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Lord McKenzie of Luton: As has been explained, Amendment No. 315B would make any order made under Clause 440 subject to the affirmative rather than the negative procedure. The power in Clause 440 is useful because it is possible that the list of permitted disclosures in Clause 439(3), (4) and (5) is not exhaustive, or that bodies or their functions would change over time. In addition, there inevitably will be changes in the situation internationally. It is therefore sensible to have the flexibility to make changes to the allowable onward disclosures through secondary legislation. The power is subject to the negative resolution procedure, and the Government consider that appropriate in view of the nature of the schedule that can be amended under the power, so we do not accept the amendment. The restriction to public bodies goes, in a sense, hand in hand with the negative resolution procedure.
While I am sure that that does not satisfy the noble Baroness, we believe that it is the correct procedure for this type of secondary legislation.
Baroness Noakes: I will consider carefully what the Minister has said. He has correctly anticipated that his reply does not find huge favour on this side of the Committee. We will consider further what our position is in relation to the information release provisions before we reach the Report stage. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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Clauses 441 and 442 agreed to.
Clause 451 [Minor definitions]:
Lord McKenzie of Luton moved Amendment No. 315BA:
The noble Lord said: In moving Amendment No. 315BA, I shall speak also to Amendments Nos. 315ZBA, A152, A153, A164, A165, A166, A176, A209 and A216. This series of amendments has no substantive effect. The amendments are proposed simply to remove unnecessary duplication in the Bill and to facilitate ease of comprehension for users. The term "regulated market" is defined a number of times throughout the Bill, sometimes on more than one occasion in the same part. In each case the term has precisely the same meaning, although it is described in slightly different ways.
The concept of "regulated market" is highly important. It is defined in a 2004 European directive on markets in financial instruments and is commonly used in European legislation to define the scope of Community obligations in the company law and financial services fields. A simple example is the takeovers directive, which applies to takeover bids for companies governed by the law of a member state and whose shares are traded on a "regulated market". The opportunity is being taken to remove all of the separately located definitions of "regulated market" in the Bill and to replace them with a general definition at Clause 766 that will apply to the whole Bill. I beg to move.
On Question, amendment agreed to.
Clause 451, as amended, agreed to.
Clause 452 [Requirement for audited accounts]:
Baroness Noakes moved Amendment No. 315C:
The noble Baroness said: We have now reached Part 16, and we are not yet quite half way through. In moving Amendment No. 315C, I shall speak also to the Motions whether Clauses 468 and 469 should stand part. These amendments are probing in nature and are designed to ascertain how the new regime, whereby the Comptroller and Auditor General may audit company accounts, will work in practice. As I said at Second Reading, we support the extension of the C&AG's role to company audits and the implementation of the report by the noble Lord, Lord Sharman.
Clause 452 states that a company's accounts must be audited unless the company is a small company, a dormant company, a charity that has an accountant's report or is exempt under Clause 468. The Clause 468 exemption, sticking with English companies for the time being, is available for a company that is non profit-making and audited by the C&AG under an order under Section 25(6) of the Government Resources and Accounts Act 2000.
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When we get to Part 33 of this Bill—it is possible that we will reach it one day—there is a new regime to allow the C&AG to become a statutory auditor subject to a set of rigorous oversight and qualification arrangements analogous to those for commercial auditors. The provisions of Clauses 468 and 469 create a form of second-class citizen of public sector company audits. The first division will be those covered by Part 33, while the other companies will be caught up in Clause 468. I had always assumed that using the Government Resources and Accounts Act was only a temporary solution so far as the audits of the C&AG were concerned until the companies Acts were themselves amended, in which case we would then have a proper regime whereby the C&AG would come within the framework of the Companies Act for auditors. I did not expect there to be a solution which had a regime for audits within the framework that exists for most companies under the companies Acts and a separate regime on the side—and so far as one can tell, that separate regime being reserved for eternity.
Why have the Government decided to create two classes of public sector company subject to public sector audit, and not one class subject to a set of common oversight and qualification arrangements? I hope that the Government will agree that if the legal form of a company is used for a public sector activity, the audit requirements should be common across the public and private sectors. As I understand it, non-profit-making companies which are not part of the public sector have to have an audit in the normal way according to standards laid down by Europe. Why is the public sector different?
I have spoken only about English companies, but my comments apply equally to Welsh, Northern Irish and Scottish companies. I beg to move.
Lord Sharman: The noble Baroness was generous enough to refer to the original recommendation made in my report which gave rise to this. I share her concern. In making that recommendation, I had assumed that when it was implemented there would be one regime and not two. I support the amendment.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): Chapter 1 of Part 16 deals with the requirement for audited accounts, and this first group of amendments would remove the only new provisions in Chapter 1, namely the special provisions in Clauses 468 and 469 for non-profit-making public sector companies.
The purpose of Clause 468 is to exempt from Companies Act audit any non-departmental public body that is a company and is non-profit-making if it has been made subject by order to a public sector audit. It implements one of the recommendations of the report on Audit and Accountability in Central Government by the noble Lord, Lord Sharman. This included the principle that,
The noble Lord recommended that the Comptroller and Auditor General should be eligible to be appointed the auditor of all NDPBs. He noted that for NDPBs that are companies, changes to company law would be necessary to achieve that, and the Bill makes those changes.
Part 33 of the Bill enables the C&AG to be a statutory auditor, which will enable him to audit profit-making NDPBs that are companies. Clause 468 will deal with non-profit-making NDPBs that are companies by ensuring that such companies that are subject to public sector audit are not also subject to Companies Act audit rules. There is a difference in approach for profit-making and non-profit-making companies, because profit-making companies are subject to the fourth EU company law directive, and so must have Companies Act audits. Non-profit-making companies are not subject to the directive, and so can be subject to a public sector audit. That will give the C&AG the flexibility to carry out the audit that will best serve the scrutiny of public funds, rather than being constrained to follow the commercial Companies Act audit rules. Clause 468 also exempts from Part 16 rules similar bodies subject to audit by the Auditors General for Scotland and Wales, and the Auditor-General for Northern Ireland.
The C&AG will be able to be appointed auditor of an NDPB by order under the Government Resource and Accounts Act 2000. There are corresponding provisions for the companies to be made subject to audit by the Auditor General for Wales and the Auditor-General for Northern Ireland, but not at present by the Auditor General for Scotland. Clause 469 therefore creates a new order-making power whereby Scottish Ministers can provide that a company shall be subject to audit by the Auditor General for Scotland. That power will be subject to affirmative resolution by the Scottish Parliament.
The noble Lord, Lord Sharman, made a convincing case in his report that parliamentary scrutiny of public funds will best be achieved by public sector audit. These clauses are part of ensuring that we achieve that improved scrutiny. To answer the question of the noble Baroness, we are trying to take non-profit-making NDPBs which can be dealt with by the C&AG, without the situation with the Companies Act having to be included in this. We think that is a sensible simplification and the best way to do it. We cannot extend that to profit-making companies, because they are covered by the European situation. That seems to be a sensible way through that problem.
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