Schedule 3 is crucial because it sets out where and how the NAO will work with the Comptroller and Auditor General. It would probably be worth while if I explained the principles set out by the Public Accounts Commission that led to the arrangements in the schedule. The proposals by the commission were designed to balance two considerations: the CAG needs the authority to form completely independent judgments about audits and value-for-money studies conducted by the NAO, but at the same time the NAO needs to maintain systems of governance and internal control that are consistent with best practice.

The governor’s framework set out in the schedule is designed to ensure that in delivering the CAG’s independent audit judgment, the NAO and the CAG are themselves operating to the best standards of probity and efficiency. Paragraph 10(2) reflects the principle set out in clause 17(1) and (2), which grants the CAG complete discretion, subject to any limitations agreed by the commission, the NAO and the CAG.

The schedule provides for the NAO to provide resources for the CAG, but as the hon. Gentleman said, it also gives the NAO a duty to monitor, and form a relationship with, the CAG. Further details on how the relationship will work are set out in the code of practice, which is prepared by the NAO and the CAG and approved by the commission. The schedule also sets out where the Public Accounts Commission, on behalf of Parliament, has a role in regulating the relationship between the CAG and the NAO.

The hon. Gentleman asked about the potential conflict of interest that arises from the fact that although the CAG is the chief executive of the NAO, the NAO has a role in monitoring the CAG. The monitoring is really part and parcel of the NAO’s role in providing the CAG with advice and support. Ultimately, the Public Accounts Commission will hold the CAG to account. That is the point that Baroness Noakes was making when she questioned whether that had happened in the recent past. The NAO’s duty to monitor is necessary because it is a body that does things, as well as a body that advises. That is the reason for that aspect of schedule 3.

The hon. Gentleman mentioned his concern about the restriction on public comments by non-executives of the NAO. We do not want the non-executives to undermine the authority of the CAG by going public, but I can assure the hon. Gentleman that there is an opportunity for non-executives to make their point; however, that needs to be done in the meetings of the NAO board, rather than in the public domain. That is really more of a professionalism safeguard to make sure that the authority of the CAG is not unwittingly undermined.