My Lords, it is not very often that the noble Lord, Lord McKenzie, makes my case for me, and I am delighted to be in this unusual situation. Perhaps I should sit down without going any further. As always, however, the noble Lord provides a sting in the tail somewhere. On this occasion it was in his final question—to which I may not, even now, be able to give him an answer, but we will try.
Under the National Audit Act 1983 the Comptroller and Auditor-General can undertake examinations into the economy, efficiency and effectiveness or value for money with which a government department it audits has used its resources. He or she can also undertake these examinations in relation to bodies that receive more than half their income from public funds and which are appointed by or on behalf of the Crown.
Clause 34 broadens the Comptroller and Auditor-General’s powers to enable the National Audit Office to undertake examinations on groups of relevant authorities, enabling a more end-to-end view on the use of public money. The powers in Clause 34 have been designed deliberately to support the National Audit Office in undertaking its core roles. It enables examinations that support the National Audit Office either in holding the Government to account to Parliament or in providing analysis and advice that is useful to the sector. By definition, this does not mean that the NAO will be examining or reporting on individual authorities. It means that the comptroller can look at what is going on in a local authority but only in relevance to a wider group or area in relation to the money coming from Parliament.
The amendment would limit these powers to enable the Comptroller and Auditor-General to undertake examinations only on groups of relevant authorities that received more than half their funds from government. I think that that is where the noble Lord, Lord McKenzie, has stepped in and given a pretty clear explanation of why this is not going to work. The amendment is overly restrictive and would not support the National Audit Office in fulfilling its core roles. The Audit Commission currently has powers to undertake examinations in relation to all relevant authorities. Removing relevant authorities that receive less that half their resources from the Government would mean that the National Audit Office could not look across the whole spectrum and thus do its job. The amendment would also reduce the level of scrutiny of public
spending that the NAO could carry out, including all the other elements mentioned by the noble Lord regarding the way that grants are paid and the money that goes into local authorities.
Amendment 18ZB would prevent the Comptroller and Auditor-General from undertaking examinations for the purpose of assessing the performance of individual authorities or the production of league tables. Clause 34(2) already provides for the first part of this. It states that a value-for-money examination must relate either to all authorities or to a particular description of relevant authority, and it is extremely unlikely that an individual authority would meet those criteria. An individual authority could be looked at but only in relation to a group and could not be identified as one authority. The Explanatory Notes set out that these powers are not designed for the National Audit Office to produce an assessment of the performance of individual authorities or comparative analyses in the form of published league tables. The Government do not wish to see a return to the comprehensive area assessment of local authorities. The NAO’s evidence to the pre-legislative scrutiny committee on the draft Bill confirmed that it is seeking neither to audit individual local authorities nor to interfere with the primary accountability of local authorities to the local electorate.
However, the clause does not prohibit comparisons of individual authorities during the course of the examination. This is because such group or overall analysis is necessary in order for the National Audit Office to make conclusions about the economy, efficiency and effectiveness with which authorities in a particular group are using resources, or to provide evaluation, commentary and advice to relevant authorities. We believe that the Clause 34 will give the National Audit Office a strengthened role in the assessment of value for money, which the Government said we wanted to achieve when we announced the intention to close the Audit Commission. I know that that intention has received a great deal of parliamentary support, including from the Communities and Local Government Select Committee, the committee which undertook scrutiny of the draft local audit Bill last autumn, and from many noble Lords during our discussions.
However, I understand—and I know that the National Audit Office does too—the concerns that have been expressed about the risks of scope drift or expansion of the programme beyond what is intended. I believe that there are safeguards in the Bill that mitigate against these risks. I emphasise that it is not the Government’s intention to replicate the Audit Commission’s programme of studies. The powers are narrower than the Audit Commission’s and there will be fewer studies. Although the examinations programme is ultimately a matter for the Comptroller and Auditor-General, Parliament undertakes a full and thorough scrutiny of the National Audit Office’s strategy and budget. The House of Commons Public Accounts Committee scrutinises the strategy and budget annually, including the balance of work between different roles, before approving the National Audit Office’s budget for the year ahead.
4.30 pm
The noble Earl, Lord Lytton, suggested that what we were doing was just reintroducing the Audit Commission by any other name—no? That is what I have in my notes. I must have misunderstood him so I will move seamlessly on.
There are further controls; for example, the Bill places a duty on the Comptroller and Auditor-General to consult the sector representative bodies before undertaking examinations under these new powers. The noble Lord, Lord Tope, spoke about some of these and it is pretty clear that the National Audit Office has signed up to its new relationship with local government.
The National Audit Office aims to develop a balanced programme of work that addresses key risks to value for money while aiming to maximise positive impact. The noble Lord, Lord Beecham, raised the issue of “whole place”. The NAO can undertake a review but it would have to be of the entire “whole place” group rather than just one.
As the noble Lord, Lord Tope, has said, the National Audit Office has already established a local government reference panel, chaired by the Local Government Association, which is being consulted on appropriate examinations. I also understand that the National Audit Office has offered to agree a memorandum of understanding with local government about how it would work with the sector. This would be a further opportunity to reinforce some key messages about how the National Audit Office would intend to use this power.
In conclusion, we believe that the power in Clause 34 supports the Comptroller and Auditor-General’s existing role. These amendments would be overly restrictive in limiting the Comptroller and Auditor-General’s ability to scrutinise broader public spending on behalf of Parliament and the taxpayer and to help public service managers’ performance and service delivery. Finally, we believe that there are duties in the Bill and parliamentary controls that mitigate the risks that noble Lords have expressed, particularly about mission creep and the possibility of reintroducing league tables. I hope that with those remarks, the noble Lord will withdraw his amendment.