Constitutional Reform and Governance Bill

David Gauke welcomes the provisions in the Bill which set out the role and appointment of Comptroller and Auditor General but moves an amendment calling for greater transparency with regard to remuneration, allowances and expenses.

The Comptroller and Auditor General

Mr. David Gauke (South-West Hertfordshire) (Con): I thank the hon. Gentleman for tabling these amendments and the new clause. I suspect that the question whether it is necessary to reassert such objectives in this Bill given that the 1983 Act, which also states them, is not being repealed, will be addressed in a moment, but the CAG’s objective of carrying out examinations of the economy, efficiency and effectiveness of public bodies is, as the hon. Gentleman says, very important. Perhaps it is more important now than ever, at a time when we will see spending restraint. The Government are spending more than ever before and, indeed, borrowing more than ever before in peacetime, so the focus must clearly be on achieving more for less. The NAO and the CAG have an important role in achieving that. Taxpayer value for money should unite us all—it should not be a partisan point—whether we are left or right. I do not think the hon. Gentleman will take it as a criticism if I say that it does not get more left wing than him. We must all ensure that public spending achieves good value and it is worth paying tribute to the work that the NAO and various CAGs have performed to achieve that.

We may differ on how to achieve greater economy, efficiency and effectiveness in public bodies, and in many ways, this is a matter for great political debate—I am sure the hon. Gentleman would not necessarily share the Conservatives’ views about the importance of choice, competition and contestability in achieving better value for money. However, there is a less political role, and the NAO performs it very well, in conjunction with the Public Accounts Committee. The new clause refers to Parliament’s important role. As I said, we could question whether the amendments are necessary, but the objective of the NAO and the CAG is important.

I have one or two points to make on clause 37. If there is a stand part debate on it, I will do so then.

The Chairman: Order. I was hoping not to have a stand part debate in view of the fact that, with the new clause, this is a fairly wide grouping.

Mr. Gauke: In which case, Sir Alan, I shall make those points now.

This part of the Bill, as the Father of the House has said, is predominantly to do with the governance of the NAO and the CAG, and there is a combination of continuity and change in the new arrangements. I think it would be fair to provide a little background on how we got into this situation and why there was a need to look again at the governance of the CAG—doubtless the Chairman of the PAC, my hon. Friend the Member for Gainsborough (Mr. Leigh), and the Father of the House will say things to the same effect.

We cannot ignore the fact that there was some adverse publicity regarding the expenses of Sir John Bourn, who was CAG for some 20 years or so. It is a great pity that there was a cloud over the last few months of his service, because he was a distinguished Comptroller and Auditor General. He did much to enhance the reputation of the National Audit Office and worked very effectively with the Public Accounts Committee. Nevertheless, there was some concern and adverse publicity over his expenses, which in many respects led to the commissioning of the Tiner review and various recommendations made as to the governance of the Comptroller and Auditor General and the NAO.

I wish to make various points about corporate governance at a later stage, but two points are appropriate to address in the context of clause 37. The first is the length of term of the Comptroller and Auditor General, and the second is the appointment process. Clause 37(7) provides that the length of term should be 10 years and subsection (8) provides that it should be non-renewable. We welcome those provisions. The tension that exists in the Government’s arrangements in this area relates to independence and accountability, and that is a point to which we may return later. However, a non-renewable term of a reasonable length gives the CAG a degree of independence. The Tiner review initially suggested eight years, and we now have 10 years in the Bill. No doubt others will explain the reason for that change, but it is not enormously significant. We welcome those provisions.

The issue of the appointment process has been touched on recently in a couple of debates when new Comptrollers and Auditors General have been appointed. I have had the opportunity to speak in both debates—first, on the temporary appointment of Mr. Tim Burr in January 2008, and secondly, on the appointment of Mr. Amyas Morse as the permanent CAG. The debate has centred on whether the existing structure, which has been in place since 1983—by which time the appointment was made by a combination of the Chairman of the Public Accounts Committee and the Prime Minister—is appropriate or whether Parliament should have a wider role, and remove the Prime Minister and the Executive from the process, either altogether or with a diminished role.

Another issue is whether pre-appointment hearings should be introduced. This is not a new debate. In the debate that took place when Sir John Bourn was appointed, the Parliamentary Secretary to the Treasury, the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown), then the Opposition spokesman, said, on the question of a greater role for Parliament:

“The Labour party intends to give effect to this principle when in government.”—[ Official Report, 16 December 1987; Vol. 124, c. 1201.]

The argument for that approach is that we should have greater parliamentary involvement in public appointments. It is an argument that the Prime Minister espoused in his very first statement to this House as Prime Minister. It is one with which I have some sympathy, as it seems to be a more democratic approach, but there are specific arguments that apply in this context that suggest that the continuation of the present system may be a sensible approach.

The first argument is that the Chairman of the Public Accounts Committee is a member of the Opposition. That is a long-standing convention, and one that I am sure will continue. The Chairman has a substantial role in determining an appointment. In fact, by and large, as I understand it, in practice the Chairman essentially makes the selection, which is then approved by the Prime Minister.

It is important that the CAG is seen as independent of the Executive, and an appointment made by a senior Opposition Member demonstrates an important degree of independence.

4.45 pm

Mr. Heald: I have been wondering whether the CAG would be the right person to be in charge of the office for budget responsibility that the Conservative party has proposed. I wonder that for exactly the reasons that my hon. Friend has outlined: the independent nature of the CAG appointment process.

Mr. Gauke: I am grateful for my hon. Friend’s intervention. That would be an interesting structure, although I would be reluctant for the CAG to perform that role. Although the CAG and whoever would be in charge of the office for budget responsibility would play an important role in budget responsibility, I would not want to complicate the role of the CAG because it is a substantial job in itself. Furthermore, the skills required of the CAG—being able to identify waste in specific programmes—involve performing a role at a micro level in identifying particular problems, whereas we envisage the office for budget responsibility working at much more of a macro level. It would be a role for an economist to assess the needs of the Government in reducing the deficit, and the progress—or lack of—made by the Government in achieving those objectives. The parallel is strong in that both roles require a high degree of independence to have the credibility required to perform successfully.

Mr. Heald: My first thought was that, to assess the sustainability of public finances, we need expert economists, as my hon. Friend just said. However, there would be two other aspects of the role of the new office: to audit fully the national debt—or debts—and to enforce a long-term strategy of value for money in public spending. Those fit in well with the role of the CAG. Would there be any logic to giving him that role? I simply cast out that thought to him.

Mr. Gauke: I am grateful to my hon. Friend, and I am sure that his points will be noted. Both roles would be important. It is helpful to the Committee highlight the significance of the office for budget responsibility, and I think that we agree on the significant role that it would play—I hope—in addressing the current huge levels of borrowing. I hope that it would be important, just as the CAG has been important.

On clause 37, we think, on balance, that the result that we have got to, which is largely a continuation of the previous process, is an important one. We are pleased that it remains a requirement for the Prime Minister to move the motion for the appointment of the CAG. As I said, I have had the pleasure of responding to the Prime Minister twice when he has performed that role—I am sure that he was delighted to have that opportunity too. All being well, however, such a motion should not happen very often—once in 10 years, as the Bill envisages—although it is always possible that things will not go entirely to plan. Because of the independence provided by the Chairman of the Public Accounts Committee, there is a danger that the existing independence might be diminished in those circumstances by a straight vote in Parliament—whether a vote in Committee or a vote by the whole House—given that the Government will always be the majority party. Consequently, we welcome clause 37.

Status of the Comptroller and Auditor General etc

Mr. Gauke: Clause 38 deals with the status of the Comptroller and Auditor General. Subsection (8) highlights and signposts the provisions in clause 43 and schedule 6, and in clause 44 and schedule 7. It may be helpful to the Committee and reduce the time that we need to debate subsequent points if we address some concerns that have been expressed about the new governance structure.

Those concerns have been raised in particular by Professor David Heald, who is a former adviser to the Public Accounts Commission. Perhaps, in the spirit of the hon. Member for Luton, North (Kelvin Hopkins), I can provoke a debate.

Professor Heald’s concern is that the role of Parliament may well be diminished by the creation of the NAO board. In an article he stated:

“This insertion of the NAO Board between the Public Accounts Commission and the CaAG creates dangers. Governments might use the chair and board as a means of curtailing the activities of the comptroller, particularly in the more judgmental value for money sphere and in relation to the outsourcing of audit work.”

His concern is that that body will have some influence on the CAG. The Chairman of the Public Accounts Committee made it clear how important it is that there is independence for the CAG and how important, therefore, the appointment structure is. There is a role for the NAO in the approval of strategy and in the provision of resources. The concern is whether the Executive, through the chair of the NAO board, could influence the CAG.

The other concern is that if the chairman of the NAO board is strong, there is a risk of interference. If he or she is weak, what is the point? Is this merely a distraction of management effort—of effort by the CAG—that could otherwise be focused on other things? I hope it is helpful to the Committee for me to put those concerns on the record and give the Chairman of the Public Accounts Committee an opportunity to respond, although in some respects he addressed those concerns in his earlier remarks.

Mr. Alan Williams: Under the Bill, the CAG retains his absolute discretion in relation to his statutory duties. It cannot endanger his statutory duties at all.

Mr. Gauke: Indeed. The Father of the House states the essence of that case. The alternative case, as advocated by Professor Heald, is that there is still a body that has influence with respect to the provision of resources in establishing the strategy for the NAO, and that that body could be used to influence. The Father of the House rightly makes the argument against that and I suspect that the Committee will be satisfied by that, but it is helpful to put it on the record and for him to put the counter-argument.

As hon. Members have said, we are dealing with an important organisation. Other countries often look to what we do as an example of an effective means of scrutinising public expenditure. We must get it right, because it is important both in the UK and internationally. The concern is that the private sector corporate governance structure that we are putting place may not be appropriate for the very particular needs that exist in this area. I am not endorsing that line of argument, but it should be stated. I look forward to others addressing those concerns.

Remuneration package of the Comptroller and Auditor General

Mr. Gauke: I beg to move amendment 57, in clause 40, page 20, line 20, at end insert—

‘(10) All remuneration, allowances and expenses in relation to P must be published monthly online.’.

In relation to the clause and the amendment, P refers to the Comptroller and Auditor General. As we have heard, the reform of the governance of the CAG has largely been driven, or provoked, by the difficulties regarding Sir John Bourn’s expenses. As the Chairman of the Public Accounts Committee said, there was a sticky patch. The amendment would address that in perhaps the simplest way possible—by introducing much greater transparency.

There is obviously a sensitivity with regard to the CAG’s remuneration and other expenses, given that his role is to identify waste in public spending. Therefore, it seems right that he should be assessed with great scrutiny. He should lead the way in moves towards scrutiny of public spending, which should include spending relating to him.

If we have time—time is short again today—I hope we can have a longer debate on the wider issue of the transparency of public spending when we discuss part 8 of the Bill, but to ensure that the CAG is above suspicion, such information should be in the public domain.

Mr. Alan Williams: The CAG already submits his expenses to me as Chairman of the commission and publishes them on a six-monthly basis which, we are assured, goes further than for any other public servant. He is therefore already ahead of the game elsewhere in Whitehall.

Mr. Gauke: The Father of the House makes a good point—the CAG is further ahead. On the whole, we believe there should be greater transparency in public spending, and the CAG could be yet further ahead. I accept that he submits expenses to the Father of the House in his role as Chairman of the Public Accounts Commission, but by putting them in the public domain we would prevent any repetition of what happened with Sir John Bourn, even though such information goes into the public domain every six months.

Our proposal is a matter of going further. As a rule, we think information on how public money is spent should be in the public domain and published online. The CAG in particular needs to be above suspicion.

To avoid—I hope—the need for a separate stand part debate, clause 40 states:

“P’s package is to be determined jointly by the Prime Minister and the”

Chairman

“of the Committee of Public Accounts before the start of the appointment.”

There is a great deal of flexibility within the clause, which is welcome and sensible, because there are dangers in being too prescriptive, depending on the nature of the CAG candidate. However, we are lucky enough to have the Chairman of the Public Accounts Committee in the Chamber, and perhaps he is in a position to say something further on the thinking behind the package. For example, there has been talk about linking it to the salary of the Treasury permanent secretary or the Lord Chief Justice. Historically, there was a link with High Court judges. We have to recognise that we want to get the right person, and pay in the private sector for audit work has increased substantially over the past 20 or 30 years or so. If the CAG is not paid enough, it will have a knock-on effect on everyone else working in the NAO. It is important to get the figure right so that we get the right people.

6 pm

It is also right that no performance-related pay is included. It was recommended by the Tiner review, but it could lead to some sort of influence being put on the CAG. The proposals do everything they can to preserve the independence of the CAG and that is welcome. Subject to those queries, we have no objection to the clause, other than to say that it would be strengthened by amendment 57 to put on a statutory basis the publication online of details of the remuneration, allowances and other expenses of the CAG.

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