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Lord Burnham: Order.

Lord Lipsey: I believe—

Lord Swinfen: The noble Lord is speaking from the Gangway, which is out of order.

Lord Lipsey: I am so sorry to be in bad form in the Chamber. That is two conventions that I have broken in one speech.

That brings me to my third and most important point. There have been misunderstandings about the proposal and great concern has been expressed, which I understand. That makes me determined to find a way forward that is based not on conflict but on agreement. I am, I hope, a reasonable chap, and I favour compromise over conflict in all circumstances. However, there is a further and much more important reason in this regard. We do not want the arrangement just as a totem of BBC accountability; we want it because we, the Comptroller and Auditor General and the PAC believe that bringing their great knowledge and experience of public sector economies to the BBC can help the BBC to save money.

That is much more likely to happen in an environment in which the BBC is going along with the NAO and the PAC being involved than in a situation in which it is hostile to that. The BBC is a marvellous organisation but among the things at which it is marvellous is bureaucratic delay and obfuscation. However, if the BBC gets in gear with this arrangement, something really creative and good for public money could come out of that way forward. I am encouraged not only by the remarks of my other good friend, the chairman of the BBC, to the Peers' meeting the other day, but also because I believe that privately he would strongly be of the view that if the BBC is going to go into this arrangement, it should do

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so wholeheartedly and with full commitment and it should try to make it work. Then, at charter renewal, all of us will have a chance to think again.

That is why I so welcomed the proposal put forward by the noble Lord, Lord Sharman, to resolve this issue. I believe that since then further progress has been made in discussions, including indications given by the Comptroller and Auditor General. But it might well be for the convenience of the Committee if we were now to hear from the Minister on how they are going because we do not want to have an argument about things we do not need to have an argument about.

Lord Maclennan of Rogart: I rise to—

Baroness Blackstone: It would be helpful if, as invited by my noble friend, I intervened at this point. It might speed debate on the issue and, to pick up the terminology used by my noble friend, take some heat out of the issue.

We believe that safeguarding the BBC's editorial independence will always be a matter of the utmost importance. For this reason, we take the view that programming and policy decisions must remain the preserve of the BBC governors and not be subject to review by the National Audit Office or the Public Accounts Committee, or to any form of political oversight or intervention.

However, I acknowledge that those who advocate extending NAO access to the BBC give assurances that the Comptroller and Auditor General does not comment on the merits of policy objectives and is prevented by statute from doing so. Nevertheless, successive governments—Conservative and Labour—and the BBC have judged that extending NAO access to the corporation would compromise the BBC's editorial independence and would undermine its existing audit arrangements.

On the other hand, we recognise the strengths in the argument that there should be clear accountability for the large sums of television licence fee revenue received by the BBC. Like my noble friend Lord Lipsey, I do not accept the view of my old friend, too, Will Wyatt, that this is not public money.

Therefore, the Government welcomed the extremely positive contribution which the noble Lord, Lord Sharman, has made by suggesting a possible way forward. I can say to the Committee that provided we can satisfy ourselves on some of the details of the proposal, the Government intend to give their support to the arrangement that he has outlined, which would be put into effect by way of an amendment to the BBC agreement.

With your Lordships' permission, I would therefore like the opportunity to take the proposal away and examine it in detail. My intention would be to indicate the Government's conclusion before we reach Report stage. While that may not go quite as far as the noble Baroness, Lady Buscombe, would have wished, I hope

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that it will reassure your Lordships of the Government's intentions and that this is something around which we are able to build a consensus.

Lord Maclennan of Rogart: I am most grateful to have had the opportunity of hearing the intervention of the noble Baroness before we have carried the debate too far today. I also recognise that coming to the debate at this stage, parachuting into the discussion as I have, may be a not wholly welcome intrusion. My credentials for doing so are that I served on the Public Accounts Committee for 16 years; for the duration of the 1990s I was a spokesman on broadcasting in another place; I have great concerns about the protection of the BBC; and I also have wider-ranging constitutional interests in ensuring parliamentary control over public funds.

No doubt at the Report stage we will hear more about the proposals of my noble friend Lord Sharman, which have been made available only in outline. But while the detail of those proposals is being borne in mind, it is important to remember the significant principles that must be recognised in any compromise. My view is neatly summed up by the chairman of the Public Accounts Committee, Edward Leigh, in the last sentence of the letter which the noble Baroness, Lady Buscombe, read to your Lordships. It stated that,

    "the point of principle that needs to be established is the clear and unambiguous statutory right of access".

In considering these matters, it is perhaps sensible to take as a point of departure the earlier report made for the Government by my noble friend Lord Sharman on public accountability and external audit. The noble Baroness will recall that that report gave the reasons for external audit and pointed out that it has a wide purpose. It indicated that a crucial element of public accountability is independent external scrutiny. It provides a means of assurance to Parliament that public money has been properly spent. Public audit has a key part to play in helping public services to achieve value for money. Public audit is also deemed to be a key element in establishing public confidence that public money is properly spent.

In the light of the helpful remarks made by the noble Lord, Lord Lipsey, it is not necessary to animadvert on whether the licence fee is public money. He has effectively established that beyond question. But if there had been any doubt about it, one could reasonably turn to the report of the Gavyn Davies committee, which fully acknowledged that the licence fee is indeed public money; that it is essentially paid to the department which in turn pays the equivalent to the BBC.

It is also worth recording what the Gavyn Davies report said in considering the future funding of the BBC. The present chairman of the BBC was chairman of that committee and I know that he has subsequently distanced himself from some of its key recommendations. Its members comprised several Members of this House, including the noble Lords, Lord Lipsey, Lord Gordon of Strathblane and Lord Newton, and a number of distinguished independent figures.

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The committee concluded—and it is worth quoting this and having it on the record—that the arrangements which apply to the commercial television companies which are subject to external regulation are missing in the case of the BBC and that the tension between the regulator and those whom they regulate, which is desirable, is absent here. According to the Davies report, it is not clear whether in the BBC such a divergence of interest can become transparent and effective. It goes on to say in terms and clearly that the most serious lacuna that results from this structure concerns financial control. It then points out that the annual grant of 170 million to the World Service is reviewed by the NAO and the Public Accounts Committee but that the much larger amount which comes from the licence fee is not.

The report quotes the view of a former chairman of the Public Accounts Committee, Mr David Davis, under whom I had the honour to serve for a certain time, although not as long as under the distinguished chairmanship of the noble Lord, Lord Sheldon. The report states that the committee agreed and accordingly recommended that the Comptroller and Auditor General's inability to report to Parliament on how the BBC uses the licence fee seriously weakens the public accountability of the BBC. It agreed and accordingly recommended that the National Audit Office should be empowered to carry out periodic financial audits of the BBC's accounts and its fair-trading arrangements.

The report refers to the BBC's fear that such an audit would provide politicians with a handle with which to beat the corporation on its policy and even on its individual programmes. However, that is suitably dispensed with by references already made in the debate which demonstrate that by statute that is not open to the Comptroller and Auditor General. The report also states that the knowledge that BBC executives might be second-guessed by politicians could result in timid and safety-first decisions by programme makers.

Furthermore, the Davies report states that if the committee felt that these fears were justified it would not recommend a change, but it did not. It says that a comptroller is appointed by Parliament and not by the Government; that it is not his job to report on matters of policy; and that the fact that the licence fee collection and enforcement arrangements are already audited by the National Audit Office—the National Audit Office also audits the grant-in-aid for the World Service—demonstrates that it can have a legitimate role in ensuring due process in the BBC.

In the light of what we have heard about the discussion of a possible compromise being made, it is not appropriate for me to speak at length. However, it is important to remind noble Lords how in practice the Public Accounts Committee works; how its work differs from that of the Department of Culture, Media and Sport committee, which already has a right—and exercises that right—broadly to oversee the BBC through scrutiny of its annual report; and how its

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chairman, Mr Gerald Kaufman, is not adverse—on his day—to making fairly trenchant criticisms of the BBC.

The Public Accounts Committee is quite different. It agrees the facts with the subject of the study before the report is published. It operates in a wholly non-partisan function. It produces unanimous reports. For more than 100 years, it has never produced a report in which there has been a dissenting voice. Its function and operations have always been at least as concerned with assisting the subject of the inquiry to do better as with underscoring any deficiencies which may have been drawn to the attention of the public by the National Audit Office. It is not an adversarial organisation. It is unsuited to being one. In my judgment it has provided a wholly non-partisan security to the public that their money is being spent wisely and that they receive value for that money. I hope that the advantages of that route will not be underestimated by the BBC and by the Government in considering the best way ahead.

1 p.m.

Lord Sheldon: My Lords, I want to put some of the debate into context. The National Audit Act 1983 excluded the BBC from examination by the National Audit Office. I was involved in the passage of that Bill. That was prior to my becoming chairman of the Public Accounts Committee. The questions I put to the committee are: what were the arguments then; and, how far have they changed over the intervening 20 years? The Public Accounts Committee looked at those bodies whose accounts would be examined by the National Audit Office.

The passing of the National Audit Act in 1983 was a close-run thing. It was passed on the last day of the 1979 to 1983 Parliament, when any remaining legislation that has not already been passed comes before the House of Commons. All that is needed to block any Bill is for one Member—any Member—to shout "Object". That task was willingly provided by Dennis Skinner and a few others. On this occasion I personally went around explaining the importance of the Bill. Fortunately no dissent was heard and the Bill passed.

The accounts audited by the National Audit Office included such organisations as the British Airports Authority, the British Airways Board, British Telecommunications and so on. The BBC did not fit into the usual pattern of non-governmental organisations, so the legislation excluded it. Later, in 1987, when the BBC's World Service came before the Public Accounts Committee, the committee concluded that it should be examined by the National Audit Office. What were its reasons for concluding that? Why did it distinguish between the World Service and the BBC? That was a conscious decision and not an oversight. It was based on the fact that the World Service is financed largely by the Foreign Office. However, it also concluded that the present arrangements for voluntary examination of the BBC should remain.

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The National Audit Office Act enables the National Audit Office to do value-for-money reviews with the agreement of the BBC and the Minister. I always thought that that was sufficient protection and that the advice, which I am sure would be valuable, was available if required. The expertise of the National Audit Office was therefore fully looked after.

Let me briefly explain how the National Audit Office goes about its work. The National Audit Office considers the areas for investigation. It looks at the whole range of expenditures. It then selects a number for examination—usually about 50 reports each year. The preliminary stage might take a few months when the decision is taken whether to investigate further. A full examination may take from about three months to well over a year. The report, after agreement, is then presented to the Public Accounts Committee. That committee has a meeting with the accounting officer and produces its report, which can then form part of the detailed annual debate in the House of Commons.

The process has worked very well indeed, as the noble Lord has mentioned. During my time as chairman more than 600 reports were published, all of which were unanimous. There are a number of difficulties in dealing with the BBC. First, the National Audit Office and then the Public Accounts Committee examine it for value for money. How can it be audited? It looks at economy, efficiency and effectiveness. What is the effectiveness of the BBC? How do we define it? Should we define it on the basis of how many viewers there are? Is the criterion a balanced output? Is it fair? Are the problems of complaints addressed properly? Should the range of programmes and how they are arranged be discussed? Are all those aspects available?

In the case of the BBC there are difficulties in auditing the effectiveness of arts programmes, in auditing a news service and in auditing an entertainment channel. As to ITV one has the test of profitability and only within that does one have to consider questions of fairness, decency, and so on. This is an impossible burden, which is obviously not put upon the National Audit Office.

I would wish to see the current position maintained. I understand that the noble Lord, Lord Sharman, has a proposition. I look forward to hearing it. But, after all, we have to consider what has gone wrong in those 20 years. Why has the situation changed? During that period many other aspects of the press, radio and television have either performed badly or could easily be improved. Attention might be focused there. But the BBC still stands as the one outstanding public service. That success has been achieved over a period of 80 years with the multitude of changes that we have seen since then.

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