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The Deputy Speaker (Lord Tordoff): My Lords, I should point out to the House that were this amendment to be carried, I should not be able to call Amendments Nos. 5 and 6, because of pre-emption.
Lord Thomas of Gresford: My Lords, we support the amendments. They set out a series of options so as to achieve consistency in the Bill, as the noble Baroness, Lady Noakes, has said. It is for the Government to choose which option they wish to follow and whether they wish to create new criminal sanctions in Wales that do not exist in England, or vice versa. It is for them to achieve internal consistency in order to have an effective regime.
Lord Evans of Temple Guiting: My Lords, the noble Baroness, Lady Noakes, asks the Government to repent. Given the number of government amendments in my speaking notes today, I think that we have shown a great deal of repentance. I am afraid that we shall not be able to repent on this amendment.
Amendments Nos. 4 to 6 reinforce the views expressed by the noble Baroness, Lady Noakes, and the noble Lord, Lord Thomas of Gresford, in Grand Committee that the Bill should provide an opportunity to rationalise audit-related criminal sanctions in Wales. Amendment No. 4 would remove the existing criminal sanctions set out in Clause 5. Those relate to failure to comply with certain of the Auditor General's access requirements in respect of undertaking a study programme.
As an alternative, opposition Amendments Nos. 5 and 6 would align these criminal sanctions with those on the access rights relating to local government bodies in Wales—Part 2 of the Bill. Following Grand Committee, officials checked with the Audit Commission, which has indicated that it cannot recall an instance where those criminal sanctions have been invoked. However, it is difficult to assess the efficacy of a sanction until such time as it is no longer in place.
The level of the penalty in respect of registered social landlords in Wales is the same as that which currently applies to the sector in England and Wales under the Audit Commission Act 1998. The Government continue to consider that to be the most appropriate approach.
I fully acknowledge that where functions have been devolved to the Assembly there is scope for secondary legislation in respect of criminal offences to diverge. The provision in Clause 39 for Welsh accounts and audit regulations, currently made under the Audit Commission Act 1998, is an example, although in practice the provisions in the respective regulations are consistent.
The Government believe that it is right that there should be consistent sanctions in England and Wales, an issue that we have discussed in debating this clause and others. Should those sanctions be subject to future review, it would be on a consistent, cross-border basis.
Amendment No. 12, if accepted, would apply criminal sanctions to non-compliance with Clause 11 access rights. That would apply to the National Assembly, its sponsored public bodies, NHS bodies in Wales, and other public bodies funded by the Assembly. It would also apply to those who hold documents or information relating to the exercise of the Auditor General's functions.
The noble Lord, Lord Davies of Oldham, in Grand Committee set out the accounting officer conventions that exist in relation to governmental bodies for which the Auditor General has statutory audit responsibilities and which would apply to any instance of non-compliance with the access provisions of Clause 11. In the first instance, the matter would be brought to the attention of the relevant body's accounting officer, then to the National Assembly's audit committee. The committee could call witnesses to seek an explanation and could issue and publish a report on the matter.
Ultimately, an instance of non-compliance could result in the removal of accounting officer status. Withdrawal of accounting officer status could well result in the individual concerned not being able to continue in his or her job. There is no equivalent to accounting officer conventions in the local government sector.
I am not aware of any instance in Wales where the imposition of criminal sanctions would have led to a more satisfactory resolution of access difficulties in the context of Clause 11 bodies. Criminal sanction provisions were not incorporated into the Auditor General's original access right provisions in the Government of Wales Act 1998. The noble Lord, Lord Sharman, also did not recommend the creation of criminal offence provisions in that context.
The Government are satisfied that the extended rights of access to documents and information under Clause 11 could be secured either under the accounting officer conventions or by way of an application for judicial review, where available—for example, by way of a mandatory order compelling the person or body to comply. Alternatively, the Auditor General could apply in the ordinary civil courts for a mandatory injunction to compel the performance of the duty to provide access. These remedies have teeth.
The Government are of the view that those are formidable weapons in the Auditor General's armoury, should it be needed. A person, for instance a sub-contractor, would think twice about refusing to comply with the Auditor General's rights of access if faced with the prospect of litigation and the costs that would inevitably ensue. On that basis, the Government remain of the view that it would not be appropriate or necessary to apply criminal sanctions generally in respect of the provisions in Clause 11.
I was asked what were the circumstances in which the Auditor General would invoke criminal sanctions in Clause 5. Even when faced with difficulties about access to documents and information in the registered social landlord sector, the Auditor General will also have the option of going to the courts to seek a mandatory injunction requiring the recalcitrant landlord to comply with the duty to provide the information and documents.
Under the Bill, the accounting officer of the NHS in Wales would be subject to the accounting officer conventions. The Auditor General would be the statutory auditor for the NHS bodies in Wales. They would be subject to Assembly audit committee procedures.
In the light of that explanation, I invite the noble Baroness, Lady Noakes, to withdraw the amendment.
Baroness Noakes: My Lords, I thank the Minister for that reply, which I found disappointing. So far as these Benches are concerned, there is never too much repentance from government Benches. We shall continue to raise such points.
The Minister repeated largely what we covered in Grand Committee. In particular, he repeated the issue about accounting officer conventions, whereas I had tried to point out in my introductory remarks that Clause 11 goes beyond those bodies to which the accounting officer convention applies. I think that I can understand why the Government may not want criminal sanctions attached to those where accounting officer conventions apply, although I can see no harm in it, if that is the consistency that they want to achieve. However, the clause already goes beyond that, so that does not seem a knockdown argument.
I am glad that the Minister has ascertained the position on the use of criminal sanctions, and that none has been involved. That was the position that we thought had existed.
I remain troubled by the Government's approach to the Bill, which is to ignore opportunities for consistency. The explanations that we have received do no more than try to cover up the inconsistency rather than explain it. I shall want to reflect further on what the Minister has said when I have read it in Hansard. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 5 and 6 not moved.]
Baroness Noakes moved Amendment No. 7:
- Page 7, line 37, at end insert "and any such fee shall cover the full cost of providing the audit"
The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendment No. 9 in this group. Both amendments deal with Clause 7, which inserts a new Section 93A into the Government of Wales Act 1998. The purpose of the amendment is to clarify the relationship between the fees that the Auditor General charges and his costs.
We shall not oppose governments Amendment No. 8, which is in the group. It seeks to delete subsection (2), which we did not understand when we debated it in Grand Committee. However, a consequence of that amendment will be to focus more attention on the basic approach taken by the Auditor General to charging, so we have tabled Amendment No. 7, which would ensure that all fees charged by the Auditor General covered his costs.
If the Auditor General does not cover his costs for an audit, it means either that other audits will have to bear more cost or that the Assembly will have to pick up the tab, under Section 93 of the Government of Wales Act 1998. I accept that there can be valid policy reasons for charging less than cost, but complete freedom such as that given to the Auditor General by the Bill means that the policy is not open and transparent. Under the Bill, he can do what he likes, and we are concerned about that.
I also have a specific concern that the Bill will allow the Auditor General to indulge in unfair competition with the private sector. The Minister wrote to me on 24 March—I thank him for that letter and for his comprehensive letter of 23 March—explaining government Amendment No. 8 in terms of the need to cover audits of bodies such as charities or voluntary organisations. That set alarm bells ringing. If the Auditor General has the power to set whatever fees he likes for the bodies who might chose to be audited either by the Auditor General or by private sector auditors, that could allow him to gain work by unfairly depressing fees below cost. That is not acceptable. Can the Minister give any assurances that the Auditor General will not use the power to undercut the market? I do not suggest that the current Auditor General would dream of such a thing, but the Bill must be proof against the actions of future Auditors General.
Amendment No. 9 deals with fees charged for certain services. Under subsection (3) of new Section 93A, the Auditor General has to set fees that do not exceed the full cost of the services. That contrasts with the formulation in the soon-to-disappear subsection (2) and the surviving subsection (4). We have focused our amendments on the use of the latter formulation for subsection (3).
Under subsection (3), there are two sorts of work that can be charged at less than cost. The first is value for money audits with the agreement of the Assembly. That is not a problem, because, if the Auditor General charges the Assembly less, it will have to pick up the tab. The second kind of audit is one done under new Section 145A, requested not by the Assembly but by some other person. The Minister's letter of 23 March said that that would allow the Auditor General to take the view that such a study could contribute to,
- "a wider programme of forward-looking cross-sectoral studies".
1 p.m.
Lord Evans of Temple Guiting: My Lords, I shall speak to Amendment No. 8 and respond to Amendments Nos. 7 and 9. I will deal first with Amendments Nos. 7 and 9.
Amendment No. 7 would seriously and unacceptably reduce the flexibility available to the Auditor General. The effect would be that if he decided to charge a fee for auditing he would have to charge the full cost. He would not have the power to charge, if he considered it appropriate, less than the full cost. The result would be that the Auditor General would either decide not to charge at all or decide to charge but be required to charge the full cost. There would be no flexibility, and we think that a bad thing.
In practice, the Auditor General charges full cost for audit work. That includes the direct cost of the work plus a reasonable attribution of central overheads. I hope that that statement will reassure the noble Baroness, Lady Noakes, that the Auditor General will not undercharge to depress market rates. If an audit involves more work than originally envisaged, his original cost estimate may have to be amended. If a small surplus occurs, it is taken into account in subsequent audit work. That does not affect, however, the general principle that the Auditor General charges full cost and only full cost. He is subject to audit by external auditors appointed by the Assembly. His practice on fee charging can also be considered by the Assembly's Audit Committee. Flexibility, as I said, is essential and was considered desirable when the Government of Wales Act 1998 was drafted.
There may be circumstances in which the Auditor General may wish to charge less than the full cost for the audit of a body or a person's accounts. Amendment No. 9 would arguably mean that the Auditor General could charge only a fee that covered the full cost of the service. The only alternative would be for him to charge no fee. As drafted, the proposed Section 93A(3) of the Government of Wales Act, to be inserted by Clause 7, would not prevent the Auditor General from charging full cost but allows him to charge less than full cost, if he wishes to do so.
Section 96(3)(b) of the Government of Wales Act 1998 relates to economy, efficiency and effectiveness examinations undertaken by way of an agreement between a person who is the subject of the examination and the Assembly or a Minister for the Crown. In such circumstances, it may be appropriate for the Assembly or relevant Minister to meet some or even all of the cost of the examination, rather than the person to whom the examination relates. In the case of a study requested under the proposed new Section 145A, to be inserted by Clause 3, the Auditor General may take the view that the study would contribute to a wider programme of forward-looking cross-sectoral studies that he may be undertaking or contemplating. For that reason, he may consider that the recovery of full costs may not be appropriate.
On the Section 145A studies and adding cost to other studies, where, in relation to previous studies, he has done the work at less than full cost, it must be remembered that the Auditor General is a public body and must act reasonably, or he may be subject to legal challenge. In addition, the studies would be by agreement; the later body could not agree to meet the fees, if the body felt that the fees were excessive.
With that explanation, I hope that the noble Baroness will withdraw the amendment.
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