My Lords, I thank all noble Lords who have contributed to what was a wide-ranging debate in the event. I also thank the Minister for his reply, but I am bound to say that I do not feel reassured by it. There are two sorts of issues flowing through this debate. One is whether, as the amendment proposes, the audit committee could not take unto itself the role of the auditor panel. Then there is the separate but obviously related issue of composition, whether it is of the audit committee or the auditor panel, and whether that should be independent as defined, quite apart from the definition.
The noble Lord, Lord Wallace, asserted that 80% of local authorities have audit committees. I accept that. I know that it is not currently mandatory, but it is certainly encouraged and there has been a substantial development of them. Their role is not limited to internal audit, controls and processes. That is part of
their role, but the CIPFA guidance makes clear that part of their role is reviewing the financial statements, the external auditor’s opinion, and reports to members, so they should already have an engagement with the external auditors and be able to take a view on how they should proceed.
5 pm
If that is right and if the audit committee’s role is wider than that perceived for the audit panel, why not have the audit committee able to undertake that role? Why confuse the matter with a separate body? If, along the way, that makes it a statutory requirement to have an audit committee, what on earth is wrong with that? That is good governance. It is mandatory, I think, in the private sector but not currently in the local government sector. We have a chance to rationalise something here for good governance and remove the possibility of confusion about which the noble Baroness, Lady Eaton—and pretty much every noble Lord who has spoken—was concerned by having the two bodies.
The amendment argues for one body to be the audit committee, which can encompass its existing role under the CIPFA guidance and the role required of the auditor panel. It seems to me to be entirely logical and straightforward.
When we are talking about independence in this context, we are talking about the independence of the members from the local authority involved. That is the independence judgment to be made. We will come to broader issues of independence. We have to question whether the definition of independence in that context is right, but that is another matter. It is argued that it would be difficult to get enough members. I am unsure about that. Were the noble Lord, Lord Shipley, in his place, I think he would strongly assert that it is not a problem. It would be good to have more evidence on that.
In a sense, the question of whether there should be a majority of independent members—I am with my noble friend Lord Beecham on that—is a separate matter. If there is agreement that there should be an independent chair and just one body, which should be the audit committee, we are well along the way to getting something that could change the Bill to make it more fit for purpose. The prospect of having those two bodies running at the same time seems horrendous. The overlaps and bureaucracy involved in that just do not seem to me to be worth while. There is a very easy solution for the Government, which is to have audit committees across the piece, certainly for all principal local authorities, as most do at the moment.
We will return to this issue as we move towards Report. I urge the Government to reflect. I think there is a chance of improving the Bill that in no way diminishes what the Government seek to do by their proposition of auditor panels. For the time being, I beg leave to withdraw the amendment.