Last time I spoke on local government matters of this complexity—this is a complex Bill—a colleague grabbed me from behind after I had finished and said, “By Christ, you seemed to know what you were talking about, but God you were boring.” I think I am likely to get the same response at the end of this speech, so I hope that Members will excuse me before I start.
I welcome the abolition of central auditing and inspection, which was highly bureaucratic and rarely had any real effect. It led to very little action, at least in my council, and was highly burdensome and expensive. Indeed, just putting in the systems to cope with it cost my council £50,000. That seemed completely over the top given that the council raises only £4 million in council tax.
I have already given an example of one of the ludicrous statistics that I had to collect, but I would like to share a couple more. We had to report the percentage of the council work force who were of black and ethnic minority origin compared with the percentage in the local area that we served. In one year, we had a 25% fall in that indicator because one person retired.
We were also asked to report on the time taken to re-let local council housing. Sitting here in Westminster that seems like a sensible thing to measure, but in Winchester we had a serious problem with hard-to-let apartments, many of which had been un-let for a year, perhaps two or even three years, because they were 30 or 40 years old and no longer suited to modern conditions. The better we did on that, the worse our indicator got, because the length of time we had taken to re-let council flats went up and up as we added a year or perhaps two years every time we re-let a council flat. That is not what was intended, and it demonstrates the problem with large central organisations. I very much welcome the abolition of the system.
Members have talked about the amount of money that has been saved by the abolition of the Audit Commission. There is some debate about this, but it is undeniable that the 70% of local government audit business that was previously handled in-house by the Audit Commission has been re-let at a 40% reduction in the amount charged. That is a real gain at a time of money difficulties, and it is to be welcomed.
The reason I have fairly lengthy notes is that the Communities and Local Government Committee, on which the hon. Member for Derby North (Chris Williamson) also served, reported on this issue in July 2011. I should like to go through some of the recommendations that we made, compare them with the Bill, and see whether what we recommended has been delivered. In evidence, we detected some nervousness about violating the principle that public bodies should not appoint their own auditors. I have never understood the problem with that. I cannot see the philosophical difference between the private and public sectors in terms of audit. In both cases, roughly the same requirements hold. Yes, we have to be absolutely confident that public money derived from taxation is properly spent, but why is that, in principle, any different from individuals giving money to private companies that has to be properly handled and is subject to the rules of the land? In both cases, the public must have full confidence that the law is being upheld and that their money is being spent as intended. I recognise that a lack of confidence in how public money is being spent threatens the whole principle of a Government being able to raise taxation in the first place, which lies at the very heart of our democracy. That said, I cannot see that there is any greater need than a general confidence in the true and fair view of the private sector on which so much of our economy rests. I cannot see why this is any more important in the public sector than in the private sector.
The Committee felt that the change was no great threat as long as sufficient safeguards were put in place, and I firmly believe that the Bill provides them. A reasonable summary of our principal recommendations is that any replacement audit regime should be independent, transparent and effective. Let us then look at the Bill to see whether it contains remedies to those three issues. We asked that any scheme be “proportionate and risk based”. Paragraph 1 of schedule 6 deals with that in that it specifically allows the code of audit practice to be different for different authorities. That is exactly as it should be. It is somewhat at odds with our request for “ensuring consistency”, but as long as all audit is driven by the same overarching principles, the need for a proportionate approach trumps uniformity.
We asked that local so-called value-for-money reporting be carried out by each authority rather than the auditor. Clause 19 provides that auditors must be satisfied
“that the authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.”
It is unclear how that will be dealt with in detail, but we must suppose that it will be covered in the code of practice issued by the National Audit Office. I urge the NAO to accept the Committee’s recommendation and leave the form of that to local authorities to supply as they see fit and for auditors to judge adequacy and robustness.
We also asked for
“clear and uncontestable protections for assuring the independence of audit committees and auditors”.
That is unequivocally provided for in clause 9 and schedule 4 for audit committees and in schedule 5 for the auditor. We asked that any appointment decision rest with full council rather than another body of councils to ensure that the decision could not be made on the quiet. Paragraph 1 of schedule 3 does exactly that.
In the other place, Lord McKenzie tabled amendments to allow local authorities to create a voluntary sector-led body to appoint auditors, thus removing the need for all local authorities to have their own independent audit committee to appoint auditors. That is eminently sensible, and I am absolutely sure that it will lead to competitive tendering that will reduce bills for all authorities. I am pleased, as was the right hon. Member for Leeds Central (Hilary Benn), that Baroness Hanham conceded that in the House of Lords and that amendments to that effect will be tabled in Committee.
In passing I note that where authorities choose not to join such a body, there may be scope for having one committee in a council that deals with all issues that require independent control. I suspect that that does not need addressing in the Bill but is something that councils could do for themselves. To my mind, there is at least one other such committee—that setting councillors’ rates of pay and expenses. There could be one committee that has a majority of independent councillors and/or members and an independent chairman that would be allowed to deal with all issues that required an independent view.
Clause 16 provides for the regulations on the removal of auditors, on which the Committee concluded that there should be a double lock, whereby both full council and the audit committee had to recommend the removal of an auditor before it could happen. Clause 16 specifies only that regulations may be issued on that subject. We will need to see the detail of the secondary legislation to be completely certain about how the issue of removal will be dealt with, but I am confident that the Government understand that protecting auditors and their role in councils is extremely important, and that removal and how it occurs must be dealt with adequately.
On the qualifications of auditors, Lord McKenzie raised in the other place the issue of specific qualifications for auditors in the public sector. Given that I have some experience of both public and private audit, I can vouch for the material difference between the two—some might call it a gulf—and I welcomed the Government’s commitment in the Lords to add words to that effect. Those words now appear in clause 17 and paragraphs 8 and 13 of schedule 5, which will establish a register for qualified individuals. That is a sensible move. If we are going to have independence of audit, we need to make absolutely certain that those who are eligible to be auditors are properly qualified and that there is a register where we can check whether they are properly qualified.
The Committee also commented on the transparency of the process, a topic that was also brought up in the Lords. I do not intend to dwell on it for too long, because I have already made clear in an intervention on the shadow Secretary of State that I think that clauses 21 and 22, combined with clauses 24 and 25, make it unnecessary for the regime to be subjected to freedom of information legislation.
The Committee was concerned that the right to object to accounts should be proportionate and reasonable. Many members of the Committee and witnesses reported that the right to object had been substantially abused in the past. I suspect that many who have worked in local government will recognise that that is a tactic used by people who are dissatisfied with the council in general or perhaps even with one particular councillor.
One individual cost my own council more than £50,000 in a single year by challenging the accounts in what can only be described as a vexatious manner and an angry
reaction to a decision that had affected him personally. As such, I welcome clause 26, which, while allowing timely and significant objections, seeks to limit the ability to misuse the power.
The Committee was particularly concerned about the matter of public interest reporting. We asked that that element be safeguarded when the Bill was introduced, but we did not seek to prescribe how that should be done. My reading of the Bill is that the issue is more than adequately covered by schedule 7.
Lord McKenzie probed the question of whether the National Audit Office should be explicitly tasked with performing the role previously played by the Audit Commission as mentor during the public interest reporting process, for which the Committee also asked tangentially. Baroness Hanham responded in the Lords by saying that, given the NAO’s role in the design and scope of local audit, she felt that it would always be there to give advice. I think that that is a reasonable assessment and it seems that Lord McKenzie agreed.
Finally, the Committee felt that the proposal for thematic studies previously undertaken by the Audit Commission to be undertaken by the NAO was entirely workable. Indeed, we said that it “may have some advantages”. We also expressed the view that the Local Government Association was well placed to do more work of this sort outside the more formal NAO structure. My understanding is that the LGA is keen to progress this matter, and I would welcome that.
It seems to me that, given all the measures under discussion, any reasonable observer can safely conclude that the new regime gives more than adequate confidence that the new system will be robust, transparent and independent.
I want to comment briefly on a couple of other aspects of the Bill that deal with matters other than audit, and it will not surprise anyone to know that one of them is “The Code of Recommended Practice on Local Authority Publicity”. At the moment the code is only advisory and continues to be abused by only a very small number of authorities. It is right that public money should not be allowed to pay for partisan political activity, save in very limited instances and when specifically authorised by Parliament; Short money is a particular case in point. The Government are absolutely right to try to stop such abuse. It cannot be right to have political campaigning on the rates, but I ask the Minister to be careful.
At present a number of authorities breach the code, but they do not do so for political gain; usually, it is related to the frequency of publication. There is an argument that quarterly publishing is more than adequate and that to allow more would threaten the viability of local newspapers, particularly if the content of the council newsletters is not limited solely to council matters, takes advertising and is laid out in such a way to compete directly with newspapers. I have some innate sympathy with that position, but I must admit that the evidence that there is truly an adverse effect is scant.
My real worry is that, while the enforceability of the code is clearly important, so too is the proportionality of the code itself. I suspect that Ministers are not, in fact, too worried about the frequency of publication. Their real worry is the partial nature of a very few publications—the “Pravdas,” to quote the Secretary of State—but legal officers on councils will not see it that
way. Understandably, once the code becomes enforceable their advice will be that they cannot recommend anything other than that which the code allows, which includes not publishing more frequently than quarterly, as detailed in paragraph 28. I believe that as long as local authorities can adequately justify a more than quarterly publication we should not seek to prevent them from doing so.
A more than quarterly publication would have been costly and pointless for my own district council. We simply did not have enough to tell our local electorate every single week or even once a month. At the same time, a number of much larger authorities could easily fill a publication monthly with objective, useful and relevant information for residents. May I encourage the Minister to look at the code with a view to dealing with that point?
Will the Minister also look again at the publication requirements for statutory notices, which have already been mentioned? Although it is right that we consider the effect on local newspapers of the competition provided by local authority publications, it is also right that we consider how we spend public money to best effect.
One of my local editors made the argument to me that it is important for readers to be able to see what is going on in a public authority and that the publishing of statutory notices in newspapers is an important part of that process. I pointed out to him that if he truly thought that to be the case, there was nothing to prevent the paper from reporting on them and publishing the list itself if it felt that strongly about the matter. The simple fact is that the vast majority of the public access data about planning, licensing and so on from public notices and, thereafter, council websites, rather than from the local paper.
This issue was a bugbear to me as a portfolio holder. It was expensive, inflexible and of little advantage to the public, and it cost my council—a small district council—£32,000 a year. It may have been to the advantage of the profitability of newspapers, but I really do not think that that should be a relevant factor.
Finally, I turn to council tax referendums. It is clear that the Government are right to give local voters the right to vote on council tax increases that are above the limit set by the Government as reasonable and proportionate. I believe that is much better than a cap, allowing as it does for a council to take its case to the voters if it believes it has a strong enough case to persuade them.
The Bill corrects an anomaly in current regulations that omit levying authority charges from the calculations that determine the proposed percentage increase on council tax. We have already had the argument about why they should be added, but there is a difficulty that the Government need to address. If there needs to be a council tax referendum because the amount charged by the levying authority pushes council tax above the Government’s limit, there is no legal way in which the council can force that levying authority to change its charge. Neither is there any duty on the levying authority to hold a referendum—that falls to the local council taxpayers. I believe that that is wrong. We have to force some decision on levying authorities if this particular provision is to work correctly.
Three simple possibilities have occurred to me. It may be that none of them is the right thing to do, but they are all possible. The first is to impose a cap on levying authorities, which is not something that I would favour. The second is to impose the cost of the referendum required as a result of the charge from the levying authority on the levying authority. The final one is to make a no vote binding on the levying authority, such that it has to change the charge back in such a way that the overall council tax will rise only by the amount specified by the Government. I would welcome a commitment from the Minister to consider the matter and hope he will make some proposals in Committee.
In conclusion, I am confident in the general thrust of the Bill and in the vast majority of its measures. I will certainly vote for it tonight should there be a Division, although I suspect that is unlikely given what others have said. I ask, however, that Ministers address some of the concerns I have raised when the Bill goes to Committee.
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