Budget Responsibility and National Audit Bill [HL]

Lord Touhig Excerpts

Thursday 9th December 2010 Grand Committee

Moved by

[Lord Touhig]

41A: Clause 15, page 5, line 36, leave out “such person as may be so specified” and insert “the Advisory Committee on Business Appointments and abide by the decisions of the Committee”

[Lord Touhig]

My Lords, perhaps I may at the outset apologise if I am partly responsible for your Lordships having to meet again today. I very much regret that I had not anticipated the speed with which your Lordships would complete their deliberations on earlier amendments. Although I was around on Monday, I was in the Chamber. I apologise again if my failure to be here has meant that the Committee has had to meet again today.

I apologise also for the fact that this amendment is a manuscript amendment. My original Amendment 41 was deficient in that it used the term “Advisory Committee on Public Appointments”, when it should have said “Advisory Committee on Business Appointments”. I took the information from the 15th report of the Public Accounts Commission. I am afraid that I should have been more careful and checked out that information.

Until earlier this year, I served on the Public Accounts Committee in the other place. As a result of that experience, I have been able to witness at close hand the tremendous work that the National Audit Office does and to see how important the work of the Comptroller and Auditor-General is in keeping a check on how government spends the taxpayer’s money. Crucial to the role of the C&AG is the independence of the person who occupies that office. It is vital that the office is both independent and seen to be independent. For this reason, none of his decisions should be seen as being born of self-interest.

Under the Bill, future appointees to the office of the Comptroller and Auditor-General will serve a one-term period of a maximum of 10 years. There will be the real prospect of former C&AGs, on leaving their appointment, seeking other employment. Indeed, in a letter to me following Second Reading, the Minister made that very point—I have copies if any noble Lord wishes to have sight of it. In the letter, the Minister points out that the Government hope that future C&AGs will want to continue their careers after they complete their 10-year term of office. If this is to be the case, it is important that sufficient safeguards are in place to ensure that that does not compromise the position of the Comptroller and Auditor-General in office.

The Public Accounts Commission’s 15th report of March 2008, to which I have referred, contained a number of proposals that sought to create safeguards. The Bill, however, reduces some of them. The commission proposed that the former Comptroller and Auditor-General should abide by decisions of the Advisory Committee on Business Appointments if he or she were to take up any further employment having left the job. My Amendment 41A would require this.

The Bill states merely that former C&AGs should consult with such people as may be specified by the Public Accounts Commission. I understand from the Minister’s letter that the wording in the Bill would allow for more flexibility on which individuals or organisations were asked to give advice. While I understand from the Minister’s letter that the wording in the Bill would allow for more flexibility on which individuals or organisations are asked to give advice, it could result in inconsistency over time, as to both who gives the advice and what advice is given. It is fairer on former Comptroller and Auditor-Generals if, at the outset of their term of office, they know who will give them advice on any appointment that they may take up on leaving office as well as the basis on which these decisions will be made. As such, I suggest that stipulating who will advise former C&AGs is preferable. Furthermore, the commission’s original proposals stated that former C&AGs would have to abide by the advice that they were given regarding their future employment. The Bill does not allow for that.

The Minister in his letter to me following the Second Reading debate stated that, if a former C&AG were to take up a position against advice received by the commission, the commission would be free to make that advice public. He drew the parallel with how advice is given to former Ministers and argued that that would be a strong deterrent against any former C&AGs going against that advice. However, former C&AGs do not have the same high profile as former Ministers; a former C&AG who ignored the advice of the commission would perhaps not attract as much attention or interest as a former Minister who did such a thing. Hence my Amendment 41A.

Amendment 42 would change the time limit on when former C&AGs may accept Crown employment. If former C&AGs were immediately able to accept a position that is in the gift of the Government, there would be a danger that some people could perceive such an appointment as being a reward for actions taken while in office. That would undermine the integrity of the C&AG and lead to his actions while in office being called into question through speculation about his future.

The Public Accounts Commission suggested in its 15th report that former C&AGs should be prohibited from ever accepting any post that the National Audit Office has audited or which was in the gift of the Government. That is a heavy penalty. The Government agree: the Bill prevents former C&AGs from providing services to the Crown or to a body that is required to open its accounts to audit by the National Audit Office for a period of just two years. However, while it is entirely understandable that we would not wish to put a restrictive life ban on former C&AGs, I suggest that two years may be too short a period. If we accept that the greatest risk is of attempts by the Executive to influence the C&AG, the sensible course would surely be for a time limit to be at least five years. In that time, there is the real prospect that the Government will have changed and that a former C&AG’s appointment would be considered as a Crown appointment by others. Such a time limit would mean that a C&AG would not be able to rely with any certainty on the incumbent Government still being in office at the time when he or she might accept some Crown appointment, which would overcome any suggestion of political influence on any decisions that a C&AG would take while in office. Amendment 42 would be the best guarantee that, between a C&AG leaving office and subsequently being appointed to a Crown position, there was likely to have been a general election.

The Bill is in the main a good Bill. It proposes to do some sensible things, but our task is to scrutinise, question and improve it. I suggest that the two amendments that I have tabled for your Lordships’ consideration will make some improvement to the Bill.

[Lord Eatwell]

I support Amendment 41A proposed by my noble friend Lord Touhig, albeit on a slightly different basis. Given that this appointment will now be for only one term of tenure, it is important that we attract people of the highest quality to the post. If they felt that their future career prospects were endangered, it is likely that we would not have the very best field from which to choose. Therefore, when someone comes to the end of their tenure, it is appropriate for them to receive advice from an established committee whose procedures and standards are well known and in the public domain, and whose approbation or approval of a particular post is seen as having undergone a strict assessment as to the impact on the integrity of the post and the individual. If we are to get the best applicants for this sort of job, we must give some certainty about the nature of their future careers. The involvement of an established body with agreed procedures and standards would help to provide that.

Interestingly enough, if my noble friend’s Amendment 41A were accepted, his Amendment 42 would be less important. The committee would have given its approval of the post and that would receive general acceptance. Therefore, the longer time period might not be so necessary. However, I defer to my noble friend, who has much more experience in these matters than I do. The Government should look carefully at Amendment 41A, which would improve both the Bill and the performance in this particular post.

--- Later in debate ---

[Lord Sassoon]

That is the intention behind the drafting but I shall see whether, on reflection, it achieves that. I think that we can accommodate the degree of certainty, albeit that, even in the period of appointment of a C&AG, the relevant advisory committee could change.

I turn to the question of abiding by the committee’s decisions. I hear what the noble Lord, Lord Touhig, says about this being different from ministerial appointments or other Senior Civil Service appointments, where similar conditions apply. However, as we have seen in recent years, there is, as there should be, a considerable focus on current and former Comptroller and Auditors-General. It is inconceivable that similar pressures to those that apply to Ministers and officials would not apply very directly in this case. Therefore, just as, so far as I am aware, it is not written into other Bills, I do not believe that there is a need to write into this Bill the necessity to abide by decisions. If it were thought appropriate to draw attention to this point, I believe it would be more applicable to the terms of appointment rather than the Bill.

On Amendment 42, I certainly agree with the noble Lord, Lord Eatwell, that we must make sure that we get the best field of candidates. If the matters that are the subject of Amendment 41A are addressed properly, which I believe in the total construct they are, then I believe that a period of two rather than five years strikes the right balance when considering the terms of the appointment. Again, it is difficult to say what the appropriate read-across should be, but two years is the period during which former Ministers go through clearance procedures, and this is a tighter requirement, as it should be.

In addition, there are potential difficulties concerning the legal enforcement of such a restriction. The issue here is whether, by specifying five years or some other relatively high number, we would risk infringing age discrimination legislation by making the appointment process exclude those who were getting closer to—I do not know what the term should be—perhaps our best years. Therefore, there are real concerns and there is clearly no easy answer to the question of what the right number might be, but the legal advice that the Government have received is that, as one pushed that number up—and five years would certainly lead to the legal advice being uncertain—there would be a significant risk that the restriction would be thought to be an infringement of age discrimination legislation. Therefore, subject to making it absolutely clear that Clause 15 works as intended—I think that it does, but I will look again—I believe that we have struck a proportionate balance which ensures that we get the best candidates for the job but does not in any way leave open a suggestion of impropriety afterwards.

[Lord Touhig]

I am grateful to my noble friend and to the Minister for their responses. I take the point that my noble friend Lord Eatwell made: if Amendment 41A were accepted, the necessity for Amendment 42 would perhaps not be as great. I also take his point—it was one reason that prompted me to draft this amendment—that the Bill simply says that,

“the person must consult such person as may be … specified”.

I hope the Minister will go back and look further at that, because there is some merit in specifying who will actually look at these matters; indeed, in 2008 the Public Accounts Commission recommended that it should be the Advisory Committee on Business Appointments. The advisory committee was formerly chaired by the noble and learned Lord, Lord Mayhew, and is presently chaired by the noble Lord, Lord Lang of Monkton, so it has a distinguished chairman and a distinguished membership. The committee’s website says:

“The Advisory Committee on Business Appointments is an independent body which provides advice to the Prime Minister, the Foreign Secretary, or other Ministers if requested, on applications from the most senior Crown servants who wish to take up outside appointments within 2 years of leaving Crown service”.

I rather think that it will not be abolished in a hurry, because we will always need such a body to give advice to Prime Ministers and to others on these matters.

I am certainly encouraged that the Minister says that he will perhaps go back and further reflect on this. He mentioned his concern that Amendment 42 might have an impact on age discrimination. As someone who celebrated his 63rd birthday on Sunday—I am still flattered, as a new Member of your Lordships’ House, when colleagues come up to me and ask, “Are you settling in, young man?”—I take the Minister’s point as a fair one. Having said that, I await the Minister’s further reflection and coming back to us, and I beg leave to withdraw the amendment.

Amendment 41A withdrawn.

Budget Responsibility and National Audit Bill [HL]

Lord Touhig Excerpts

Monday 8th November 2010 Lords Chamber

[Lord Touhig]

My Lords, I am delighted to follow the noble Baroness, Lady Browning. She and I served for a number of years on the Public Accounts Committee in the other place. She was a formidable inquisitor; woe betide any senior official from any department who came before us and who did not really get to the point and answer her questions. I am sure that the Minister will take note of that.

As your Lordships will be aware, the Public Accounts Committee works very closely with the National Audit Office and the Comptroller and Auditor General produces his value-for-money assessments for the committee. As a result of the experience which I had in serving on the committee, I have been able to witness at first hand and appreciate the tremendous work that the National Audit Office does and how important the audits carried out by the Comptroller and Auditor General are in keeping a check on how the Government spend taxpayers’ money. As a result, I am mindful that when we are considering reforming the way in which the National Audit Office and the Comptroller and Auditor General operate, we must ensure that we do not undermine the independence of their capacity to scrutinise public spending.

In considering the Bill, we must satisfy ourselves that the measures which it contains will strengthen the independence and internal governance of the National Audit Office and not undermine them at all. Crucial to that is the operational independence of the Comptroller and Auditor General. As the Public Accounts Commission noted in its 15th report, the Comptroller and Auditor General’s independence is an,

“absolute requirement for effective audit, and … is the cornerstone of integrity in public finance”,

in the United Kingdom. It is therefore vital that nothing is allowed to prevent the Comptroller and Auditor General from forming independent judgements and deciding what value-for-money assessments it is appropriate to make.

It would therefore be unacceptable if the NAO board were able to prevent the Comptroller and Auditor General from conducting certain audits or were to constrain his audit decisions, not least as this would lead to the relationship between the board and the Comptroller and Auditor General becoming untenable. I therefore welcome the fact that this legislation does not infringe on the Comptroller and Auditor General’s freedom to decide how to conduct value-for-money assessments of government departments. In that respect, the legislation preserves the vital operational independence of the C&AG, while seeking to improve internal systems of governance within the NAO.

However, while the Comptroller and Auditor General must have operational independence, he must still be capable of being held to account for his decisions. That is the proper role of the NAO board. In setting out how the board will carry out this function, the legislation sensibly separates the Comptroller and Auditor General’s statutory and non-statutory work. We should be rightly proud of the international reputation of the National Audit Office, which is such that it is asked to carry out work in other parts of the world and for organisations other than the Government. However, by giving the board the power to veto such work, the legislation places a check on the C&AG to ensure that the core function of the NAO and its public work are not undermined by any other activities. That is a sensible precaution and precisely the sort of function that the board should be carrying out.

It is entirely logical that the NAO board should set the overall strategy for the National Audit Office. This will allow the board to guide the balance of the Comptroller and Auditor General’s programme of work, which complements its power to veto non-statutory work and so ensure that the NAO properly fulfils its role in protecting the tax payer. It also allows the board to challenge the Comptroller and Auditor General if he departs from what has been agreed, and to call on him to explain why an audit has or has not taken place. Clearly, we hope that there will be a harmonious relationship between the Comptroller and Auditor General and the NAO board, but these arrangements make proper provision where such harmony is absent.

Protecting the independence of the Comptroller and Auditor General means not only preventing others from influencing which audits are and are not carried out, but ensuring that the Comptroller and Auditor General is seen to be independent. This clearly means that none of his decisions should be seen as being born out of self-interest. With the introduction of the 10-year term limit for the Comptroller and Auditor General there will be a real prospect that, on leaving office, former Comptrollers and Auditors General will seek alternative employment rather than simply retiring. If former Comptrollers and Auditors General were to be able to accept a position in any body that had been audited by the NAO or that was in the gift of the Government, then there would be a danger that some people could perceive such an appointment as being a reward for actions while in office. This would clearly undermine the integrity of the Comptroller and Auditor General and lead to actions in office being called into question through speculation about his future.

The Public Accounts Commission suggested in its fifteenth report that Comptrollers and Auditors General should be prohibited from accepting any post that the NAO has audited or that is in the gift of Government. It is proposed that, where conflicts of interest could arise if he were to accept any other position, the Comptroller and Auditor General should abide by the view of the Advisory Committee on Public Appointments on the appropriateness of his taking such a post.

The Bill, however, waters those two proposals down. It prevents the Comptroller and Auditor General from providing services to the Crown or to a body that is required to open its accounts to the NAO for audit only for a period of two years, rather than the lifetime envisaged by the commission. On some levels it is understandable that we should not wish to put such a restrictive limit on former Comptrollers and Auditors General, but I suggest that two years may be too short a period of time. If we accept that the greatest risk is of attempts by the Executive to influence the Comptroller and Auditor General, then the sensible course would surely be for the time limit to be of five years so that there was the real prospect of the Government having changed by the time that the Comptroller and Auditor General was eligible to be appointed to another position. Such a time limit would mean that the Comptroller and Auditor General would not be able to rely with any certainty on the then current Government still being in office at the time he was eligible to accept Crown appointments, and hence he could prevent any suggestion of political interference in his report.

The Bill also reduces the obligation that former Comptrollers and Auditors General must abide by the decisions of the Advisory Committee on Public Appointments. Instead, it states only that former Comptrollers and Auditors General should consult with such people as are specified by the Public Accounts Commission. The original, firmer objective is preferable, otherwise a former Comptroller and Auditor General could take up a post that was wholly inappropriate for him to do so. If the Bill is not amended to include such provisions, it would be sensible for provisions having that effect to be introduced in any contract of employment drawn up for a new Comptroller and Auditor General. With the exception of these reservations regarding the employment of former Comptrollers and Auditors General, I am broadly in favour of the Bill as it relates to the National Audit Office and I encourage the Government to address the concerns that I and others are expressing today.

I also welcome the measures in the Bill that grant legislative competence to the Welsh Assembly in relation to the Auditor General for Wales. The new competence would allow the Assembly to put in place new governance arrangements in relation to the Auditor General for Wales that could be similar to those which the Bill will introduce for the NAO and Comptroller and Auditor General. This is a sensible step, which will allow the Assembly to take the necessary action in order to ensure that there is a thorough and properly operating Auditor General in Wales, auditing areas that operate in Wales alone. The Bill introduces provisions to protect the Auditor General's independence from the Assembly. That, too, is to be welcomed. With such safeguards, we are enabling the Assembly to have a Comptroller and Auditor General fit for the 21st century.

Independence is vital for the Office for Budget Responsibility; we have heard a number of comments from noble Lords about that already today. Earlier this year we saw the reputation of that office being called into question when figures that assisted the Government were released before a session of Prime Minister’s Question Time. I therefore welcome the fact that the Bill requires the Treasury Committee of the other place to consent to the appointment of members of the Office for Budget Responsibility.

This is a good Bill in principle and it does many sensible things. However, our role is to question it and improve it where we can. I hope that the Government will listen to the views expressed today and will seek to amend the Bill accordingly. If they do that, we can be content that the legislation that is now being considered by your Lordships’ House will be fit for the 21st century.

Public Expenditure: Value for Money

Lord Touhig Excerpts

Tuesday 26th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, the assessment cannot be done exactly in that way—but when it comes to procuring large public projects and it costs more to cancel the project than it does to complete it, that is not the sort of behaviour that most people would indulge in when spending their own money. I absolutely take my noble friend’s point that there is far too much waste in procurement in government expenditure, inherited from the previous Government, and that is not the sort of thing that any of us would do when managing our own budgets.

[Lord Touhig]

The Government announced £1.1 billion-worth of savings in discretionary spending, including savings in consultancy contracts. Between May and 13 August, the Government signed 50 new contracts costing £10 billion with consultants. The National Audit Office has said that this is not value for money. Indeed, it said that the Government,

“lacks the information, skills and strategies to manage”,

these contracts. What is the Government’s response to the National Audit Office?

[Lord Sassoon]

My Lords, shortly after coming into office we cancelled £6 billion of in-year expenditure. That is the sort of rigorous approach that we will take, not only to inherited expenditure but to the management of all new contracts.

Comprehensive Spending Review

Lord Touhig Excerpts

Wednesday 20th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, I think I would probably faint at this moment if I even mentioned the debt number. The critical thing is that the debt will peak and we will bring it down, as we said we would, within this spending review. I am grateful to my noble friend for stressing that it has indeed been a courageous and careful exercise that is enabling us to make sure that the debt tops out and starts to come down within the spending review period. He reminds us that a twin failure of the previous Government caused the mess that we are in: first, as my noble friend points out, the great increase in public expenditure that we could not afford; and, secondly, the complete failure to regulate our banking system properly, which caused the whole house of cards to come down. I can give my noble friend the numbers on the public sector net debt, which will go up from 53.5 per cent of GDP in 2009-10 to a staggering 70.3 per cent in 2013-14 before we bring it down to 69.4 and 67.4 per cent by 2015-16 thanks to the measures that this Government have announced today.

[Lord Touhig]

My Lords—

[Lord Stoddart of Swindon]

My Lords—

--- Later in debate ---

[Lord Sassoon]

I thank the noble Lord, Lord Stoddart, for a question that reminds us that we are working extremely hard as a nation to live within our means. It is equally important that within Europe the European Union also lives within its means. The Government will be doing everything they can to make sure that proper financial discipline is applied to the European budget this year and for the next spending period. I do not know, but I have a sense—I might like to ask on the subject—that the Labour Members of the European Parliament were today voting to allow the European Union to have its own tax-raising powers to fund a separate pot of money. The present Government want to see proper discipline applied to European Union expenditure.

[Lord Touhig]

My Lords, the noble Lord said that fairness is important to his Budget. He went on to say that a civilised society protected the most vulnerable. Yet in 21st-century Britain 30 per cent of disabled people live below the poverty line. What specific measures are proposed in this spending review to reverse that and to give some fairness and justice to the most vulnerable in our society?

[Lord Sassoon]

My Lords, as I have reiterated, at the absolute centre of this spending review is the universal credit, which, over the next two Parliaments as we bring it in, will go to the heart of the challenge the noble Lord poses. As to the provision for disabled people, people with long-term conditions account for around 70 per cent of the NHS budget, which is the area of spending being protected above all others.

People with disabilities and social care needs will also benefit from the additional resources given to social care within the health and local government budgets. People with care needs are also being protected from the extension of the single-room rate in the housing benefits. Finally, of the measures to which I should draw the attention of the House, families where someone claims a disability living allowance will be exempt from the new cap on total household welfare payments. Care for disabled people is absolutely at the heart of this review.