I want to address three issues. The first is the Bill’s failure to acknowledge the fears for probity in local government, the second is its failure to address the structural and procedural breakdown of accountability and the third is the new code of practice for council newspapers.
We usually preface such debates by explaining our background in local government, and I am trying to address these matters completely objectively and without being partisan in any way. I do so as someone who has worked on the front line of a social services department, who was the head of policy of a London borough and who then became an elected member of the Greater London council, chair of finance and deputy leader before going back to being a bureaucrat in local government as the secretary—they now call them chief execs—of the Association of London Authorities, then the cross-party body of the Association of London Government. I have done my time, I suppose, over 25 years in local government.
There are fears for accountability and probity that the Bill does not seem to acknowledge or address. I wonder whether Members have seen the report published this month by Transparency International UK. Many of us will have worked with that organisation—which monitors corruption and probity, particularly in developing countries around the world—in the context of our countries of interest. I have, particularly on Kenya and other African countries.
The organisation monitors corruption in government throughout the world—establishing league tables, as some Members will recall—raises awareness of it and advises civil society and Governments on how to combat it. I urge Members to look at the report it has published this month, entitled “Corruption in UK Local Government: The Mounting Risks”. Let me quote the executive summary and some of its recommendations, which I will want to try to insert into the Bill as we discuss it in detail.
The good thing about the report is that it says there is not much evidence of corruption—but that is because what evidence there is, is anecdotal, although part of the problem is that not a lot of research has been done. The report found that although there was no agreement on the levels of corruption in local government, there was agreement across the board about the “disturbing picture” whereby
“the conditions are present in which corruption is likely to thrive”.
The report states that those conditions are
“low levels of transparency, poor external scrutiny, networks of cronyism, reluctance or lack of resource to investigate, outsourcing of public services, significant sums of money at play and perhaps a denial that corruption is an issue at all.”
The report goes into some detail about the checks and balances for accountability and probity in local government and is critical of the previous and current Governments’ performance, which undermined some of the processes of transparency, particularly the awarding of public contracts, the overseeing of their implementation and the growing tendency to outsource provision and transfer personnel between public and private roles—the revolving door syndrome that occurs not only in central Government but has gone into local government. The report also states:
“Planning decisions remain highly discretionary and are vulnerable to corruption in several areas.”
Allegations and incidents have been recorded—not at any high level, but they exist—of bribery in local government, collusion, conflicts of interest and corruption-related fraud. Of course, we have also seen examples of electoral corruption prosecuted in Birmingham and elsewhere. The report refers to a number of changes in legislation, particularly this Bill, that undermine the climate, procedures and structures that would address corruption and protect us from it.
Let me go through some of the criticisms of this Bill and some of the other legislation introduced by the Government. Transparency International UK is concerned about the abolition of the Audit Commission, as there will not longer be a “back-stop” to provide support and work to protect against corruption. There will be
“no institution with wider powers of public audit to enable criminal investigations, which the Audit Commission used to have”.
There will be
“no institution to collect nationwide data on fraud and corruption or analyse trends”,
and:
“New external audit reports will not be adequately covered by the Freedom of Information Act”.
That point has been raised by my right hon. Friend the Member for Leeds Central (Hilary Benn). The report also states:
“Local authorities will have a reduced internal capacity to investigate fraud and corruption, due to austerity measures”.
Those concerns will build up to create a climate in which there are fears for probity. The report also states:
“The responsibility for investigating and detecting fraud and corruption is being delegated to lower-level officers”
in local government. It continues:
“Audit committees are weakened and may disappear because there is no longer a statutory requirement for an audit committee to be a full committee in its own right…External auditors appointed under the new arrangements may face incentives to avoid undertaking investigations or raising concerns about suspicions of fraud or corruption.”
The report expresses its concern that:
“There is no longer a universal code of conduct to provide clarity to members serving on different public authorities and committees…There is no longer a requirement for members to declare gifts and hospitality and no legal requirement for either a standards committee or the monitoring officer to check any register of interests on a regular basis”.
Again, that is not addressed by the Bill. The report goes on:
“There is no longer a statutory requirement for a council to have a standards committee…There is no longer any obligatory sanction for members that violate the local codes of conduct”
and there is an overreliance on party discipline as the main sanction. It states:
“Since the abolition of Standards for England, there is no longer a national investigations body for misconduct.”
As the hon. Member for Mid Dorset and North Poole (Annette Brooke) mentioned, that means that some local authorities might struggle to appoint independent people
“of the appropriate calibre and legitimacy to perform the new role”
under the self-regulatory system of panels. The report says:
“The system relies too heavily on the new offence of failing to declare a pecuniary interest”,
and, of course:
“The ability of chief executives, financial officers and monitoring officers to hold elected members to account would be compromised by proposals to abolish their statutory employment protection.”
That all leads Transparency International UK to conclude:
“The Government’s changes, without apparent consideration of the consequences for corruption, are likely to have unintended consequences. The effect of the changes has been to create a situation in which corruption could thrive.”
The report is worrying and when the Bill goes into Committee, it might be worth inviting the organisation to address the Committee or provide evidence so that these matters can be properly discussed with it and its expertise can be drawn in to our consideration of the Bill, which is about local audit, and therefore probity, and local accountability, and therefore democratic accountability.
Some of the recommendations that Transparency International UK suggests could be built into the Bill are worth examining. The first states:
“Private companies, when operating services in the public interest, should be required to comply with the Nolan Principles.”
Secondly, the organisation recommends:
“Legal employment protections should be maintained for key anti-corruption officials, including Chief Executives and Monitoring Officers”.
Thirdly, it suggests:
“It should be a statutory requirement”
in this Bill
“for a local authority to have an audit committee as a dedicated full committee, with a specific remit to oversee corruption risk assessments and corruption investigations.”
It also suggests that now that the audit will be undertaken by private firms, consideration should be given to creating an auditors’ forum on corruption to bring together the private audit firms involved in local authority audit to share information, advice and good practice on the risks they identify in the audit role.
Transparency International UK also recommends that the Government should insist that the research function undertaken by the Audit Commission should continue somewhere within Government to give a clearer picture of the prevalence and scale of corruption in UK local government.
Again, although work has been undertaken by existing structures, such as the national fraud audit that has been taking place in some specific areas, there is no overall responsibility lodged with a specific body to undertake research at a national level.
The report recommends that each local authority should have a nominated individual responsible for counter-corruption who conducts a regular corruption risk assessment and liaises closely with law enforcement authorities. I will not go through the remaining recommendations except for the final one, which states that as work now goes out to the private sector, it is critical that auditors should be allowed to assess the documents from significant private contractors that a local authority has used.