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Lord Thomas of Gresford: I am grateful to the Minister for that response. It is wrong in principle to legislate in an unnecessary way. The word used is "individuals". If the Secretary of State does not have
access to a list of individuals and knows what they are currently doing under the 1998 and 1982 Finance Acts, that would suggest that perhaps there are people practising in this field who are not known to the Secretary of State. Surely, they must be known, there must be a list and their current status must also be known. One does not want unnecessary verbiage in what is already a complex enough Bill.
Lord Davies of Oldham: I do not have a great deal to add. I assure the noble Lord that I have heard what he has said. It will be noted most carefully and we will look at the matter. We will reiterate our response to him more accurately on Report or we will produce a different solution.
Baroness Noakes: I thank the Minister for his explanation and I thank the noble Lord, Lord Thomas of Gresford, for intervening in relation to these amendments. I, too, was going to challenge the Minister to produce a list because that is all that is required. It would encourage the Minister not to legislate unnecessarily. I do not believe that many people were ever involved under this section and I suspect that none is still practising. I may be wrong and there may be one or two, in which case paragraph (c) or (d) may need to remain. I will read carefully what the Minister said in respect of the other points I raised.
On Amendment No. 32, relating to joint audits, the Minister will not be surprised to hear that I was not comforted by the model used for the Audit Commission as now applies to England. If his officials look at its history, they will see that it is something to do with large complex audits in London. It is also concerned with the opening up of the local authority audit market for private firms so that individuals could carry out audits on a low-risk basis while making the transition to the new audit players in the audit sphere as a consequence of the introduction of the Audit Commission in the early 1980s. That provision, too, has no real relevance in today's world, certainly not in the much less complex environment of Wales.
With the same plea as the noble Lord, Lord Thomas of Gresford, not to legislate for things that are not necessary, I hope that the Minister's officials will look at these matters again before the Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 30 to 33 not moved.]
Clause 15 [Persons to assist auditors]:
On Question, Whether Clause 15 shall stand part of the Bill?
Baroness Noakes: We have tabled our objection to Clause 15 standing part of the Bill in order to probe what the clause is all about. We have already remarked on the curious construction of the Bill, which has separate audit arrangements for local government audits. Clause 15 is another example of this.
The clause is headed "Persons to assist auditors" and it goes on to empower the Auditor General to approve arrangements for non-appointed auditors to
assist the appointed auditors in carrying out their functions. There is no similar provision in relation to the other audits that the Auditor General will be carrying out, so a number of questions arise in my mind which I hope the Minister will be able to answer.What are these arrangements? What do they mean in practice? What types of people will the auditors be making arrangements with? Why will the Auditor General be appointing auditors who are not competent to carry out the totality of their audit functions in the first place? What kind of controls will the Auditor General place on these arrangements? In what circumstances would the Auditor General approve arrangements as allowed under subsection (2) and when would he stick to individual appointment?
They are not idle questions because subsection (3) states that, in effect, these persons are treated as auditors under the Bill. So, these non-auditor assistants can avail themselves of the access rights conferred by Clause 18, with the possible consequence that criminal offences for non-compliance could be triggered. Perhaps the Minister will confirm that that is the case.
In the ordinary course of events, we would expect to turn to the Explanatory Notes for assistance. I have already alluded to the not-too-helpful quality of the Explanatory Notes. But they merely repeat the wording of Clause 15, adding an extra word. There is nothing by way of explanation or example.
The Committee is entitled to understand the purpose and effect of Clause 15, which is why we tabled this objection.
Lord Davies of Oldham: The basis of Clause 15 is that it would enable an appointed auditor to seek assistance in the exercise of his duties on matters which might be of significant complexity to require a specialist contribution; for example, on aspects of taxation or the interrogation of complex information data bases. The support of a person with expertise in such an area would be of potential assistance to the appointed auditor and the clause clearly indicates that the Auditor General could oversee such arrangements.
A facility is already available to appointed auditors under the provisions of the Audit Commission Act 1998. The resource would remain available to appointed auditors in England, irrespective of whether Clause 15 was part of the Bill. I know that the noble Baroness and I are engaged in an elegant dance around whether consistency on my part between England and Wales is an important principle and on her part whether advances cannot be made within the framework of this legislation. I presume that if they were advantageous, at some stage they would be followed in England in due course. We will continue that dialogue for some time. I attest to the obvious fact that the removal of Clause 15 would inhibit the Auditor General in Wales while not having the same implications in England. It would place appointed auditors in Wales at a disadvantage in comparison to auditors appointed to a local government body in England. I cannot see how that could be construed as advantageous.
If there is no need for the Auditor General in Wales to appoint someone to assist the auditor where he himself is the auditor, he can bring in such technical services as he needs. In making those arrangements, the Auditor General could take account of such issues as potential conflict of interests. It is to be recognised that the framework for that is supervised; it is to be carried out only where it is recognised that there is a particular difficulty.
The noble Baroness asks how it is that the auditors appointed are not competent to deal with the problems in hand. I take second place to nobody in my admiration of auditors and their overall competence—in the past I have been more than grateful for their expertise, as we all have in some general way—but, nevertheless, the noble Baroness will recognise that there is some merit in having specialist expertise made available, subject to supervision. That is the concept in the Audit Commission Act. Apparently, the noble Baroness is of the view that it would be advantageous to Wales if no such comparable power existed for it. I am afraid that we will have to differ on that point.
Lord Thomas of Gresford: On behalf of my party, we support the Government in retaining Clause 15. However, the Minister should appreciate that it is quite right that Wales should have its own methods of innovation for building up new techniques and training and should lead the way for England to follow; it should not necessarily be the other way round. In the field of rugby football, England won the World Cup as a result.
Baroness Noakes: I thank the noble Lord, Lord Thomas, for that intervention. Rugby is a game that I will never understand. I cannot follow it. I thank the Minister for his response.
I wish to ask two questions. If a private-sector auditor were appointed under the basic appointment provisions of Clause 14, would anyone who works on the audit—from the most junior audit clerk to the most senior tax or IT partner—have to be approved under those arrangements? My second question repeats what I asked in the introduction of the clause stand-part debate: does subsection (3) mean that all those people are treated as the auditor for the purpose of the access rights and therefore the ability to trigger a criminal sanction under Clause 18? I wish to be clear on those aspects.
7.15 p.m.
Lord Davies of Oldham: In response to the first question, provided that the firm was approved, each individual would not have to be approved. The answer to the second question is that each individual would be liable to be sanctioned.
Baroness Noakes: Does the Minister mean that each individual would be able to trigger the sanction, rather than be liable to it?
Lord Davies of Oldham: Yes, I am sorry.
Baroness Noakes: On that basis, I thank the Minister for his explanation, which I shall consider carefully in Hansard, and withdraw my objection to the clause.
Clause 16 [Code of audit practice]:
Baroness Noakes moved Amendment No. 34:
- Page 14, line 6, leave out subsection (4).
The noble Baroness said: In moving the amendment, I shall speak also to Amendments Nos. 35 and 36. They are probing amendments concerning the code of audit practice, which is clearly an important part of the local government audit framework that we are borrowing from England.
The point of Amendment No. 34, which would delete subsection (4) of Clause 16, is to question the precise role of the Assembly in relation to the code. I can understand the Assembly's interest in the code, because it is the paymaster of local authorities and will want to look at the code. But my question is whether the Assembly can amend the code before giving its approval. I would not have thought that the Assembly would basically wish to do so, on account of its professional character and because that would undermine the authority of the Auditor General. The question is: can it do so? I would be grateful for the Minister's view on that.
Amendment No. 35 leaves out subsection (7) because that provision is a mystery to us. Subsection (7) says that the code, even after it has been issued by the Auditor General and approved by the Assembly, can be annulled by statutory instrument in either House of Parliament. Will the Minister say why that power has been taken and in what circumstances it might be used? It seems to go too far from designing a solution fit for Wales.
Amendment No. 36 is probing; it is intended to ascertain the role of the Audit Commission's code of practice in relation to local government audits in Wales. Clause 16 provides that the Auditor General may issue a code of audit practice. Clause 17 says that the auditor must comply with it. But Clause 17(4) says that "code of audit practice" means not only a Clause 16 code but also the code issued by the Audit Commission. Amendment No. 36 would remove that paragraph.
Again, the Explanatory Notes are unhelpful in that respect. I am sorry to keep repeating that point, but it can become frustrating when Explanatory Notes give no further information and simply repeat the draft of the Bill. My question is: what relevance has the Audit Commission's code of practice to Wales? If the Auditor General is to issue his own code, why should Welsh local government auditors also have to comply with the English code, and what is to happen if the codes do not coincide in all respects? I beg to move.
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