Session 2010-11
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Budget Responsibility and National Audit Bill [Lords]

Budget Responsibility and National Audit Bill [Lords]

The Committee consisted of the following Members:

Chairs: Mr Roger Gale  , Dr William McCrea 

Docherty, Thomas (Dunfermline and West Fife) (Lab) 

Gilmore, Sheila (Edinburgh East) (Lab) 

Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

Greening, Justine (Economic Secretary to the Treasury)  

Hames, Duncan (Chippenham) (LD) 

Jones, Graham (Hyndburn) (Lab) 

Leslie, Chris (Nottingham East) (Lab/Co-op) 

McCarthy, Kerry (Bristol East) (Lab) 

McGovern, Alison (Wirral South) (Lab) 

Morrice, Graeme (Livingston) (Lab) 

Morris, Anne Marie (Newton Abbot) (Con) 

Nuttall, Mr David (Bury North) (Con) 

Patel, Priti (Witham) (Con) 

Shelbrooke, Alec (Elmet and Rothwell) (Con) 

Smith, Julian (Skipton and Ripon) (Con) 

Truss, Elizabeth (South West Norfolk) (Con) 

Williams, Stephen (Bristol West) (LD) 

Wilson, Sammy (East Antrim) (DUP) 

Alison Groves, Committee Clerk

† attended the Committee

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Public Bill Committee 

Thursday 3 March 2011  


[Mr Roger Gale in the Chair] 

Budget Responsibility and National Audit Bill [Lords]

Schedule 1 

Office for Budget Responsibility 

Amendment again proposed (this day): 28, page 13, line 21 [Schedule 1], at end insert— 

‘Premises7A The Office and its employees will not be located in the Treasury.’.—(Kerry McCarthy.)

1 pm 

Question again proposed, That the amendment be made. 

The Chair:  I remind the Committee that with this we are discussing amendment 29, page 13, line 28 [Schedule 1], at end insert— 

‘(3A) The Staff must be employed solely by the Office, and not be seconded to or from other departments.’.

Thomas Docherty (Dunfermline and West Fife) (Lab):  Good afternoon, Mr Gale. I believe I am right in saying that this is the first time I have had the privilege of serving under your chairmanship. I very much look forward to doing so this afternoon and perhaps next week. 

I rise to speak in support of amendment 28, tabled by my hon. Friend the Member for Bristol East. I confess that I have an ulterior motive in supporting the amendment, and, based on some private conversations that I have had with Government Members, I suspect that they, too, might be tempted to see the reason of it. 

The amendment would not just ensure that the Office for Budget Responsibility was based physically outside the Treasury but would allow it to be based elsewhere in the United Kingdom. I am sure that many hon. Members on both sides of the room will make articulate cases in their own right for the benefits of that. The hon. Member for Scarborough and Whitby would be a true champion of the merits of Scarborough, the hon. Member for Bury North would argue the case for basing the OBR in the north-west, and the hon. Member for Witham would make an equally powerful case for her constituency. Of course, it goes without saying that my hon. Friends the Members for Nottingham East and for Bristol East and other hon. Friends would make powerful cases, as would the hon. Member for Chippenham. 

One reason a location has not been specified is that when I did a head count around the room this morning, I felt that Yorkshire would be in a powerful position, given the power of the Whips in this matter. Both of them would gang up on us humble Members and ensure

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that Yorkshire won the case. [ Interruption. ] I apologise—my hon. Friend the Member for Hyndburn is a Lancashire MP. 

Julian Smith (Skipton and Ripon) (Con):  Could I ask the hon. Gentleman to point out that, as a result of this Government’s investment in superfast broadband, rural Yorkshire would be a good place for his proposal, if the Government were to agree with it? 

Thomas Docherty:  The hon. Gentleman is absolutely right about the merits of locating in a rural part of the UK. As a Member for a semi-rural constituency, I would echo that sentiment. However, I do not want to get tempted into a debate on the merits of individual locations. Suffice it to say that I think the amendment would produce an excellent clause. It is highly reasonable, and I am sure that the Minister, who has an excellent reputation as someone who keeps a tight hold on the Treasury’s purse strings, will see the strong case for it. We would not have to pay the exorbitant central London rates and office rents. A location in Bury, Witham, Livingston, Edinburgh or another place would save the Treasury a great deal of money. I very much hope that the Minister will be able to find some merit in the amendment. 

The Economic Secretary to the Treasury (Justine Greening):  It is a pleasure to serve under your chairmanship again, Mr Gale. 

I understand the rationale behind amendment 28, and, in many respects, I agree with it. We briefly touched on the OBR’s location yesterday, when I recounted the potential for a Treasury Minister to bump into Robert Chote, for example, in the Treasury. I said that I was sure that would not happen once the OBR had moved. Actually, it has already moved—that demonstrates just how independent it is—and is not located in the Treasury. In October, Robert Chote announced his intention to move the OBR out of the Treasury, and it moved in December. It now co-locates with the Attorney-General’s Office. 

Future decisions on the location of the OBR will be a matter for the independent OBR and its chair. I have no doubt that Committee members who wish the OBR to be located in their constituencies will be able to make a passionate case to its chair on behalf of their local community. However, because the OBR is independent, such requests would have to be made to the OBR itself. It is important that the OBR is seen to be independent, and its location is relevant to that. At the heart of what we are trying to do is ensuring that it has an independent working relationship. That is the ultimate test. 

The Congressional Budget Office was mentioned earlier, and I wondered where it was located—in particular, was it in a separate location? It is located in the Ford House office building, one of four buildings for House of Representatives staff on Capitol Hill in Washington DC. The Ford House office building is the only building not connected underground to the other office buildings or to the Capitol, and it is the only office building that does not contain offices for Members of Congress. There, as with the OBR, we see the use of ensuring that the office is located in a different place. However, the interesting thing about it being the only office building

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that is not connected underground is that it shows that being in a different building does not necessarily mean that you are not connected with other buildings. In relation to amendment 28, the OBR is already located separately. 

Thomas Docherty:  Given that fact, and given that we are talking about less than 1 square mile of real estate, does it not therefore follow that the Minister can accept this reasonable amendment? 

Justine Greening:  I would be undermining the independence of the OBR if I told it where to locate. The hon. Gentleman should make his case to the chair of the OBR rather than to me as a Treasury Minister. 

Thomas Docherty:  We do not want Parliament to tell the OBR where to locate. We simply want to tell it where not to locate. 

Justine Greening:  In a way, that is one and the same thing, so we do not need the amendment. In practice, it would not make any difference, because the OBR is no longer located in the Treasury. 

I turn to the question of employees and secondees. Once the OBR is established by statute—that is the Bill’s intent—a number of forecasting experts will be formally transferred from the Treasury to the OBR. They will not be secondees; they will be direct employees of the OBR, and will report to the chair of the OBR. As we heard earlier, the chair will be independent. The process for appointing the chair is fully independent, and the appointment can be vetoed by the Treasury Committee. The OBR staff are absolutely independent. 

Kerry McCarthy (Bristol East) (Lab):  The Minister may be about to speak about this—I may be slightly premature—but she said that staff will be transferred from the Treasury. Who will decide which Treasury staff are to be transferred? Surely the director of the office should have the final say. Doing otherwise would suggest that the Treasury was trying to put its placemen or women in position. 

Justine Greening:  I agree with the hon. Lady. I assure her that the OBR is responsible for all future staffing decisions—not only hiring but firing. 

In light of what I have said, we do not need amendment 29. The provision is clear cut; people working in the OBR will be working for the OBR. They will report to the chair of the OBR, and he has decision-making powers over his staff. Hopefully, I have now answered the shadow Minister’s queries. 

Kerry McCarthy:  It is, of course, a pleasure to serve under your chairmanship, Mr Gale. I accept the Minister’s point that the office has already moved out of the Treasury. That is obviously welcome although I see no harm in having the Bill make that a permanent state of affairs. Who knows what may happen in future? As for the staff being employed solely by the office, I am reassured that Robert Chote will have complete discretion in the people he takes on. The Minister said that the forecasts would be transferred over and that sounded as if it was an automatic process based on people’s job

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descriptions. If people are currently doing the economic forecasting role in the Treasury, but Robert Chote does not think that they should join his team, is he entitled to say no? 

Justine Greening:  To be absolutely clear, the chair of the OBR is responsible for all hiring and firing of staff. As the hon. Lady will understand, there is a limited pool of talent to do the forecasting that the OBR needs to do. So, of course, as it starts it is perhaps understandable that it will draw from the talent that was in the Treasury. In future I would expect it to be able to draw more staff from other areas into its overall staffing levels. But it is absolutely in charge of hiring and firing. 

Kerry McCarthy:  I thank the Minister for that reassuring response. There is one point that may still concern us. As she says, some people have already gone over from the Treasury to the office that is currently running. There is a potential conflict of interest if during the course of their career progression some of them return to the Treasury. Obviously within the civil service as a whole there will be far more career opportunities than there are in the OBR because it is a much smaller entity. We would not want to restrict people’s career development, but at the same time, if they spent a few years in the OBR and then returned to the Treasury, and if there was quite a lot of that cross-fertilisation going on, it would give cause for concern. That is something that needs to be kept under scrutiny once the office is put on a statutory footing and starts to bed down. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Kerry McCarthy:  I beg to move amendment 30, page 14, line 13, at end insert— 

‘(3) The Budget Responsibility Committee and all sub-committees established under paragraph 10 will publish the minutes of all their meetings.’.

The amendment is fairly self-explanatory. Again, it addresses the point that we have discussed already about how the functions of the OBR should be as transparent as possible so that it can be as accountable as possible to the public and to Parliament. Obviously the Monetary Policy Committee publishes minutes of its meetings, albeit with some delay. We think the minutes of the Budget Responsibility Committee and any of the sub-committees that are established under the Bill should also be published. I should be interested to know whether the Minister agrees. If she does, perhaps she will be prepared to accept the amendment to ensure that that will definitely be the process in future. 

1.15 pm 

Justine Greening:  Because the OBR is independent, it is ultimately a matter for the OBR whether it chooses to publish the information relating to its committees and its contacts with Ministers. Schedule 1 allows the BRC to determine its own procedures and the OBR to determine the procedures of its committees and sub-committees. As I said, that supports independence. Minutes are probably not the best way to communicate the OBR’s conclusions. The hon. Lady may have in mind the Bank of England and the publication of the Monetary Policy Committee’s minutes. Those minutes are the principal means by which it explains its monthly policy decisions. 

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The OBR is not a policy-making committee, so it is appropriate for the Budget Responsibility Committee to explain its forecast judgment in its reports. That is one reason why, in the charter and the Bill, we make it clear that those reports should set out the risks considered by the OBR, the assumptions that it makes and the various methodologies that it uses, so that there is complete transparency. 

It is not for the Government to say that the OBR should have to publish its minutes. There would be a danger of slight overkill if it had to publish the minutes of every meeting. However, it is important that when the OBR has finished its work, it is put into the public domain and that it is transparent and comprehensive. The provisions in the Bill ensure those very things. It makes it clear that all OBR reports must be published. As I said, those reports must include key risks and assumptions. The OBR has the underlying duty to act transparently. I assure the hon. Lady that there is a transparency safeguard. As for the questions that people might have about how the OBR goes about its reporting, I hope that that will be covered by the report. 

Kerry McCarthy:  I thank the Minister for her response. In this and other sittings, she has stressed that the OBR is independent and should therefore decide for itself how to conduct its affairs and exercise its own judgment on whether to publish minutes. However, it is we in Parliament who are setting up the OBR. We are not just saying, “Here you are, get on with it.” The purpose of the Bill is to set out and prescribe in detail how the office should be run. This is our one opportunity to ensure that the office is given certain guidelines. I appreciate the Minister saying that the office will publish regular reports, outlining its reasons and giving the methodology on which it bases its forecasts. That is little different from publishing minutes of meetings. 

Again, we come to the question of the relationship between the OBR and the Treasury. For example, it would be in the public interest to see minutes of any regular meetings the OBR had with Treasury officials. I do not suggest that a full transcript should be made of everything that it discusses, because some matters will obviously be confidential. It would also be a huge burden. I would be interested to know to what extent it would be covered by the Freedom of Information Act, but it is entirely reasonable to suggest that the OBR should publish minutes of those meetings. 

Justine Greening:  The hon. Lady is right that freedom of information provisions will apply to the OBR. She spoke about the public interest, and the FOI mechanism is a good one for assessing what is in the public interest. The hon. Lady spoke about minutes, but those who make freedom of information requests will know that there may be other documents; the danger with the amendment is that it may not catch what she wants. 

I draw to the hon. Lady’s attention the fact that clause 5 clearly states that 

“The Office must perform that duty”— 

how it delivers its reports— 

“objectively, transparently and impartially.” 

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If we are going to give the OBR independence, we have to allow it to see for itself how best to fulfil its duty. It may decide that it wishes to publish minutes, but I believe that it is not for the Government or Parliament to tell it to do so. 

Kerry McCarthy:  I thank the Minister again. I have residual concerns, but I shall not press the amendment to a vote. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Kerry McCarthy:  I beg to move amendment 31, in schedule 1, page 15, line 18, leave out ‘5’ and insert ‘3’. 

The Chair:  With this it will be convenient to discuss the following: 

Amendment 32, in schedule 1, page 15, line 40, leave out ‘5’ and insert ‘3’. 

Amendment 33, in schedule 1, page 15, line 41, leave out ‘5’ and insert ‘3’. 

Amendment 34, in schedule 1, page 16, line 1, leave out ‘5’ and insert ‘3’. 

Kerry McCarthy:  The Minister will be aware that this part of the schedule was substantially amended in the Lords at the Government’s request, after the Grand Committee debate. It now includes the proviso: 

“The Non-executive Committee must, at least once in every relevant 5-year period, appoint a person or body to review and report on such of the Office’s reports as the Committee determines.” 

All four amendments in this group deal with the same point, a factor that was discussed in the other place when the Government amendments were debated. They suggested that five years is too long. It is important to revisit the question. I have two concerns. 

First, if the OBR waits the maximum five years before commissioning an external review of its reports, it will take us beyond the next general election. When setting up a new body, it is important to review its workings at a fairly early stage. I appreciate that there will always be the opportunity for people such as the Treasury Committee to look into the matter, but this provision is about an independent review to be set up by the non-executive committee. It will be an ongoing process, and getting it in motion fairly early in the life of the OBR is important. 

Secondly, there are obvious political concerns, particularly if we have five-year fixed-term Parliaments. It is always possible that the external review could be carried out just after the general election, but I believe that it is important to put the OBR under a little more scrutiny before the election to ensure that it is up and running and doing its job properly. It is up to the office to decide when such a review is carried out and I am sure that the Minister will say that it will be a maximum of five years, but there is a danger that the office will decide that it wants to carry on in its own sweet way for as long as possible before asking someone else to pass judgment on it. Giving it five years’ leeway is too long. We believe that it should be three. 

Justine Greening:  It is important for the OBR periodically to have an independent external review. As the hon. Lady pointed out, when the Bill was debated in the

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other place, the question was asked how often the process should take place. We amended the Bill in the light of that debate. 

Ultimately, if we have non-executives in place—they are an in-built external check on how the Budget Responsibility Committee is working—we have to allow them the independence to take a view on when external peer reviews should be carried out. As the hon. Lady said, they must be carried out at a maximum of every five years, and it is important that there is a periodic external assessment of how the OBR is working. Of course, there is nothing to stop those non-executives deciding that they want an external peer review earlier than that; for instance, they could decide to commission a review every three years. However, there is no doubt that such external reviews are not the only means by which the work of the OBR can be scrutinised between times. 

The OBR’s work will be scrutinised under a package that comprises various factors. There is the duty under clause 5 to act transparently; its work will be open to ongoing challenge and review by well-regarded think tanks and academics whose time is spent commenting on economic matters. There is also a statutory requirement on the OBR to produce an annual assessment of the efficacy of its fiscal and economic forecasts. That will be done in the presence of the non-executives; they will be there on a day-to-day basis, to challenge internally how those forecasts are being done. Behind that, the OBR has said that it intends to establish an advisory panel of experts to support and challenge its work. We spoke earlier about the Congressional Budget Office; these provisions bring us into line with US practice. 

The OBR’s integrity depends on whether people believe that it fulfils its role of producing independent, robust and credible economic and fiscal forecasts. In the difficult economic times of recent years, it has been a challenge for independent groups to achieve that, but in an underlying way they will be expected to be robust. The OBR will have every incentive to carry out its work to the highest standards of accuracy. It will set up a panel to advise it, and the non-executives will be there from day to day. We also have the peer review, which will be entirely external, and the OBR will publish its reports. There will be a huge amount of transparency on whether its forecasts and estimates are accurate. We do not need to fetter the responsibilities or decision-making powers of the non-executive directors. 

I assure the hon. Lady that she has raised an important matter, but we believe that leaving the Bill as stands will allow us to ensure that the external review happens and is of high quality. 

Kerry McCarthy:  I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Kerry McCarthy:  I beg to move amendment 35, schedule 1, page 16, line 7, at end insert— 

‘(3) The Treasury’s decisions on payments and the budgets for the operations of the Office shall be subject to the approval of the House of Commons Treasury Select Committee.(4) The Office’s budget will be published annually.’.

I am sure that some members of the Committee will be pleased to hear that this is the last amendment to schedule 1, but it is one of the most important. We have

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already discussed the matter in passing. It is about the OBR’s budget. The Minister said that a five-year budget had been agreed under the spending review, but given the precedents mentioned earlier of what happens in other countries, I believe that it ought to be subject to some sort of check from outside the Treasury rather than being announced in the Treasury’s spending review. We believe that the Treasury Committee should act as watchdog, to ensure that the OBR is properly funded. 

The Minister says that funding is secure for five years. We do not know at this stage quite how much work the OBR will have to do; it will depend on economic circumstances. A certain degree of leeway has been given to the office to undertake additional work, and there is no limit on the number of reports that it can produce. The office may want to revisit the matter before those five years are up and make a plea for extra funding. It should not be a matter for debate between the OBR and the Treasury; the Treasury may say that the OBR has already made far too much noise and ought to be kept in its box. We therefore suggest that the Treasury Committee should be involved. 

I am sure that the Minister will seek to reassure us that the Treasury wants the office to be able to do its work to the full, and that it will want to give it the resources to do so. I have already mentioned the concerns expressed in the other place by Lord Eatwell about the Parliamentary Budget Office that was established in Canada in 2008. A year later, after it had produced two reports critical of the Government, its annual budget was frozen, despite earlier promises that it would be boosted by a third. Sweden’s Fiscal Policy Council was set up in 2007 by the incoming Conservative Government, but on 18 November last year the council wrote to the Government pointing out the discrepancy between its remit—what it had been asked to do—and the resources that it had been given. The Swedish Minister of Finance is reported to have reacted negatively, suggesting that the council’s budget be cut. 

Sweden and Canada are fairly respectable countries to which we would normally look for examples of best practice; there was another example from Hungary as well, which I will not go into now, not that I am suggesting that it is not as respectable and well thought of as Sweden and Canada. Those are examples of democratic countries that operate in a transparent and accountable way pulling the plug on resources for the equivalent of the OBR when they did not like how it was operating. They did that in the early stages. 

I cannot imagine the Minister standing up in public and saying, “We don’t like what you are doing. Therefore I’m going to speak to my friend the Chancellor and take all your money away.” I am sure that she would not be so indiscreet, but there is obviously a danger that the budget could be gradually whittled away, whether by the front door or the back door, to try to hamper the OBR’s work. That is why it is important to ensure in the Bill not just that the OBR is properly funded but that there is check and balance through the Treasury Committee, which should have a remit to ensure that the funding is in place. 

1.30 pm 

Justine Greening:  We agree with the spirit of the amendment to the extent that it recognises transparency, and parliamentary scrutiny of the OBR’s budget. Clearly,

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parliamentary scrutiny will be a hugely important safeguard of the OBR’s independence. However, the Government have already put a number of arrangements in place to ensure that there is confidence about resourcing for the OBR. Perhaps I could run through them and then back up the fact that they are sufficient by quoting what the current chair has said about the resourcing that he has to run the OBR. 

The amendment would give the Treasury Committee an additional role in looking at payments and budgets. Aside from the logistics—it would be extremely difficult for the Treasury Committee to have, in effect, sign-off on the OBR making payments—the Treasury Committee has not asked for those powers, and it would be hard to make them work constitutionally. 

In line with the Treasury Committee recommendation, the annual budget of the OBR will be identified separately in the Treasury’s estimate, so it will be available for the Treasury Committee to scrutinise there. The hon. Lady will be aware that the OBR has been provided with an agreed and publicly documented multi-year budget, so the annual budget exercise that she was concerned about cannot be used to exert pressure on it. In fact, that aspect of how the OBR has been set up has been welcomed by the IMF, which has, no doubt, looked at the examples of different countries that she gave and recognised that there is a real problem. 

Interestingly, the hon. Lady mentioned the Canadian example. The Canadian parliamentary budget officer was not given an agreed, published, multi-year budget, which I think was one of the reasons why it was easier to reassess that budget downwards, if that is what happened. In the UK, we have set up an independent OBR, and we have been very clear about setting a five-year budget for it which is now in the public domain. 

Additionally, in line with the Treasury Committee recommendation, the OBR will also be able to submit to the Select Committee an additional estimates memorandum alongside that of the Treasury in which it can explain for itself the reasons for changes in the available budget for the year ahead. The Bill gives the OBR’s non-executives a duty to report on anything that appears to them to constrain the OBR’s discretion, which could include any attempts to control the OBR by manipulating its budgets. I understand what the hon. Lady is trying to achieve with the amendment, but I do not think that it will deliver anything over and above the safeguards that are already in place. 

My other concern is that, in expanding the role of the Treasury Committee, we could end up with a situation in which the Committee, having signed off on various payments made by the OBR, finds itself being summoned to the Public Accounts Committee, which might decide to inquire into the financial running of the office. That would start to muddy parliamentary scrutiny. 

Finally, the Chair of the Treasury Committee, speaking of his ability to look at the financing and funding of the OBR, said: 

“It is vital that the OBR has the resources it needs. The Committee will monitor this carefully: the Terms of Reference suggest that the Treasury accepts the importance of transparency and separate disclosure, and we will have the information we need to do our work.” 

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He clearly feels that he has enough transparency to do his job. There is the question of whether the amount in place will allow the office to do its statutory duty, and the hon. Lady made the point that one can ask someone to do something and then not give them the resources to do it. The chair of the OBR has already made it clear that he feels that he has adequate resource, and has said that he will promptly raise any funding issues with the Treasury Committee. In talking before the Committee he said: 

“If you accede to my appointment and I find myself being squeezed in that way, this Committee will be hearing about it very promptly. That’s how we make that public and ensure that those sorts of pressures do not go unremarked.” 

We have the right safeguards and the right people in place to ensure that the risk that the hon. Lady rightly identifies will not be realised in practice. I hope that, with that reassurance, she will withdraw the amendment. 

Kerry McCarthy:  I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Schedule 1 agreed to.  

Clause 10 ordered to stand part of the Bill.  

Clause 11 

Office of Comptroller and Auditor General 

Question proposed, That the clause stand part of the Bill. 

Chris Leslie (Nottingham East) (Lab/Co-op):  It is probably worth noting that we are moving on to part 2 of the Bill, which is about amendments to and reforms of the National Audit Office and the office of Comptroller and Auditor General, and to the architecture that accompanies those important elements of our constitution, which oversee the sound and prudent use of public money. In many ways, the NAO and the work of the CAG and the Public Accounts Committee are more important and far more serious than the subject of some of the discussions that we have had today, but because they are of long standing—I think that the Comptroller and Auditor General post has existed since 1866—they often pass without much comment. 

The term “comptroller” is derived from a conjunction between the English word “controller” and the French word for account—“compte”—and hence the notion of the “controller of accounts” was set up. In Welsh, as stated in the Bill, the term is Rheolwr ac Archwilydd Cyffredinol. This is an important appointment, and I am glad that the office will continue and that the appointment will be made by Her Majesty in response to an address of the House of Commons, prompted by a motion from the Prime Minister. Those are fundamental issues. This whole part of the Bill, in some ways, reflects a rather unfortunate piece of the most recent history of that office respecting certain expenses, accounts, allowances and so forth that were reported in the British media, prompting many people to query whether the structures for checking expenses and the accounts of the office of the CAG were adequate. The Public Accounts Commission commissioned John Tiner to do an inquiry and review. 

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As a consequence, a series of recommendations were made, including a set of reforms to the law, which the previous Labour Administration sought to put into what is now the Constitutional Reform and Governance Act 2010, but due to the wash-up before the general election, there was no time to give the provisions full and proper scrutiny, so the Government rightly brought them forward and appended them to the Bill. The new structures are already in place. As with the OBR, we are essentially doing a bit of post-hoc scrutiny, given that the new arrangements are up and running but we are here debating the legislation. I always dislike that approach to legislation slightly—I find that I would rather legislate before changes happen—but it seems to be a recent trend in certain circumstances. I suppose needs must. 

I was a member of the Public Accounts Committee 13 years ago—I think before nearly any other Committee member had been elected to this place. It shows my age. Obviously I am getting on in years. 

Alec Shelbrooke (Elmet and Rothwell) (Con):  You were very young. 

Chris Leslie:  I thank the hon. Gentleman for that. I was hoping somebody would say it. I will thank him later as well. 

My specific point on clause 11 concerns the change taking place to the tenure of the office of the CAG. Committee members will see on page 4 of the Bill that the person appointed holds office for 10 years and may not be appointed again. It is a single term of appointment, for a decade, and is not renewable. That is a change. Sir John Bourn, a distinguished Comptroller and Auditor General with whom I worked on the Public Accounts Committee, held the post for 20 years in total. I suspect that, partly to reflect the Tiner review, Ministers and others thought that if we were legislating, we should take the opportunity to consider that tenure of office. 

Will the Minister explain why 10 years was chosen? It might have been debated in the other place. One anxiety that has been voiced is whether that length of tenure will affect the type of candidate who may be deemed appropriate for appointment or may apply. Obviously, it is a long period in office, but because office holders cannot be reappointed, it would be a significant career choice for an individual to apply for the role. Provisions later in the Bill prevent an individual from working for the Crown, for example, for at least two years thereafter, so doing that job would mean working for 10 years and then moving on to an undetermined something else. Does the Minister have any observations about the career attractiveness or otherwise of the construct? It does not seem massively objectionable to me, but it is quite unusual for a public office. We will come to other aspects of the legislation as the clauses progress. 

1.45 pm 

Justine Greening:  It might be the right moment for me to give some background to this part of the Bill. Overall, the coalition programme makes it clear that the Government will take significant steps to increase the transparency of public spending to enhance accountability. The first stage, which we have been debating in the first part of the Bill, is to subject the Treasury’s fiscal judgments to external scrutiny by making economic and fiscal forecasts independent. 

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The same applies to the scrutiny of public expenditure. Modernising the governance of the National Audit Office will also help advance those coalition Government objectives. The provisions in part 2 strengthen the resilience and integrity of the body that is best placed to assess the Government’s use of public funds. Effective independent oversight of the efficiency of Government spending will be particularly important when public resources are under pressure. 

Part 2 implements the recommendations in the Public Accounts Commission’s 15th report. Its proposals were designed to balance two considerations: the need to ensure that the CAG has the authority to form completely independent judgments about the audits and value-for-money studies conducted by the NAO; and the need for the NAO to maintain systems of governance and internal controls that are consistent with best practice. The provisions in part 2 introduce a number of checks and balances to achieve those aims. 

In summary, part 2 modernises the governance arrangements for the national audit. It continues the office of the CAG as an independent officer of the House of Commons, but limits the term to a single appointment of 10 years. I shall answer the hon. Gentleman’s questions about that in a moment. 

Part 2 provides for the establishment of a new corporate body, the new National Audit Office, the functions of which will include providing resources for the CAG’s functions, monitoring how those functions are carried out and approving the provision of certain services. Importantly, it will be able to support and challenge constructively the CAG’s decisions without, of course, preventing him from carrying out his statutory responsibilities. 

The NAO will have a majority of non-executives and will be led by a non-executive chair. The CAG will be the chief executive, but will not be an employee of the NAO . It is important to stress that, within the new governance framework, the CAG will continue to have complete discretion in forming audit judgments and carrying out value for money studies. Schedules 2 and 3 set out details on the new NAO and the relationship between it and the CAG. 

Clause 11 is straightforward in that it provides for the office of the CAG to continue. It carries forward the appointment process in section 1 of the National Audit Act 1983, under which the CAG is appointed by Her Majesty by letters patent, following an address in the House of Commons. It is a legal requirement that the Prime Minister agree the appointment of the CAG with the Chairman of the Committee of Public Accounts. The choice of CAG will continue to require cross-party agreement. 

To address the point made by the hon. Member for Nottingham East, subsections (6) and (7) limit the term of office to a single 10-year appointment instead of the current unlimited term. A time frame of 10 years is significant, but it gives the incumbent time to settle into the role and to become a strong and effective leader. On the other hand, it mitigates the risk of the office becoming too closely aligned with the personality of a single individual. Refreshing the leadership of an organisation at appropriate intervals is widely recognised as a driver to improving performance. 

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Chris Leslie:  I have always been sceptical of term limits, perhaps because I began a particular career choice early on in my working life. When people suggested that Members of Parliament should be appointed only for two terms, or that Prime Ministers should serve for a fixed term, I always thought that that would fetter the choice of the public if there were a really good candidate. In many American presidential elections, potential presidents have been unable to be appointed, even though they were popular. Is the Minister certain that term limits, as a principle, are a good thing? 

Justine Greening:  It is probably unwise for me to make broad comments that do not relate to this role. That would be an entirely different debate about roles that might have different requirements. The hon. Gentleman’s points about politics are separate from the situation that we are discussing; in the case of the CAG it is right to have a single term. High-quality candidates will always be available to carry out the role. There is no question of the CAG seeking reappointment. That means that there is no danger, either in reality or perception, that his or her judgments will be compromised as the period for the renewal of their term approaches. The clause reflects the position of the Public Accounts Committee as set out in its 15th report. 

In terms of how our approach compares with that of other countries, many other countries have fixed-term appointments for their similar auditor generals. In Norway, the fixed term is five years, but in the United States it is 15. By setting a tenure of 10 years we have hopefully got it about right. It is a substantial role that needs a substantial person in it. That tenure will give them time to come into the role and develop the leadership that they need. 

Question put and agreed to.  

Clause 1 1 accordingly ordered to stand part of the Bill.  

Clause 1 2 ordered to stand part of the Bill.  

Clause 13 

Remuneration arrangements 

Question proposed, That the clause stand part of the Bill. 

Chris Leslie:  The clause is about the remuneration arrangements for the Comptroller and Auditor General, and how those arrangements are to be made. Will the Minister put on record the CAG’s salary? Why are the remuneration arrangements to be made between the Prime Minister and the Chair of the Public Accounts Committee, rather than with that Committee itself? I understand that the PAC used to have a role as it is a Committee of the House of Commons, but that has now been limited to the Chair. 

There are a number of interesting provisions in the clause. Subsection (6) seems to suggest that the pension arrangements are wholly under the Treasury’s control. That seems slightly at odds with the salary arrangements, but I may have got that wrong and be misreading the legislation. A reasonable recommendation was made by, I think, the Public Accounts Commission that the CAG’s salary be tied in law—pegged—to the salary of the Permanent Secretary of Her Majesty’s Treasury. That seems a reasonable provision, but it did not make it into the Bill. Will the Minister explain why? 

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The provisions were debated in the House on 4 November 2009, before the general election. They were pretty much in the form in which they exist today, with a couple of small exceptions. The current Exchequer Secretary to the Treasury, then in opposition, proposed an amendment. Given the attention that had been paid to the CAG’s allowances and expenses, he moved an amendment proposing that all remunerations and allowances should be published monthly online so that there would be more transparency about them. That amendment was put to the vote in the House, and the Minister, as she now is, voted in favour of it during that debate. Unless I am missing it, however, that provision does not seem to have made it into the legislation before us. Will the Minister explain why just over a year ago she thought it was necessary for the CAG’s remuneration and allowances to be placed online on a monthly basis, and why she has now changed her mind? Will she explain why the arrangements in subsection (8) are subject to the negative procedure rather than the affirmative one? 

Justine Greening:  The clause provides for the determination of the CAG’s remuneration arrangements. Those provisions have been prepared with a view to the overriding requirement of preserving the independence of the office, in order not to constrain the CAG’s operational decisions. The hon. Gentleman raised a number of questions, which I will come on to in a moment. 

On what is contained in the clause, it provides that the remuneration arrangements have to be agreed in advance by the Prime Minister and the Chair of the Committee of Public Accounts; that it can include an automatic uprating during the term of the CAG’s appointment; that it precludes performance-based incentives, in order to preserve the CAG’s operational independence; and that, as of now, it is to be charged on and paid out of the Consolidated Fund, with no need for the resources to be voted on annually by Parliament. The main change to the current arrangements relates to the requirement for the remuneration arrangements to be agreed between the Prime Minister and the person who chairs the Committee of Public Accounts. There will no longer be a direct link to a particular salary or salary range. 

The hon. Gentleman asked about linking salary with that of permanent secretaries, but there are a number of them. 

Chris Leslie:  I referred to the Treasury. 

Justine Greening:  The hon. Gentleman says that, but as and when the Treasury has a new permanent secretary, they may be paid less than the current one. There is, therefore, no rate for the job, either across Departments at the moment, or in roles going forward. We try to get over that by ensuring that we set the salary at an agreed level, at the beginning of the CAG’s employment, and alongside that we have a suitable uprating mechanism so that any incoming candidate understands what the remuneration will be. 

Turning to some of the detailed provisions, subsections (1) and (2) provide that the CAG will have remuneration arrangements that may include an annual salary, allowances,

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provision for a pension and other benefits. As I have said, the remuneration arrangements have to be agreed by the Prime Minister and the Chair of the Committee of Public Accounts before the CAG is appointed. 

The hon. Gentleman asked about the salary of the present CAG, Amyas Morse. Mr Morse is paid a salary of £210,000 per annum. That will be uprated each year on the anniversary of his first day of office, in line with the consolidated pay increase of the senior civil service. As the senior civil service will not receive consolidated pay increases for the next two years, Mr Morse’s salary will remain at that level. The hon. Gentleman asked about the pension. I understand that Mr Morse has opted not to receive a pension. 

Chris Leslie:  The Chancellor has, on a number of occasions, voiced his disquiet about salaries in the public sector that are higher than that of the Prime Minister. Is the hon. Lady content with that level of salary? 

Justine Greening:  The rate that has been set is one that has been agreed by all parties. The hon. Gentleman wanted to link the salary rate of the CAG to that of permanent secretaries. Permanent secretaries receive between a minimum of £140,000 and a maximum of £273,000, which is clearly a wide range. He makes a good point on salary levels, which is one reason I made the point to him that maybe over time, as we get incoming permanent secretaries, that range will narrow. 

It is right to have transparency. The hon. Gentleman asked about publishing details, but I think that he would recognise that this Government have pushed Whitehall and local government to publish more details about spend. I hope that at some point in the future he will be able to encourage his local council, Nottingham, which is the only one in the country that refuses to publish details of its spend, to do so. 

2 pm 

On broader CAG spend, that is published regularly on the NAO website, as are the expenses of senior officials. I think those are published half-yearly, so there is transparency there, and I urge the hon. Gentleman to achieve that transparency with his local council too, because it is important, as he points out. Maybe it will be prepared to publish all those details on a monthly basis—we will see if he has the powers of persuasion to get it to do that over the coming weeks. 

I have probably answered many of the hon. Gentleman’s questions. Subsection (4) provides for the CAG to continue to be eligible for a civil service pension, although we have heard that the incumbent has elected not to. Subsection (6) allows the Treasury to make regulations for purposes that are supplementary to any agreed pension arrangement. 

Chris Leslie:  I asked the Minister to explain why arrangements under subsection (8) would be made under the negative statutory instrument procedure. 

Justine Greening:  To reassure the hon. Gentleman, that process is exactly the same as it was before; there is no change. It was set out in the Superannuation Act 1972, so it is of relatively long standing. I commend the clause to the Committee. 

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Chris Leslie:  I shall not rise to the bait thrown before me about Nottingham city council. Obviously I do not run it; nor is it featured in the Bill as far as I can see. I have no problem with transparency in public funds; I only wish that Government Departments would also publish all spending above £500 online, but they will not. I think about £25,000 is as far as they have come down. 

I do not want to labour the point about the salary of the CAG, because obviously we can come back to this at another time, but it seems unusual for this Administration—having made such a great fanfare about tackling high salaries in the public sector—to be actively legislating, but not taking the opportunity to do something about high salaries when they are before us in the clause. The Minister did not say whether she was content with this particular salary level, so I am none the wiser as to whether the Chancellor is going to haul the CAG before him. He seemed to suggest before and after the general election that he would do that before he granted permission for any public office to have a salary higher than the Prime Minister’s. We will wait and see whether the CAG will have to come and account to the Chancellor because he is to be paid more than £142,000. Obviously the Chancellor has some say in the remuneration arrangements. However, while we may return to this matter at a later date, I think we have debated it sufficiently. 

Question put and agreed to.  

C lause 13 accordingly ordered to stand part of the Bill.  

Clause 14 ordered to stand part of the Bill.  

Clause 15 

Employment etc of former Comptroller and Auditor General 

Question proposed, That the clause stand part of the Bill. 

Chris Leslie:  The clause relates to what might be known as the revolving-door problem, where holders of certain offices are prevented from working for the Crown when their office is terminated or they leave. That is perfectly reasonable in many ways. However, there was some debate in the House of Lords about why the period of two years was chosen to prevent a person ceasing to be CAG from holding Crown office. I think there was an original proposal by the Commission that the ban should be for life—that the person leaving should never be able to hold Crown office—but that was reduced to two years. 

My noble Friend Lord Touhig proposed an amendment to strengthen the provisions in respect of the sort of occupations that it was felt appropriate for a former CAG to hold by referring those cases to the Advisory Committee on Business Appointments. The Minister will know that, when she leaves her ministerial office in the not-too-distant future, she will have to apply for permission to the advisory committee if she wishes to take up office after she has left her political career. That applies to a number of senior posts in the public sector, but such a stipulation is not in the Bill. It seems slightly unusual that it has not been referenced. I think the Government tabled an amendment to try to allow the Public Accounts Commission to specify what sort of advisory arrangements would be appropriate, but I am

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still not convinced that the absence of the advisory committee is a good thing for the clause. Will the Minister think again about that? 

Justine Greening:  As we have heard, clause 15 sets out restrictions on the employment of former holders of the office of Comptroller and Auditor General. It might be helpful to go into some of the points that the hon. Gentleman raised about why we put in place the period of two years. Clause 15 restricts the former CAG from working for the Crown or providing services to persons acting on behalf of the Crown for a period of two years after they cease to occupy that role. We think that is a proportionate way of meeting the objective of protecting the independence of the CAG’s office. 

The hon. Gentleman asked about the current incumbent’s salary. I should point out that he was recruited in June 2009, so that was probably when his generous salary was agreed. The Public Accounts Commission has recommended a five-year ban, but there is a problem with that. 

Graham Jones (Hyndburn) (Lab):  Is the Minister suggesting that the generous payment is too much? 

The Chair:  That issue has already been dealt with. The hon. Lady introduced it again, but I do not think it is provided for in the clause. However, if the hon. Lady wishes to reply, she may do so. 

Justine Greening:  I was merely adding to the debate and clarifying the issue for the hon. Member for Nottingham East. It is relevant to the Committee to know the time at which the decision on pay was made, because the hon. Gentleman was effectively trying to say that somehow the Government had not taken the right approach in setting the salary level. 

To return to clause 15, a two-year employment restriction, with a related requirement to seek advice after that period, is necessary to protect the independence of the office, without making a former CAG subject to disproportionate restrictions in their ability to work. A five-year ban could result in discouraging candidates, particularly younger ones, from applying. We do not want the post to become a role that somebody does before they retire, for example. 

There is just one exception to the two-year ban. Subsection (7) allows a former CAG to hold office as Auditor General for Wales or for Scotland and as Comptroller and Auditor General for Northern Ireland. It would seem perverse for former holders of that office to be denied the opportunity of making their experience and knowledge available to the devolved Administrations if they so wish. Apart from that, we think that a two-year period of restriction gets the balance right. It ensures that their independence is not compromised when they leave office, and it is not so long that it would discourage candidates from applying for the position in the first place. 

Chris Leslie:  I asked the hon. Lady why reference to the Advisory Committee on Business Appointments had not been made. It would seem appropriate for that to apply here, as it does to other public offices. 

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Justine Greening:  There was no need to put that in the Bill. The clauses clearly establish the way in which the person who has previously been in the role of CAG can go forward should they wish to go into a role that may conflict with their previous position. That is unlike the position that exists for MPs. People who have been Ministers can take roles, but the advisory committee looks at whether those roles are restricted. In this case, it is very clear cut that a full two-year ban is in place. The process maintains the independence of the role of the CAG. 

Question put and agreed to.  

Clause 15 accordingly ordered to stand part of the Bill.  

Clause 16 

Provision of Services 

Question proposed, That the clause stand part of the Bill. 

Chris Leslie:  This is a short clause about the services that the Comptroller and Auditor General may provide in any place within or outside the United Kingdom under agreements or other arrangements that they enter into. 

I suspect that this clause relates primarily to audit support for other domains and territories and so forth. Given that the Government have decided to abolish the Audit Commission, which clearly has had a role in auditing local authority activities in England and Wales for a considerable period, and given that there is an opportunity for the National Audit Office potentially to take on some of those residual but necessary audit and scrutiny functions that the Audit Commission formerly pursued, I take it that this clause also then allows the NAO to extend some of its scrutiny role into local public service activities as well as Whitehall and other Departments. Will the Minister confirm that? 

Justine Greening:  The thinking behind this clause was mentioned by the hon. Gentleman when he started his comments. As he pointed out, the NAO supports a wide range of international institutions. Some of its work can be helping to build up financial management and audit skills. He mentioned that it can work in different countries—Vietnam is one example—as well as auditing a number of international organisations such as the World Food Programme. He will be aware that the NAO also supports and encourages the professional development of the international community of audit offices. The Comptroller and Auditor General has been elected to the UN board of auditors, which is responsible for auditing the United Nations. 

Closer to home, the NAO also provides support to a number of Select Committees, including the Public Accounts Committee. That is the backdrop to clause 16. The hon. Gentleman asked whether there is any link to the Audit Commission. Ultimately, the Secretary of State for Communities and Local Government is taking forward work to create a new local audit framework. This clause is not designed to tackle that. Future local audit arrangements will allow local authorities to appoint their own auditors, and it is proposed to move the Audit Commission’s in-house practice to the private sector. Some services that are currently being carried out by the

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Audit Commission will in future be done by the NAO, but the arrangements in this Bill are purely about modernising NAO governance, so no additional audit or value-for-money responsibilities are being given to the NAO. I hope that that is clear. 

Question put and agreed to.  

Clause 16 accordingly ordered to stand part of the Bill.  

Clauses 17 to 19 ordered to stand part of the Bill.  

Clause 20 

Incorporation of NAO 

Question proposed, That the clause stand part of the Bill. 

2.15 pm 

Chris Leslie:  Many people may be surprised by the clause. People may think that the National Audit Office has been in existence for a long time, but if we look at the swirling mists of the British constitution, such as it is, with its still-undefined character, we see that in many different ways the NAO has never found its way properly on to a statutory footing, so the clause will create a body corporate called the National Audit Office. The clause also triggers schedule 2, which hon. Members will see is a quite a considerable schedule at the back of the Bill, detailing what the NAO shall do. 

As I mentioned earlier, the Tiner review, and the set of circumstances that prompted the thinking about modernising the governance and constitutional arrangements of the Comptroller and Auditor General, the NAO and the scrutiny of the UK’s public accounts, have opened the box on a number of different areas, and we welcome the modernisation process. However, a number of anxieties have been voiced at different times about certain aspects; for example, it has been suggested that parliamentary oversight of the NAO and the CAG may be unwittingly diminished by the creation of a whole panoply of boards of directors and executive and non-executive directors for the NAO, and accountability will in some cases be redirected. I think Professor David Heald, a former adviser to the Public Accounts Commission, said that when the NAO begins to negotiate internally between its board and the CAG, there will be fewer opportunities for the PAC, and by extension the House of Commons, to have the same effective right. 

I am not quite clear that I agree with the professor’s view, but there have been criticisms of all that activity, not least by the noble Baroness Noakes, a Conservative peer who suggested that the House of Commons ought to have pulled its finger out when the expenses and allowances issue arose for the CAG. That perhaps showed that the House of Commons procedures for keeping close account of what was going on were lax, and that it was creating all the arrangements almost as an excuse. She described the arrangements as 

“a costly and cumbersome superstructure of a board and non-executives.”—[Official Report, House of Lords, 8 November 2010; Vol. 722, c. 26.] 

To a certain extent, I sympathise with her anxieties. Will the Minister put on record her estimate of the total costs of creating the board, the non-executive directors and the new governance arrangements? On balance, the arrangements are probably necessary, as there is an

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expectation that that is the modern way of doing business. However, Baroness Noakes made a fair point: the legislation is not exactly light touch. It is belt and braces, and there is a cost involved. It would be illuminating if the Minister could give a figure. Obviously, there are a number of issues that we will come to in schedule 2. 

The Chair:  I was just going to say that it might be helpful if we got clause 20 out of the way, and then Members can thrash out the meat of the matter under schedule 2. 

Justine Greening:  The hon. Gentleman mentioned a number of points that I am sure we will come on to in schedule 2. He is right to say that at the moment, the National Audit Office is not a corporate body, and the clause will establish it as a new corporate body. He is also right that there is a range of issues on governance, structure and constitution related to the establishment of the NAO as a separate legal body. However, I think we should proceed to schedule 2, where we can debate some of the issues. 

Question put and agreed to.  

Clause 20 accordingly ordered to stand part of the Bill.  

Schedule 2 

National Audit Office 

Question proposed, That the schedule be the Second schedule to the Bill. 

Chris Leslie:  Essentially, I wish to reiterate—I mentioned this in debating the previous clause—that if the Minister is able to give us a sense of the total cost of the governance structures and arrangements, it would be useful. There are a number of other little observations that are worth mentioning. We had an interesting debate earlier about how it was exceptional and perhaps inappropriate for the Treasury Committee to have oversight of the appointment of non-executive members of the OBR. However, I note that, under schedule 2, all non-executive members of the NAO are to be appointed by the Public Accounts Commission. That is obviously a slight problem in her argument. There are parliamentary processes regarding the appointment of non-executive members. If the Minister could explain the consistency of her argument on that point, it might be useful. 

There are no restrictions under part 4 regarding terms of appointment—determination of appointment—on the severance or compensation provisions. In fact, there is no mention at all of severance or compensation provisions. As I read the Bill, whereas in relation to the OBR the Treasury is taking a power in a general sense to make a payment in those circumstances, there is no provision for payment at all to be made on the termination of appointments. Therefore, I am assuming that whether because of voluntary or compulsory removal from office or departure from office, no compensation would be allowable for those persons either appointed to the board or employed at the NAO. That might be something that has been accidentally missed from the drafting. Obviously, we have time to address those things. By and large, the provisions seem otherwise to be fairly straightforward. 

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Justine Greening:  As the hon. Gentleman has pointed out, schedule 2 sets out the various details of the National Audit Office’s constitutional functions, including rules on its membership, status and the appointment of members and staff. There are several different parts to that, as the Committee can no doubt see. He raises the question of whether all this governance will be somehow unwieldy in relation to Parliament’s role in scrutinising. That is a fair point to make. 

I, too, have a huge amount of respect for Baroness Noakes in the other place. She has raised the issue of the challenges and concerns surrounding the expenses of the previous incumbent. She also referred to how, at the time, the House of Commons had not picked up on that or expressed concern. It may be that, with hindsight, we will see that the challenges that Members of this House had surrounding their expenses were part of the backdrop to an environment in which it was felt that the CAG’s expenses were not something to be raised. However, schedule 2 sets out a strong governance structure for the NAO. 

The hon. Gentleman also asked about the total cost of change and of setting all this up. I do not have a specific figure for him right now, but I am happy to write to him with that. Our expectation is that the cost will be very small. As he is aware, there is already an NAO; it is just not a body corporate. In many respects, we are putting in place in legal footing for something that is already there. I take on board that point, but I suggest that the costs will not be excessive. 

On the rest of the questions that the hon. Gentleman raised on parliamentary oversight, I should point out to him that the Public Accounts Commission will have to hold accountable not just the CAG—who is, of course, chief executive of the NAO—but the NAO chair. The Bill increases the Commission’s scrutiny role by requiring it to approve more of the NAO’s work than it did in the past. That includes the NAO strategy, the estimate, the code of practice on the relationship between the CAG and the NAO in paragraph 10 of schedule 3, and the annual report. He is right to point out that there is a desire to ensure that we are clear-cut about how the NAO will work alongside the Comptroller and Auditor General, and how both those roles will work alongside Parliament. 

Finally, the hon. Gentleman asked about non-executive appointments to the NAO being made by the Public Accounts Committee. That happens because the NAO and its members are Officers of Parliament. The OBR is entirely independent and is a non-departmental public body. That is the reason for the difference, although he was right to pick up that point. 

Chris Leslie:  I sense that the Minister is winding up, but there was a specific point about compensation and severance arrangements; I could not see provision for that in the Bill, and I am anxious that that might fetter the Treasury’s ability to make those payments. If she wants to write to me on the subject, I am content with that. 

Justine Greening:  I will write to him on that. The commission will decide on the remuneration of the other non-executive members, but I will address his particular issue on severance in a letter. 

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Question put and agreed to.  

Schedule 2 accordingly agreed to.  

Clauses 21 and 22 ordered to stand part of the Bill.  

Schedule 3 

Relationship between NAO and Comptroller and Auditor General 

Question proposed, That the schedule be the Third schedule to the Bill. 

Chris Leslie:  Schedule 3 sets out the relationship between the National Audit Office and the Comptroller and Auditor General. Given that this complex architecture is being established, it was felt that a set of memorandums of understanding, codes of practice and so forth needed to be established so that the workings could be clear. The situation is becoming slightly convoluted because of the number of players involved, including the Public Accounts Committee, the Public Accounts Commission, the Prime Minister, Her Majesty, the Comptroller and Auditor General, the NAO, the chair of the NAO—Members will get the sense that this is a complex process. By and large, we can see that the code of practice that is being set up is needed. 

There are a couple of points that I want to make. Paragraph 4 of schedule 3 states: 

“NAO must, in such manner as it considers appropriate, monitor the carrying out of the Comptroller and Auditor General’s functions.” 

Paragraph 5 states: 

“The Comptroller and Auditor General must have regard to any advice given.” 

That is behavioural monitoring by the NAO of what the CAG does, even though the CAG is the chief executive of the NAO. I get the sense that an organisation, subordinate to its chief executive, has a monitoring role of that chief executive. There may be some circularity of accountability there, but perhaps the Minister will elaborate. For example, I do not see any reference to the role that the Public Accounts Committee or the commission might play, although they might have been more appropriate bodies to do the monitoring; that was my first point. 

My second point relates to the code of practice. There are several provisions that it might cover, but the schedule mentions a provision 

“restricting the public comments that a non-executive member of NAO may make in relation to the carrying out of the Comptroller and Auditor General’s functions.” 

In other words, people appointed as non-executive members of the NAO will be gagged when it comes to discussing the carrying out of the Comptroller and Auditor General’s functions. I do not know what circumstances the Minister envisages. Why would we need to restrict the making of public comments by a non-executive member of the NAO? The whole point of non-executive appointees is often to provide a challenge and a level of scrutiny to ensure that there is a balanced point of view. Essentially muffling the voice of the non-executive members seems entirely counter-intuitive. That is on page 29, line 19. Those were my only two queries about the schedule. 

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2.30 pm 

Justine Greening:  Schedule 3 is crucial because it sets out where and how the NAO will work with the Comptroller and Auditor General. It would probably be worth while if I explained the principles set out by the Public Accounts Commission that led to the arrangements in the schedule. The proposals by the commission were designed to balance two considerations: the CAG needs the authority to form completely independent judgments about audits and value-for-money studies conducted by the NAO, but at the same time the NAO needs to maintain systems of governance and internal control that are consistent with best practice. 

The governor’s framework set out in the schedule is designed to ensure that in delivering the CAG’s independent audit judgment, the NAO and the CAG are themselves operating to the best standards of probity and efficiency. Paragraph 10(2) reflects the principle set out in clause 17(1) and (2), which grants the CAG complete discretion, subject to any limitations agreed by the commission, the NAO and the CAG. 

The schedule provides for the NAO to provide resources for the CAG, but as the hon. Gentleman said, it also gives the NAO a duty to monitor, and form a relationship with, the CAG. Further details on how the relationship will work are set out in the code of practice, which is prepared by the NAO and the CAG and approved by the commission. The schedule also sets out where the Public Accounts Commission, on behalf of Parliament, has a role in regulating the relationship between the CAG and the NAO. 

The hon. Gentleman asked about the potential conflict of interest that arises from the fact that although the CAG is the chief executive of the NAO, the NAO has a role in monitoring the CAG. The monitoring is really part and parcel of the NAO’s role in providing the CAG with advice and support. Ultimately, the Public Accounts Commission will hold the CAG to account. That is the point that Baroness Noakes was making when she questioned whether that had happened in the recent past. The NAO’s duty to monitor is necessary because it is a body that does things, as well as a body that advises. That is the reason for that aspect of schedule 3. 

The hon. Gentleman mentioned his concern about the restriction on public comments by non-executives of the NAO. We do not want the non-executives to undermine the authority of the CAG by going public, but I can assure the hon. Gentleman that there is an opportunity for non-executives to make their point; however, that needs to be done in the meetings of the NAO board, rather than in the public domain. That is really more of a professionalism safeguard to make sure that the authority of the CAG is not unwittingly undermined. 

Question put and agreed to.  

Schedule 3 accordingly agreed to.  

Clauses 23 to 26 ordered to stand part of the Bill.  

Schedule 4 agreed to .  

Schedule 5 

Consequential Amendments relating to Part 2 

Question proposed, That the schedule be the Fifth schedule to the Bill. 

Column number: 134 

Chris Leslie:  I have only a minor point, which is probably the final point in the debate on the Bill. I am curious because page 38 contains a number of changes to the Corporate Manslaughter and Corporate Homicide Act 2007, and simultaneously IPSA is mentioned in paragraph 33. As hon. Members know, I should not have mentioned that acronym in Committee. That now means that the sky will fall in and the performance has been jinxed. 

The provisions stretch quite a long way. Am I correct in presuming that the NAO has a role in auditing IPSA? I note that a provision is made about some of the board members of IPSA needing certain qualifications to be eligible, and I am not sure whether that has been spotted in the past. I raise this only because I thought that it would be interesting to Members. 

Justine Greening:  The hon. Gentleman has raised a couple of interesting points. In setting up the new corporate body for the NAO we need to ensure that the other laws into which it needs to fit are amended as appropriate. This part of the schedule contains a series of consequential technical amendments to existing legislation, which ensure that the establishment of the new NAO on a statutory footing fits into the existing legal framework of other Acts. 

The hon. Gentleman has briefly mentioned IPSA. The qualification to be a board member was apparently defined by the reference to qualification to be able to audit the NAO. 

Question put and agreed to.  

Schedule 5 accordingly agreed to.  

Clause 27 ordered to stand part of the Bill.  

Schedule 6 agreed to.  

Clauses 28 to 30 ordered to stand part of the Bill.  

Clause 31 

Short title 

Justine Greening:  I beg to move amendment 1, in clause 31, page 10, line 13, leave out subsection (2). 

Having debated the Bill, we no longer need the original section of the Finance Act. The Committee will be aware that much of the original legislation that established the code for fiscal stability, for example, was set out in an earlier Finance Act. Because the Bill overrides and renews what was in the code by setting up not only the Office for Budget Responsibility but the charter, we can now effectively rescind that previous legislation. 

Regarding amendment 1, when a Bill starts its passage in the House of Lords a privilege amendment is inserted by the Lords at its final printing. By claiming that nothing in the Lords’ Bills imposes a charge on the public funds or on the people, the amendment preserves the financial privilege of the Commons to authorise such charges. Once a money resolution has been passed by the Commons to authorise a charge on public funds, which for this Bill took place after Second Reading in the Commons, the privilege amendment is routinely removed by the Commons at the first opportunity, having served its purpose, in other words when the Bill is in Committee. 

Column number: 135 

Amendment 1 agreed to.  

Clause 31, as amended, accordingly ordered to stand part of the Bill.  


Column number: 136 

That certain written evidence already reported to the House be appended to the proceedings of the Committee.—(Justine Greening.)  

Bill, as amended, to be reported.  

2.40 pm 

Committee rose.