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Baroness Noakes moved Amendment No. 29:

Page 12, line 37, leave out paragraph (b).

The noble Baroness said: I shall speak also to the other amendments included in the group. We move on to other aspects of the appointment of auditors for local government bodies. These are all probing amendments. The Minister may think that I have put on my anorak in drafting and speaking to these amendments, because I recognise that they will not be proposals in which many people have an interest. Although they are only probing amendments, I hope that the Minister will be in a position to provide some answers.

Amendment No. 29 seeks to delete paragraph (b) of Clause 14(4). Paragraph (a) is straightforward, stating that those eligible for appointment should be eligible for appointment as a company auditor, which has its own set of references. If a person is a member of one of the recognised accounting bodies, they may be an auditor. For example, if one is, as I am, a member of the Institute of Chartered Accountants in England and Wales, one must also be an approved auditor, which I am not. The Minister will be pleased to know that I could not be appointed as an auditor under the provision.

However, paragraph (b), which my probing amendment deletes, allows the Assembly to approve many bodies of accountants whose members do not have demonstrated audit competence. It is quite unlike paragraph (a). It would allow the Assembly to approve members of the Chartered Institute of Management Accountants, for example, an excellent body which

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has no pretensions whatever, to audit. It would allow the Assembly to approve a whole host of non-UK European accounting bodies. I would stretch the patience of the Committee if I explained why that is the minefield—I invite the Committee to accept that it is.

I am aware that, historically, local authority audits have been carried out by members of the Chartered Institute of Public Finance and Accountancy. I will not argue any case against that, being a pragmatist. Accepting that, in practice, CIPFA accountants need to be capable of being appointed, I want to hear from the Minister why that extensive power of approval is necessary instead of simply naming CIPFA. I believe that that is the reason for the drafting.

I invite the Minister to say how the Assembly intends to use the powers. The Minister may well be aware that approving an overseas accounting body as appropriate to carry out audit functions requires very extensive investigation. The Department of Trade and Industry has similar functions in relation to company audits in the UK. The DTI takes years over individual bodies—and I do not exaggerate—because of the nature of the inquiries that are conducted. Perhaps the Minister would comment on what, in practice, the Assembly might do to use its power to approve particular accounting bodies, in particular those outside the UK.

Amendments Nos. 30 and 31 propose the deletion of paragraphs (c) and (d) of subsection (4). They allow a form of grandfathering to individuals whose qualifications do not pass muster under paragraphs (a) and (b). These provisions have been in existence in different legislation for quite some time. I am always mystified as to whether any specific individuals still need to be grandfathered under these provisions.

I hope that the Minister will say how many people are expected to receive the protection of paragraphs (c) and (d) in terms of their appointment. I hope that the Government are not simply repeating legislation that has been used in the past without substantive reason. The circumstances which the provision seeks to address should, in my view, already have been time-expired. It will be interesting to know whether there are any particular instances. I accept that the Minister may not be able to answer that today.

Finally, I turn to Amendment No. 32 which deletes, on a probing basis, the power of joint auditor appointment in subsection (6). I am sure the Minister will be aware that joint audits are not the norm in the private sector—and for good reason. They nearly always involve duplication and therefore cost. They also run a risk of gaps—things falling between auditors and escaping audit. I am aware that there is a similar provision in the Audit Commission Act, but I hope that the Minister will be able to explain how that power has been used in the past and for what purpose. A power to have joint audits ought to be justified on its own merit because one would not choose them as a matter of course.

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The Explanatory Notes on Clause 14 are, to be polite, sparse. I hope that the Committee will be enlightened by the Minister's comments. I beg to move.

Lord Davies of Oldham: The noble Baroness said that she would don an anorak for the purpose of these amendments. The problem is that anyone who wants to follow her to the same event that evening would be unsure of the appropriate dress code. Some of us would not qualify for an anorak in the same terms—and from our earlier discussions, she is well aware that I would not do so.

With regard to Amendments Nos. 29 to 31, I listened to her expositions most carefully. The practical effect of the amendments would be that members of the Chartered Institute of Public Finance and Accountancy—a body which we all recognise is most relevant to local government audits—would not be eligible for appointment. CIPFA is not a "recognised supervisory body" for the purposes of Section 25 of the Companies Act, yet we believe that CIPFA would be an obvious candidate for recognition by the National Assembly. That is our main anxiety about the implications of the amendments tabled—

Baroness Noakes: The Minister said that CIPFA would be covered and I conceded that. I was trying to establish whether anyone else was expected to be covered and, if so, why we have such convoluted drafting approving all kinds of accounting bodies when all we are trying to do is legitimise the status quo so that CIPFA accountants who are not subject to a recognised supervisory body can carry on audits in the public sector.

Lord Davies of Oldham: Of course, the situation could be solved by naming CIPFA. The problem is that it is a non-governmental organisation and it has every right to change its name, as bodies do. However, the problem is that legislation referring to a particular body which may undergo change which none of us can foresee would present obvious problems. We seek to provide legislation that is expressed in more general rather than ad hoc terms because of such difficulties.

We are not aware of the number of people covered by paragraphs (c) and (d), which I recognise the noble Baroness spoke about with greater insight and knowledge. We simply do not want to disqualify people without justification. I hope that she will forgive me for saying what a hullabaloo would be caused if, by some inadvertence, legislation were drafted in such a way as to disqualify those who we had no intention of disqualifying simply because we were unaware of the full range. Those are our reasons for keeping the clause as it stands and why I am anxious about the amendments.

With regard to Amendment No. 32, the noble Baroness is right in saying that the Auditor General would be deprived of the discretion to make a joint audit appointment, but that is not likely to be used on many occasions. They are sometimes used when

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specific skills not held by the initially appointed auditor are needed for complex audits or for a peer review undertaken during an audit. But the fact that the power is not used frequently does not detract from its potential value. If we restricted the power with regard to the Auditor General for Wales, we would be removing a discretion which obtains for the Audit Commission in England. The noble Baroness may consider that a step forward, but, as she will have recognised, one of my abiding commitments with regard to the legislation is the degree of consistency between England and Wales.

I recognise that on both counts the noble Baroness has made an interesting case. We are not talking about a wide range of institutions or occasions, but it is right that we should frame legislation that is not restrictive and does not cause difficulties in future. In particular, it should not prove restrictive when comparable legislation elsewhere has it merits. On that basis, I ask her to withdraw the amendment.

7 p.m.

Lord Thomas of Gresford: I understand from the Minister's response to the amendment to delete subsection (b) that he does not wish to be tied down to a particular body. That causes problems—one thinks of the position of the Lord Chancellor, for example, and the problems the Government are facing in redefining his role and the powers of anyone replacing him.

Surely, the Secretary of State has a list of individuals who have been approved under the Audit Commission Act 1998 and approved under the Local Government Finance Act 1982. If there is such a list, are they still in practice?

Lord Davies of Oldham: I cannot give a direct answer to the noble Lord. If I could, I would be in a different profession. Let me make the obvious point, which I believe he recognises. We are seeking to keep the situation as wide and as open as possible because the only conceivable criticism of a government operating in this area of professional expertise is where they were proven wrongly to have been restrictive; that in their legislation they had restricted that which they had no intention of restricting, but had done so through narrow drafting based upon a degree of ignorance of the situation.

I hear what the noble Lord says about these categories and that the Government must have all these names somewhere. I cannot answer the question now, but I know the principle on which the clause is based. If he is saying, "If you were totally secure about the information which you have, you would not need that subsection", I would agree with him. I merely reflect the fact that where there are areas of uncertainty, it is only right that we should not be too restrictive.

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