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"The Labour party intends to give effect to this principle when in government."-[ Official Report, 16 December 1987; Vol. 124, c. 1201.]
The argument for that approach is that we should have greater parliamentary involvement in public appointments. It is an argument that the Prime Minister espoused in his very first statement to this House as Prime Minister. It is one with which I have some sympathy, as it seems to be a more democratic approach, but there are specific arguments that apply in this context that suggest that the continuation of the present system may be a sensible approach.
The first argument is that the Chairman of the Public Accounts Committee is a Member of the Opposition. That is a long-standing convention, and one that I am sure will continue. The Chairman has a substantial role in determining an appointment. In fact, by and large, as I understand it, in practice the Chairman essentially makes the selection, which is then approved by the Prime Minister.
It is important that the CAG is seen as independent of the Executive, and an appointment made by a senior Opposition Member demonstrates an important degree of independence.
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Mr. Heald: I have been wondering whether the CAG would be the right person to be in charge of the office for budget responsibility that the Conservative party has proposed. I wonder that for exactly the reasons that my hon. Friend has outlined: the independent nature of the CAG appointment process.
Mr. Gauke: I am grateful for my hon. Friend's intervention. That would be an interesting structure, although I would be reluctant for the CAG to perform that role. Although the CAG and whoever would be in charge of the office for budget responsibility would play an important role in budget responsibility, I would not want to complicate the role of the CAG because it is a substantial job in itself. Furthermore, the skills required of the CAG-being able to identify waste in specific programmes-involve performing a role at a micro level in identifying particular problems, whereas we envisage the office for budget responsibility working at much more of a macro level. It would be a role for an economist to assess the needs of the Government in reducing the deficit, and the progress-or lack of-made by the Government in achieving those objectives. The parallel is strong in that both roles require a high degree of independence to have the credibility required to perform successfully.
Mr. Heald: My first thought was that, to assess the sustainability of public finances, we need expert economists, as my hon. Friend just said. However, there would be two other aspects of the role of the new office: to audit fully the national debt-or debts-and to enforce a long-term strategy of value for money in public spending. Those fit in well with the role of the CAG. Would there be any logic to giving him that role? I simply cast out that thought to him.
Mr. Gauke: I am grateful to my hon. Friend, and I am sure that his points will be noted. Both roles would be important. It is helpful to the Committee highlight the significance of the office for budget responsibility, and I think that we agree on the significant role that it would play-I hope-in addressing the current huge levels of borrowing. I hope that it would be important, just as the CAG has been important.
On clause 37, we think, on balance, that the result that we have got to, which is largely a continuation of the previous process, is an important one. We are pleased that it remains a requirement for the Prime Minister to move the motion for the appointment of the CAG. As I said, I have had the pleasure of responding to the Prime Minister twice when he has performed that role-I am sure that he was delighted to have that opportunity too. All being well, however, such a motion should not happen very often-once in 10 years, as the Bill envisages-although it is always possible that things will not go entirely to plan. Because of the independence provided by the Chairman of the Public Accounts Committee, there is a danger that the existing independence might be diminished in those circumstances by a straight vote in Parliament-whether a vote in Committee or a vote by the whole House-given that the Government will always be the majority party. Consequently, we welcome clause 37.
Mr. Edward Leigh (Gainsborough) (Con): I rise to speak in favour of clause 37, which covers the office of the Comptroller and Auditor General, and to oppose amendments 68 and 78, and new clause 41.
A number of provisions already protect the independence of the post holder, including the appointment process, the length of tenure and the terms of the appointment. Let me start with some context, so that we can understand the significance of the legislation, why it is important to be clear about the purpose of the Bill and why we must tread carefully in this territory.
The Comptroller and Auditor General is an Officer of the House of Commons. He is not a civil servant and is completely independent of the Government. Uniquely, he is selected by the Government and the Opposition. He reports to Parliament on the activities of the Government and his work is overseen largely by the Public Accounts Committee-the oldest Committee in Parliament, which was set up 150 years ago-which is always chaired by a member of the Opposition. Therefore, there are a number of locks throughout the process to ensure the independence of the Comptroller and Auditor General.
All those arrangements are supported by complex legislative structures and significant parliamentary conventions, many of which have existed for a long time. The result of all those conventions and laws, as well as what we are talking about in clause 37, is to enable the Comptroller and Auditor General to function absolutely independently of the Government. That is what they all do. He must have complete discretion in how he carries out his functions.
I worked closely with the Father of the House, after the retirement of Sir John Bourn. We were clear at all times that we must not mess with the traditional independence of the Comptroller and Auditor General. There may be an opportunity later to discuss the corporate structure and all the rest of it, but the fundamental point is that the Comptroller and Auditor General is completely independent of the Government and that he alone and nobody else-not the Public Accounts Committee and not the board of the National Audit Office-signs off the reports. Nobody else can affect his judgments. He is completely independent, and that is vital.
That statutory independence, which is underpinned by the new Bill, is not a notional phenomenon, shrouded in cobwebs and dating back centuries, or at least back to Gladstone. Rather, it is real, it is current and it forms a key plank of our constitutional fabric. One only has to look around the world at what has happened in other countries to know how important it is-indeed, vital-to have an independent supreme audit office. Every country has a supreme audit office, but not all of them are as independent or effective as ours. Indeed, ours is arguably the best in the world.
I am therefore pleased that the current arrangements, whereby the Comptroller and Auditor General's appointment is proposed by the Prime Minister following consultation with the Chairman of the PAC, have endured-I say "consultation", but it goes much further than that. Frankly, they both have a veto. This gentleman-Amyas Morse, although the Comptroller and Auditor General may be a lady in the future; we do not know-can be appointed only if the Prime Minister, who is obviously
a member of the Government by definition, and the Chairman of the PAC, who by convention is a member of the Opposition, both agree.
In fact, in appointing the current Comptroller and Auditor General we improved the process further. Last time, when Sir John Bourn was appointed, my predecessor, Bob Sheldon-now Lord Sheldon-was given a list by the civil service and he interviewed the candidates in his flat. It was a closed process. We now have an open competition, and this time there were a number of advertisements, and anyone could apply. The interviews were carried out at length by myself and the permanent secretary to the Treasury, who represented the Prime Minister. I would like to thank the permanent secretary for the many hours of work that he put into this. By that stage, we had already appointed the new chairman of the National Audit Office, Sir Andrew Likierman, and he was also involved in the latter part of the process. We had an open competition with a number of good candidates, and I believe that we came out with the best.
Mr. Philip Dunne (Ludlow) (Con): My hon. Friend has just referred to the chairman of the National Audit Office having some involvement in the selection of the current Comptroller and Auditor General. Will he elaborate a little further on the relationships involved, in the context of the appointment of a Comptroller and Auditor General? The Prime Minister is involved, as is the Chairman of the Public Accounts Committee, but what is the role of the chair of the National Audit Office in the appointment of its chief executive?
Mr. Leigh: The chairman's role was simply to advise. He is a very distinguished gentleman-he is the dean of the London Business School, and he was head of the Government resources office in the Treasury-and he simply gave me advice. Obviously, I am not going to reveal who was on the shortlist or what happened in the discussions, but I can say that, ultimately, the decision was mine and no one else's. I listened to his advice and that of Tim Burr, the then Comptroller and Auditor General, who was also on the selection panel as he was not a candidate himself. Nick Macpherson, the permanent secretary to the Treasury, also gave me his advice. I chaired the meeting, and I made the decision: I appointed the new Comptroller and Auditor General.
Then, however, my decision had to go to the Prime Minister, and I give him credit for acting promptly, because, within a week, he had approved the appointment. So he, too, had a lock on the process. Of course, it is not surprising that he approved the appointment, because Nick Macpherson was part of the process. If I had insisted on appointing someone who was obviously not qualified, the Prime Minister would have vetoed it. So we each had a lock on it, and that is a very good process.
It might sound democratic to suggest that the House as a whole should vote for the Comptroller and Auditor General, but that would go against everything that I have been arguing for-namely, that the Opposition and the Government should both have a lock on the process. If the House as a whole voted on the appointment, the Government party would effectively appoint him.
Mr. Alan Williams:
Does the hon. Gentleman recollect that the one proposal that we turned down from Tiner was his suggestion that the chair should be selected by the Prime Minister and the chair of the Commission? We unanimously rejected that, because the chair of the
Commission is chosen by the Prime Minister, or by the Government party, and is of the same party. For that reason, we insisted on reverting to the situation that the hon. Gentleman enjoyed.
Mr. Leigh: It was the same process. I am grateful to the Father of the House for his generous offer to surrender his right to appoint the chairman of the National Audit Office, along with the Prime Minister; that was what was originally proposed. We immediately spotted the problem that he has just alluded to-namely, that that would effectively mean that the Government party would appoint the chairman. The right hon. Gentleman therefore immediately, and very generously, surrendered that right. Just as there was an appointment panel for the Comptroller and Auditor General, there was also one previously for the chairman. Again, the Prime Minister, as a member of the Government, and I, as a member of the Opposition, had a lock on that process. So I think that we have the right structure.
The independence of the Comptroller and Auditor General is guaranteed by a jigsaw of measures that hang together as a whole, and we should be very wary of unpicking any one part of it without careful consideration. We do not know what is going to happen in the future. There could be some kind of appalling financial scandal at the heart of the Government, for example, and it is absolutely essential that this man-or lady-is completely independent.
Central to this has always been the fact that the Comptroller and Auditor General also has tenure of appointment and, like a judge, cannot be removed from office except on a vote of the entire House of Commons. The Public Accounts Commission, which I also sit on-it is, of course, separate from the Public Accounts Committee-has concluded that the current unlimited appointment was "anachronistic". I do not think that when Sir John Bourn was appointed anyone spotted that the civil service retirement age at the time was 60: it was rigidly enforced; all senior civil servants had to retire at 60.
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Mr. Alan Williams: Will the Chairman of the Public Accounts Committee bear in mind that there is an important extra safeguard even there? If a vote of only this House were required, the Government could use their majority, which is why a vote of both Houses is required to dispose of the Comptroller and Auditor General.
Mr. Leigh: I should have made that clear; it is a very important point. In other words, it is virtually impossible to get rid of him. That is absolutely right.
I was saying that the previous appointment was anachronistic and that no one spotted at the time Sir John Bourn was appointed that even though the civil service retirement age was 60, he could basically go on. I had a very good relationship with Sir John Bourn, who was outstanding public servant. Frankly, however, let us be honest about it, 20 years is perhaps too long. The equivalent office in the United States has a fixed single term of 15 years, which we also thought was too long. The Public Accounts Commission thus concluded that a fixed term of 10 years was appropriate. There was
some argument over whether it should be eight or 10 years. I think that the Government probably favoured eight years and I would have been happy with eight years, but 10 years is a real good length of time to make one's mark-it could span three, certainly two, Governments.
It is very important that this appointment be non-renewable. We do not want the CAG to suffer the fate of all US Presidents and most new Prime Ministers where the first term is overshadowed by the need to be re-elected. This chap owes nothing to anybody. Nobody can sack him-short of he or she having a hand in the till-and nobody can get rid of him; he is there for 10 years and then he retires.
We need to take great care before tampering with any of the founding legislation, which was carefully drawn to provide broad rights of access and reporting and to safeguard the independence of the CAG as an Officer of the House and the external auditor of the Government. That is not to say that no aspect of the arrangements can be improved upon. I am in favour of the changes proposed in the Bill. I think that the arrangement is being improved, but we need to take great care and to be alert to our old friends-the unintended consequences.
The Public Accounts Commission has worked very closely with the Government to ensure that the clauses improve the governance arrangements of the National Audit Office. I pay tribute to the Government for adopting all that the commission proposed; there was complete agreement within it, as well. We should also pay tribute to the fact that the Government, working with the commission, have ensured that we are not going to undermine the audit independence of the CAG.
The commission agreed that it was possible to separate the internal governance-this is a very important point-of the NAO from the responsibility for making audit judgments, but we recognised that to do so required arrangements that were unique among the panoply of organisational models used in 21st century Britain. What the Father of the House and myself were absolutely determined to avoid was some kind of new corporate structure in which a board could affect the independence and audit judgments of the CAG. I know that there has been some debate about this, and some worries that we were creating something like the Audit Commission-we are not. The CAG is completely independent. This board will deal only with the organisational structure of the body.
The Bill thus proposes no changes that will affect the work-the real and important work-of the CAG in the audit of Government accounts or in the 60 reports on value for money that he makes to the Public Accounts Committee every year. He remains independent. He alone will be responsible for all audit judgments; he alone will maintain complete discretion in the discharge of his office. His access rights are not affected and the results of his work will continue to be reported in full to Parliament through the Public Accounts Committee.
Mr. Dunne:
I am grateful to the Chairman of the Public Accounts Committee for clarifying the important tenets of independence that the Comptroller and Auditor General will continue to have in carrying out his day job, if I can put it that way. Will he elaborate a little further on the distinction he made a few moments ago
about the role of the board and the chairman in so far as they relate to the CAG? In a conventional sense, a chairman would normally have some authority over the CAG, but it appears from what my hon. Friend said that that is not intended.
Mr. Leigh: I hope that I am not giving away any confidences by saying that Amyas Morse told me this week that it can be a very lonely job-and, as I have described it, a very important one-and he welcomes the advice of the chairman of the board, Sir Andrew Likierman. The Comptroller and Auditor General can go to him in confidence at any time and ask for his support and advice. However, the arrangement is unique: although Sir Andrew Likierman can give his advice, the buck ultimately stops with the Comptroller and Auditor General.
The Comptroller and Auditor General has a large staff of 800 people who help him to write reports, but he puts his signature on the document, and it is his document and his alone. The board will be involved, for instance, in appointments, such as deciding who should be deputy Comptroller and Auditor General, what the travel arrangements of the Comptroller and Auditor General should be, and what should be the size of the staff. It was wrong that, under the previous incarnation of Sir John Bourn, who was a fine public servant, the Comptroller and Auditor General was a complete dictator-that was always the case; Sir John did not change anything in that regard. He not only had complete independence on his audit judgment, which is right, but appointed all the deputy Comptroller and Auditor Generals, decided the travel arrangements and everything else. In the modern world, one cannot go down that route. One must have a modern corporate structure, involving a board, as long as the board does not tell the Comptroller and Auditor General what to do in relation to his audit judgments.
Mr. Andrew Tyrie (Chichester) (Con): Does the Chairman of the Public Accounts Committee agree that, taking all things into account, we now have a structure that deals to some degree with the loneliness problem, and creates a relationship between the board chairman and the CAG that will enable the morale of the NAO to be not only sustained but strengthened? Does he also agree that the work of the Public Accounts Commission, and particularly of its chairman, was instrumental in enabling such significant changes to be made without damage to the morale of the NAO, at a time when the structure had a sense of fragility about it?
Mr. Leigh: As I understand it, morale in the National Audit Office is now very high. It went through a sticky patch-there is no point denying it-and there was bad publicity, much of it unfair, but that is now past us. Morale is high and people feel that the structure is fair and open, that people are appointed entirely on ability, and that their career is judged by a number of people sitting on the board, the chairman and the non-executive directors. I believe that we have got it right, and for that reason, I oppose the amendments, as they serve to define the Comptroller and Auditor General's audit purpose and to open up discussion of his access rights, neither of which was covered by the review commissioned by the Public Accounts Commission that led to this part of the Bill.
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