. It was not a move that I expected the Prime Minister to have bothered his mind with, but I wrote to him and asked whether he would consider dropping us from the order because it was just another tidying-up move—a centralising, little measure. He decided that we should be dropped from the order, so I rise to support the extension of powers to other bodies, but wish to record my thanks on behalf of the body that I used to chair that we will not be covered by it. It is a nice little story that goes against the general trend of people wishing the Prime Minister to ever concentrate power to himself. I have given an example of him refusing to do so and leaving power where it previously resided.
Angela Eagle: Thank you, Mrs. Dean, for pointing out that my neighbour, my right hon. Friend the Member for Birkenhead, had come in. I had not noticed that he was there or that he was seeking to intervene. I am more than happy to have allowed him to do so because he has shared with the Committee the issue about the Churches Conservation Trust, which is a body that does a great deal of good work. In fact, it recently completed an extremely good restoration of a church in my constituency in Liscard, and my right hon. Friend and I were happy to attend the opening ceremony.
Clearly, as my right hon. Friend has rightly said, the Church Conservation Trust was originally part of the order, but it was taken out when the Cabinet Office decided that the trust was not a non-departmental public body. I hope that the trust will at some stage contact some of the 25 other non-departmental public bodies that are quite enthusiastic about the prospect of the CAG auditing them. If it wants a good a deal for any future audit that it wishes to undertake with the public money with which it does such good work perhaps it will consider the CAG as a potential auditor in the future—it will certainly get good value for money if it does.
Mr. Field: Perhaps.
Angela Eagle: With that little caveat and a bit of local colour, I hope that the Committee will pass the order.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2008.
Committee rose at ten minutes to Five o’clock.
 
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