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Appointment of the Comptroller and Auditor General

Volume 492: debated on Wednesday 20 May 2009

[Relevant Document: The Twelfth Report from the Committee of Public Accounts, HC 256, on Selection of the new Comptroller and Auditor General.]

I beg to move,

That an humble Address be presented to Her Majesty, praying that Her Majesty will appoint Amyas Morse to the Office of Comptroller and Auditor General.

Mr. Morse has agreed that the appointment will be for a non-renewable term of 10 years. I should like to record the Government’s thanks to Mr. Tim Burr, who agreed to serve on an interim basis and recently announced his retirement, for his work and expertise.

As a first stage in implementing the recommendations of the Public Accounts Commission, a new board structure with a majority of independent non-executives, including a non-executive chair, who has already been appointed—Sir Andrew Likierman—is being established.

The Government will introduce legislation to implement the other recommendations of the Public Accounts Commission on the governance of the National Audit Office.

Mr. Morse was subject to a pre-appointment hearing before the Public Accounts Committee—the first such hearing that the Committee has held. He will be the first Comptroller and Auditor General who has extensive private as well as public sector experience, which will enable him to bring best practice and discipline to public audit work, and that will benefit the scrutiny of Government.

I believe that Mr. Morse is eminently qualified for the office of Comptroller and Auditor General, and I commend the motion to the House.

It is a pleasure to second the Prime Minister’s motion. I personally thank the Prime Minister for his role in the process, which has been completely fair and open.

The whole point of the job of Comptroller and Auditor General is that it must be above politics. For 150 years, since Mr. Gladstone founded the Public Accounts Committee, it has been a tradition that the Chairman of that Committee is drawn from the Opposition. However, there is also a well-established convention, which is now in statute, that the new Comptroller and Auditor General must be appointed by the Prime Minister—by definition, a member of the Government—and that the Chairman of the Public Accounts Committee, who is obviously a member of the Opposition, must countersign the motion. Both Government and Opposition therefore have a lock on the appointment. As far as I know, it is the only public sector appointment to which that applies.

Apart from what I have outlined, the process is new because it is 20 years since we had to appoint a permanent Comptroller and Auditor General. The last time we did it was when Baroness Thatcher, as Prime Minister, appointed Sir John Bourn. The system was old fashioned, with no open advertisement. My predecessor, Robert Sheldon, now Lord Sheldon, conducted interviews on his own, and that was clearly inappropriate. We had to create a modern structure, and we have tried to do that.

In his opening remarks, the Prime Minister alluded to the modern structure. The first step in the process was to make the National Audit Office completely open, transparent and accountable. We had to preserve the ability of the Comptroller and Auditor to be entirely responsible for his reports—nobody can influence their content. However, it was clearly wrong that he was running the National Audit Office on his own. There had to be a modern board structure and, as the Prime Minister said, the Public Accounts Commission—not the Committee, but the Commission, under the able chairmanship of the Father of the House, who is here today—devised a structure.

I headed an appointments panel, which appointed the new chairman of the National Audit Office, Sir Andrew Likierman, who has unrivalled experience. He was head of the Government Accountancy Service—apparently known in the trade as “Hot GAS”—and is the dean of the London business school. He was an outstanding candidate and now sits at the apex of this modern, open and transparent National Audit Office. This morning, the Commission met again, and we have given him the go-ahead to appoint further independent board members. The creation of an independent structure was therefore the first part of the process.

We then had to move to interviewing. Again, I thank the Prime Minister. Of course, he is far too busy running the country to sit for 25 hours, as we had to do, interviewing people, and he therefore delegated Sir Nick Macpherson, the Treasury’s permanent secretary, to sit on the interview panel, which I chaired with Tim Burr. I thank Sir Nick Macpherson, with whom I worked closely and who is an outstanding public servant, and Gus O’Donnell, Secretary to the Cabinet, for their help in the process. The process was completely open and transparent, with open advertisements, head-hunters appointed, a long list of outstanding people applying, more than 20 hours of interviews and Sir Andrew Likierman finally getting involved, and we came up with an outstanding candidate, Amyas Morse.

As the Prime Minister said in his opening remarks, Amyas Morse is, as far as I know, the first ever chartered accounted to be Comptroller and Auditor General. That is an important point in respect of when we talk about professionalising the civil service. He works in the public sector at present, having taken a huge cut in his salary to do so, but before that he rose right to the top of the accountancy profession, as the global managing partner of PricewaterhouseCoopers. It was quite obvious to all of us that he was the outstanding candidate and that is why we on the panel decided to appoint him.

Amyas Morse’s name was then put to the Prime Minister, who, again in the entirely helpful way in which he has conducted the process, approved the nomination within days. He had a veto, but he decided to trust the Committee with our decision. As the Prime Minister said, we then had the first ever confirmation hearing before the Public Accounts Committee; it is something that has never happened before. My colleagues on the Committee will confirm that Amyas Morse performed very well, with firm, well-argued answers, and the Committee clearly had confidence in him.

The whole process is extremely important. It is not just about appointing a chartered accountant or an accountant of government, and it is far more important than just bean counting or adding up the figures. The National Audit Office is at the centre of the drive to promote economy and efficiency in government. It spends £103 million a year, but it saves the best part of £900 million a year. The National Audit Office is at the centre of the process. The Public Accounts Committee could not work without the National Audit Office, headed by the independent Comptroller and Auditor General.

Whatever the faults in our Budget process or whatever Parliament’s other faults may be, it is not surprising that our process of audit is widely admired and copied throughout the world. It is not surprising that every Commonwealth country has a supreme audit body reporting to a public accounts committee, but even the Czechs have now created a public accounts committee in the past two years. They have perhaps taken to extremes the idea that their chairman—the person who will hold their Government to account—should be a member of the opposition, and have appointed a communist.

We can be very proud of the work of the Public Accounts Committee. We should thank the National Audit Office and pay tribute to Tim Burr for holding the fort for this interim period. We have appointed a man who must be completely un-influenceable by anybody. That is why we said that he will have one term for 10 years that will not be renewable. The position must also be completely independent. We have ensured his independence through the process that we have undergone. I think that Amyas Morse will be a worthy successor to Tim Burr and I commend his name to the House.

It is symbolic of the significance of the post of Comptroller and Auditor General that the announcement of his appointment should be made in the House by the Prime Minister. However, it would be fair to say that doing so is not one of the more onerous duties of a Prime Minister.

As we heard, such an announcement has been made only twice before, first in December 1987, when Margaret Thatcher announced the appointment of Sir John Bourn. I note that on that occasion the person responding from the Front Bench on behalf of the official Opposition was the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown), who is here again today. Indeed, if I remember rightly, he was also present on the second occasion, in January 2008, when the Prime Minister announced the interim appointment of Tim Burr.

Such announcements are happening slightly more frequently now, with somewhat less of a gap between them. It is not unusual in public life for one person to hold a position for a long time and for his successor’s time in office to be relatively brief. However, that is no reflection on Tim Burr’s performance, because it was always his intention to take the position for an interim period. He has had a distinguished career, working for the National Audit Office for 15 years before becoming the Comptroller and Auditor General, eight of which were spent as deputy. As we heard from my hon. Friend the Member for Gainsborough (Mr. Leigh), the Chairman of the Public Accounts Committee, Tim Burr played a useful role in the selection of his successor. I would like to thank him for his contribution over many years.

When we debated Mr. Burr’s appointment in January 2008, much of the discussion centred on the selection process. The consensus in the House was that it was important for Parliament to have a significant role in the appointment to such an important position as that of Comptroller and Auditor General. Some argued for a parliamentary vote. Others, including the Chairman of the Public Accounts Committee, argued that if that were to happen, there may be a perception of a loss of independence from the Executive. The Chairman of the Public Accounts Committee is an Opposition MP, and if he has a greater role in the appointment, the perception may be one of greater independence. That view has prevailed and the Government have accepted it. I fully acknowledge my hon. Friend’s point that both he and the Prime Minister have worked together successfully and smoothly in making this appointment. That helps with the perception of independence.

I agree with both the Prime Minister and my hon. Friend that an appointment for a single 10-year term is also helpful in maintaining independence and the perception of independence. There can be difficulties and dangers—perhaps more of perception than in reality—when someone has a shorter term and is then reappointed. For example, adverse comment was made about the delays in the reappointment of the Governor of the Bank of England. We think that the current structure has much to commend it.

In debating the appointment of Mr. Amyas Morse, it is worth highlighting how important the role of the Comptroller and Auditor General has always been and, indeed, how much more important it may become in the years ahead. We are entering a period of public spending restraint. We face record levels of borrowing and it will be necessary to ensure that public money is spent wisely, whoever is in power in the years ahead. Even the Government recognise that there is room for further efficiencies. In a period when the Government’s projections are such that there will be real-terms reductions in departmental spending in some areas, the emphasis on value for money is significant.

Hon. Members perhaps need no reminding of this, but it is worth reiterating the fact that the demand from the public for greater transparency in and scrutiny of public spending is greater than it has ever been before. The public demand to know more. We live in a less deferential society. Developments in technology make it easier for information to be disseminated and obtained. For example, the Conservative party supports the introduction of a website detailing items of significant public spending. We think that more can always be done. However, the National Audit Office, the Comptroller and Auditor General and the Public Accounts Committee all have distinguished records in scrutinising public spending, and they will continue to perform that important role. Indeed, just last night in his statement, Mr. Speaker announced a role for the Comptroller and Auditor General in examining MPs’ expenses.

Let me deal finally with the appointment of Mr. Amyas Morse. We have heard from the Chairman of the Public Accounts Committee and the Prime Minister what a distinguished career Mr. Morse has had, at PricewaterhouseCoopers and, more recently, at the Ministry of Defence. I know from speaking to my hon. Friend the Chairman how deeply impressed he was by Mr. Morse, and I know that this view was shared by the rest of the panel. Indeed, I think that Mr. Morse impressed the Public Accounts Committee as a whole when giving his evidence to it in February. I have also spoken to others who know Mr. Morse, all of whom speak very highly of him. He has an important task, and we are confident that he will perform his role with great distinction. On behalf of the official Opposition, I wish him well.

In my role as Chair of the Public Accounts Commission, may I endorse completely everything that has been said about Mr. Morse’s suitability for this job? There was an extremely good shortlist, and he was undoubtedly the best candidate. It is not surprising that it was a good list, because this is one of the most important public sector roles. Parliament would be impotent to carry out its financial scrutiny of the Government if it did not have an effective National Audit Office headed by a clearly independent and strong-minded Comptroller and Auditor General. Without the Comptroller and Auditor General, we would be incapable of monitoring the hundreds of billions of pounds of expenditure and income. He does not simply audit; he checks for value for money, probity and accuracy.

I should like to put a different hat on to describe another role of the Comptroller and Auditor General. In my role as Chair of the Liaison Committee, I have been very grateful to the previous Comptrollers and Auditors General, Sir John Bourn and Tim Burr, for all the work they have done with the Committees outside the Public Accounts Committee. For many years, the other Committees have justifiably been envious of the incredible support that the PAC receives from the National Audit Office. Sir John must be given credit for his decision to start using the NAO’s expertise to support the other Select Committees, through the use of secondees and briefings. At the post-appointment hearing, I spoke to Sir Andrew Likierman, the new chair of the NAO, which is a new post. I was particularly delighted when he and Mr. Morse reiterated their commitment to expand the role of supporting the Select Committees. That can only be good news for the Committees.

I, too, would like to thank Tim Burr. He stood in at a difficult time, and he indicated that he had no intention of applying for the post himself. I know that the Chair of the PAC will agree that he has done an excellent job in running the National Audit Office. More than that, however, he has started to implement the restructuring of the NAO and to adapt it to the best modern standards of corporate government, as recommended by the Tiner report. We owe him a lot for that.

I first started to serve on the PAC in 1990, when I left the Front Bench. At that stage, the NAO was saving the taxpayer five times its annual running costs. That gradually increased, under pressure from the Commission and the Committee, to seven, eight and then nine times the running costs. Tim Burr gave us a pleasant surprise at the last meeting of the Commission, when he told us that the NAO is now recovering 10 times its cost to the taxpayer. That works out at more than £1 billion every 18 months, which is a remarkable achievement. Tim has done a great job. He has been a pleasure to work with, and I wish him well in whatever he decides to do in the future.

It is indicative of the significance of the position of Comptroller and Auditor General that the Prime Minister himself moved the motion on the appointment of Mr. Morse. I congratulate the Prime Minister on the nerveless performance that he gave a few minutes ago.

The post of Comptroller and Auditor General is a highly significant one, particularly at this time, when the Government have a public sector deficit of £175 billion this year, falling to £173 billion next year—according to their projections. The deficit represents more than 10 per cent. of gross domestic product, so it is essential that we achieve value for money in public spending. That is clearly a task that Mr. Morse is well equipped to contribute to.

A number of concerns have been expressed, not about Mr. Morse’s individual qualifications and suitability but about the role more generally. There is a potential for conflict between the positions of the chairman, Sir Andrew Likierman, and of Mr. Morse. I am talking not about them as individuals but about the two roles, which have the potential to overlap. There are issues about the usefulness of the hearing processes, when they do not contribute directly to a recommendation or otherwise on the suitability of an applicant. There is also an issue about the balance between finding value for money and the financial audit work undertaken by the NAO. Mr. Morse will of course have some significant issues in his in-tray, not least the vexed question of whether private finance initiatives will contribute to the overall public debt of the country.

If the hon. Gentleman had taken the trouble to read the PAC report, he would have seen that the hearing process contributed directly to the satisfaction expressed by the Committee that Mr. Morse was a suitable person to appoint.

I am grateful to the hon. Gentleman for that contribution. Perhaps I did not word my comment as neatly as I might have done, but my understanding is that the Committee was not able to ratify the appointment, and that it was able only to guide it. That might be suitable, however; perhaps everyone on the Committee feels that that level of authority is appropriate.

This is a very important point. The reason we did it this way is that the Committee, like every other Committee in the House, has a Labour majority. If it had seconded the motion of the Prime Minister, we would have had a Labour Prime Minister proposing the new Comptroller and Auditor General and a Labour-dominated Committee seconding his appointment. The whole point, as I outlined earlier, is that both the Opposition and the Government have a lock on this process.

I am delighted that Mr. Morse’s appointment finds favour with all parts of the House. His appointment is certainly supported by my party. I have not, to my recollection, ever met him, but his CV is certainly impressive and hours of hearings have been undertaken to gauge his suitability. I can only conclude that he must indeed be a person who can undertake this onerous task in a distinguished manner.

I shall conclude with a quote from the Committee’s report—which I have indeed read—that makes this point forcefully. It states:

“As a Committee, we have no role in the statutory process of selection and appointment of the Comptroller and Auditor General. Nonetheless we believe that our views should carry weight in the debate on the Prime Minister’s motion praying the Queen to appoint Amyas Morse, since we have collectively some 65 years of experience on the Committee and thus of working with the Comptroller and Auditor General and the National Audit Office. We are satisfied that Amyas Morse is highly suitable for the post of Comptroller and Auditor General.”

On that basis, I hope that the appointment will find favour among all Members.

I am pleased to take part in the debate to confirm the appointment of Mr. Morse as Comptroller and Auditor General. Having seen him in the hearing, I have no doubt at all about his suitability. His experience of running a large international accountancy practice, PricewaterhouseCoopers, combined with his experience as commercial director of the Ministry of Defence, renders him highly suitable for this very difficult job.

In appointing Mr. Morse as Comptroller and Auditor General, the Government are going to have to fix several things. It is a pleasure to see a number of former members of the Public Accounts Committee now sitting on the Treasury Bench and taking part in the debate. I saw the hon. Member for Hemsworth (Jon Trickett) earlier. When he was a member of the Committee, I always used to feel that he and I were hunting together as a pack when we were probing the civil servants before us. Unfortunately, he is now engaged on other responsibilities—bunker maintenance might be the best description for them. There are others sitting on the Treasury Bench who have had recent PAC experience. I enjoyed their incisive contributions through the years when they were members.

There are aspects of the Comptroller and Auditor General’s access to the information he needs that will have to be fixed. The National Audit Act 1983 states that the Comptroller and Auditor General should have complete discretion in the exercise of his functions. One might assume that this is completely true, but in fact it is not true at all, as there are three obvious exceptions.

The first is the Financial Services Authority, to which the Comptroller and Auditor General does not have access. That means that he cannot carry out an audit of the effectiveness, efficiency and economy of the FSA in the way he can with, say, the Ministry of Defence or the Department of Health. I personally believe that that has had significant consequences—for example, in respect of Northern Rock. When it got into huge difficulties, it was discovered to be subject to a regulatory system under which the different players did not know what they were doing. It became very obvious in the autumn of 2007, as seen in the National Audit Office report based on evidence from the Comptroller Auditor General, that the three parts of the regulatory system did not know what the others were doing. That was the result of a lack of scrutiny of the FSA. The Comptroller and Auditor General would have carried it out, I believe, if he had had the right of access to do so—but he did not, so when it was done, it was done by the Treasury.

I am afraid that only once over a period of seven or eight years did the Treasury ask the NAO to look at the activities of the FSA. In that regard, it failed in its functions. I do not blame the Exchequer Secretary, who was a very incisive member of our Committee when she was on it. Functionally, however, the Treasury has failed, and Sir Nicholas Macpherson has more or less admitted that point and agreed to go back and look over the matter.

Secondly—

Order. I think the hon. Gentleman is ranging rather wide of the measure before the House, which is specifically about an appointment.

Indeed, Mr. Deputy Speaker, so I shall try to confine my remarks to the appointment of the Comptroller and Auditor General. In talking about that appointment, I hope it is in order to discuss the functions of the Comptroller and Auditor General once he is appointed and whether or not he is able to exercise them.

I will be very narrow and very brief, Mr. Deputy Speaker.

My second point concerns the BBC, to which the Comptroller and Auditor General does not have access either. That has an impact on the effectiveness, efficiency and economy of the BBC and on the extent to which it is scrutinised. When Dame Ellen MacArthur sailed around the world, 64 television producers turned up in Falmouth to cover it. I am not sure that that would have happened if they had known that they were going to be subject to public audit in the way that most Government Departments are. That has nothing to do with editorial control.

The third point, and it is the most serious of all, concerns this House. I hope that you will agree, Mr. Deputy Speaker, that it is directly relevant to this debate. What better time to appoint the nation’s chief auditor than after what has happened over the last couple of weeks? I can think of no more important appointment for us to make. According to statute, the Comptroller and Auditor General has all the authority over the National Audit Office. As the Government well know, that is why we are soon going to see changes. As I say, the Comptroller and Auditor General has all the authority under statute and the NAO is organised under his control into value-for-money divisions and financial audit divisions.

I would rather keep going, if I may, as Mr. Deputy Speaker has asked me to be brief.

As it is organised, the Defence, Health or Transport audit will have two sub-branches: financial and value for money. Within the NAO, there is also a section called “Justice and Parliament”—and I had always assumed that the Justice and Parliament section could audit the House of Commons administration in exactly the same way as the Health audit section can audit the Department of Health or as the Culture, Media and Sport section or the Transport section can audit those Government Departments. It turns out, however, not to be the case.

I discussed this issue with an assistant Comptroller and Auditor General last week. Previously, I had always thought that the auditors could go in and examine the House of Commons administration and do all the audit they needed to perform to satisfy themselves in exactly the same way as for Departments. It turns out, however, that for all these years, all they have been able to do is to compare the claims made by Members with the amounts paid and check that the two are the same—that is all they can do. When I asked one of the assistant auditors general why it was not possible to do more, the reply was, “That is all we could get.”

I hope that you will agree, Mr. Deputy Speaker, that what I am saying now is directly relevant to this debate and to the appointment of the Comptroller and Auditor General. The truth is that that is not good enough. It is not the fault of the Comptroller and Auditor General that it is not good enough, as it is the responsibility of the Government and this House. When the Government fix the problem, they have to ensure that the new Comptroller and Auditor General we are appointing—I think he is the right person for the job—has all the access he needs to do the job properly.

It is a great pleasure to conclude the debate. I echo the tributes of my right hon. Friend the Prime Minister and of right hon. and hon. Members on all sides of the House to the outgoing Comptroller and Auditor General, Tim Burr. He has been a public servant for more than 40 years, beginning his career in the Treasury. In particular, he was the Treasury Officer of Accounts between 1993 and 1994 before moving to the National Audit Office to become a member of its management board. In 2000, he became deputy Comptroller and Auditor General, before assuming the office of Comptroller and Auditor General, on an interim basis, on 1 February last year. I am glad that all Members—and particularly my right hon. Friend the Member for Swansea, West (Mr. Williams), who although not the current Chairman is the most experienced member of the Public Accounts Committee and provided great service in that role over many years—have paid full tribute to Mr. Burr. The Government were grateful that Mr. Burr agreed to take on the role of Comptroller and Auditor General on a temporary basis. We know that he has fulfilled that role with integrity and been a steadying hand on the tiller.

The hon. Member for Taunton (Mr. Browne) suggested that there might be some disagreement over the roles of the Chairman of the National Audit Office and the Comptroller and Auditor General. Actually, all parties are agreed on what we have done in making this appointment today, and the approach was agreed by the National Audit Office.

This is a very important point, which was carefully considered by the both the Commission and the Committee. There will be no disagreement because Sir Andrew Likierman will concern himself only with the corporate governance of the NAO. The CAG will have the absolute, independent, full and individual right to propose what he studies and to issue his results to the PAC. The PAC will never consider policy in itself, but only its effectiveness. I have chaired more than 450 meetings of the PAC, at which we have never had even one vote. Contrary to what was said earlier, the system does work and does provide independence for the CAG.

I am a former member of the Public Accounts Committee and I have had the privilege of occasionally sitting in on some hearings—not all 450—from the Government side. I can certainly confirm that when I was a fully fledged and regularly attending member under the chairmanship of the hon. Gentleman, we did not have any votes. I believe that the PAC continues to do a vital job, so I welcome the hon. Gentleman’s clarification in response to some of the doubts expressed by the hon. Member for Taunton.

The Government are committed to bringing forward legislation to implement the recommendations of the Public Accounts Commission on NAO corporate governance and will do so as soon as the legislative timetable allows.

I want to welcome the appointment of Mr. Morse as Comptroller and Auditor General. As the Prime Minister said, Mr. Morse has had a distinguished career in the private sector and is currently the Ministry of Defence’s commercial director. His appointment brings a number of “firsts”. He will be the first Comptroller and Auditor General to have private sector experience, which will prove invaluable to the National Audit Office. He will be the first chartered accountant, the first to be appointed through open competition and the first to be subject to a pre-appointment hearing. He is also the first to agree to be appointed for a limited term.

I have been listening with great attention to the Minister’s speech. She endorsed the recommendation, with which I agreed, that the new Comptroller and Auditor General should be both a chartered accountant and from private practice. Given that audit background in private practice, will the Government accept any of the Comptroller and Auditor General’s recommendations? I am thinking of, for instance, the recommendation presented jointly by the Audit Commission and the National Audit Office that the private finance initiative should go on the Government’s balance sheet.

That is a rather wider question than the question of the appointment hearing, but, as the hon. Lady knows, changes to accounting mechanisms are being considered by the professional bodies that have a bearing on this matter. I look forward to discussing it with her during one of our regular Public Accounts Committee debates, when she may wish to make her points again.

I suggest that Members read the transcript of Mr. Morse’s pre-appointment hearing before the Public Accounts Committee. It provides an insight into his background and knowledge, as well as how he will work with the new non-executive chairman, Sir Andrew Likierman.

A substantial amount of work will be involved in bringing the corporate governance of the National Audit Office into the 21st century, and, as we have already heard today, similar work is being done in parallel in other institutions. I am sure that Mr. Morse is relishing the opportunity to lead the National Audit Office through the next decade of change. The NAO and the PAC do a vital job in securing value for money for every penny of public expenditure and explaining to us what we can do in the event of failure. I know that Mr. Morse will be ably supported by Sir Andrew Likierman, and I commend the motion to the House.

Question put and agreed to.

Resolved,

That an humble Address be presented to Her Majesty, praying that Her Majesty will appoint Amyas Morse to the Office of Comptroller and Auditor General.