Code of Audit Practice 2010 for Local Government Bodies

My Lords, I am grateful to the three noble Lords who have spoken in support of these codes of practice. The noble Lord, Lord Adebowale, spoke about the importance of audit. He is absolutely right; it is part of the accountability process for local government and the NHS. He rightly explained the history of these proposals and the fact that only minor changes have been made between the previous set and those before us this afternoon. The noble Lord, Lord Rennard, talked about the importance of independent audit in giving us confidence in local government and its expenditure of public funds. I very much support the noble Lord in that. Particularly at this time, when there will be pressure on public finances, it is important that people are assured that money is spent in best-value terms and is properly accounted for through audit processes. The noble Earl, Lord Cathcart, raised three questions for me. In the first, he talked about section 5 of the local government code and asked why there was no equivalent for NHS bodies. The rights of electors of local government bodies reflect the fact that those bodies are funded by local taxation and date back to the mid-19th century. NHS bodies are of course funded by national taxation. The noble Earl may well point out that, given the range of support that comes from central to local government, perhaps there should be some qualification of that; but that is the history of why that process is in place. He asked about the abolition of reporting on best-value performance plans. This is about reducing the burden on local authorities and the Government legislated to remove the statutory requirement. So far as small bodies are concerned, I should say first that the code of audit practice itself does not address any thresholds; it simply provides for the approach for small audits. The thresholds are set out in other legislation. At the moment, the requirement for the audit of small bodies is when there is a turnover of less than £1 million. That is specified in the regulations. Schedule 1 to the code specifies a proportionate approach to the conduct of the audit, but the commission is discussing with CLG raising the threshold for small bodies to align with small companies—the £6.5 million level. In terms of the importance of that on fees, the code continues to specify separate audit arrangements for smaller audited bodies such as parish and town councils, and the new, lighter-touch audit regime has established itself well. The new code maintains that. While the commission has reduced the burden of audit on small parish councils, it has done so recognising that there continues to be a need for appropriate and proportionate audit of bodies spending public money and potentially taking on new responsibilities. The limited assurance arrangements have significantly reduced audit costs for smaller bodies, and the number of complaints regarding audit arrangements for parish councils. The previous approach had become unsustainable and disproportionate. I hope that dealt with each query that the noble Earl raised. If there are no further points, I will simply commend the codes to the House. Motion agreed.