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Lord McIntosh of Haringey: We come here to the same difficulty that we had in relation to earlier amendments. To agree to these amendments would be compromising the responsibility of the preparers of the accounts for what is contained in the accounts, and we would be giving the Comptroller and Auditor General powers which it is inappropriate for an auditor to possess and which threaten his independence. In private accounts the directors of the company prepare the accounts and they submit them for audit and the auditor audits them. If the auditor has been involved in the preparation of the accounts and what is contained in the accounts, how can the auditor provide an independent view of whether the accounts provide a true and fair view of the circumstances of the organisation? The Treasury can consult the department and the Comptroller and Auditor General. Surely therefore it is best placed to know what accounts are required and to determine the most appropriate and useful format for them. The Treasury and the preparing department can then be held responsible for the accounts. If the preparers of the accounts have no role in deciding what accounts they should prepare, or what information is included in them, they cannot be expected to take responsibility for them.

Auditors must be able to comment independently on the accounts they audit. For them to be made responsible for determining what accounts are to be prepared and the basis on which they are to be prepared is simply not acceptable. It compromises their ability to take an independent view.

I should also point out that these amendments are inconsistent with the proposal for a national accounts commission. Why should there be a national accounts commission which sets out the standards for departmental accounts, but allows the Comptroller and Auditor General to determine them for those departmental accounts covered by this clause?

The noble Lord, Lord Higgins, said that Clause 7 is too widely drafted. It is indeed true that the Treasury has discretion. That is because the clause is designed to cover accounts which are not covered elsewhere. They may be cash accounts as well as resource accounts, so it is not appropriate to refer them to the generally accepted accounting practice or the true and fair view. Directions issued under the clause will, of course, be agreed with the National Audit Office before they are issued.

Lord Higgins: The Minister is right in saying that this is the same problem as we had before. Perhaps the

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amendments are rather confusing inasmuch as we have in this case suggested that the matter should be decided by the Comptroller and not the Treasury. For that we must obviously take responsibility. But it is still the case that the Treasury is going to decide the form of the accounts. That does not happen in normal private or public companies. The form of the accounts is decided by the various accountancy bodies, not by the company. What is lacking here is an independent body which will decide that. Of course the auditor does so within that framework. But we are on much the same point as before and we will delay the Committee unnecessarily if we go over the same ground again.

It seems to us that the Treasury has virtually unfettered discretion in this case and, except for the Minister's final few words, we are not happy about it. However, I do not wish to pursue this matter and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

Clause 7 agreed to.

Lord Higgins moved Amendment No. 16:

    After Clause 7, insert the following new clause—

(" .—(1) This section applies to any public service agency of the sort described in subsection (8), unless otherwise provided in any enactment passed after this section comes into force.
(2) On the prescribed date, for each public service agency to which this section applies subsections (3) to (6) shall apply to that agency.
(3) Every public service agency shall prepare accounts in respect of each financial year and shall send them to the Comptroller and Auditor General.
(4) The Comptroller and Auditor General shall examine accounts sent to him under this section with a view to satisfying himself—
(a) that the accounts present a true and fair view, and
(b) that any public money provided to the agency has been expended for the purposes intended by the body by which the money was paid.
(5) Where the Comptroller and Auditor General has conducted an examination of accounts under subsection (4) he shall—
(a) certify them and issue a report,
(b) send the certified accounts and the report to the Treasury, and
(c) if he is not satisfied of the matters set out in subsection (4)(a) and (b), he shall report to the House of Commons.
(6) The Treasury shall lay accounts and reports received under subsection (5)(b) before the House of Commons.
(7) Subsections (3) to (6) do not apply to any body to the extent (but only to the extent) that any of its accounts are or become subject to audit—
(a) by the Auditor General for Scotland, or
(b) by the Auditor General for Wales.
(8) "Public service agency" means a body—
(a) which is not a government department or comprised within a government department,
(b) which exercises public functions of a governmental nature which might otherwise fall to be exercised by central government, and

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(c) as respects which an accounting officer has been designated,
but does not include a public service agency which is a company registered under the Companies Act 1985.
(9) In this section "prescribed date" means, as regards each public service agency, the first day of the first full financial year of that agency commencing after the expiry of the term of appointment of the person who is the auditor of the agency when this section comes into force.").

The noble Lord said: This is an important amendment. It is concerned with the extent to which the existing arrangements will cover public service agencies of the kind described in Clause 8. It effectively relates to whether or not the National Audit Office will be able to extend its remit to cover executive non-departmental public bodies. At the moment the situation seems to us to be arbitrary and illogical. A substantial minority are audited by auditors other than the Comptroller and Auditor General, but the decision of who will audit each newly established body is made by the sponsoring department when the body is established. It does not seem to us that that is appropriate. There is a lack of consistency in the information provided to the department, and waste and duplication of audit effort.

The new clause seeks to say that, given the vast change that has happened in the quangos and non-departmental public bodies of one kind or another, the Comptroller and Auditor General ought to be appointed as auditor for all such bodies, both those already in existence and those which are newly created. That is what the amendment seeks to do.

This is effectively a tidying-up exercise, and it is the view of Opposition Peers that it ought be done on a uniform basis. There are a number of examples on which one could expand. Housing receives around £1 billion a year, while English Heritage and the Environment Agency receive £100 million a year. But they are three of the biggest spenders outside of the Comptroller and Auditor General's remit and they are not subject to the same degree of public scrutiny. Given that they receive public money, there is a strong case for extending the remit of resource accounting to bodies of this type on a universal rather than a selective basis.

6.30 p.m.

Baroness Sharp of Guildford: Although my name is not attached to the amendment I support it because it is a key issue. It relates to the question that we have previously debated of the extent to which Parliament is able to control the Executive. The National Audit Office is the eyes and ears of Parliament if it is to achieve proper scrutiny of public affairs. The problem arises because of the vast range of providers of public services today that are paid from the Exchequer.

In the old days it used to be simpler. One had Government departments and they were normally the providers of services. Today, with the division between purchasers and providers, there are a range of contractors working for government departments which are being paid with public money and it is necessary for us to make sure that we get good value

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for the benefit of the public. The noble Lord, Lord Higgins, has already mentioned the Housing Corporation; Camelot is another. Issues have arisen where the National Audit Office has looked at further education colleges where there have been difficulties.

Such non-departmental public bodies should, like departments, be answerable to Parliament. Therefore the National Audit Office and the Comptroller and Auditor General should have access to and scrutinise their accounts as they do departments of state. There are at the moment big gaps in public scrutiny and the Bill is an opportunity to fill them.

The arguments raised against that in Committee in another place were that the Bill is not an audit Bill, but merely transposes existing accounting arrangements into resource accounting space and that it is therefore an inappropriate vehicle to make good gaps in the current range of public scrutiny. That does not stand up well. This clause repeals Sections 16 and 17 covering the audit in the 1866 and 1921 Acts and to a degree it throws the powers of the Comptroller General and Auditor into doubt because it deliberately confines the National Audit Office to departmental walls. The Government did not need the Bill to introduce resource accounting. They could have moved ahead without it. They themselves are introducing an extraneous affair in the sense that the latter part of the Bill deals entirely with the PFI and the PPP arrangements.

Last, and by no means least, Bills on public accounting seem to emerge approximately once every 50 years. Therefore, it is appropriate to take the opportunity provided by the Bill to make good any gaps. The Government's arguments do not stand up. They also suggested that the matter had been raised too late. Although I have come to it fairly recently, I have done some homework and find that it is something that the Public Accounts Committee has been raising for many years, so the Government have therefore had plenty of notice.

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