I am pleased to be able to bring this debate to the House, as it covers serious questions about Swindon borough council and its wi-fi scheme. In November 2009, the council announced an initiative with two newly formed Swindon-based businesses, Digital City (UK) and a London-based and Isle of Man-registered company, aQovia. It was an ambitious project that would deliver a limited free internet link to all who signed up, alongside three paid packages aimed at businesses, homes and roving users. A third company, Avidity Consulting, is also involved in the initiative.
I want to ensure that it is understood that the issue under debate today is not wi-fi itself but probity. The debate is about the behaviour of ruling Conservative councillors and, as a consequence of that, the behaviour of officers. It is also about accountability to the public and the lack of effective scrutiny procedures at Swindon borough council.
I am grateful to my constituents, and those of my right hon. Friend Mr. Wills, who have spent many hours investigating Digital City and its connections with the council. They have provided a good deal of the factual information that I will be putting forward today. I thank Geoff Reid and members of the Talkswindon website, particularly the blogger known as Komadori, and Chris Watts, a local businessman whose involvement came about through his anger at the restrictive practices adopted by the council.
I wish to state clearly at the outset that I support universal internet access, innovation and local councils working with local businesses. However, neither I nor the Government support excessive secrecy, and I believe that Swindon borough council should have been open, transparent and prepared to engage with everyone on these issues. Sadly it has been exactly the opposite.
As the Prime Minister said this morning:
"Super-fast broadband is the electricity of the digital age....it must be for all-not just for some...We have already decided to commit public funding to ensure existing broadband reaches nearly every household in Britain by 2012".
In his speech, he gave details of how Labour will ensure that super-fast broadband reaches every home in the UK, creating thousands of new jobs in the process. Labour's plans will see universal access to broadband by 2012, with 90 per cent. of UK households having access to next-generation broadband by 2017.
Labour's support, and mine, for universal access to high-speed broadband, rather than a two-speed scheme as envisaged by Digital City, should not be doubted. Although that is the major issue, my constituents raise many other issues about the wi-fi project that damage that aspiration in their eyes, such as whether the best technology has been employed, the effect of the council's secretive deal with a newly established company on other, well established small and medium-sized enterprises in Swindon, and the health implications of a wireless network.
Swindon borough council has provided a loan of £450,000 on commercial terms to Digital City to enable it to create the wi-fi network across Swindon. In return for that loan, the council has received a 40 per cent. equity stake in the company. If the loan is repaid within two years, Avidity Consulting has an option to purchase 5 per cent. of the company's shares from the council for £1. Avidity already has a 25 per cent. stake in the company. The other shareholder is aQovia, which holds the remaining 35 per cent. of the company. Digital City intends to install wireless internet across the entire borough of Swindon. Both Digital City and Avidity Consulting were incorporated on
According to a timeline produced for me on
"On 25th June 2009 Rikki Hunt presented an outline proposal to the Leader and various members of the Cabinet; this consisted of the business idea, the level of investment that was being sought and the potential level of return if the Council chose to invest. Subsequently, officers were asked to do some more detailed work in order for a funding proposition to be considered.
3rd - 10th July 2009 a financial plan and written outline business case was received from Rikki Hunt."
Following that, a decision was taken by Rod Bluh, the Conservative leader of the council, to deal with the proposal using a lead member briefing note. Crucially, that confined the formal consultation and decision making to two councillors only-the leader, Councillor Bluh, and the lead member for finance and benefits, Councillor Mark Edwards. Both those councillors subsequently signed a cabinet member briefing note in mid-October, following which officers were able to exercise substantial delegated powers. That meant that the proposals did not have to be discussed in committee at an early stage or voted on by a larger group of councillors.
The immediate consequence was that the councillors could ensure that officers were able to use council powers to the advantage of Digital City and the wi-fi project. For example, an earlier resolution made at full council specifically for rapid action to be taken on town centre regeneration was used to enable the loan of £450,000 to be made, which meant that the loan did not have to go through the normal council processes. The requirement for a credit rating of the companies concerned under treasury management rules was set aside, presumably because the companies were less than a year old and had no substantive credit history. Given the lack of a corporate track record, the decision by Swindon borough council was made
"primarily on the track record of the key individuals concerned and on the basis that risks and rewards would be fairly apportioned", according to the minutes of the council scrutiny meeting on
In a letter to me dated
"even below these thresholds, the EU treaty-based principles of nondiscrimination, equal treatment, transparency, mutual recognition and proportionality apply."
She went on to comment that
"in most cases there should be a competitive procurement advertised".
Swindon borough council asserts that because the £450,000 was a loan, it is not subject to the normal procurement rules, despite its own shareholdings in Digital City and place on its board. However, the council is using EU competition rules to prevent our local dial-a-ride from competing for council contracts to carry the disabled, and other councils, including Norfolk county council, have published a tendering process for their wi-fi networks.
The cosiness of the relationships of those involved, and the lack of external scrutiny while they were being set up, should alarm all who are interested in local government probity. At the very least, it calls into question the judgment of those concerned, who should have been well aware that they would be called to account, and that they therefore needed to put extra safeguards in place to protect themselves from suspicion as their roles cross over so many times. At worst, it obfuscates actions which gamble public money in untried companies with inexperienced and naive directors, who had no sustainable business plan and were unprepared to answer serious and searching legitimate questions from other elected members as well as local people.
I shall quote at length from the important timeline that the chief executive of Swindon borough council provided for me-I remind the Minister that the document from which it is taken is dated
"It came to light that an officer involved with this project had been registered as a Director of Digital City (UK) Limited since September 2009. He was unaware of this. He had pre-signed but not dated a registration document during the preparatory phase of this project and this was highlighted to colleagues at the time. The signed form was held by Digital City (UK) Limited, on the understanding that this was a contingency measure to be invoked if required and if agreed by the Council. The registration was sent off in error by Digital City (UK) Limited and they have apologised to the officer for this. The officer asked to resign from the Board of the company as soon as this came to light and this was effected on the 11th March 2010. He is no longer a Director of Digital City (UK) Limited. At no time did the officer receive any communication from Digital City (UK) Limited stating that he was a Director of the company nor did he receive any remuneration or any other consideration from Digital City (UK) Limited. There have been no Board Meetings of Digital City (UK) limited. This officer has, however, participated, with other Swindon Borough Council colleagues, in regular project and progress meetings."
I have quoted that at length because it contradicts two other sources of information sent directly to me. The first is a letter to me dated
"This is an arm's length arrangement; we hold shares in Digital City and there is governance in place that allows us to protect the Council's interests; we have a Director on the Board".
That contradicts the
The second source of information is a letter from Rikki Hunt dated
"As well as myself, the two other board members are Hitesh Patel, a Director of Swindon Borough Council and Mustafa Arif, a Director of aQovia", although there is no record at Companies House of Mr. Arif being a director. Anecdotal evidence also suggests that officers and councillors referred to the officer's appointment to Digital City's board on several occasions. In addition, the officer himself was clearly aware that he was a director of Digital City, as he apparently self-publicised the fact for five months via his LinkedIn profile. I can conclude only that when it was advantageous for the council to have an officer on the board of Digital City, it publicly claimed that that was so, but as soon as the matter became too hot to handle, it found a way of disposing of the board membership.
Several questions arise about the robustness of Swindon borough council's contract with Digital City.
The hon. Lady is a caring and assiduous constituency Member of Parliament, who works hard for her people in Swindon. Does she feel that the cabinet system that she describes allows a small number of councillors to become cosy and close to senior officers in a council, and that that enables such circumstances to develop, when a more traditional cabinet system would give more councillors more information and prevent such things from happening?
I understand the hon. Gentleman's concerns. The problem has been the process. I think that sufficient safeguards exist, but the cabinet member brief brought about all the secrecy. That is my concern-it is a very unusual process. The hon. Gentleman gives me an opportunity to say that I have a high regard for the officers and particularly the chief executive of Swindon borough council. I believe that the ruling Conservative group has placed pressure on those officers. Even if all seats are won by opposition parties at the local elections in May, that group will still be in power in Swindon. That is a difficult situation for officers to combat.
As I was saying, a number of questions arise about the robustness of Swindon borough council's contract with Digital City. Does it reflect the council taking on what appears to be 100 per cent. of the risk? That question is relevant if wi-fi does not succeed in attracting sufficient customers in a crowded market, because £450,000 of taxpayers' money will be lost. If wi-fi succeeds, will the contract bring the council sufficient rewards, or does the larger proportion go to the individuals behind the recently set up companies Digital City and aQovia? That should be subject to the council's scrutiny process, but it is impossible for me, my constituents or councillors of any party not involved in that enterprise, including the ruling Tory party, to find out, because the council determines that such questions are for Digital City-not the council-to answer. Digital City has provided basic information, but it cannot be tested through the normal democratic process, thus disfranchising councillors, MPs and their constituents.
No opposition councillor has had sight of the contract or the business plan, but at the beginning of this month the company had sold only five packages, rather than the 100 private-use packages and 25 business packages in the original loan conditions, and it had not managed to attract any private sector investment. It is clear from the cabinet briefing paper of
Although that was agreed by the cabinet, in an unprecedented move last week's scrutiny committee meeting at the council referred the decision back to the next cabinet meeting on
The technology used by Digital City is a wireless network with signals sent from boxes attached to council-owned lamp posts throughout Swindon. For that, Digital City needs planning permission and an electricity supply for the planned total of 1,400 boxes, which one of my constituents estimates will cost approximately £35,000 per annum. It is not clear whether Digital City or Swindon borough council will bear the cost. That is old technology, and whether it will produce the speeds quoted by Digital City remains to be seen, but there is scepticism that it will consistently provide speeds of 20 megabytes, which are crucial for wide take-up. Those who sign up for free wi-fi will not have access to the fastest speeds, creating the kind of two-tier network that was criticised by the Prime Minister in his speech today.
Digital City relies on Swindon borough council's connections, which I understand must be upgraded to take that into account at a cost of approximately £45,000. Although there is nothing wrong-in fact, it is good-with councils increasing their internet capacity, the issue is one of openness and transparency, because of the cost to taxpayers and the potential commercial gain by Digital City, which is not required to provide expensive infrastructure.
There are many opportunities for IT companies to provide digital access for Swindon homes, and we already have one of the highest take-ups in the country. It is a very crowded marketplace, with some of the largest companies in the country competing with small local businesses: our newest housing estate, Wichelstowe, provides fibre optic connections to all homes for both television and internet access; the Toothill estate in west Swindon is one of BT's pilot areas for comprehensive and very fast fibre optic connection; and an international company with headquarters in Swindon is upgrading its internet signal and considering making free wi-fi available after office hours within a 20-mile radius of its building. I welcome those initiatives, because they promote social inclusion and ensure a marketplace for my constituents that will keep prices competitive and offer a wide choice.
However, the entry into the marketplace of a council-backed company-effectively, it is publicly subsidised-will have a detrimental effect on small and medium-sized IT companies in Swindon. Several local companies have raised considerable concerns with me, particularly about the lack of opportunity to tender for the business and the loan given to Digital City during the worst recession for many years, when most SMEs were finding it impossible to get loans at a decent rate of interest, especially brand-new companies without a track record. Had Digital City gone instead to a high street bank for a £450,000 loan on the evidence of its business plan and ropey marketing strategy, I imagine it would have been laughed off the premises. The rate of interest on the loan has not been disclosed. As I said, it has been described as a loan on commercial terms.
In addition to the loan, Digital City has been given council premises for its headquarters at no cost to the business, and free access to council officers' time and advice. Councillors and officers claim that the council premises have no value and Digital City would enhance the offices, but that is at odds with the cabinet member briefing note of
"The space will be made fit for office occupation and this cost will be met through the existing corporate repair and maintenance budget."
This is a massive subsidy, as all small businesses will know that start-up office costs are a big initial outlay for new ventures. In addition, the briefing note acknowledges that Digital City will need to install wireless boxes on council-owned lamp posts and states, in advance of any discussion at planning committee:
"The Council will also grant Digital City licences to install equipment at a number of its facilities across the Borough. Discussions are continuing around the possible need for Planning permissions to be granted."
Again, any business that has had dealings with council planning departments will know what a massive commercial advantage the automatic granting of licences gives, alongside officer help through the planning process if needed.
Swindon borough council, unlike Essex county council, does not have a small loans scheme for local businesses, so there are no opportunities for other SMEs in Swindon to take advantage of a council loan in the way that Digital City has. While Swindon borough council states that the loan is at "commercial rates", there is no evidence of what these rates are and how they compare to what was being offered to similar SMEs last year, when interest rates averaging 15 per cent. and secured against their own homes were being quoted to my constituents. Was this a condition the council set for the directors of Digital City? I very much doubt it.
There is no question but that all this provides Digital City with an unfair advantage in a crowded market. To state in a response to my constituent Chris Watts, a local businessman, that
"the council hasn't spent any cash on this, only officer time", is to be economical with the truth and insulting to small businesses in Swindon. Until this venture was announced in November last year, Swindon borough council's interest in providing free internet access across the borough was not apparent from its published strategies and appeared, at most, a long-term aspiration. Other providers of this service have thus been excluded from bidding to offer a similar service.
A number of constituents have raised their concerns about the protection of communities from radiation hazards, including those associated with wi-fi communications systems. I am assured by the Department of Health that there is to date no consistent evidence that exposure to radio waves adversely affects the health of the general population, although the Independent Advisory Group on Non-Ionising Radiation is currently reviewing radio frequency exposures, including those from wireless networks. The Health Protection Agency considers it sensible to adopt a precautionary approach to the use of any new technology.
Had the borough council been better prepared, it could have prepared information in advance for residents. In fact, the lack of information available for residents on any issue relating to wi-fi is quite breathtaking. A question asked by an opposition councillor about the provision for a family to object to a transmitter being located level with and 6 feet away from their child's bedroom window has not been answered by the council. Because of the secrecy surrounding the project, a mature debate on this subject has been impossible and it was left to me to provide information to residents.
I deal now with the relationship between Swindon borough council officers, councillors from the leading Conservative group and the directors or owners of Digital City, aQoviaand Avidity Consulting. Underlying concerns about the lack of competition is the possibility that the individual behind this venture, Rikki Hunt, may have had access to privileged information that gave him an unfair advantage when putting his proposition to the council. Mr. Hunt is the chair of Swindon Strategic Economic Partnership. Until the end of 2009, he was also a non-executive director of Swindon Commercial Services Ltd, which is Swindon borough council's direct services company and the main contractor to Digital City for installation and maintenance of its wireless network. That would have given him access to senior councillors and council officers and, potentially, access to commercially valuable information not available to competitors.
It has been too easy for those concerned to hide behind various companies and to deny the public access to the full facts, yet the public are paying for those companies' activities and the directors are, as far as I can ascertain, accepting no liability. By virtue of his close association with Swindon borough council, Mr. Hunt may have been in receipt of privileged information in relation to the council's plans for widening access to the internet, as well as those of the economic partnership. As a consequence, it is possible that a conflict of interest could arise in his company's approach to the council, as covered by section 175 of the Companies Act 2006, under which a director has a duty to ensure that they avoid a situation where they have, or can have, a direct or indirect interest that conflicts, or may conflict, with the interests of the company. The information made available to the public by Swindon borough council provides insufficient evidence that no such conflict has arisen or that the council made efforts to assure itself that such a conflict had not arisen.
There has been considerable interest in the scheme from councils across the country-and, indeed, some councils from abroad-which is why we should look carefully at the business plan and the public service model offered. As I have said, rolling out internet access to the whole population is a good idea. The Government have stated so on numerous occasions and in various publications, and today the Prime Minister took that support further, giving Martha Lane Fox a role in co-ordinating the Government's digital activities. It is right that councils should be involved, but plenty of other good ideas have gone bad when people seek a commercial advantage through councils. We know what happened in the past when over-close relationships developed between councillors, council officers and property developers.
It has been suggested by Conservative councillors, including the leader of the council, that anybody who asks questions or raises concerns-or, indeed, anybody who even reports these in the local press-is working against an excellent initiative and against the interests of our town. That attitude worries me considerably. Asking pertinent questions is a legitimate activity in a healthy democracy. Probing questions should be welcomed, not pushed to one side or deflected by smokescreens. The job of elected members is to explain and promote their policies. They should not be secretive or defensive about that, nor should they abuse their position with officers. What has happened is a failure of the political process, and whatever errors of judgment have been made, officers must not be made convenient scapegoats. The scheme arose from discussions among councillors.
It is an irony that the internet has provided access to much of the information that I have detailed in this debate. Talkswindon members have sifted through council documents and company documents that are available online, and although it still took dedication and time to find the relevant information, that was a matter of days and weeks, rather than the months and years that it used to take.
Although I do not believe that there has been corruption on the part of officers, the process put in place at the behest of Conservative leaders of the council lays open the possibility of future corruption. I repeat my plea to the cabinet to delay any further allocation of taxpayers' money until a full cross-party investigation can be carried out into the actions of councillors and officers. Mrs. Spelman is quoted on Digital City's website as saying:
"We want to see a flowering of this all over the country".
My message to her is that she and her party's councillors need to have much more probity before they rush headlong into schemes that have the potential to waste hundreds of thousands of pounds of taxpayers' money, disadvantage small businesses and threaten the reputations of local councils.
There are still serious questions to be answered. Did this sorry mess come about because leading Conservatives wanted to keep the initiative secret, not just from opposition councillors, but from members of their own group, in case it was scuppered at an early stage owing to the flimsy business plan, or because they were scared that credit could be claimed by others? Although the blame lies squarely at the door of leading Conservative councillors who insisted on secrecy, were council officers unable or unwilling to challenge the Conservative group, which will still be in power on
It is a pleasure to respond to this debate, introduced by my hon. Friend Anne Snelgrove. I congratulate her on securing this opportunity to discuss her concerns about the way in which Swindon borough council introduced borough-wide wi-fi. As she knows, local authorities act independently of central Government, and Ministers such as I have no remit to intervene in their day-to-day affairs, except when specific provision has been made by Act of Parliament. However, local authorities are accountable to their electorate for their actions. If a member of the public suspects fraud, corruption, or misuse of public money, they should contact the appointed auditor for that authority. If a member of the public believes that the council has acted illegally or not in accordance with its constitution, they should contact the authority's monitoring officer. Despite the limitations on central Government intervention, measures are in place to secure local intervention.
The fact that Swindon is working with the private sector to make the town the first in the UK to provide free wi-fi internet access for all its residents has been widely reported in the press. That is a good aim, and may have replaced Swindon's magic roundabout as an identifying feature of the town. The challenges of the current recession make it even more important that successful partnership works to make effective use of public money, and that available resources are deployed as efficiently and transparently as possible to pursue local priorities.
The concerns expressed by my hon. Friend are primarily about the procurement process and the decision-making aspects of the project. They include the way in which the council handled the wi-fi zone roll-out in Swindon; the pilot scheme that was set up with Digital City UK, a company that started with a £450,000 loan from the borough council; the transparency of the decision-making process as only three councillors were involved in the agreement; the fact that a council employee is a member of the company's board; the fact that taxpayers' money seems to be at risk because the business risk does not seem to have been underwritten; and the lack of information on wi-fi, especially its effects on health, which are, hon. Members know, a cause of great concern.
Finally, my hon. Friend said that wi-fi is not necessarily the best solution for delivering broadband to any community, let alone excluded ones. In a city area, it may be difficult for wi-fi to penetrate housing, especially if the walls are thick and were built in Victorian times. Wi-fi is unlikely to support next-generation access speeds, so it may be quickly superseded by cable and fibre-optics, and wi-fi speed suffers as more people use it-the contention ratio. All in all, there are many concerns about the way in which Swindon borough council went about the provision of that laudable item, and about the research it carried out.
I shall now outline the Government's established policy on procurement to clarify the matter for my hon. Friend. Our policy is that public procurement should be based on value for money, having due regard to propriety and regularity. The European Union's procurement directives set out the legal framework, detailed procedures and criteria for the specification, selection and award of contracts above certain thresholds. Even below those thresholds, the EU treaty-based principles of non-discrimination, equal treatment, transparency, mutual recognition and proportionality must apply. The EU procurement directives and implementing regulations enforce EU rules on transparency, free movement of goods and non-discrimination. They require that, in most cases, there should be a competitive procurement advertised across Europe.
Subject to their legal duties-including the duty of best value-and to public procurement law, local authorities are responsible for taking their own procurement decisions. The duty of best value, as laid down in legislation, requires authorities to make arrangements to secure continuous improvement in the way in which they exercise their functions, having regard to a combination of economy, efficiency and effectiveness. Any specific complaints that best value is not being met in a particular set of circumstances would need to be addressed in the first instance to the authority's external auditor. I stress again that Ministers have no ability to intervene in individual procurement decisions made by local authorities. Local authorities need to satisfy themselves that any aid provided by them does not contravene the European Commission's prohibition on the granting of state aid and that it meets the requirements of competition law.
I shall turn now to the audit and inspection of local authorities. Systems are in place to assess and audit decisions made by local authorities. Auditors perform an annual audit of financial statements. However, they also have wider responsibilities to review and report on whether an audited body has made proper arrangements for securing value for money, economy, efficiency and effectiveness in its use of resources. The auditors are obliged by the code of audit practice, which is approved by Parliament, to consider whether any representation or information that they receive needs investigation or action under their specific powers. They must consider whether to make a public interest report under section 8 of the Audit Commission Act 1998 on any matter that they judge should be considered by the audited body or brought to public attention. I am dwelling on these specific matters because some of the issues that my hon. Friend has raised could possibly be addressed through these means, if members of the public felt that they should be.
Those external auditor assessments of value for money in the use of resources feed into the performance framework for local services for all outcomes secured by local authorities working alone or in partnership. Such a partnership is known as the comprehensive area assessment. The CAA use of resources assessment considers how well individual public bodies manage and use their resources to deliver value for money and better sustainable outcomes for local people. The assessment focuses on the importance of sound, strategic financial management, strategic commissioning, good governance and the effective management of natural resources, assets and people.
My hon. Friend has raised several points about governance in the council, particularly in regard to the transparency of the process for decision making and to the fact that an employee of the council was and is a member of the company board. My understanding is that Swindon borough council operates a leader and cabinet model, made up of the leader of the council and a cabinet of up to nine councillors to whom the leader allocates portfolios. The cabinet makes decisions in line with the council's overall policies. If it wishes to make a decision that is outside the budget or policy framework, this must be referred to the council as a whole to decide. To speed up decision making and to allow the cabinet to concentrate on major matters, members have the delegated power to make day-to-day decisions in relation to areas within their portfolio. However, specific questions about an individual decision would have to be addressed to the council.
One issue raised by my hon. Friend was how just three councillors can make a decision that affects the whole authority. Sadly, once again, it would be inappropriate for me to comment on an individual case. However, in terms of governance, there are times when it could be appropriate for decisions to be made without the participation of the full council. However, the council's particular decision-making process will be outlined in its constitution.
A further issue was whether there is a conflict of interest when a council employee is a member of the board of a company-in this case, the wi-fi company. Again, it is not appropriate for me to comment on an individual case. However, it is reasonable to expect councils to have in place mechanisms to deal with conflicts of interest such as that one, because employees may live in the authority and use its services, so they may have to come to decisions on matters that have a material effect on them and their lives.
I think authorities should have in place robust mechanisms for dealing with conflicts of interest and for advising staff on how to behave when they arise. In an ideal world-I do not know whether this is a duty, but I can write to my hon. Friend about it-councils should have the rules made accessible to members of the public either in a printed form or on their websites.
In summary, complaints about value-for-money decisions should be addressed to the authority's external auditor and concerns about the propriety of decisions and decision-making processes should be addressed to the local authority's monitoring officer.
It is unfortunate that the circumstances of the setting up of this project have caused comment, since the Government strongly support increased access to internet services and are committed to ensuring that virtually everyone in this country, including those living in rural areas, has access to a good level of broadband. It is important not to lose sight of that in the specific concerns raised about the Swindon project. I am glad that my hon. Friend emphasised that the Prime Minister said today that broadband is the electricity of today. Indeed, it is; it will make a huge difference to our country's economy and the lives of the people who live here.
As I have explained, central Government have no ability to intervene in the decisions that have been made by Swindon council or in respect of the manner in which those decisions were taken. These are matters that need pursuing locally and I hope my hon. Friend is able to secure answers to the questions she has posed.
The Swindon project should present an exciting opportunity to boost the local economy and regenerate parts of the borough by giving people, especially those in disadvantaged communities, a chance to access and use technology and share the benefits that it can bring. However, the questions that my hon. Friend has posed about the project and the process that has been followed are very important. It is in the council's interest to provide satisfactory answers to those questions, and to make transparent the way in which decisions have been made. Then, and only then, will residents' concerns be laid to rest. I sincerely hope that Swindon council will provide those answers, and that the project can then proceed to bring the benefits that my hon. Friend and the Government wish it to bring.
Question put and agreed to.