Economy, Energy and Fair Work Committee

Meeting date: Tuesday, April 30, 2019

Official Report 628KB pdf

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Subordinate Legislation

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Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019 [Draft]

For agenda item 2, I welcome Joe FitzPatrick, the Minister for Public Health, Sport and Wellbeing. He is joined by Nadine Murphy, Paul Ingram and Elaine Black from the Scottish Government. I invite the minister to make an opening statement on the instrument.

Good morning. The order that is before the committee is largely technical in nature, but I thought that it would be helpful to put on record some background and context to its purpose.

The independent living fund was a United Kingdom scheme that made care payments to severely disabled people. The scheme closed to new applicants in April 2010 and ceased to operate on 30 June 2015. The Scottish Government made a commitment to maintain the ILF in Scotland and established ILF Scotland, which operated from 1 July 2015.

The funding is used by recipients for services that they otherwise would not have and which offer them flexibility to live in their own home or take up employment or education and which help to reduce social isolation. An agreement has been reached to allow ILF Scotland, on behalf of the Northern Ireland Executive, to distribute packages of ILF support to existing recipients of ILF payments who live in Northern Ireland.

ILF Scotland was established in 2015 as a company that was limited by guarantee and owned wholly by the Scottish ministers to meet the very tight timeframe for delivery and to ensure that payments were protected. At the time, ILF Scotland appointed its own external auditor, and its annual accounts have been audited under the commercial sector audit requirements that are set out in the Companies Act 2006.

In June 2018, ILF Scotland was established as a new devolved Scottish public body, with the classification of executive non-departmental public body. NDPBs follow an executive model framework that requires that external auditing is provided by the Auditor General for Scotland. The Auditor General for Scotland is a statutory auditor whose services are outlined in the Public Finance and Accountability (Scotland) Act 2000. The auditor is accountable to the Scottish Parliament and has several statutory powers to assist the auditing process. It is therefore desirable, for auditing and accountability purposes, for ILF Scotland to be on the same footing as other statutory NDPBs. To that end, the order’s purpose is to enable the Auditor General for Scotland to provide external audit services to ILF Scotland. In seeking to make the change, we have consulted the Scottish Government legal directorate, senior staff from the Auditor General for Scotland’s office and ILF Scotland.

The order will subject ILF Scotland to section 1226 of the Companies Act 2006, which will allow the Auditor General for Scotland to be appointed as the statutory external auditor, and to section 483 of the 2006 act, which will allow ILF Scotland to be specified as a body that is subject to the Auditor General’s auditing powers.

I am happy to take any questions on the order.

The Delegated Powers and Law Reform Committee has drawn attention to the fact that the order has not followed proper drafting practice in relation to territorial designation. The Government’s response is, basically, that that does not matter because ILF Scotland is clear about what it does. Regardless of whether it matters, proper drafting practice would seem to be a good thing; not following proper drafting practice complicates the scrutiny of legislation, because we need to determine whether the drafting matters, whereas if proper drafting practice is carried out in the first place, we do not need to do that. What is your response to that, minister?

The matter was raised by the Delegated Powers and Law Reform Committee, which, I think, was satisfied by the response that it received from the Government.

The Scottish Government’s view is that the order extends to the whole of the UK, as a matter of Scots law. That reflects the general UK-wide extent of the enabling powers that are set out in section 483 of the 2006 act, under which the order is drafted, and, therefore, in line with drafting practice, a provision that deals with extent is not required. That position is supported by the Scottish statutory instrument drafting manual, which states that an instrument will have the same extent as the power under which it is made. In those circumstances, to include a provision on extent could be criticised as being unnecessary. That criticism was made of the Construction Contracts (Scotland) Exclusion Order 2011.

Subordinate legislation that contains no express proposition about its extent is presumed to have the same extent as the parent act. It is useful to note that similar orders have been made by Scottish ministers under the enabling powers of UK acts of Parliament that have UK-wide extent. That was demonstrated by the Proceeds of Crime Act 2002 (Disclosure of Information to and by Lord Advocate and Scottish Ministers) Amendment Order 2014 and, more notably, by the Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2008, which was made using the same enabling powers as those used for this draft order. The 2008 order forms a precedent for making legislation under section 483 of the 2006 act.

Thank you. I follow all that. Can I take it that there is a difference of opinion between the Scottish Government and the Parliament on whether proper drafting practice has been followed? You are arguing that the statutory instrument manual suggests that including a provision on extent is not required.

Yes.

However, the Delegated Powers and Law Reform Committee said that there was a failure. Is it fair to say that there is a difference of opinion?

That is fair. Our drafting is supported by what the manual says and by precedent. In fact, the same drafting was used for an order that had the same parent act as the order that is before the committee.

It is not unusual for there to be differences of opinion on drafting, but the Government fully appreciates the work that the Delegated Powers and Law Reform Committee does in raising such issues so that we can ensure that we get things absolutely right.

On timing, I want to clarify why the order is being made now rather than last year, next year or some other time.

The order could not be introduced until the ILF’s function changed to become an NDPB.

This was the first opportunity that the order could be made.

Yes—in effect, this is the first opportunity.

As there are no further questions from committee members, we will move to the formal debate on the motion to approve the affirmative instrument. I invite the minister to formally move the motion.

Motion moved,

That the Economy, Energy and Fair Work Committee recommends that the Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019 [draft] be approved.—[Joe FitzPatrick]

Motion agreed to.

Does the committee agree to the clerk and I producing a short factual report of the committee’s decision and to our arranging for it to be published?

Members indicated agreement.

I thank the minister and his officials.

10:41 Meeting suspended.  

10:43 On resuming—