My Lords, the purpose of this amendment is to introduce arrangements to prevent individuals with a disqualifying interest from sitting on an audit committee. In this context, the term “audit committee” is being used but, if we reverted to the context in the Bill, it would be the “auditor panel”. We have just discussed the fact that there is a requirement for the auditor panel, or auditor committee, to be independently chaired and, as we have also discussed, for there to be a majority of independent members.
However, as the Bill is currently drafted, whether somebody is independent for the purpose of being able to serve is determined broadly by whether they have been a member, officer or employee of the authority, a connected entity or, indeed, a close friend, whatever that may mean. These relationships which preclude someone from serving on the committee or panel do not appear to encompass a person with a significant business relationship with the relevant authority. This might be someone who is a major supplier to the authority—a significant landlord, for example—or a major client of one of the audit firms being considered for appointment.
We have not attempted here to define these disqualifying attributes exhaustively because it seems to me that that is a job for parliamentary counsel. However, another issue is raised about the obligation, if any, on audit panel or audit committee members, whether or not they are members of the authority, to declare any interest which, if prejudicial, would require them to withdraw from any meeting if they were a member of the authority. Obviously that could upset the balance of dependent and/or independent members. It may be that this is all closed off through other regulations but perhaps the Minister will put it on the record.
In summary, the question is whether a business relationship between an individual and a local authority could be deemed to make them not independent of the authority and how that is encompassed within the Bill? Also, what guides the activities of such members when they serve on one of these bodies and might have a conflict of interest arising from something that is on the agenda of the meeting? I beg to move.