Local Government (Wales) Measure 2009 (Consequential Modifications) Order 2010

My Lords, we have brought this draft order forward at the request of the Welsh Assembly Government to make a few minor technical amendments to the Government of Wales Act 2006. The amendments relate to inspection and audit fees charged by the Auditor-General for Wales, and are consequential on the Local Government (Wales) Measure passed by the National Assembly for Wales last year. The amendments are needed to ensure that the measure operates as intended and that fees charged under the measure are treated in the same way as the fees that are charged under existing legislation. The Local Government (Wales) Measure 2009 has several broad purposes. First, it replaced the system of "best value" in local government with a new "local government improvement" regime which introduces a broader set of duties and powers for service improvement by local authorities. Secondly, it reformed the process for producing community strategies and requires local authorities and other local service providers to collaborate in developing and implementing a long-term strategy for enhancing local well-being. Thirdly, it joined these two processes together, requiring local authorities to reflect strategic objectives in service improvement. Local government in Wales has long been devolved, and these changes are all within the legislative competence of the National Assembly. However, one small element of the package of changes is outside it. It is that element which is addressed by the order before the Committee today. In replacing the "best value" regime, created by the Local Government Act 1999, the measure also replaced the inspection and audit regime under the 1999 Act. Independent audit is of course vital to public accountability and can stimulate improvement. The measure reflected that principle. It also streamlined and simplified the role of the Auditor-General for Wales and the Wales Audit Office in inspecting and auditing local authority performance. In particular, it gave the Auditor-General greater flexibility to support performance improvement and to report clear findings which enhance local and national accountability. The measure also sought to preserve the principle that public audit and inspection takes place on a quasi-contractual basis between auditors and the bodies that they audit, and is funded by fees levied on audited bodies rather than from central government. This is a widely accepted practice across the United Kingdom, for two main reasons. First, it maintains audited bodies’ responsibility for, and ownership of, the audits to which they are subjected and avoids a general charge on the public purse. Secondly, the extent and thus the cost of an audit generally reflect the level of risk within an organisation. Funding it via fees provides a further incentive to public bodies to improve their standards of corporate governance and performance management, leaving them liable to a lower fee. The local government measure empowered the Auditor-General to levy fees for audits and inspections as previously, but it could not deal with the accounting treatment of those fees. Under Section 120(1)(c) of the Government of Wales Act 2006, the default position is that the Auditor-General must surrender any income that he or she receives to the Welsh Consolidated Fund. The Act also makes exceptions to that rule to allow the Auditor-General to retain income from specified sources, including fees charged under the Local Government Act 1999. This means that best-value audit and inspection is funded from fees and preserves the general principles which I described earlier. The local government measure made no equivalent provision for fees charged under the new improvement regime because it had no power to do so. In general, the Assembly is prohibited from passing a measure which amends the Government of Wales Act 2006. There are obvious constitutional reasons for that general rule, but in this case it creates a problem. This order is designed to solve it. The Auditor-General would have to surrender fee income to the Welsh Consolidated Fund, and audit and inspection work under the measure would have to be financed centrally from that fund. That would be contrary to established practice across the United Kingdom, which I have already outlined, and would diminish the local ownership and effectiveness of such work. The draft order is designed to correct that situation and allow the Auditor-General to retain fees charged under the measure. It would also ensure that the Assembly’s audit committee could not examine estimates of the Auditor-General’s fee income under the measure, just as it cannot currently examine fee income under the Local Government Act 1999. This reflects the fact that the Committee’s remit does not extend to the Auditor-General’s work in relation to local government performance. In making these changes, the draft order seeks to maintain long-established principles and practices which exist for sound reasons of public management and accountability. The Wales Audit Office strongly supports the draft order and, indeed, believes that it is vital to make the draft order before the start of the 2010-11 financial year, when audit work under the measure will begin. I commend the draft order to the House. I beg to move.