Clause 11

Part of Budget Responsibility and National Audit Bill [Lords] – in a Public Bill Committee am 1:45 pm ar 3 Mawrth 2011.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 1:45, 3 Mawrth 2011

It might be the right moment for me to give some background to this part of the Bill. Overall, the coalition programme makes it clear that the Government will take significant steps to increase the transparency of public spending to enhance accountability. The first stage, which we have been debating in the first part of the Bill, is to subject the Treasury’s fiscal judgments to external scrutiny by making economic and fiscal forecasts independent.

The same applies to the scrutiny of public expenditure. Modernising the governance of the National Audit Office will also help advance those coalition Government objectives. The provisions in part 2 strengthen the resilience and integrity of the body that is best placed to assess the Government’s use of public funds. Effective independent oversight of the efficiency of Government spending will be particularly important when public resources are under pressure.

Part 2 implements the recommendations in the Public Accounts Commission’s 15th report. Its proposals were designed to balance two considerations: the need to ensure that the CAG has the authority to form completely independent judgments about the audits and value-for-money studies conducted by the NAO; and the need for the NAO to maintain systems of governance and internal controls that are consistent with best practice. The provisions in part 2 introduce a number of checks and balances to achieve those aims.

In summary, part 2 modernises the governance arrangements for the national audit. It continues the office of the CAG as an independent officer of the House of Commons, but limits the term to a single appointment of 10 years. I shall answer the hon. Gentleman’s questions about that in a moment.

Part 2 provides for the establishment of a new corporate body, the new National Audit Office, the functions of which will include providing resources for the CAG’s functions, monitoring how those functions are carried out and approving the provision of certain services. Importantly, it will be able to support and challenge constructively the CAG’s decisions without, of course, preventing him from carrying out his statutory responsibilities.

The NAO will have a majority of non-executives and will be led by a non-executive chair. The CAG will be the chief executive, but will not be an employee of the NAO . It is important to stress that, within the new governance framework, the CAG will continue to have complete discretion in forming audit judgments and carrying out value for money studies. Schedules 2 and 3 set out details on the new NAO and the relationship between it and the CAG.

Clause 11 is straightforward in that it provides for the office of the CAG to continue. It carries forward the appointment process in section 1 of the National Audit Act 1983, under which the CAG is appointed by Her Majesty by letters patent, following an address in the House of Commons. It is a legal requirement that the Prime Minister agree the appointment of the CAG with the Chairman of the Committee of Public Accounts. The choice of CAG will continue to require cross-party agreement.

To address the point made by the hon. Member for Nottingham East, subsections (6) and (7) limit the term of office to a single 10-year appointment instead of the current unlimited term. A time frame of 10 years is significant, but it gives the incumbent time to settle into the role and to become a strong and effective leader. On the other hand, it mitigates the risk of the office becoming too closely aligned with the personality of a single individual. Refreshing the leadership of an organisation at appropriate intervals is widely recognised as a driver to improving performance.