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Baroness Sharp of Guildford: My Lords, I do not wish to delay the House with a lengthy speech. We discussed this matter at considerable length in both Grand Committee and on Report. We have consistently supported the Opposition on the issue of access. As I made clear on Report:

He has to rely on government departments for access to documents which are relevant to the pursuit of his duties. It is important that he has those powers. We therefore support the amendment.

Lord Shaw of Northstead: My Lords, I support the amendments brought forward by my noble friend Lord Bridgeman. Clause 8(1) of the Bill states:

    "For the purposes of an examination by the Comptroller and Auditor General of a government department's accounts--

    (a) he shall have a right of access at all reasonable times to any of the documents relating to the department's accounts".

I suspect that those words will be interpreted as meaning freedom of access only to those documents relating to the financial regularity of the account. But the duties of the C&AG run much wider than that, not least in looking at the value for money aspects of a department's activities. For example, at Question Time yesterday I asked the Minister this question:

    "My Lords, is the Taylor report available to the Comptroller and Auditor General?"

Perhaps I should have asked, "Will it be available after the Bill becomes law?" The Minister replied:

    "My Lords, I do not think that it is a financial report, so it does not come within the scope of the Comptroller and Auditor General's responsibilities".--[Official Report, 11/7/00; col. 130.]

As I understand it, the Taylor report concerns the smuggling of tobacco. Is the Minister saying that there will be no circumstances whereby the Taylor report might be relevant to any future investigations of the C&AG? I find that difficult to accept. If, in fact, the C&AG felt that the report was relevant to his inquiries, my fear is that the department might refuse to make it available. If that were to be the case, perhaps I may refer the Minister to a debate in the other place on 24th October 1985. In that debate I referred to a meeting of the PAC where the basis for certain actions had been contained in a letter from the Permanent Under-Secretary of State. At that meeting we asked why the letter had not been available. We were told that it referred to a certain helpful report submitted privately to the Secretary of State for Defence by the then Mr Peter Levene, now, happily, with us as the noble Lord, Lord Levene. It was submitted by him when he was in a position in industry and before he became a member of the staff of the MoD. Since that report influenced the ministry's decision, the C&AG had felt it right to demand sight of it. The PAC agreed and suspended

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its own inquiries until the report was produced. It was produced at our next meeting. At the end of that debate, Mr Moore, then the Financial Secretary to the Treasury, said:

    "My hon. friend the Member for Scarborough also mentioned what is known as the Levene report. All I can say is that there is no reason to suppose that any similar reports in future will not be released".--[Official Report, Commons, 24/10/85; col. 493.]

Perhaps I may deal briefly with the amendment to Clause 8 which would give the C&AG access to all information to which the European Court of Auditors has access in relation to the United Kingdom. I was a Member of the European Parliament when the European Court of Auditors was set up in 1977. I was also Rapporteur for the Financial Regulation of 1977.

In setting up the Court of Auditors, it was obvious that much of the revenue and expenditure transactions of the Community were nationally based. Therefore, the more that the various national audit bodies could become involved in working with the European Court of Auditors, the better; otherwise, the Court of Auditors would have--and has had--a quite impossibly large task. There must be a continuing need for the European Court of Auditors to seek to establish as much co-operation and confidence as possible in the work of each of the national audit authorities.

In this country we are blessed with a first-class National Audit Office under the leadership of an outstanding C&AG. It would go greatly against the interests both of this country and of the European Court of Auditors if we did not assist in achieving the utmost co-operation between the two bodies.

If the C&AG was in a position to act on behalf of the European Court of Auditors when required, that would also remove the resentment that I have already heard expressed; namely, "Why should the European Court of Auditors be allowed to come nosing around our affairs?" Of course, occasions will arise when it must do so, but wherever possible, it would be much more acceptable if it could seek the assurances it requires through the good offices of the C&AG. I strongly support my noble friend's amendment.

4.30 p.m.

Lord McIntosh of Haringey: My Lords, I am faced with the difficulty--this happens from time to time--of having to decide whether to respond to the speeches or to the amendment. It is clear that the speeches that have been made--I have listened to them with great care--bear no relationship to the amendments before us. However, before I try to respond to the amendments, which I believe is my duty, I should say a few words to the noble Lord, Lord Shaw of Northstead.

I believe that I was wrong in what I said yesterday and I am glad to have been given an opportunity to correct it. I was taken by surprise by his question about the Comptroller and Auditor General and the Taylor report on tobacco smuggling. From Section 8 of the National Audit Act 1983 it is quite clear that the

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Comptroller and Auditor General has separate rights of access to value for money studies, and that such access is not limited to financial information.

Lord Shaw of Northstead: My Lords, I thank the Minister. I am grateful for that reply.

Lord McIntosh of Haringey: My Lords, I shall take advice as to whether there is any other way in which I should put the record straight. However, it is clear that I was wrong on that occasion.

Perhaps I may now turn to the amendments. The Opposition have responded to the point I made on Report; namely, that additional access is not needed for the purpose of auditing departmental accounts. Indeed, the Comptroller and Auditor General himself admitted that in giving evidence to the Public Accounts Committee. However, the Opposition have responded in the most extraordinary way: by removing the requirement that the clause should apply to departmental accounts, which is what is meant in Amendments Nos. 4 and 5.

That will not make matters better; it will make them very much worse. These amendments would divorce this clause from the subject matter of the Bill, which is government accounts, and instead turn it into a general power of access for the Comptroller and Auditor General. By referring in general terms to "examinations", it would apply both to his value for money examinations carried out under the National Audit Act and to the audit of accounts. The amendments appear to be a way of changing the National Audit Act by stealth. This Bill is not, and never has been, a replacement for the National Audit Act 1983. It seems extraordinary to be proposing at this late stage of the Bill--at Third Reading in the second House--amendments which open up entirely new topics and suggest sweeping changes which have not been subject to any debate or consultation and which are not based on any evidence of problems of access.

Amendment No. 8 would give the Comptroller and Auditor General access to any body to which a department or one of its NDPBs--I shall not labour the point about the definition--has, or can obtain, access. Furthermore, it repeats an amendment discussed on Report. The effect would be to allow the NAO access to a very wide range of businesses and even individuals who have financial dealings with government.

Amendment No. 7 would give the Comptroller and Auditor General the same rights of access as the European Court of Auditors has in the United Kingdom. I must admit that I am astonished that a member of the Conservative Party, who has trumpeted his concern for UK sovereignty, would wish to make the access rights of Parliament's auditor partly dependent on the rights enjoyed by a European body under the European treaties. That surely represents a unilateral surrender of parliamentary sovereignty.

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It is clear that the intention behind the amendment, contrary to what was said by the Official Opposition at earlier stages of the Bill, is to enable the Comptroller and Auditor General to be able to follow public money wherever it goes. That is confirmed if we look at Article 248(3) of the European Treaty which states:

    "The audit shall be based on records and, if necessary, performed on the spot ... including in the premises of any natural or legal person in receipt of payments from the budget".

That would give the C&AG access to, among others, every farmer in the country. Perhaps I may point out that Article 248(3) is very clear that the Court of Auditors should co-operate with other auditors and with national governments in exercising these rights. The amendment contains no such safeguards.

How can we reconcile the sweeping powers of access conferred by Amendments Nos. 7 and 8 which, if the other amendments in this group are accepted will no longer even be tied to the audit of departmental accounts, with the concerns expressed by the Government and, as I mentioned on Report, by the British Chambers of Commerce and the Federation of Small Businesses; namely, that additional powers for the Comptroller and Auditor General could result in additional burdens on business, over-regulation and an overlap of functions? The simple fact is that they cannot be reconciled. As I said earlier, if my noble friend Lord Haskins were in the House today, he would be horrified at the suggestion.

Amendments Nos. 7 and 8 would not have the effect, as the Opposition would have us believe, of simply entrenching in statute the C&AG's existing access rights, thus putting him on a par with the Court of Auditors. What they will do is to give him extensive rights of access, unrelated to the audit of departments' accounts, to anyone who has financial dealings with government.

It has been said already that this clause is not essential to the central purpose of the Bill, which is the introduction of resource accounting. However, by introducing the clause, we sought to take the opportunity to make provision to ensure that the Comptroller and Auditor General has the access he needs to carry out the audits of departmental accounts. The clause as it stands already ensures that he has that necessary access, so additional amendments are unnecessary.

This was the concern expressed by the noble Baroness, Lady Sharp, at an earlier stage. I understand that point. However, as I said when we debated this on Report, the Comptroller and Auditor General has already audited the first "dry-run" sets of resource accounts. Although he qualified many of these, he did not once do so on the ground of insufficient access. Even more tellingly, on 7th June the Comptroller and Auditor General said, in giving evidence to the Public Accounts Committee, that although he would like additional access, he does not need it in order to audit departmental accounts. I think that that in itself renders Amendments Nos. 7 and 8 redundant.

The Government have responded to a number of the key concerns expressed by the Comptroller and

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Auditor General and the Public Accounts Committee. At Report stage in the Commons the Government tabled a completely redrafted version of this clause to take account of those concerns. In particular, we have added what is now Clause 8(2)(b) to give the Comptroller and Auditor General a statutory right of access to third parties which hold departmental financial records. This deals with one of the major concerns expressed by the Comptroller and Auditor General and the PAC that over the past few years many departments have contracted out the operation of their accounting and other information technology operations. As a result, the Comptroller and Auditor General needs a statutory right of access to do his audit of departmental accounts. The new subsection recognises that and provides him with that power.

More generally, the Government have accepted that the whole area of audit and accountability needs to be carefully looked at. That is why we have set up the review under the noble Lord, Lord Sharman. We recognise that Parliament must be satisfied that the Comptroller and Auditor General has the powers he needs to do his job on behalf of Parliament. But that must be balanced against legitimate concerns that to give the Comptroller and Auditor General further powers may result in additional burdens on business, over-regulation and an overlap of functions.

These are wide-ranging and complex issues. The Government do not believe that they can be adequately dealt with during the passage of a Bill that is concerned with reforming the way the Government do their accounts and, therefore, deals only with audit issues to the extent that they impact on those accounts. The study chaired by the noble Lord, Lord Sharman, can look at these issues in the detail they require and deserve. The Government believe that that review provides the necessary basis. The Government have as much interest as Parliament in ensuring that the Comptroller and Auditor General delivers independent and high quality audit scrutiny.

The new amendments tabled by the Opposition are so different from those tabled on Report that I must appeal directly to the Liberal Democratic Party. I understand its support for the previous amendments, but I do not see how it can conceivably support these amendments. We were told that the amendments tabled on Report were necessary to enable the Comptroller and Auditor General to carry out his audit of departmental accounts. Although we understand that, we do not share the view of those who have sympathy for that proposal. But the amendments that the House is being asked to consider today are of a completely different order. They break the fundamental link between the clause and the subject-matter of the Bill.

At this very late stage we are being asked to consider changes which would make this clause a general purpose right of access for the Comptroller and Auditor General that would cover his value for money examinations as well as his audit of accounts. The amendments raise entirely new issues which have not

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been the subject of previous amendments, debate or consultation at any time during the passage of this Bill. We cannot accept them.

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