Public Bodies Bill [HL]

Lord Warner Excerpts

Wednesday 1st December 2010 Lords Chamber

Moved by

[Lord Warner]

23: Schedule 1, page 16, line 13, at end insert—
“Audit Commission.”

[Lord Warner]

My Lords, my amendment would add the Audit Commission to Schedule 1. I move it not because I wish to abolish the Audit Commission—quite the reverse—but because I wish to probe the thinking of the Government on why it has been excluded from the Bill while other bodies have been included in Schedule 1.

The utterances of Conservative Ministers in the coalition have been extremely critical of the Audit Commission and there has been a steady trickle of briefing against it from within the CLG so I, in my naivety, had rather assumed that Mr Eric Pickles would have been rather keen to rid himself of this body at the earliest legislative opportunity. Perhaps, let us hope, he has had a damascene conversion against abolition but more probably, as I suspect from my own intelligence, it is proving a bit more difficult than he thought to dismember the Audit Commission. That sort of impetuosity is typical of the way in which much of this Bill has been produced: decide first and think about what the reasons were afterwards.

I should acknowledge that, over the years, my path has crossed several times with the Audit Commission, so I could be said to have an interest to declare. In 1986, the commission produced an excellent report on community care which, to their credit, the Conservative Government acted upon. I was very involved with the reforms that followed that commission report, and again, 10 years later in 1996, when the commission produced a withering critique on the state of the youth justice system under the Conservatives that in its turn led to the establishment of the Youth Justice Board in 1999—an issue that we will debate later under an amendment in my name and that of the noble Lord, Lord Ramsbotham. Then, when I was a Health Minister, the commission helped to sort out some arcane, unworkable NHS accounting rules and provided much technical help on NHS reform, certainly to me. The fact that this commission has been capable for many decades of speaking truth to power has been a continuing feature of its work, but it seems to be a quality that has been little valued by some senior Ministers in the coalition Government. The way that this Bill has been produced rather confirms that.

I will not spend a lot of time today explaining why abolition of the Audit Commission is a thoroughly bad decision and will do much damage to good governance and efficiency in the public sector. There will be plenty of time to do that when, as I suspect, the Government eventually find a way to swing the legislative axe next year. However, I shall mention one issue that affects many public bodies but which, it is clear, has not been adequately thought about before the Government decided to abolish the Audit Commission—how to ensure that all local public bodies have an audit system based on clear principles of independence. We will not go into that tonight but I want to register that point.

There is no doubt that the Audit Commission has curbed the fees of the big accountancy firms for auditing public bodies and that its removal is likely to unleash significant increases in public expenditure thereafter. This is the kind of thing that we would expect to have spelt out in any impact assessment on legislation on the Audit Commission. However, if one looks at this Bill, one actually sees what I can only describe as contempt for Parliament, with the publication of an impact assessment that has no costs and benefits assessment in it about these bodies in Schedule 1. There is nothing there to tell us what the benefits and costs are of doing the things that the Government want done through Schedule 1. That is one reason why many of us are so concerned about the Bill.

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[Viscount Eccles]

My Lords, I have not the good fortune to have been in this House for very long. I have had two sessions here. One, in 1999, was rather short, but I have been here from 2004 until today. I do not know a great deal about the procedure of this House, but that sounded extraordinarily like a Second Reading speech. Perhaps I am mistaken, but that is how it sounded to me.

I will briefly offer a little comfort about impact assessments. This is, admittedly, a framework Bill, and there is a long list of bodies in Schedules 1 to 6. Whenever a Secretary of State wishes to put down an order to abolish, to change funding or to merge, he will have to produce an affirmative instrument. Affirmative instruments are subject to 12 weeks’ consultation and the provision of an impact assessment, unless there is a very good reason why there should not be an impact assessment. The idea that there will never be any impact assessments for this House to look at is not right.

How will this House look at them? There is a committee called the Merits Committee, on which I was fortunate enough to serve for four years. That committee, as your Lordships know, looks carefully at every instrument. If it thinks that it is right to draw something to the attention of this House, it does so. If it thinks that the policy in the instrument is inconsistent with the Government’s declared policy, it says so. Then that affirmative instrument is debated.

It has been said—and we shall come back to this—that there should be some enhanced procedure, allowing Parliament to debate the thing in more detail because, it is said, Parliament does not usually turn down affirmative instruments. Nevertheless, we have that power. I believe, if the noble Lord, Lord Warner, will forgive me, that to reiterate that there is no impact assessment is to misunderstand the way in which the Bill has been put together. If you believe that this Bill should not have been put together as it was and that we should do whatever will be done only by primary legislation, what you are saying is that we will do only half a dozen bodies a year, because that is about all we would ever get the parliamentary time for.

[Lord Warner]

The noble Viscount may wish to interpret this as a Second Reading speech, but I thought that I was asking a very serious question about why some of these bodies are in Schedule 1 when they are fundamentally not that much different from the Audit Commission, which is not in Schedule 1. I am trying to understand the Government’s criteria for including some bodies but not others in this Bill. That is the whole purpose of my speech. I say to him, with the greatest respect, that debating the detail of an order some many months after the passing of this Bill will be too late. Those of us who have experience of chairing and being a member of staff of some of these public bodies would say to him that, once you have signed the death warrant—that is what the Bill is—you have no hope of retaining a great deal of talent in some of these bodies. That melts away. It is a perfectly rational, human response to a death warrant being signed on the organisation that you work for. It is a bit late in the day, when we get to the order, to start having the debate about whether it was a good idea in the first place.

[Lord Hunt of Kings Heath]

This has been a very interesting short debate. I am grateful to my noble friend Lord Warner for allowing us to debate the Audit Commission and some of the matters that arise from consideration of it as far as the Bill is concerned. My noble friend has a distinguished record as a quango basher. He led the arm’s-length body review in the Department of Health, which I succeeded him on. That reinforces the view that we, on this side, are not at all opposed to the principle of looking at each of these organisations where it is quite clear that they ought not to continue or that their functions can be done in another way. We have no problem with that. We do have a problem, however, with the architecture of the Bill. There is the general principle of the Henry VIII clauses, a huge and unprecedented power given to Ministers. I have no doubt whatsoever that, if we as a party had brought this Bill before your Lordships’ House in the last Parliament, we would have had no possibility whatsoever of having it passed.

The second point is this. The noble Viscount is right to suggest that, when affirmative orders come before your Lordships’ House, consultation has to take place and impact assessments have to be published. However, we are right, at this stage, to scrutinise those bodies that are under threat in this Bill.

Also, as a distinguished member of the Merits Committee, the noble Viscount may well have observed the correspondence between the committee and the noble Lord, Lord Strathclyde—the Leader of the House—on the question of the use of the conventions as regards secondary legislation. The Cunningham joint select committee report, which was approved by this House, made it clear that there were circumstances in which it was quite appropriate for the House to seek to defeat secondary legislation. My judgment is that that would apply to this Bill, because the kind of skeletal Bill that the Cunningham committee described is exactly what we are debating today.

The noble Lord, Lord Strathclyde, seeks to reinterpret the convention as regards secondary legislation. Essentially, he does not accept that there is a convention that this House can seek to defeat secondary legislation in the circumstances described by the Merits Committee. That increases our nervousness about whether the scrutiny available to the House of Lords will be sufficient to meet the needs of this Bill. We would have had greater comfort if the noble Lord, Lord Taylor, who is leading this Bill through with his usual inestimable charm, had clearly indicated that the Government would not proceed with Clause 11 and Schedule 7 and would agree to use the super-affirmative procedure. If he had acknowledged that at an early stage, the passage of this Bill would be an awful lot easier. I suspect that that will be the end point of our debates in your Lordships’ House. He will know that there is profound unease about this Bill all round the House. We will continually come back to the point about the architecture.

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[Lord Taylor of Holbeach]

We had this debate the other evening. If the noble Lord remembers, I corrected what I said from “convention” to “custom”. I think that that more closely fits what happens in this matter. It is for the House to decide how it deals with statutory instruments. It is not a matter of convention; it is purely a matter of custom. If the noble Lord is seeking to develop this argument, which may be connected to this amendment—I understand that it is certainly connected to the purpose of the Bill—I think that it would be important for him to bear that in mind.

[Lord Warner]

Whether it is a custom or a convention makes very little difference to the people working in these organisations. As far as they are concerned, if Schedule 1 goes through, they are for the chop. That is the end of those organisations. People will make their own dispositions. They are not going to sit around waiting for the customs and conventions—or whatever we want to call them—of this House to decide whether this House will or will not defeat an order many months later. Does the noble Lord accept that there is a problem of handling for many of the organisations in Schedule 1?

[Lord Hunt of Kings Heath]

Perhaps I may come in first and respond to the noble Lord, Lord Taylor, before he responds to my noble friend. In my remarks I made no criticism whatsoever of the noble Lord, Lord Taylor. He is quite right that he made the point about custom, but I was referring to the correspondence between the noble Lord, Lord Strathclyde, and the Merits Committee, which has been published in, I think, two reports of the Merits Committee.

Finally, having raised concerns about this Bill, we have been informed that we should be comforted by the fact that each order would be an affirmative order. I do not think that that is sufficient, nor do I think that the amendment that the noble Lord has tabled in relation to enhancing that is sufficient.

The problem is that at the moment we do not find the Government willing to hear the voices around this Chamber or to understand that at some point they will have to make some movement, as it is pretty plain that this Bill will not get through your Lordships’ House in its present form. Therefore, it would be in everyone’s interest for the Government to show willing and to sit down and listen to some of the genuine concerns that are held in the House to see whether we can find a constructive way through. The debate on the Audit Commission allows us to put those matters on the table.

[Lord Taylor of Holbeach]

I thank the noble Lord for that contribution to our discussion on this amendment. The amendment in the name of the noble Lord, Lord Warner, if not a probing amendment, is a teasing amendment. It is a new parliamentary device to tease the Government into enunciating their philosophy behind the Bill. Noble Lords would agree that some of the speeches have resembled Second Reading speeches and have gone over ground that we have discussed before. So that all noble Lords are aware of this, I reaffirm that I am listening and that I am conveying the mood of the House.

Why I must resist the amendment to include the Audit Commission in Schedule 1, which I have no hesitation in doing, and why I forgive him for not producing an impact assessment on his proposal to include it in the schedule is because the noble Lord knows very well that the time for consultation and impact assessments comes later on in the proceedings. It is not part of this legislation to produce those documents for individual bodies.

[Lord Warner]

The Government actually produced an impact assessment and that impact assessment is totally silent on the subject of costs and benefits of the proposals, even in any kind of outline form. Is the Minister saying that the Government can bring a Bill to this House seeking to abolish a very large number of bodies and not produce any numbers whatever about the costs and benefits? Is that his position?

[Lord Taylor of Holbeach]

Indeed, it is. The process that is built into the Bill allows for impact assessments to be presented at the time of change. The Bill does not propose change; it facilitates change. I tease the noble Lord. He is proposing to include a body in Schedule 1 but, quite rightly, he has not come up with an impact assessment because he is not in any position to provide that; nor would I be in a position to provide that. The time to do that is when the department makes a decision to act under the Bill. I know this is a tease on the noble Lord’s part, but it is very important to use the opportunity of this debate to get that message across.

[Lord Warner]

If the Minister looks back to the period between 2004 and 2007 or 2008, he will see that the previous Government came forward with primary legislation for changes to bodies set up by Parliament with an impact assessment which set out the cost of those changes so that Parliament could see the money implications of changes to legislation that it was being asked to make. In effect, the Minister seems to be asking for a constitutional change: to come to Parliament to take primary legislation to abolish bodies which have been set up by Parliament without giving any idea of what the costs and benefits of that decision are. That is what he seems to be saying.

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[Lord Taylor of Holbeach]

Indeed, I reassure the noble Baroness that any instrument produced under the Bill to enact any of the powers within it will contain that information. That is the position. This is not primary legislation to abolish the Agricultural Wages Board or the Audit Commission. That is not what the Bill is about; it is intended to empower the executive with the ability to bring forward secondary legislation in order to facilitate change. It is at that stage that the legislation occurs. It is very important to get that message over.

We have produced an impact assessment for the Bill. It talks about changes to particular bodies made under the orders of the Bill, and they will be produced in accordance with its existing rules and guidance on impact assessments at the appropriate time. Perhaps I may continue by addressing the amendment. After all, the noble Lord has proposed that we should include the Audit Commission in Schedule 1, and I wish to tell the Committee why I think that suggestion needs to be resisted and why there may well be a better way of dealing with the policy change which the coalition has announced in order to deal with it.

The Government intend, where appropriate, to use the power in the Public Bodies Bill to make changes to public bodies. However, the changes regarding the Audit Commission require power changes to legislation which is outside the scope of the Public Bodies Bill. Therefore we are setting up an alternative legislative vehicle. I will explain the background to that. On 13 August, the Secretary of State for Communities and Local Government announced plans to disband the Audit Commission and refocus audits on helping local people to hold local bodies to account for local spending, as well as on saving the taxpayer some £50 million a year. This figure reinforces the one given by my noble friend Lady Hanham.

The commission’s responsibility for overseeing and delivering local audits will stop, its research activities will end and its in-house audit practice will be moved to the private sector. We are considering a range of options for doing this. Councils will be free to appoint their own independent external auditors from a more competitive and open market, and there will be new audit arrangements for local health bodies. All local audits will be regulated within a statutory framework, with oversight roles for the National Audit Office and the profession. As a result, the Audit Commission’s in-house practice will be transferred out of public ownership. A range of options are being considered and evaluated for moving the audit practice into the private sector. The department is now working closely with the commission, the accountancy profession, local government and the health sector to develop the detailed design of the new systems, and to take forward, in the most effective way, the transfer of the commission’s in-house audit practice into the private sector. This work is ongoing. We are aiming for the new regime to begin to come into effect during 2012-13. That regime will require primary legislation and as such, this timetable is dependent on parliamentary time. If the noble Lord’s amendment were to succeed, it would mean that the Government could use the power in Clause 1 to abolish the Audit Commission. However, the Government would not be able to ensure that a robust statutory framework for local audit is put into place.

This is the statutory regime for the audit of local authorities and local health bodies, including foundation trusts and other NHS trusts. For example, the powers in the Public Bodies Bill would not allow the Government to provide these bodies with the powers they need to appoint their own independent external auditors. Likewise this Bill would not enable provision to be made for the arrangements through which the quality of local audit will be maintained. The Government intend to bring forward separate primary legislation, subject to parliamentary time, which deals with the disbanding of the Audit Commission, the transfer of the in-house practice into the private sector and the setting up of the new local audit regime in a comprehensive and integrated way. As such, I hope that the noble Lord will withdraw his amendment.

[Lord Warner]

My Lords, I was fascinated to hear that elegant explanation of how the Government will deal with the Audit Commission. If only I felt they would use that same elegant approach to some of the other bodies in Schedule 1, I would go home happy. I shall continue to reflect on what the noble Lord has said, and look forward to having answers to my questions, which I do not feel that I have had. In the mean time, I beg leave to withdraw the amendment.

Amendment 23 withdrawn.