Company Law Reform Bill [HL]

moved Amendment No. 286:"Page 215, line 42, leave out paragraph (b)." The noble Baroness said: My Lords, in moving Amendment No. 286, I shall also speak to the other amendments in this group. They concern the special provisions in the Bill to allow public-sector non-profit making companies not to be subject to the ordinary audit requirements that apply to all other companies, whether profit-making or not. I have observed over the years that if there are two ways to achieve a policy objective in the public sector, and one is complicated and the other is straightforward, there is a tendency for the public sector to opt for the complicated solution. That is what has happened in the Bill. When the noble Lord, Lord Sharman, produced his report on public-sector audit a few years ago, he recommended that the Auditors General, who cannot meet the requirements for Companies Act auditors at present, should be able to carry out the audits of public-sector companies. We fully agree with that, and there are provisions in Part 32 to achieve that objective. We expected to find something along the lines of Part 32 in the Bill, and we were surprised to find that the Government had also invented a new category of company—the public-sector non-profit making company—which would not need a normal Companies Act audit. Under the eighth directive, the Government would be fully entitled to remove all non-profit making companies from the audit requirements of the directive, but they have chosen not to do that, and we support them in that. But we do not support them in creating two classes of public-sector company. I do not believe that anyone reading the report of the noble Lord, Lord Sharman, would have concluded that he intended the creation of a two-tier audit rating for the public sector. He is in his place, so perhaps he will be able to confirm that. If the Bill is passed, the Comptroller and Auditor General will be carrying out two different types of audit. The Comptroller and Auditor General’s audits of profit-making companies will be subject to the full regime of oversight and supervision contained in Part 32. There will be no such regime for the non-profit making companies. In case noble Lords think that this is a distinction without a difference, and that an audit is an audit however it is carried out, I shall read an extract from the helpful letter of 26 April, which the noble Lord, Lord Sainsbury, sent me following our debates in Grand Committee. In the letter, he says:"““The NAO is already preparing to bring their skills up to speed with current practice so that the C&AG can be ready to take on his new responsibilities””—" that is, for audits under the Part 32 regime—““promptly and efficiently””. As we would expect, this emphasises that the NAO’s existing regime is not operating at that standard at the moment, so would not pass muster under Part 32. The implication is that that will remain the case for audits of the new non-profit making public-sector companies that do not come under Part 32. We must not let this Bill create a two-tier audit for companies which happen to find themselves in the public sector. My amendments remove the lower tier for non-profit making companies so that all such companies will be audited to the full standards that we expect for companies in this country. I beg to move.