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Government Resources and Accounts Act 2000 (Audit of Health Service Bodies) Order 2003

7.32 p.m.

Lord McIntosh of Haringey rose to move That the draft order laid before the House on 2nd April be approved [17th Report from the Joint Committee].

The noble Lord said: My Lords, I beg to move that the draft order laid before the House on 2nd April be approved. This occasion marks the concluding stage of a long dialogue between Parliament and the executive on the powers of the Comptroller and Auditor General. Members of this House will recall passionate discussion of this issue during debate on the Government Resources and Accounts Bill in 2000. That Bill provided for the change from cash accounting to resource in Government.

However, there were vigorous representations both here and in the House of Commons that the Bill should also provide for the Comptroller and Auditor General's powers to be strengthened in line with Parliament's concerns, which centred on three areas:

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first, the present inconsistency in the audit treatment of NDPBs, where, although the C&AG is currently the statutory auditor of about three-quarters of such bodies, the rest are subject to different arrangements; secondly, the fact that public services are now being delivered in increasingly new ways, including through the intermediation of private sector bodies—increasingly, the C&AG needed a right of access to those bodies; and thirdly, the fact that arranging administrative access for the C&AG may give rise to delay.

While the Government had some sympathy for those concerns, they also had concerns of their own about moving in the direction advocated. For instance, on the audit of NDPBs, the Government were concerned that the same level of service as is currently delivered by competitive tender might not be available under the C&AG's monopoly audit. On access, the Government were concerned that extending statutory access could be not only more burdensome for contractors and other parties subject to access but could also discourage them from coming forward to engage as partners in the delivery of public services.

However, the Government concluded that it would be appropriate to include provision in the Government Resources and Accounts Bill for orders which could be used to address the PAC's concerns. At the same time the Government sought to set out some wider considerations and implications arising from any such changes, and therefore invited the noble Lord, Lord Sharman, to review current audit and accountability arrangements in central Government.

The noble Lord, Lord Sharman, reported in February 2001. He broadly endorsed the extension of the C&AG's powers and recommended that the order-making powers should be used to address them. However, he also recognised the need to address the Government's own concerns in that area, and recommended that any new arrangements should be the subject of protocols and other arrangements to maintain service levels and minimise any extra burdens.

The Government accepted the key recommendations of the noble Lord in that area. The Government's response to his report also records assurances endorsed by the C&AG of the kind which the noble Lord recommended on service levels and burdens, and I am pleased to report that the response received a warm welcome from the PAC.

It is clear, I hope, that, with the leave of the House, I am speaking to all three orders. The second and third orders carry into effect the intentions set out in the government response by making the C&AG the statutory auditor of certain non-departmental public bodies where he is not already the statutory auditor, and by strengthening his powers of access. The original orders, which were laid on 6th February, were withdrawn in the light of concerns by the Joint Committee on Statutory Instruments. I am sorry for the inconvenience caused by the need to re-lay the two orders. However, I can assure the House that the

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revisions have not entailed any diminution in the powers of the C&AG compared with the original versions of the orders.

The first order, which I have moved, is also being made under the Government Resources and Accounts Act and is intended to make the C&AG the statutory auditor of the 19 special health authorities, including the Dental Practice Board, which is treated as a special health authority for audit purposes. Together with an accompanying negative resolution order, this order will ease the audit burden on special health authorities and the Department of Health, while maintaining full parliamentary accountability.

The audit of public bodies order provides for the C&AG to be made the statutory auditor of those NDPBs—other than NDPBs incorporated under the Companies Acts—which are required by or under statute to be audited by auditors appointed either by the Minister or the NDPB. The order includes a schedule listing the NDPBs affected and sets out the legislation that is being amended and the amendments to be made. The intention is that the C&AG will become statutory auditor of the NDPBs on the dates shown in the order.

Of the 25 NDPBs affected by the order, five are already audited by the C&AG by agreement. The remaining 20 are currently audited by private sector auditors, and the dates shown in the order for these NDPBs reflect the expiry dates of the auditing contracts.

I should remind the House that the C&AG is already the statutory auditor of most NDPBs, although I should add that a change in the Companies Act will be needed, possibly together with a change in the EU's eighth company law directive, to make the C&AG eligible to audit NDPBs which are companies.

The rights of access order extends the C&AG's statutory access rights for the purpose of his financial audit of all government departments and NDPBs. For that purpose his statutory access will be extended to grant recipients, but excluding individuals receiving social security and similar grants, to registered social landlords, train operating companies and bodies contracted or subcontracted to provide goods and/or services to Government or NDPBs. The order also provides access to the Regulator of the Landfill Tax Credit Scheme. In general the order will have the effect of making statutory the administrative arrangements already established or likely to have been established in the future for access.

The assurances about how the C&AG will use his powers under these two orders are set out in Section 3 of the Government's response to the noble Lord, Lord Sharman. As the response records, the assurances in Section 3 were endorsed by the C&AG. In particular I note that he has undertaken to consult the audited NDPBs and their sponsoring departments on key aspects of the audit, to provide additional audits at their request and to minimise any potential burdens on the bodies subject to statutory access, most of which are in the private sector. I welcome these and the other assurances that he has given.

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On the basis of the regulatory impact assessment which accompanies the orders, the Government are satisfied that on balance these new audit and access arrangements add up to a clear gain for Parliament and the public.

I take the opportunity to reconfirm the Government's policy that the C&AG should have access to the bodies covered by the Audit of Public Bodies Order for the purpose of his value-for-money studies as well as his financial audits. Although the value-for-money access to these bodies will not be statutory, it will be implemented through contract, grant conditions or other appropriate means. Such access will of course be used by the C&AG solely in connection with his statutory value-for-money examinations of public sector bodies, and not for the purpose of conducting value-for-money examinations of the accessed bodies themselves, most of which are in the private sector.

The Government Resources and Accounts Act 2000 (Audit of Health Service Bodies) Order 2003 deals with the audit of the special health authorities and has of course been prepared in consultation with the Department of Health. The SHAs are listed in the annexe to the order. The order is intended to ease the audit burden on SHAs and the Department of Health, while maintaining full parliamentary accountability.

At the moment SHAs prepare their own annual accounts. Those accounts are then audited by auditors appointed by the Audit Commission and submitted to the Department of Health, which prepares separate NHS summarised accounts for each SHA, making changes to ensure consistency of presentation across all NHS organisations and to reflect events which come to light affecting the accounts after the underlying individual accounts have been completed. Finally, the C&AG examines and certifies the summarised accounts and lays them before Parliament together with his report on the accounts.

Plainly, the present arrangements require two sets of accounts to be prepared for each SHA—one set by the SHA and the other set by the Department of Health. Each SHA is, in effect, audited twice—once by auditors appointed by the Audit Commission and then by the C&AG.

By making the C&AG the statutory auditor of SHAs in place of the Audit Commission arrangements, the order will remove the dual audit burden. However, the individual SHAs' accounts will of course continue to be laid before Parliament. The Dental Practice Board, which is treated as an SHA, is covered by the new arrangements.

The companion negative resolution order will discontinue the requirement for the Department of Health to prepare summarised accounts for the SHAs mentioned in that order, which will achieve a resource saving for the department itself. These new audit arrangements for SHAs are intended to take effect for the 2003–04 year and subsequent financial years.

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On the basis of a regulatory impact assessment on the affirmative SHA order and the associated negative order, the Government have concluded that the new audit arrangements for SHAs will bring clear gains in terms of a simplified auditing framework, reduced audit burdens and the maintenance of full accountability to Parliament. I should add that the Audit Commission is content with this change. I commend the draft order to the House.

Moved, That the draft order laid before the House on 2nd April be approved [17th Report from the Joint Committee].—[Lord McIntosh of Haringey.]


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