My Lords, my noble friend Lord Christopher’s opposition to this clause standing part was delivered in a very knowledgeable and passionate way and with some understandable logic underpinning it. However, the Audit Commission would maintain that it has already been significantly changed from its prior status. Its in-house audit practice has been privatised and the commission’s routine inspection and annual inspection of local government has ceased, as has its work on comprehensive area assessment. It has already incurred significant redundancy costs, partly funded by CLG, and offices have been closed with early termination costs incurred. The NAO is already picking up the task of value-for-money studies.
The Audit Commission of today is not the same as the Audit Commission of three years ago, and we have heard from my noble friends Lord Christopher and Lord Beecham about some of the splendid and effective work that it used to do. It would be difficult to put it back together again in anything like its original form. To that extent, the Bill has been rather pre-empted. The challenge for us in considering the Bill before we sign it off is to scrutinise the proposed new framework to evaluate whether its proposals are fit for purpose, can deliver an effective regime and build on what was good about the Audit Commission, and some of our amendments seek to do this. That process of scrutiny should particularly pursue the line just outlined by my noble friend Lord Beecham to see how joined-up we can be in an era when we are at risk of fragmenting arrangements.
My noble friend Lord Christopher is right that a significant part of the commission’s work has been the commissioning and provision of local audit services. As he said, the need for further commissioning generally, other than dealing with changes in the existing contracts, will not arise until 2017. My noble friend made a very telling point: if the contracts are extended until 2020, what is the incentive for those audit firms that do not have contracts at the moment to invest in something that may not come to pass until seven years hence?
In a subsequent amendment, we explore what is involved in the ongoing management of these audit contracts. This raises the question of why the commission could not be retained at least to see these through to finalisation. Part of our task in scrutinising the Bill is to understand whether the regulation of local audit and the respective roles of the Financial Reporting Council, the professional accounting bodies and the NAO are fit for purpose. The Government may pray in aid the savings that have accrued from the closing of the Audit Commission, but the reality is that those savings have been measured against the 2009-10 baseline. As the Audit Commission has pointed out to the CLG, those savings had already been secured, and the annual costs under the future regime broadly equate to the annual costs of the commission in its current form. This is without taking account of the added ease with which it could facilitate the future central procurement of audit contracts. We are aware that the commission has submitted details to this effect to CLG, particularly in a letter dated 23 May 2013. Perhaps we can understand from the Minister how the department proposes to respond to that.
My noble friend’s Motion invites us to consider keeping the Audit Commission in its slimmed-down form, at least until the end date of the current centrally procured contracts. What work have the Government undertaken to specifically examine the option of the Audit Commission continuing until 2017, rather than designating another entity to manage those audit contracts? What assessment has been undertaken?
It is noted that there will be no central body for grant certification relating to grants and subsidies from government departments. The Government say that this will be undertaken through tripartite arrangements and other forms of certification. Will the Minister expand a little on precisely what is envisaged in that
regard? Reference is made to the wind-down of certification for housing benefit, but of course housing benefit will run for some time after 2015, for no other reason than the delays in the introduction of universal credit, which will not come fully into being until 2017 or 2018. So precisely what will happen to housing benefit certification after 2015?
The problem is that we are where we are with the Audit Commission. Had we been able to have this debate two years ago, we could have prevented what has happened to that organisation. Our task now is to make sure that what is in the Bill to pick up the fragments from the Audit Commission is made fit for purpose.