Local Audit and Accountability Bill [Lords]

– in the House of Commons at 4:34 pm on 28th October 2013.

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[Relevant documents: The First Report from the Communities and Local Government Committee, Session 2010-12, Proposed Code of Recommended Practice on Local Authority Publicity, HC 666, The Fourth Report from the Communities and Local Government Committee, Session 2010-12, Audit and inspection of local authorities, HC 763, and The First Report from the Draft Local Audit Bill ad hoc Committee, Session 2012-13, Draft Local Audit Bill: Pre-legislative Scrutiny, HC 696.]

Second Reading.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government 4:35 pm, 28th October 2013

I beg to move, That the Bill be now read a Second time.

This Bill is a natural progression of the coalition Government’s programme for reform. It decentralises power away from quangos to local people, it saves taxpayers money by cutting waste and red tape, and it replaces top-down inspection with local accountability and transparency.

The Bill will do three things. First, it will abolish the residual Audit Commission. We have already abolished its interfering and ineffective inspection regimes, such as comprehensive area assessment. We have successfully outsourced its local audit contracts, building on the fact that a lot was already outsourced. This Bill provides for the primary legislation to finish the job. There is an obvious question to ask at the outset: if companies and charities can choose their own auditors, why should councils be any different?

The Audit Commission was born of good intentions, but in a different age. Local government has changed since the 1980s, in part due to the reforming legislation of that decade which helped stamp out corruption and jobs for the boys, but by the end of the century the Audit Commission was no longer the protector of the public purse under the new regime. It had become a top-down regulator of local government, micro-managing local services and imposing excessive and questionable red tape.

The Audit Commission was a creature of the centralised state, more interested in the views of “central Government stakeholders”—to use a dreadful phrase—than of local taxpayers. For example, it failed to act on the real problems of dysfunctional administration in Doncaster. It praised Corby council for its financial controls, missing wholly the Corby cube scandal. It was caught up in the Icelandic banking collapse, and then tried to shift the blame on to councils, while it had itself badly invested £10 million in Iceland. Meanwhile, councils, like my own in Brentwood, were marked down for having weekly rubbish collections because Millbank-based inspectors did not like them.

Research before the general election suggested that local government inspection and performance regimes added up to 40% to core council expenditure. Even the Department for Communities and Local Government’s own documents admitted that the performance management regime was “unbalanced”, with 80% focused on meeting top-down requirements.

Meanwhile, the Audit Commission itself wasted taxpayers’ money with a culture of excess. The Audit Commission hired lobbyists to stop the abolition of comprehensive area assessment, and indeed, to

“combat the activities of Eric Pickles.”

I have no idea how that ended. It splurged on corporate credit cards, including £770 for a lavish meal in an oyster bar for its board members to discuss better “corporate governance”. The commission subsequently lost the bill for its own dinner. It spent £53,000 on designer chairs for meeting rooms in 2010, with some costing as much as £900. The Audit Commission spent, in its latter time, far too much time sitting comfortably.

We have already shut down most of the Audit Commission. This Bill will close it down for good and introduce a new, localised audit regime, with estimates suggesting it could save £1.2 billion over the next 10 years —with councils saving the most. Local bodies will appoint their own auditors from an open and competitive market, with thousands more contracts up for grabs. There will be a significant opportunities for small firms to bid and expand their businesses. Local bodies will be able to choose their own auditors, join forces to appoint auditors together or establish a body to appoint auditors on their behalf. The key principle is that they can choose auditors in a way that best suits their needs.

Photo of John Redwood John Redwood Conservative, Wokingham

Does the Secretary of State agree that what we want is an audit system that does not equate amounts of money with outcomes without proper testing of that? We seem to have an audit system that says, “This council spends twice as much as that council, so it must be twice as good.” We want to know what we get for the extra money.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

My right hon. Friend makes a reasonable point. The audit regime is just part of the process of transparency; the publication of amounts above £500 and the right to be able to see what the council is doing increase the opportunity for the taxpayer, the voter and the local press to investigate.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

I entirely agree with my right hon. Friend’s observation about the great opportunities we are giving to the council tax payer. Does he also agree that the perverse consequence of the previous system was that council policies were often skewed towards obtaining the result required to get approval by the Audit Commission, rather than towards the priorities that the council tax payers would have wished for?

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

My hon. Friend makes a reasonable point. There was a box-ticking culture, and local authorities were often spending an enormous amount of time on increasing their scoring as opposed to delivering decent services for local people.

Protection remains in place for whistleblowers and to prevent Enron-style conflicts of interest. We need to remember that the Westminster homes scandal was uncovered not by the Audit Commission, but by an outsourced auditor from Touche Ross. There is no reason why private sector auditors cannot be independent and fiercely robust. Reserve intervention powers will remain to tackle systemic failures such as those at

Doncaster, working with the local government sector, but they are the exception that proves the rule. There will be a continuing role for both Members of Parliament and Ministers to use their public voice to challenge local government when bad decisions are made—that is called democracy.

The second provision in this Bill will protect the local press from unfair local competition. Where local newspapers thrive, local democracy thrives. Local newspapers not only inform residents of what is going on, but play a vital role in exposing local waste, mistakes and corruption, and, thus, in holding councils to account. When councils put out their own glossy free sheets to compete with local newspapers, local democracy is the loser. Tackling that abuse was a key pledge in not just the coalition agreement, but the general election manifestos of both parties.

In 2011, Parliament previously strengthened the local government publicity code, but a small number of councils have intentionally ignored it, with Tower Hamlets being a case in point. Ofcom has found it guilty of breaching broadcast rules for political advertising, but no power exists to tackle its political propaganda sheet, and local auditors have recently refused to intervene. Such actions are not just a misuse of public funds; they are, ultimately, harmful to local democracy and the independence of the free press. They are also further evidence of a worrying pattern of divisive community politics and mismanagement of council staff and resources by the mayoral administration. So provisions in the Bill will ensure that we will act when Parliament is ignored. Yes, this is central intervention, but it is being done to protect the free press and deal with the serious abuse of power. Even in a localist system, there is a role for central Government to set an ethical framework and maintain checks and balances on local government to prevent corruption. Without such backstops, there would be a siren voice for a return to top-down inspections or to set a quango such as the Audit Commission.

The third and final provision in the Bill will close a legal loophole and ensure that all councils’ bills will be set so that they are fully accountable to local taxpayers. Some unelected bodies are setting a levy on council tax bills with little or no accountability for local voters—from waste disposal authorities and integrated transport authorities to crematorium boards. We will ensure that the direct democracy provisions in the Localism Act 2011 allow council tax referendums to apply also to that quango state.

The Bill has already been scrutinised in the Lords, where the Government listened to a range of views and made a number of minor amendments. Subject to the will of the House, we intend to make the Bill even stronger. We will modernise the archaic rules on parish polls, for example by allowing longer voting hours and postal votes. Perhaps our most significant proposal is to give people the right to film, blog or tweet at council meetings. Some councils would prefer meetings to be held behind closed doors, but the public has the right to see decisions being taken and how the money is spent.

A private Member’s Bill promoted by Mrs Thatcher introduced the right to attend council meetings back in 1960, and that in turn built on a law introduced by the Liberal Government of 1908, so this is truly a coalition of minds. It is right that we should now bring her legacy up to date for the digital age. We have previously amended secondary legislation to open up councils’ executive meetings and have encouraged councils to open up their full council and committees. Many have refused, however, citing health and safety, data protection or just standing orders. Tower Hamlets said that such a change would lead to “reputational damage”. Well, yes, it probably will when people see what is going on in their council chambers. There have even been cases of the police being called to threaten bloggers with arrest. We will therefore make the necessary changes to primary legislation to allow full councils and committees to be open as well.

Our argument is that the coalition Government are scrapping the top-down red tape of Whitehall inspection and micro-management. That will save taxpayers’ money and help to devolve power, but it must go hand in hand with local transparency and accountability. We must ensure an independent free press and scrutinise and challenge bad decisions by councils. Individual taxpayers and the new wave of citizen journalists must be let in to conduct their own scrutiny. We are localising audit and scrapping protection, while ensuring that there is protection against the bad old days of municipal corruption. In short, the Bill will deliver greater openness, stronger local democracy, accountability and significant savings for the taxpayer. I commend it to the House.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government 4:48 pm, 28th October 2013

The Bill might appear to some to be rather dry—[Hon. Members: “No!”] I am relieved to hear that.

As the Secretary of State has said, the Bill principally concerns how we ensure the probity, economy, efficiency and effectiveness of the spending of billions of pounds of public money. As we have heard, it might be said that the Bill, introduced by one of the late Baroness Thatcher’s great supporters, seeks both to extend, through greater transparency in council meetings—the subject of her private Member’s Bill, as the Secretary of State has reminded us—and to overturn, through the abolition of the Audit Commission, part of her political legacy. The Audit Commission was of course set up by the noble Lord Heseltine. As he explained in his autobiography—it is important to remember this:

“I thought it wrong in principle, as the 1976 Layfield Report had said, that councils should be able to appoint their own auditors. Awkward auditors do not get reappointed.”

That was his judgment.

Lord Heseltine’s creation did have achievements to its credit, although we did not hear them from the Secretary of State. It contributed to savings in local government and it developed value-for-money comparisons. I think I am right in saying that it was the Audit Commission that appointed John Magill under section 13 of the Local Government Finance Act 1982 to investigate Shirley Porter and the homes for votes scandal in Westminster.

Photo of John Redwood John Redwood Conservative, Wokingham

On the point about the value-for-money component of the audit, I and a friend of mine, John Hatch, wrote that idea up and persuaded Conservative Ministers to introduce it. It did not come from the Audit Commission.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

I shall come to the need to maintain a value-for-money focus in the work of the successor bodies for precisely the reasons that the noble Lord Heseltine set out, but I accept that the Audit Commission had its critics and in some respects it lost its way. The Opposition accept that there is no going back on its abolition—rather suddenly announced, to the surprise of many, by the Secretary of State in August 2010. Clearly, it is personal.

The fact that it has taken three years for the Bill to reach this House is a sign of the complexity of what has been removed and what has had to be created to replace it, and of an unfinished task. It took the dedicated probing of my noble Friends Lords McKenzie and Beecham—I pay tribute to them for their expert scrutiny in the other place—to draw out all the questions to which the Government still do not have answers, despite having had so long to think about them. I wish to acknowledge the helpfulness of the noble Baroness Hanham during consideration in the other place. She indicated the Government’s willingness to move on some of our areas of concern, but on one occasion she was famously reduced to saying that

“this matter is still under consideration, as are all the other matters.” —[Hansard, House of Lords, 15 July 2013; Vol. 747, c. 557.]

I shall now turn to these outstanding matters.

First, the Bill needs to provide for the joint procurement of audit for principal authorities, and we are told that this will be added in Committee. It must be, because significant savings can be made this way. The Government’s own impact assessment recognised that individual audit procurement was unlikely to match joint procurement when it came to producing lower fees. There is limited market in public audit. In the last financial year 800 councils, health bodies and fire and rescue authorities were audited by private firms. How many auditors were appointed? Seven. We believe, and many others agree, that the intended savings may not appear at all—quite the contrary.

A central procurement system with the power of appointment could yield savings of up to £200 million over five years, according to the Audit Commission’s own analysis. I do not understand why the Government spent quite so long in the other place resisting what is a very sensible idea, and we look forward to seeing the promised amendment.

Secondly, there seems to be a marked lack of enthusiasm on the part of Ministers for the kind of comparative value-for-money studies that the commission has undertaken. We are not yet sure how the value-for-money profiles, which help to ensure best practice and are currently maintained by the commission, are to be managed in future and by whom. When he introduced the original legislation to create the Audit Commission, the then Secretary of State, Lord Heseltine, said:

“Audit involvement in value-for-money work is not new, but the Bill gives much greater emphasis to it. The commission will have a duty to undertake comparative studies . . . and the auditor will have a duty to satisfy himself that the authority has made proper arrangement for securing value for money.”—[Hansard, 18 January 1982; Vol. 16, c. 52.]

This Bill puts less emphasis on it. Only a residual role is being given to the National Audit Office. Is that really the right thing for Ministers to do, given the pressures that councils face today, and the changes they are having to make to the way they work? Surely, this is a time when value-for-money studies—learning from others—are even more important than they were.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

The right hon. Gentleman will know that the Bill enables the National Audit Office to provide value-for-money studies, but because he is well informed about local government matters, he will also know that the Local Government Association has expressed considerable enthusiasm for conducting these reviews itself. Is it not better that local government finds what it needs to make value-for-money judgments on, and starts those reviews itself?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

I entirely accept the hon. Gentleman’s point. It seems to me that there is a case for both. Having read the deliberations in the other place, I am just reflecting that Ministers there really lacked enthusiasm for the continuation of central value-for-money work, but I take his point about local authorities coming together to learn from each other.

Thirdly, the Bill as drafted requires the appointment of new auditor panels. The health bodies, as we know, will have panels based on their existing audit committees. On the one hand, the ad hoc Committee that scrutinised the draft Bill described that as an added layer of governance and made a case for strengthened audit committees in order to meet the independence requirements of best practice. On the other hand, the contrary argument has been made that there would be difficulties in asking audit committees to do the work of the panels, not least because in many local authorities the audit committees have a much wider range of responsibilities. Perhaps when he replies, the Minister will explain how he sees audit panels working as sub-committees of audit committees.

Fourthly, on freedom of information, the Bill will weaken the public’s right to know. The Audit Commission is covered by the Freedom of Information Act, but, generally speaking, private auditors are not, so transparency, which the Secretary of State repeatedly tells us he supports, will be diminished. That is really important, especially as more councils are outsourcing work to private companies. We all remember the Government’s recent unhappy experience with the tagging contract scandal. Given that the Government’s view on applying the Act and the arguments they advanced in the other place have changed over time, it would be helpful if the Minister indicated whether there is any chance that their view might change again.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I am grateful to the right hon. Gentleman for being so generous in giving way. Is it not the case that clauses 21 and 22, when combined with clauses 24 and 25, mean that freedom of information requests are completely superfluous? Clauses 21 and 22 allow the auditor to request any and all documents not only from the council but from connected parties, and clauses 24 and 25 make that information available to the public, so why would one need an FOI request?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

I do not accept the argument that the Freedom of Information Act is superfluous, because it depends on whether auditors seek the information in the first place. I think that, regardless of the action that auditors might or might not take, the public should be protected by having the right to request the information. That point was made extremely forcefully and eloquently by my noble Friend Lord Wills in the other place.

There are some other concerns. We need clarity on who will maintain the outsourced contracts when the Audit Commission finally disappears. What about certification relating to reimbursement of housing benefit claims? We welcome the movement of the national fraud initiative to the Cabinet Office, but the provisions on the purposes for which data matching can be used do not include the prevention and detection of maladministration and error, which we would like to be reflected.

That is what is in the Bill, but there is a great big hole in it. It is principally a backward-looking piece of legislation giving effect to the Secretary of State’s decision of three years ago. He has completely failed to make provision for auditing in the new world being built before our very eyes, which I think is an astonishing omission. The proposed audit arrangements simply do not provide for that changing world in which public services are managed and provided. We have shared services, community budgets, city deals and combined authorities, which are all part of a shift towards much stronger working between central and local government, yet the current and proposed audit arrangements still focus much too narrowly on institutions—the arrangements in the Bill for local government and the National Audit Office for Whitehall—rather than the work they do. Therefore, as community budgets develop, does it really make sense for different auditors to examine the use of the local government pound while the NAO examines the use of the Whitehall pound when they are being spent together? If the service is shared and common, so should the audit be. I hope that Ministers will reflect on that point.

Robust independent audit of public bodies is essential to ensuring public confidence in Government. It is up to us to ensure that we get it right, especially after the three years that have intervened, followed by a Bill that—I gently point out—took longer to gestate than a baby African elephant.

I turn now to clause 38. Let me say at the outset that one local authority publication, which the Secretary of State mentioned, is pretty clearly outside the letter and the spirit of the code—that is, East End Life, which is weekly, advertises property, and carries local news. The Labour leader in Tower Hamlets says that it is an expense that residents cannot afford. The question for the House is therefore a simple one: why has the Secretary of State not done anything about it already? Why has he not sought judicial review? It is no good his shaking his head—he could have taken action, given the fuss he is making, but he has chosen not to do so, and he gives no answer.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

On precisely what grounds does the right hon. Gentleman think that judicial review could take place, since non-compliance with the code has no sanction attached to it?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

It would be a very important legal argument as to whether the courts would attach weight to what is a code. If the Secretary of State is that worried about East End Life, why did he not take action before coming to this House to ask for clause 38 and the extraordinary powers it contains?

The Secretary of State is asking the House to give him the right, if he feels like it, to control local council publications. We have recently had a great deal of debate about the royal charter following the Leveson report.

[

Interruption.

]

The Secretary of State is chuntering, but there is a lot more to say about this clause. The charge has been levied, quite wrongly, that politicians are trying to control what appears in the press, yet this clause really would give a politician the power to control, if he wanted to, what is written, how often, and in what way. This shows that underneath a lot of localist rhetoric, the right hon. Gentleman is nothing more than a centralist. I am astonished that Liberal Democrats appear to be happy to go along with a thoroughly illiberal proposal.

The clause would allow the Secretary of State to issue an order directing that one authority, or every authority, comply with his interpretation of one or all of the provisions of the code. I remind the House that the code covers paid advertising, leaflet campaigns, publication of free newspapers and news sheets, the maintenance of websites, the frequency of publications, the content of publications, and even display stands at party political conferences. Clause 38(1)(4)—the first time I read this I could not really believe it—says the following—[Interruption.] I know that Government Members do not want to hear it. Perhaps the right hon. Gentleman could explain why he wants to be given this power:

“The Secretary of State may give a direction to an authority whether or not the Secretary of State thinks that the authority is complying with the code to which it relates.”

Roughly translated, he wants the power to give direction to a council even though he does not think that it is not complying with the code, and nor does anyone else. We are sometimes mystified by the way his mind works, but under this Bill he will not even have to answer to himself for his own thoughts and actions.

That prompts the question why the Secretary of State has put this measure forward. He advanced two arguments, the first of which is about competition with local newspapers. I agree that local newspapers are a very important part of our democracy. Their independent reporting holds us to account, and they give us important news and information about what is happening in our area. However, many local newspapers are in real difficulties as readership declines and people get more of their news from the electronic media. Sir Merrick Cockell, the highly respected Conservative leader of the Local Government Association, says:

“We’ve simply not been shown any evidence that council publications compete unfairly with local newspapers.”

Such evidence as we do have suggests that the amount of advertising revenue taken by council publications is relatively small, especially compared with the amount of revenue contributed to local newspapers by way of statutory notices.

It is therefore very curious that, despite great play being made in the Secretary of State’s speech and in all the consultation documents of unfair competition and the loss of advertising revenue, it was reported a little while ago that he had indicated to a private meeting of Conservative councillors at the LGA conference that the requirement to place statutory notices in local newspapers is going to be phased out within a couple of years. I would be happy to give way to the right hon. Gentleman if he would like to clarify the Government’s position on the future of statutory notices. The House will have noticed that he has nothing to say. That is because on the one hand he is arguing that council magazines and the advertising revenue they take are a terrible threat, while on the other hand it seems, as reported by Conservative councillors who were at the meeting, that he is thinking of withdrawing a much larger amount of money that papers get from local councils in the form of statutory notices. The truth is that his position is utterly inconsistent.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I am grateful to the right hon. Gentleman for giving way; he is truly being generous with his time. Is he able to give any particular reason why local papers could not report statutory notices as a news item rather than as something that they are paid to do? Does he think it is right that the public purse subsidises commercial organisations like local newspapers when they have plenty of other opportunities to make money?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

The hon. Gentleman makes a perfectly fair point, partly because of the changing way in which people are getting their news. He is right that there is nothing to prevent papers from publishing those notices anyway, and I think that everybody recognises that we are moving towards a different era. The point I am making is that the Secretary of State has jumped up and down to complain about advertising revenue, which is very small compared with the much larger revenue that comes from statutory notices, hence the inconsistency of his argument.

Photo of Annette Brooke Annette Brooke Chair of the Liberal Democrat Parliamentary Party

Should the main concern not be the best use of council resources? Is it really a good use of those resources if they are paying for statutory advertisements that most people manage to miss?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

That is a fair point, as I have said, but perhaps the hon. Lady should have a conversation with the Secretary of State about what his policy is, because we are none the wiser. Indeed, when the code of practice was originally published, the Government specifically rejected a prohibition on authorities taking third-party advertising in their magazines. That is what paragraph 8.25 of the explanatory memorandum had to say.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

Does my right hon. Friend agree that, while an awful lot of people may miss statutory notices, some organisations—like estate agents, property agents and anybody involved in the licensing trade—trawl through the papers deliberately looking for them?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

I accept my hon. Friend’s point. If the system is changed in the future, as long as people knew where they should look, they could trawl through council websites or other publications.

On the frequency of publication, the vast majority of councils that produce magazines publish them four times a year or less. A very small number publish more frequently, but does that constitute justification for the power in clause 38? Does it actually matter if a small parish council puts out an A4 newsletter once or even twice a month? What business is it of the Secretary of State anyway? Has he not got more pressing things to do?

The second argument we have heard is that Ministers are exercised by propaganda on the rates. The Under-Secretary of State for Communities and Local Government, Brandon Lewis, has talked about a

“corrosive abuse of taxpayers’ money.”—[Hansard, 14 February 2013; Vol. 558, c. 840W.]

The Secretary of State has talked about pocket Pravdas, town hall Pravdas and shutting down the Pravda printing presses. Members will detect a bit of a theme there, so I thought I had better have a look. I spent a little time reading through council publications, copies of which I have with me.

Given what Ministers have said, I was expecting to find a hotbed of raw, red propaganda and party politics, but I have to say that I was sorely disappointed. There was not a single proclamation from local authority supreme Soviets, no diktats from executive board commissars and—this was especially disappointing—not a single article on the latest tractor production figures. There was nothing on collective farms. The nearest I got to that was an article about a community garden where “residents developed plots”. Is that the sort of dangerous, collectivist revolutionary activity—plotting in the garden—that keeps Ministers awake at night? Actually, the piece is from an excellent publication, South Kesteven Today—the local magazine of the Under-Secretary of State for Communities and Local Government, Nick Boles—and is about a community garden in Stamford.

I continued my search for the cause of all this anxiety. I had a look at Bradford’s Community Pride. The Under-Secretary of State for Communities and Local Government, Kris Hopkins, who has responsibility for housing, has left the Chamber, but the magazine had an article on deadlines for primary school applications and an explanation of council tax. Is that a problem?

I had a look at the Epping Forest magazine, Forester, which had an article about parking charges. We know how that subject gets the Secretary of State going, but it is also a very good publication. And what has Luton done? What has Luton done?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

The Secretary of State obviously forgets that he criticised Luton for its publication. I have the latest edition of Luton Line. It is a very good publication. On the front page is a photograph of the former Transport Minister, Norman Baker, holding a spade and standing next to the Labour leader of the council—now that is a coalition to reckon with. They are celebrating work starting on a new relief road.

These publications contain articles about recycling, articles on health, pleas for foster parents, adverts for MPs’ surgeries, and lists of councillors. Pocket Pravdas? What a load of nonsense.

Moving from the fanciful to the serious, the LGA has taken independent legal advice on clause 38, and Sir Merrick Cockell says that it

“confirms our fears that a government could hand power to one individual in Whitehall to restrict councils from campaigning on important issues such as HS2 or hospital closures if they so wish.”

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

No, the Secretary of State does not know his own Bill and he does not want to hear what his Conservative colleague, Sir Merrick Cockell, has to say about it.

Members should remember what the code says. Paragraph 15 states that local authorities should

“avoid anything likely to be perceived by readers as…being a commentary on contentious areas of public policy.”

High Speed 2 is contentious, as are hospital closures, the removal of fire engines, and whether Heathrow should expand. Is the Secretary of State really saying that there is something wrong with local councils representing the views of their residents? Sir Merrick’s conclusion is that clause 38 “sets a dangerous precedent”. I could not agree more.

The National Union of Journalists says:

“There is no evidence that extra statutory powers are required”.

The National Association of Local Councils opposes clause 38. Birmingham city council said in its response:

“we do not accept the government’s starting point.”

Exactly!

Photo of John Redwood John Redwood Conservative, Wokingham

We all understand that it can be desirable for councils to run political campaigns and that it will certainly happen. Is not the point that they can do so in the usual way—by making speeches in the council chamber, talking to journalists, getting it in the local media and putting it on free websites—but not through paid-for propaganda?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

Let us take the case of High Speed 2 and the concerns that have been expressed by some of the right hon. Gentleman’s colleagues about the route. Is he saying that local councils should not be able, on behalf of their residents, to express a view, to make representations and to say that they want the route to be changed? If he is not saying that, I do not see how he can support clause 38, given the advice that the LGA has taken.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the right hon. Gentleman give way?

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

No, I have been very generous in giving way.

The great localist is, in this Bill, asking to be given a great big blue pencil so that he can cross out things that he does not like.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

The right hon. Gentleman shakes his head and says that it is nonsense, but he is undone by his own words. He has obviously forgotten what he said in the response to the consultation, in which ministers justified the new powers by saying that they would

“ensure that in future effective action can be taken should any council be considering publicity that is of a political or tendentious character.”

The only way in which that can be interpreted is that the Secretary of State is seeking to take a pre-emptive power of censorship. What did he mean by that and how on earth will it work?

Last year, the Secretary of State told the Conservative party conference that

“without constant vigilance—the cigar-chomping Commies will take over.”

What none of us realised then was that the person we needed to worry about was him. Clause 38 is wrong in principle and I cannot see how it will work in practice. We will seek to remove it in Committee.

I turn now to clause 39 and the new matters that the Secretary of State wants to include in the Bill. In responding to the debate, will the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth, explain why he is reneging on the deals that his Government signed by making the provision on referendums and levying bodies retrospective?

The Secretary of State well knows that an important element of the Leeds city region deal was the establishment of a significant transport investment fund, partly funded by central Government and partly funded by the transport authority levy over 20 years. A year ago, the former cities Minister, Greg Clark, said that the deal was:

“Giving cities the powers, control over resources, and funding they need to fire on all cylinders”.

Will the Secretary of State explain why, almost a year after his ministerial colleague put pen to paper to sign the deal, he is asking the House to undermine it? Will he set out his assessment of the impact of his decision, and say what effect it will have on holding back investment in transport infrastructure and local growth in the city region? This is an important point of principle, because I fear that the actions of the Secretary of State in imposing the rules retrospectively and going back on a done deal will undermine confidence in the city deal process—which I support—and harm the certainty on which sound financial planning and private investment rely.

To limit the damage of his decision, will the Secretary of State clarify for the record that at the time the city deal was signed, he had no plans, and had had no discussions, about changing the rules on levying authorities? The answer to that must be no, because if he had done so he would—of course—have been honour-bound to disclose that to the people with whom he was negotiating.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

It is important to address this rather silly suggestion. From the published plans and what we know, the extra levy does not make a single percentage share difference. We know what the city deal is for Leeds—it is perhaps the most ambitious of the lot. Even assuming that we have the same referendum threshold as in the past, the proposal comes nowhere near to going over that threshold.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

First, that is not the view held by the Leeds city region, and secondly, the House will have noticed that the Secretary of State did not answer the specific question I put to him about what he knew when he signed the deal.

The Secretary of State proposes to make other changes by widening the scope of the Bill, and there have been discussions about how we deal with the problem of the Leeds city region and the fact that York cannot be a full member of the combined authority because of what is known as the Selby corridor—it is not coterminous. Perhaps he will respond to that point. I am grateful for the indication I have received from Ministers that they are willing to deal with that issue—in the Bill if they can, and if not through other legislation—and it would be helpful if the Secretary of State could place that on the record.

Photo of Eric Pickles Eric Pickles The Secretary of State for Communities and Local Government

I am happy to say that what the right hon. Gentleman wants to achieve—to ensure that authorities can work together as part of a deal, even though they are not coterminous—is eminently reasonable. Whether we achieve that through the Bill or through other mechanisms, we are happy to enter into discussions about that, and I am confident we can have a resolution before Christmas. What he seeks is wholly reasonable, wholly sensible, and we will do our best to achieve it.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

I am genuinely grateful to the Secretary of State for that assurance, and I look forward to working with him to bring that change about.

On parish polls, it is clearly not sensible to allow 10 people, in some cases, to trigger a referendum in a parish that represents 10,000, 20,000 or an even larger number of people. We will therefore support that change, and also the proposal that councils in England should allow the recording and videoing of council and committee meetings. In this day and age, big changes in technology make recording and videoing readily possible, and I cannot see the difference between sitting in a meeting, listening and writing down what is being said, or—for those who have shorthand—taking a verbatim record, and making one’s own recording.

As the Secretary of State acknowledged, a new generation of bloggers is relating to politics in a different way, which we should all warmly welcome—frankly, the more people who get to hear what their local council is doing, the better. Who knows? Perhaps this House will one day follow suit and allow those watching us to keep their own records of proceedings—indeed, I may one day be tempted to record the Secretary of State from across the Dispatch Box. I have, however, a sneaking suspicion that Brass Crosby—who, as some Members will know, was committed to the Tower of London in the 1770s for daring as Lord Mayor to release a newspaper editor who had had the audacity to report what was happening in Parliament—and indeed Thomas Hansard, after whom the Official Report is named, would both thoroughly approve of that change.

In conclusion, there is a great deal for the Committee to discuss, and I know that my hon. Friend Andy Sawford will do a sterling job leading for the Opposition and responding to the debate. We owe it to ourselves, local authorities and the people that we—and they—represent, to get the right system in place, and it is clear there is still much to do.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party 5:19 pm, 28th October 2013

I was delighted to hear my right hon. Friend the Secretary of State finish an important piece of work to which we committed ourselves when we first came into government. I was intrigued to listen to Hilary Benn, the shadow Secretary of State. It was a curate’s egg performance. I grant that there were some near rib-tickling moments—some of which were probably not intended—but it was a classic case of an Opposition searching for something to oppose. My right hon. Friend has introduced and delivered a Bill that the Government said at the very beginning of the coalition we would introduce. I am delighted that it has come to fruition.

Let me deal with the various parts of the Bill. I was fascinated to see some of the Audit Commission’s expenditure when I was part of the Opposition Front-Bench team. In the climate of the 1980s, there was an argument for considering a body such as the Audit Commission. However, two things happened: the Labour Government caused massive mission creep in the Audit Commission, and the climate changed. What caused the massive mission creep? Effectively, the Audit Commission was used as the machine for imposing a centralised performance regime on local government. That was a distinctly and fundamentally un-localist thing to do.

The situation is well described by Professor George Jones of the London School of Economics, whom many hon. Members will know—he is the biographer of Herbert Morrison. Professor Jones would not regard himself as a natural admirer and advocate of the coalition Government’s policies, but he believes in local independence. I disagree with many of the things he says, but he has described the Labour Government as taking “a fateful decision” that

“turned the Audit Commission in effect into an agent of central government…[It] marked the end of its independence, which was confirmed as further tasks required by central government were placed on the Commission: inspecting local authorities’ performance, judging and scoring them.”

Professor Jones is one of the leading independent academics. Most people would say he has a left-of-centre viewpoint—he happens not to be a member of any political party—but that significant academic is condemning the actions of a Government of whom the right hon. Member for Leeds Central was a member. It is therefore a bit rich of him to accuse the Secretary of State of back-door localism. Anyone who knows my right hon. Friend and the history will know that that is nonsense.

The Audit Commission grew beyond its remit to such an extent that it became the elephant in the room in a great deal of local government budgeting. Increasingly, time and again, local authorities—officers and members—felt themselves to be more constrained. They felt they had to play the system and adopt policies and priorities that ticked the box of Audit Commission approval. The system of reward and funding was such that they were incentivised to tick the box to meet central Government objectives rather than those of their council tax payers.

That was initially swept away when the coalition Government got rid of the iniquitous comprehensive area assessments regime, which, at that time, was a huge amount of the Audit Commission’s work. Essentially, the core audit function was left. As I recall, by that stage, the Audit Commission was about the fourth largest audit practice in the country. There was no logical reason why such a large audit practice should not operate in a commercial environment, providing that a proper statutory regime was in place to overarch it and that there was a proper regulation and performance regime, which the Bill introduces.

We saw that when the in-house audit practice was successfully floated in the private sector. It is worth noting that, as a consequence, there has been a 40% reduction in audit fees paid by local authorities. By the time the Bill is implemented and the Audit Commission is finally abolished, there will be a 50% reduction in those bills. That has got to be a good and thoroughly localist thing. Those of us experienced in local government will remember regular complaints about the level of charging by the Audit Commission. There was also the iniquitous situation of its top-slicing, whether it did the job in-house or it was done through private sector contractors, which was clearly unjustifiable. I hope people accept that the Bill recognises a sensible reality.

I have to say with a smile that I note the cost of trying to persuade the Opposition Front Bench team to change our minds was put at £56,000. They were getting my right hon. Friend the Secretary of State and I cheaply at that price. On the other hand, it did not have much effect, so perhaps they were had in any event. I assume that £50,000 was for my right hon. Friend and £6,000 was for me—I am fully aware of the status of these things—but it says something of the level of unreality in the Audit Commission. In the end, that is why it had so few friends in local government and why its departure will be unlamented. Instead, we have a sensible set of checks and balances which need to be put in place, and which I think the local government sector now understands.

It is also worth saying that performance management and improvement in the sector has matured—a point made in interventions on the right hon. Member for Leeds Central. There is a great willingness to collaborate and work closely together; that is a classic case of recognising that the game has moved on.

The Bill seeks to tackle the code of practice on publicity, which is significant. I was the Minister when we introduced the code and there had been a number of egregious examples of abuse by local authorities. East End Life is of course the example most regularly cited, but I am afraid there are others.

Photo of Hilary Benn Hilary Benn Shadow Secretary of State for Communities and Local Government

It would certainly help consideration of the Bill on Second Reading if the hon. Gentleman listed those examples. Indeed, Baroness Hanham said that she had a list, but did not want to share it with Members in the other place. Perhaps the hon. Gentleman will now tell us which local authorities are breaking the code.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

The right hon. Gentleman obviously knows that the only roles in Gilbert and Sullivan I could do at school were the patter songs—one does not have to sing in tune. I do “have a little list” and will come to it in but a moment.

It is significant that East End Life, run now by an independent council but initiated at a time when the council was otherwise controlled, is one case on which the right hon. Gentleman and I can agree. We agree that that is a particularly bad case, but it goes further than that. Much of East End Life was based on some of the work done by

The Londoner

, which was produced by the first Mayor of London. By the end of his first term of office, he was a member of the right hon. Gentleman’s party. The current Mayor of London has had no difficulty in getting his case and his arguments across to the London public, and getting information about Greater London authority services across, without the cost of

The Londoner

. In fairness, even when Ken Livingstone was a member of the Labour party, he supported the current mayor of Tower Hamlets—against a Labour candidate. Perhaps I should not remind the right hon. Gentleman of that.

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

A constituent of mine is a member of an active parish council in my constituency. She raised concerns that the Bill seeks to curtail how parish councils can communicate regularly with their constituents. Does my hon. Friend agree that that would not be right?

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

Many responsible local authorities communicate sensibly and proportionately with their constituents, and there is no reason why parish councils cannot do that too. There has been a great deal of scaremongering from some commentators and sources, some politically motivated, regarding the extent of the Bill. I am sure that my hon. Friend’s parish council has nothing to fear.

Photo of Chris Williamson Chris Williamson Labour, Derby North

Might the current Mayor of London’s ability to get his message out and his not having to rely on a council newspaper have something to do with the fact that the Evening Standard is his chief cheerleader and ran a vituperative campaign against the previous incumbent, and might that have something to do with the previous incumbent’s inability to get his message out?

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

Now that, like me, the hon. Gentleman has time to reflect from the Back Benches, he might consider that part of this problem was that he always fought the last battle. That one is dead and gone. The current Mayor gets his message across because he makes the right case to Londoners. I would think it a good thing if an independent newspaper supported my policies; it would be better than having to pay £1.5 million or £2 million to cook up a newspaper to support them instead. So I do not think he has advanced his case with that intervention.

For another example, the right hon. Member for Leeds Central could pop across to Greenwich from Tower Hamlets and have a look at the—taxpayer-funded, of course—Greenwich Time which has been published for several years now by the Labour-controlled council. In one recent editorial, the council leader attacked the Government’s policies of austerity for damaging the people of Greenwich. That is an interesting view which might have come straight from the pen of the shadow Chancellor—perhaps it did, for all I know—but I am not convinced that it is relevant to the role of the local authority.

Neither am I convinced that it is the role of that interesting Greenwich publication to tell me about the football fixtures or the cinema listings or to give me helpful restaurant reviews. It is the same with East End Life. These are all worthy things that a commercial local paper does, but to use the phrase of my hon. Friend Annette Brooke, it is not a sensible use of council resources. I am sure we all want leisure or weight-loss ideas, but it is not the job of these supposed newspapers—these council publications—to provide them. It is a deliberate move on to the turf of privately run, independent newspapers. I say “deliberate” because in some cases, I regret to say, local authorities do not like the competition and criticism. That is what this is about.

Moving away from Greenwich, the right hon. Member for Leeds Central could cross the river again to Newham, where TheNewham Mag makes great play of the “savage cuts”—an interesting phrase that I am sure the ever-restrained mayor of Newham had nothing to do with—imposed by the Government. In one fascinating passage, it stated that some councils pulled the plug on their Christmas lights this year because of “savage cuts” in their funding from central Government. When we worked on the formula grant, my right hon. Friend the Secretary of State and I did not consider taking out local authorities’ Christmas light funding. It was a clever use of words to try to suggest that central Government were being Scrooge and making it impossible for people to have Christmas lights on their high street. The article did not mention, of course, that Newham council did not cut the publicity budget, which paid for The Newham Mag, and which even on a conservative estimate would run to about 10 sets of high street lights. Interestingly, even in otherwise legitimate advertising—about making benefit claims and where to go—every reference to cuts is prefaced with “savage” or “massive”. It is clearly politically loaded and another example of how councils are acting against the spirit of the code.

Photo of Ian Mearns Ian Mearns Labour, Gateshead

I am following the thread of the hon. Gentleman’s argument. Is he actually saying that the Gateshead Post, which used to be published every Wednesday, but met its demise more than a dozen years ago, was put out of business by a council publication that did not exist at the time it ceased printing?

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

What I am saying is that the Gateshead Post was entitled to its view because it was not paid for by public money.

If the leader of Barking and Dagenham council or the mayor of Newham want to put across their views, they can put out a press release through their respective Labour party offices, just as I put my views across in press releases paid for by my constituency party. I do not believe that I should get the council tax payers in my area to pay for me to put out my political views. Such activities are happening consistently, however. The London borough of Barking and Dagenham’s News stated that the council had been forced to make cuts to services. The article related to the spending review, but the council made no reduction to the £1.5 million that it was spending on the News. Simply hiding behind East End Life might make the shadow Secretary of State appear reasonable, but there is a lot more to it than that. I regret to say that, as it happens, all the publications on my list are in Labour areas.

Photo of Chris Williamson Chris Williamson Labour, Derby North

The hon. Gentleman has expressed his opposition to press releases being distributed by local authorities on behalf of the controlling group. When he was a Minister in the Department for Communities and Local Government, did his Department issue press releases on his behalf?

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

Yes, but I did not use them to attack the policies of the Opposition in party political terms. I would not have been allowed to do so under the ministerial code, and anyway they were dealt with by civil servants. I think the hon. Gentleman is also forgetting that, in all the cases I have described, local authorities that are using publicly funded publicity instruments to protest against Government cuts are using discretionary spend that they could have directed into front-line services. That is a classic example of why the Labour party is unhappy about this issue. I regret to say that it goes well beyond the egregious case of Tower Hamlets.

If local authorities want to get information across, which I accept has to happen, they might like to do as my own council, the London borough of Bromley, does. Rather than going to the expense of running its own newspaper, it puts a four-page wrapper around one of our local papers about four times a year. Those pages set out the information very attractively. They are well designed and contain professional journalistic input, and they wrap round the free-sheet that is delivered to everyone anyway. That is a cost-effective and politically proportionate way of getting genuine information across. Also, it does not offend against the code. It is nonsense that although an independent watchdog has held Tower Hamlets to be in breach of the publicity and advertising codes, there is still no legal means of doing anything about it. The Bill will rectify that anomaly.

I say with respect to the right hon. Member for Leeds Central that it is not good enough to say that we could try a judicial review.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

Well, we could try to resolve many things by way of a judicial review, but whether that would be a wise or proportionate use of public funds, when the outcome is highly uncertain, is questionable. Surely it would be much better to deal with the problem at source, in the way that is being proposed. The Opposition appear to have little to say on this matter, and they appear to be shedding a great many crocodile tears about this aspect of the Bill.

Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government)

The hon. Gentleman has shared his thoughts on a range of publications by London local authorities. I invite him to condemn Hammersmith and Fulham council, which he would surely deprecate for publishing a magazine that not only advertises “Sofas and Stuff” on the local high street but comments on the impacts of Government policy on local residents. Will he also consider the publication from the royal borough of Kensington and Chelsea, which gives its views on the Government’s Crossrail proposals and on funding implications for the council, among other things? Does the hon. Gentleman see any difference between that—

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. The hon. Gentleman is new to the Dispatch Box, but

I must remind him that interventions must be brief, whether they are made from the Dispatch Box or from the Back Benches.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

There is often a material difference, depending on the precise nature of the language used and the objectives sought to be put across. That is precisely why the Bill is framed in such a way as to provide discretion for the Secretary of State to act where a number of triggers are coming into play. I do not think that intervention worked from the hon. Gentleman’s point of view either.

Let me deal with the issue of council tax referendums. A great deal of objection was raised in the other place, but I do not believe that it was all genuinely warranted. I am glad that the right hon. Member for Leeds Central did not pursue the argument of retrospectivity to the extent that it was pursued in the other place. My noble Friend Baroness Hanham dealt with that effectively, making very clear the Government’s intentions in this regard. Levying bodies and their principal councils had clear notice, so that argument has been knocked on the head. I want to take the opportunity to pay tribute to Baroness Hanham’s work as a Minister in the Department for Communities and Local Government. She was a fantastic and unusually hard-working colleague—someone who probably has more experience in local government than many people here will have forgotten about, let alone learned from. I hope I am allowed to say that, Madam Deputy Speaker.

The key objective of council tax referendums is to protect the council tax payer. It could not be right to get to a position where it was possible to have a degree of expenditure shunting. We sometimes hear about cost shunting, but a degree of expenditure shunting is possible in theory, from the constituent member authorities of a levying body on to the levying body in the knowledge that the expenditure moved on to the joint body would not be captured by the council tax threshold referendum. With respect, that would be pulling the wool over the eyes of the council tax payers of the local authority’s area. The council tax referendum proposals are therefore sensible in protecting council tax payers by removing a loophole that could have been open to that sort of abuse. As the Secretary of State said, when we looked at city deals, we found that the amount involved was not such as to cause the extent of the problems suggested.

For a raft of reasons, the levy on some local authority areas amounts to more than the amount of council tax itself. The levies account for something like 56% of council tax bills—in Liverpool, for example. I am sure that all hon. Members who support our proposals for council tax referendums would agree, in principle at any rate, that they exist to protect the council tax payer. It surely cannot be right that under current arrangements over half the spend is exempt from control by a referendum.

Photo of Annette Brooke Annette Brooke Chair of the Liberal Democrat Parliamentary Party

I quite understand the intention behind this measure, but could my hon. Friend help me with this query? Is not an unintended consequence possible? If the referendum were lost, the levy went ahead and the council tax was frozen, might not the penalty fall back on the council, which would have to bear the costs and cut back on its own services?

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

In the case of the majority of the larger levying authorities—it does not apply to some smaller ones—my experience has often been that they take the form of joint boards or joint authorities, which have elected members of the constituent authorities sitting on them, but who are also in a sense members of a separate legal personality. That is why they are not part of the council for the purposes of the council tax itself. If a council is concerned that its council tax bill should not rise unduly, which might put it in jeopardy of breaching the referendum threshold, it would be perfectly logical and sensible for it to talk to its representatives on the board. If I were the leader of that council, I would talk in clear terms to my colleagues who were the leaders of the other constituent authorities. There is thus a perfectly good and practical means for council leaders and their representatives to avoid that happening. Equally, when they sign up to particular elements of expenditure through a joint board, it is not unreasonable for them to take into account the budgetary consequences of that expenditure for their council tax payers. As I say, these are sensible proposals, which close a loophole.

I hope that the Bill will commend itself to the House. It deals with important issues, and I agree with the right hon. Member for Leeds Central that it is not a purely dry piece of legislation. I congratulate my right hon. Friend the Secretary of State on producing an entirely localist Bill. After all, localism is not just about passing power down to local authorities as institutions; it is also about passing power down to the residents of those authorities, who are the ultimate consumers, and the ultimate people to whom councillors, officers, and we as Members of Parliament ought to be responsible.

Photo of Chris Williamson Chris Williamson Labour, Derby North 5:45 pm, 28th October 2013

The Government have presented us with yet another very bad Bill. Indeed, it is so bad that it is difficult to know where to start, but let me begin by saying that there is a certain irony in what we are doing today. As was pointed out by my right hon. Friend Hilary Benn, the Audit Commission was established by a former Conservative Government 30 years ago, and here we are now, debating this Bill because another Conservative Government want to get rid of it.

Government Members, including the Secretary of State himself, have suggested that the exposure of the gerrymandering of Westminster city council, which was exchanging homes for votes, had nothing to do with the Audit Commission. I wonder, however, whether the regime that the Government are now proposing would have been able to unveil that appalling scandal, as the district auditor did then. It really was an absolute disgrace, and it led to a huge surcharge on the leader of the council.

The role of the Audit Commission has been both extended and reduced over the years, but I often found its interventions very helpful when I was leader of Derby city council. It was able to assess the effectiveness of local public services, thus providing us with a benchmark in relation to local authorities in other parts of the country and the services that they provided. It did so by means of the comprehensive area assessment which has been so ridiculed by the Secretary of State, and which was one of the first things to be ditched when the Government came to office.

It is probably not surprising that the Government made that decision, as it coincided with their imposition on local authorities of unprecedented cuts, which have continued year after year. The comprehensive area assessment would doubtless have highlighted the significant diminution in the quality and breadth of the services provided by local authorities that resulted directly from the Government’s cuts agenda—and a very unfair agenda it was. As we know, the cuts fell most heavily on the local authority areas in greatest need, although, perversely, some authorities in other parts of the country received an increase in Government grant. I think that, had it been allowed to continue, the comprehensive area assessment would have put the Government parties in a highly embarrassing position.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

When I was a portfolio holder on Winchester city council, I had to respond to the comprehensive area assessment. One of my favourite statistics that it made me report was the number of buildings that were open to the public and the number of those buildings that were accessible to disabled people. I managed to improve the ratio in my first year in post, simply because we closed a building to the public. Do Members actually think that that constitutes a useful set of reporting targets for any normal council? If the hon. Gentleman is really so keen on the comprehensive area assessment, may I ask whether he would reinstate it if he were the relevant Minister in a Labour Government?

Photo of Chris Williamson Chris Williamson Labour, Derby North

The hon. Gentleman makes an extreme point to illustrate his argument. No one is justifying unnecessary targets. There was perhaps an over-burdensome target culture, but surely that is not a reason to throw the baby out with the bathwater. It would be an extreme overreaction to get rid of the whole shooting match just because there were perhaps some overbearing and silly performance indicators, although there was certainly scope for improvement. As my right hon. Friend Hilary Benn said, we accept that the Audit Commission is going, but what is being put in its place leaves a lot to be desired.

Government Members have said that getting rid of the Audit Commission will realise significant savings, but the truth is that most of the savings have already been achieved by axing the inspection work for which the commission was responsible. It seems that this is yet another case of double counting by the Secretary of State, as there is not much evidence to support his statement that there will be a saving. Indeed, many experts say that fees are likely to increase as a consequence of scrapping the commission. The draft Local Audit Bill ad hoc committee called for the publication of a new financial impact assessment and said that the baseline should be 2010-11, rather than 2009-10. If that were done, we might get a clearer picture of what the savings will be, if any, as a consequence of the Bill.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

The hon. Gentleman is being generous in giving way. I am puzzled by the putative ideas on the savings that are being made. The Audit Commission has recently re-let 70% of the business that it did in-house to private contractors and achieved 40% savings—some £40,000 per council, I understand, although that figure may be slightly wrong. Nevertheless, there was a 40% reduction in the costs of audit. Does the hon. Gentleman not recognise that that is a real and proper saving that would not have happened if the Audit Commission were still in place?

Photo of Chris Williamson Chris Williamson Labour, Derby North

Let me quote people who perhaps know a little more about these things than me. The draft Local Audit Bill ad hoc committee looked at the matter in detail. It

“heard conflicting evidence about whether and how much public money is likely to be saved by implementing this legislation.”

I have struggled to find anyone who thinks that the proposal is a good idea.

The Audit Commission said:

“Under a free market model, the current benefits of pooling auditors’ costs will be lost and councils in remote geographical locations”— many of the locations represented by Government Members—

“will have to meet the economic cost of the audit. In some cases this may be significantly higher than historical fee levels.”

The Local Government Information Unit said:

“If the market concentrates further, or even stands still, this will eventually lead to higher, not lower, fees.”

The Select Committee on Communities and Local Government has pointed out that the Government’s proposals for local government

“contrast with the situation in central government, where the NAO is reducing the percentage of work that it contracts out to private firms”.

I do not understand why that double standard is being applied by the Government when it comes to local government. Cynics might say that the Government are creating yet another money-making cartel. We know that the Conservative party has form in using taxpayers’ money to enrich vested interests in the private sector. We need look no further than the privatisation of the utilities, with millions of consumers being ripped off on a quarterly basis by the big six utility companies. We could also look at railways privatisation, which has seen the railway companies fleecing the travelling public, or the deregulation of the private rented sector, where we have seen a massive hike in rents. As a consequence, the housing benefit bill has gone through the roof—some £10 billion a year is going into private landlords’ pockets. This is yet another example of the Conservative party flagrantly using taxpayers’ money to enrich vested interests in the private sector. It is a shameful abuse.

The Communities and Local Government Committee hit the nail on the head:

“Unless the Government can crack the problem of the very limited competition in the audit market in the UK, it will be open to the accusation that the abolition of the Audit Commission is not a measure to save public money but merely a mechanism to transfer public money into private hands.”

I could not put it better myself. Clearly, that is an endorsement of my suspicion about the Government’s real motive for introducing the Bill.

Photo of Bob Neill Bob Neill Parliamentary Assembly of the Council of Europe (Substitute Member), Vice-Chair, Conservative Party

How does the hon. Gentleman square that with the Competition Commission’s recent report into statutory audit services, which pointed out that some 90% of audits of FTSE 350 companies are dealt with by what are sometimes termed the big four, whereas they only deal with about 50% of local authority audits and mid-sized firms get the bulk of the rest?

Photo of Chris Williamson Chris Williamson Labour, Derby North

The hon. Gentleman is a big champion of vested interests in the private sector, so I am not surprised that he tries to argue that what the Government are doing is right. It is not for me to square that. If he has an issue with what the Communities and Local Government Committee has said, I ask him to take that up with the Committee. I am quoting directly from its conclusions after it looked at the matter in some detail. Do not come to me and ask me to square that. I invite him to ask the Committee to square the evidence that it took. This is the reasoned conclusion that it reached—

Photo of Chris Williamson Chris Williamson Labour, Derby North

Indeed. As I understand it, those were the unanimous findings of the Communities and Local Government Committee.

The Bill is misconceived in another respect. My right hon. Friend the Member for Leeds Central dealt with this eloquently. In the Bill, there is no recognition of joint working, which is essential; it was increasingly important when I was leader of Derby city council. We worked to bring other public sector agencies on side with us to get more bangs for the public sector pound that was being spent in Derby, and that is even more essential as the budget at our disposal diminishes.

Therefore, I hope—my right hon. Friend made this plea—that the Government will reflect on the matter. If, as seems likely, they proceed with the Bill, I hope they will consider how the audit process could be made more relevant and up to date, given the situation we find ourselves in and the way in which public services are delivered. It does not make sense to require each public sector body to undertake a separate audit. It would be far better to recognise the fact that local authorities and other public sector agencies are working collaboratively. It is far better to have a collective audit that recognises the reality of the way in which public services are delivered in this day and age.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley

I was interested in the comments by the shadow Secretary of State, because the explanatory notes to schedule 4, paragraph 1, say:

“This paragraph sets out the different ways in which a body may meet the requirement to have an auditor panel. It is intended to provide flexibility for different arrangements that can reflect local circumstances and, for example, any joint working arrangements.”

There are clearly provisions in the Bill to deal with that matter.

Photo of Chris Williamson Chris Williamson Labour, Derby North

But not—[Interruption.]—as my right hon. Friend Hilary Benn is pointing out sotto voce, where there is a national and local collaboration in that sense. That is the point. This is not a partisan matter; I hope that the Government will take that on board and make that sensible amendment so the Bill is more fit for purpose.

I want to touch on the Secretary of State’s Orwellian proposal effectively to take charge of all council communications across the country. Whatever happened to the Secretary of State’s brave new world? When he first came into office he promised the end of what he described at the time as

“the Ministerial command and control system”.

Well, if this is not a ministerial command and control system, I do not know what is. This is the party that promised us localism and that promised it would sweep away the controlling hand of central Government. What a joke!

The Secretary of State has most certainly gone back on that, and his justification for his position simply does not stand up to examination. Let me quote a couple of experts in the field. The National Union of Journalists said:

“We do not believe that this element of guidance reflects the needs of many communities, nor the practicalities of providing prompt, accurate advice and information to them. In areas where there are no, or limited local newspapers”— that, again, will include the constituencies of many Members on the Government Benches—

“then sharing planning details, service changes and details of consultations on a quarterly basis is insufficient.”

Even coalition Members in the other place have criticised this proposal. Lord Tope said:

“All we have had from the Government is rather silly and misleading statements from the Secretary of State about ‘town hall Pravdas’.”—[Hansard, House of Lords, 22 May 2013; Vol. 745, c. 898.]

Baroness Eaton, who, like the Secretary of State, is a former leader of Bradford city council, said

“there is no evidence that council publications are competing unfairly with local newspapers and, by the Government’s own admission, very few councils are breaking the existing recommendations” and,

“It is therefore regrettable that many of the proposed measures in the Bill centralise powers to the Secretary of State and allow central government to interfere with matters that should rightly be decided at a local level.”—[Hansard, House of Lords, 22 May 2013; Vol. 745, cs. 903 and 902.]

The Conservatives claim to be the great localists. When I was on the Front Bench and said that the Labour party is the true localist party, Conservative Members scoffed, but here we have a clear example of the Conservative party being the true centralisers in this country today.

We must also consider the retrospective impact of the proposed council tax referendums. Robert Neill referred to that and suggested that somehow it was not really an issue, but I beg to differ. I genuinely think that there is a real issue, which goes a long way towards undermining city deals—a welcome innovation as they give more powers to local authorities in the major core cities around the country—although I think the Government should go further in terms of devolving powers.

Again, I could not find anybody with a good word to say about this part of the Bill. The LGA says it jeopardises growth-generating investment. The country is on its knees and we are barely back into growth, so it seems absolutely crazy to deny the opportunity of growth-generating investment now. The Chartered Institute of Public Finance and Accountancy says it will confuse local accountability. Baroness Eaton said:

“It is like revising the speed limit downwards and then fining any motorist who has not obeyed the new limit before it was introduced.”—[Hansard, House of Lords, 22 May 2013; Vol. 745, c. 903.]

The truth of the matter is that local authorities are reaching agreements with levy-imposing agencies with whom they are working in partnership. They will have made arrangements going forward and some of the fees will be increasing over time, and that could push the council tax increase above the threshold at which a referendum must be called. That could leave councils in a very difficult situation. What will happen if the referendum results in opposition to the increase being imposed? The fees will still have to be paid. It will simply mean there will be even deeper cuts over and above the unprecedented cuts that have already been imposed on local authorities.

We know that many local authorities are heading towards a situation in the very near future—in the next financial year and certainly the year after that—where it will not be possible to deliver any non-statutory services. The litter will not be removed from streets and grass verges will be growing out of control. What is going on here? This is simply unacceptable. These are services that define a decent and good society, yet they are being put in jeopardy still further by this part of the Bill.

This is a dog’s dinner of a Bill, as is clear from what has been said not only by my right hon. Friend the Member for Leeds Central and me, but all the experts on these matters. They are all saying the Government have got this wrong. I urge the Minister to take a long hard look in Committee at the provisions contained in this Bill, and to perform some serious surgery and agree to the amendments we will be putting forward to try to make a better job of what is a very poor Bill. I think it will create a very difficult situation for local authorities, end up costing more money and ill-serve the people in the local authority areas that will be affected.

P

Chris Williamson (Derby North, Labour) says "We know that many local authorities are heading towards a situation in the very near future—in the next financial year and certainly the year after that—where it will not be possible to deliver any non-statutory services. The litter will not be removed from streets and grass verges will be growing out of control. What is going on here? This is simply unacceptable. These are services that define a decent and good society, yet they are being put in jeopardy still further by this part of the Bill".

However councils have a duty under the Environmental Protection Act S89(1)to ensure the land under their control is kept free of litter.

For more information go to www.cleanhighways.co.uk

Peter Silverman
01895 625770

Submitted by Peter Silverman

Photo of Annette Brooke Annette Brooke Chair of the Liberal Democrat Parliamentary Party 6:07 pm, 28th October 2013

I had better start by declaring that I am a vice-president of the LGA, as it is being mentioned rather a lot in this debate. I also want to thank the Secretary of State—albeit in his absence—for his introduction of the Bill and his enlightening examples. I thank, too, the shadow Secretary of State for his visual aids and his account of his search for plots, which was interesting.

As the Bill has passed through the other place, it has already been considered in detail, and a large number of amendments were made, although some of them were minor and technical. I was very pleased that the Government undertook to introduce more amendments in the Commons, and I was also pleased by the announcements that consideration will be given to the modernisation of parish polls and the introduction of more openness in the recording of council meetings. It will be very good on occasions for people to be able to watch them at home and be able to switch off, rather than having to set off on what might be a long journey and then have to sit through a great deal of business before getting to the relevant part.

I want to comment on four main areas of the Bill. First, I want to discuss the principles behind the abolition of the Audit Commission, although I recognise that today we are really only talking about abolishing the residual part of it. I thought we had achieved a consensus about the abolition, until I heard the speech of Chris Williamson and now I am not so sure. I recall the many briefings from all the councils in my constituency that have included reference to the burdens and costs arising from this set-up, always with the rider, “There is never any compensation from central Government, despite all these burdens placed upon us.”

The Audit Commission did become bureaucratic; it changed from its early purposes, there was little incentive to reduce its costs, which were paid for by local bodies, and its approach encouraged local bodies to focus more on the views of the Audit Commission than those of local people. The reforms in this part of the Bill will create a more efficient audit system. They are part of this Government’s wider drive to give greater responsibility to local bodies and encourage local people to hold those bodies to account, and the Bill is a step in the right direction. Councils are perfectly capable of appointing their auditors, as companies, charities and foundation trusts already do, and are best placed to decide what arrangements suit them locally. It should not be for central Government or anyone else to dictate to local bodies the people they should appoint. Under these reforms, they should know exactly what they are paying for and have control over their procurements. I am sure that we will discuss whether we are ending up with a cartel or with competition in greater detail in Committee.

The Secretary of State said that the expected savings from the abolition of the Audit Commission are estimated to be £1.2 billion. Despite the comments made by Labour Members, I felt that it was good to know that, unlike with some other Bills passing through this House, some pre-legislative scrutiny was undertaken on the then draft Local Audit Bill.

The Local Government Association wants the Bill to be amended to allow councils to continue to procure external audit nationally and, in so doing, avoid the need to establish independent audit appointment panels. Lord Tope said on Second Reading:

“In my long experience of local government, I have yet to meet anyone who has been clamouring to be a member of an independent auditor panel. That is not usually the way in which public engagement is sought by the public.”—[Hansard, House of Lords, 22 May 2013; Vol. 745, c. 898.]

I am pleased that the Government have been in dialogue with the LGA and agreed to work up an amendment that will create a sector-led body to offer councils an opportunity to opt in to a national procurement option. The LGA would also like the current audit contracts to be extended until the completion of the 2019-20 audits, in order to lock in significant savings—that is very important in these times of austerity. I imagine that matter will also be discussed in greater depth in Committee.

On council tax referendums, closing a loophole to prevent unaccountable levying authorities from exerting pressure on council tax seems a laudable aim—however, I have two buts to add. As a localist, I am not keen on council tax referendums—an alternative to capping—because they interfere with local decision making. However, I accept that, in these times of austerity, council tax freezes and controlling council tax are very important controls of the cost of living for many hard-working families. Secondly, I am concerned about the unintended consequences if the council and the levying board do not work perfectly together, despite the fact that the council might have representatives on the levying board. A financial risk is also placed on the local authority, which it could well do without in these difficult times. As Labour Members have said, there could also be a perverse incentive in terms of growth, whereby much-needed investment in infrastructure could be curbed, which does not seem right. I also share the concerns about the retrospective nature of the provision. So there are definitely questions to be answered here.

What I really want to see is transparency for the general public. Both on precepts and levies, members of the public are confused by the newspaper headline, “Your council tax is frozen”. They might not go through all the details in the Bill—I accept that the details are in place—but the bottom line for them is that their council tax is not frozen. That makes people very angry, because they do not see the accountability in the system. So I have just a few questions about that proposal.

The publicity code has been much mentioned this afternoon. My experience of local government, public relations departments, and council newspapers and publications has led me to conclude that the administration —the party in power—has a greater enthusiasm for having a big PR department and good, big, flashy newspapers than the opposition. Normally, the opposition will say, “We can find savings in the budget by slashing the PR budget.” That is usually the proposal on budget-setting night. However, if the opposition party then moves into control, it suddenly finds that the PR department is rather useful, after all. There are rightly questions about this money and the way it is spent, but a council publication has an important role to play; it certainly means that the public become more engaged, even if that is just a case of knowing where grit bins will be in icy weather and what provision is going to be made. Such publications are important disseminators of information for the many people who still do not access the internet. We cannot have all the information in that format at the moment, so the newspaper is of importance.

Given that not many examples of abuse are being provided and that most local authorities are probably not going to be affected by this measure, I have a concern that we may be using a sledgehammer to crack a nut—that question needs to be asked. Again, the measure slightly offends my localist principles, because the local council should be making the decisions and standing up to be counted when it is seen by its electorate as wasting money on these “lavish” publications. I am not at all convinced by the argument that such publications are in widespread competition with local newspapers, and the evidence would seem to be against that view; so, again, questions remain. I can see what the Government are aiming to do, but we have to recall that the provision of information and a council being outward looking is a good thing, even if most of the photos in the newspaper are of members of the ruling party.

I wish to end by talking about statutory notices. The LGA has called for the introduction of a new clause that would remove the duty on local authorities to publish statutory notices in their local newspapers. It would not remove the duty on councils to inform their residents about the statutory notices or any other area of council policy; it would just allow councils to decide whether or not the local newspaper was the best place to do that. It has been estimated that adopting the new clause could save local government at least £26 million per year, which is a considerable sum, and more cost-effective methods of conveying this information are available. I believe an Opposition Member intervened to suggest that estate agents and other professionals look at all the public notices, but they should be there for ordinary members of the public, who are the ones who do not spot the notices that affect them. So I do not feel that the most effective method of conveying information to the bulk of council tax payers is being used. The professionals who need to know this information could access it online; perhaps it is paper notices that are needed for residents. Will the Government repeal this outdated and expensive statutory requirement? Such an approach would be strongly welcomed by all parties in local government.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington 6:19 pm, 28th October 2013

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 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 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.

Photo of Chris Williamson Chris Williamson Labour, Derby North

On that point, is my hon. Friend familiar with the PricewaterhouseCoopers citizens jury which showed that, when polled, the overwhelming majority of the British public favour public services being delivered by public authorities and by directly employed public servants? If services are to be externalised, the safeguards that my hon. Friend is describing would be the bare minimum that the vast majority of the British public would expect.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

There is a general worry about what happens after privatisation. My hon. Friend cited a number of examples—rail, energy and others. People are concerned about standards of probity and issues surrounding the exploitation of the resource. There are similar concerns in relation to local government and the use of the private sector. It is important, therefore, that we build safeguards into the Bill to reassure people. I am a great believer in direct provision by the local authority itself, but if there is to be contracting out or outsourcing, it is important that we reassure people that there is a legislative framework that provides safeguards to ensure probity and to counter corruption. Transparency International suggests that that should be built into the legislation. It is important that we listen to an organisation that has the relevant expertise.

The final recommendation deals with freedom of information, which has been raised a number of times in the debate. Transparency International recommends:

“Private companies, when operating services in the public interest, should be required to comply with the Freedom of Information Act with regards to those services.”

As a specific example, it states that

“audit reports from local authorities should be covered under the Freedom of Information Act or published directly as public documents.”

That is not a particularly challenging recommendation. It should be standard practice.

As Members consider the Bill further, I suggest that they read the Transparency International report “Corruption in UK local government—the mounting risks”, and invite the organisation to provide them with more detailed information and evidence. That might enable us to address some of the concerns that have been expressed and which we all hear from time to time in our constituencies. These may be anecdotal, but the information from Transparency International suggests that there is mounting national concern as well.

My second point is about examples in my own area. The Bill does not seem to address any of the structural or procedural concerns arising from the degradation of accountability within local government. I was hoping that the Bill would go further in ensuring full accountability and transparency in local decision making. To a certain extent I blame the previous Government for the structural problems that we now have in local government. I use my own local authority as an example. I would like to see amendments to the Bill that ensure full transparency of all decision making.

In my local authority, Hillingdon, we have a leader and cabinet system which has centralised powers in the hands of one person—the leader. The leader is able to use exclusive patronage to appoint all the other members of the cabinet, and that patronage then determines the lucrative business of the payments of himself—£65,000 a year for a part-time job, plus expenses—and of every other member of the cabinet, who receive £50,000 to £55,000 each. If any members step out of line, they are demoted. In recent weeks in my local authority, I have seen long-standing experienced senior councillors prevented even from standing again for the local authority.

Transparency International’s report expresses concern about cronyism in local government. In my local area I am witnessing the worst forms of cronyism where the leader appoints everybody, everybody is responsible to the leader, and there are financial consequences if people step out of line. In addition to that, there is nothing in the Bill about the decision-making process in relation to policy, which has also been centralised. In my local authority all decisions, no matter how minor, go through the leader’s office. If any officer loses the favour of the leader, they are out. If an officer provides unpalatable advice to the leader, that is enough for them to be shown the door. That is described among officers in Hillingdon as a reign of terror.

Whistleblowing is not an option for most. In Hillingdon, when people are asked to leave, they go under a compromise agreement, which includes a gagging order. I would like to see in the Bill an end to all compromise agreements in local government and an end to all gagging orders that are implied as part of those compromise agreements, because they prevent officers from providing independent advice or making public their concerns to all members of the council and to the general public.

I want to see the Bill also address the issue of secrecy. The cabinet system means that all major decisions in my area are made in part 2 of the cabinet agenda—that means in confidence and in secrecy. As an officer in the past, I have advised on what should be in part 2 and what should be in part 1 and in public. Decisions which I considered in the past should be made in open committee and information upon which those decisions are made are almost inevitably put in part 2 in Hillingdon—the confidential part of a cabinet meeting. I want to see a provision in the Bill which restricts the ability of members to avoid accountability by putting decision making into the secret part of cabinet agendas.

I shall give a couple of examples to show how ludicrous the practice has become. For the building of a new school in my area, a matter which I have raised in the House before, a consultant was employed to examine which site the school should be built on. It was controversial because the council wanted eventually to build on a country park—a green-belt field about which even the Mayor of London expressed his concerns. The consultant’s report on which sites were examined, all in council ownership, was put in part 2 of the cabinet agenda—the secret part. Even freedom of information requests were refused on the grounds of commercial confidentiality.

We must address in the Bill how councils are allowed to interpret commercial confidentiality in a way that avoids accountability and avoids their providing even the basic information to local members of the public and also to opposition members. Let me give another example. On the same site there was a recent archaeological find of flints. The report from the archaeologist who discovered the flints was put into part 2 of the cabinet agenda on the basis of commercial confidentiality. It might have been commercially confidential 6,000 years ago, but not now. Eventually both reports were released, but not in a timely fashion.

The problem—I say this from a non-partisan point of view—is that an opposition councillor who seeks to reveal anything that is in part 2 of a cabinet meeting is threatened with criminal sanction, so people are fearful of releasing information from part 2. We should address that matter in the Bill. We need to define more clearly what is commercial confidentiality, and what criteria can be used for putting items into the secret part 2 of the agenda for a committee or cabinet meeting. I believe that is being abused, not necessarily for corrupt reasons, but perhaps for party political advantage or because individual councillors do not want to be held to account by local communities.

The Bill refers to audit and some elements of transparency as best it can, but it does not really address accountability and scrutiny. In my borough, scrutiny is virtually non-existent. Scrutiny committees are packed with a majority of party members loyal to the leader and can therefore be controlled by patronage. Scrutiny committees might have been an excellent idea some years ago, but in many local authorities, including mine, they have proved toothless.

There are real concerns about corruption. Advice needs to be provided to local authorities on how independent investigations should take place when allegations of corruption are made, but again that is not covered in the Bill. I will cite an example I raised in the House some years ago relating to the planning incentive grant introduced under the previous Government by the then Department of the Environment. If a local authority considered its planning applications within 13 weeks, it was given an additional grant from central Government, so it was in incentive to improve efficiency. In my local authority—this was proved, and the details published, as a result of what I said in the House—dates and signatures on documents were found to have been forged in order to bring planning application decisions within the 13-week period, even though many were taken later.

Those forgeries were exposed because fortunately one of the planning applications was submitted by a police inspector. He looked at the documentation and discovered that the dates had been changed. In fact, decisions on his application had been recorded as taking place even before council officers had met him to discuss it. After an investigation, a couple of officers retired from the local authority unsanctioned. Bizarrely, the leader of the section responsible for the planning process was then promoted. There is nothing in the Bill that provides real direction for local authorities on how to deal with such matters. It is extraordinary that these things still go on, yet we turn a blind eye to it by not relating the legislation to the real world of local government.

I could cite many other examples, including Southern Cross and the neglect of the elderly in my constituency, and non-monitoring as a result of the staff cuts that have taken place. Again, elderly people suffered but no one was held responsible. There was a refurbishment programme of an old people’s home—I raised this 12 months ago—which resulted in a year-long delay for elderly people being relocated to their homes. There was laundering of money via contracts to a builder. Again, there was an internal investigation that reported to part 2 of a cabinet meeting and there were no sanctions whatsoever against any officer. I wrote to the Secretaries of States of successive Governments on all those matters to call for an inquiry, but there was no response and no action was ever taken.

I am using my local authority as one example, but there are others across the country. My point is that the Bill seems to be irrelevant to what is happening in my local authority and many others across the country. It is irrelevant to the concerns about corruption raised by Transparency International and to our concerns about good governance and accountability at the local level. I hope that there might be an opportunity to amend the Bill and expand some elements of its remit to tackle some of the concerns that I, many of my constituents and many others across the country have. I hope that the Government are not fearful of grasping this nettle. Their main priority in the Bill should not be simply to let more contracts to the private sector; it should be to improve local audit and accountability. A key element of that is probity.

Let me turn to the proposal relating to local authority publicity. The all-party group on the National Union of Journalists, of which I am secretary, has been expressing concerns about some of the ideas raised throughout the consideration of this proposal. The NUJ represents members of the local press and media as well as local government officers working on the newspapers and journals published by local authorities. It is worth remembering, whatever has been said in the knockabout between the parties, that NUJ members working in local government abide by the same code of conduct as other journalists but, as local government officers, are not allowed to put forward party political views. Indeed, they could be sanctioned legally for doing so.

It has been argued that additional statutory powers are needed to strengthen the existing code of practice. As my right hon. Friend the Member for Leeds Central said, there are existing powers for that and the Government could take action against local authorities that overstep the mark, but they have failed to do so. They have taken no legal action and there has been no judicial review whatsoever of any council newspaper. I find that surprising, given the outrage that has been expressed in this House and elsewhere.

Although many of us would like to see thriving local newspapers reporting what happens in council chambers and providing information to their local communities, in reality it is rare to find a single journalist even at full council meetings. I will circulate the information from the NUJ on just how many newspapers have gone to the wall over the past 20 years, how many jobs have gone in the industry and the impact that has had on quality journalism. The circulation of some of the papers that still exist is also very limited.

The council newspaper is therefore often the only way that local people can get some form of information on what is happening in the local authority. I have looked at this, as has the Communities and Local Government Committee and others, to see what impact council newspapers have had on the commercial viability of local newspapers, and no evidence whatsoever has been found. In some instances it is quite the reverse, with an element of synergy between the local press and the local authority in its publication of information. I am concerned that the proposed measure is unnecessary, because sanctions already exist. It will also undermine the dissemination of information by local authorities to their local communities. From the NUJ’s point of view, it could have as a consequence the loss of jobs at a local level, which we should all be concerned about.

There also needs to be some clarity. I have criticised Hillingdon council, but let me now try to defend it. It is currently seeking to ensure that the local community is properly informed on two key issues of local concern. One of them, as my right hon. Friend the Member for Leeds Central mentioned, is the expansion of Heathrow airport, in which it is up against a large corporation that is sending out large amounts of information to the local community, most of which is inaccurate. It is only the local authority that is providing a balanced analysis of what is happening. The other issue is high-speed rail. I am anxious that Hillingdon council, or any other local authority, should not be debarred from ensuring that local people are kept informed about such pertinent issues, because it is absolutely essential that they are fully aware of the consequences if they are to exercise their democratic right and decide on the actions taken by local and national Government.

I would like assurances from the Minister that the activities of local authorities to inform local residents of matters such as high-speed rail or the expansion of Heathrow airport will not be curtailed by this legislation. I agree that putting press releases out is one thing, but if the local press has declined so badly, with a limited circulation and an inability to report on many issues, a press release will be inadequate. I understand the point the hon. Member for Mid Dorset and North Poole made about other mechanisms, particularly the internet, but not all people are connected, so they rely on the local authority journal that comes through the letterbox. I agree with what she said about having pictures of local councillors on every page, which I could possibly do without.

It is important that we in no way hamper the ability of local authorities to communicate with their residents. There may be opportunities for authorities to work together with the local press. I understand the point made about newspaper wrap-arounds, which have proved effective in some areas. That can assist greatly in communicating local ideas, but it does depend on the local newspaper’s circulation. Even the free sheets do not get everywhere, unfortunately. It might be possible—I would like the Government to look into this—to enable partnerships between local authorities and the local press whereby joint publications or similar could assist in the dissemination of local information.

Photo of Chris Williamson Chris Williamson Labour, Derby North

Many local newspapers already print the council newspaper, thereby providing an income stream and additional source of welcome revenue for those newspapers, which are often under extreme financial pressure.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

I hate the word “synergy” but there is a potential for synergy between the local authority and some of the independent local press and publishers to disseminate information locally. One of the ideas that has come up is about local authorities participating in independent publishing companies—DCMS considered this previously—through joint ownership of a magazine or other communication that can go out to local residents. However, some flexibility from Government and amendments to the Local Government Act 2000 and the Local Government Act 2003 may be required to enable that sort of investment by the local authority in participating in independent companies.

There are constructive ways forward on this issue. If we take away the banter, whether it is about Hammersmith, or East End Life or whatever, we may arrive at a constructive way forward whereby local authorities can communicate with their residents and we can ensure that that is not used for purposes beyond good information dissemination and can protect jobs in the local authority and the local press.

Photo of George Hollingbery George Hollingbery Conservative, Meon Valley 6:52 pm, 28th October 2013

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 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 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.

Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government) 7:08 pm, 28th October 2013

This has been a lively debate on an important Bill and it is a pleasure to follow the contributions of many hon. and right hon. Members. Robert Neill spoke with experience of local government, and it may not surprise him that I want to start on a note of consensus with him and George Hollingbery by saying that I for one recognise that the Audit Commission went beyond its remit. Indeed, my right hon. Friend Hilary Benn made clear at the outset that we do not seek the restoration of the Audit Commission, and we understand that, to be frank, no one will lament its passing.

However, even though the Bill has been three years in the making, it is full of holes. My hon. Friend Chris Williamson said that the Bill is a dog’s breakfast. He made a strong speech in which he talked about the important functions of the Audit Commission, such as auditing and providing value for money in an independent way. Although we might not lament the Audit Commission’s passing, we should be concerned about those vital functions.

We must explore critical issues in Committee that are currently unclear, such as the arrangements for the future management of audit contracts and the transfer of Audit Commission functions. We do not know, for example, who will maintain the vital value-for-money tools. As a result of pressure in the Lords, not least from my hon. Friends, we have been promised improvements, such as amendments on opting into centralised arrangements for audit procurement. We can only hope that when the details are forthcoming in Committee, they meet the aspirations of their lordships and of the many organisations, including the LGA, that have pressed for those sensible amendments. It was good to hear Annette Brooke pressing the Government on that point. I hope that she will take forward the good work of her colleague, the noble Lord Tope, in Committee.

There is doubt about the amount that the proposals will save. When the Minister responds, I expect that he will make claims about the level of savings, as did the Secretary of State in opening the debate. However, it would do Ministers much more credit if they stopped double-counting and deliberately inflating the estimated savings. We all know that most of the savings have already been banked with the axing of the Audit Commission’s inspection work and with most of the audit work outsourced.

It is disappointing that the Government ignored the advice of the draft Local Audit Bill ad hoc Committee, which, after receiving conflicting evidence on the savings, recommended that a new financial impact assessment be made. The Committee believed that only modest savings were likely and was concerned about whether a real market would develop. As my right hon. Friend the Member for Leeds Central said, in the last financial year, only seven firms were appointed for the nearly 800 councils, health bodies and fire and rescue authorities that were audited by private firms, and 90% of those bodies were audited by only five firms.

The Audit Commission has raised fears that some local authorities might find it hard to attract a suitable auditor:

“In a free market, we believe there is a risk that some local authorities may find it hard to attract an auditor with the necessary skills and experience, at a reasonable price.”

It continues:

“We are aware that the firms are already considering which audits they would look to drop under the new arrangements.”

As my hon. Friend the Member for Derby North, the LGA and the National Association of Local Councils have said, that will be a particular concern for smaller authorities.

On new entrants to the market, I share the scepticism of the draft Local Audit Bill ad hoc Committee, which said:

“We heard evidence to suggest that it is not realistic for smaller firms and organisations such as mutuals and co-operatives to bid successfully for one-off audits without an inevitable impact on quality, consistency or cost.”

The Local Government Information Unit, whose evidence and advice should always be considered—I should declare an interest as its former chief executive—points out that a 10% increase in audit fees would wipe out any predicted savings. Grant Thornton said that

“it is likely that fees will increase, not decrease, as a result of the draft Bill”.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

One simple measure to expand the market might be to prevent an audit firm from being the auditor for a local authority if it already has contracts with that authority.

Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government)

My hon. Friend made a very interesting speech and I hope that he will follow the passage of the Bill closely. I will have to give further thought to the implications of his suggestion, but if the arrangements proposed by the Government are to work, there must be an open market and a wide range of audit firms must provide audit services. We would also want that to be reviewed regularly by the audit panel. The points that the hon. Member for Meon Valley made about the dismissal of auditors were important.

Steve Parkinson of the Society of Local Council Clerks said:

“When we get to the 2017 tender exercise, I cannot imagine those fees going down, and especially for the smallest, I can see them needing to go up.”

That speaks to the point made by my hon. Friend the Member for Derby North about what lies ahead. What assurance can the Minister give that the new audit arrangements will not lead to rising costs, rather than savings, for some councils?

On savings, it is welcome that, after Labour pressure in the Lords, the Government undertook to look sympathetically at a proposal for an optional joint procurement body. We welcome the assurances that the Secretary of State has given today and we look forward to seeing those proposals. Central procurement could save more than £205 million of public money over five years. That figure does not come just from the Audit Commission, but is supported by the LGA. Will the Minister assure us that he will bring forward detailed proposals on joint procurement as soon as possible? We hope to have them by this Thursday evening so that we can give them full and constructive consideration in Committee.

Joint procurement arrangements might address some of the concerns about the practicalities of requiring all councils to have auditor panels with independent members. As my right hon. Friend the Member for Leeds Central said, the Secretary of State considers himself to be a revolutionary, so he must be disappointed to be associated with arrangements that everyone but him sees as overly bureaucratic.

We will table amendments in Committee on the overlap between the new audit panels and the audit committees that most councils already have. My hon. Friend John McDonnell suggested that all councils should be required to have an audit committee. Most councils have one already, but we should consider his suggestion further in Committee. We will also raise the practicalities of recruiting sufficient independent and appropriately qualified members for the audit committees, which were referred to by the hon. Member for Mid Dorset and North Poole. What evidence does the Minister have that there are people who are willing and able to take on that important role?

In Committee, we will also explore the removal of auditors and the purposes for which data matching can be used. As the Bill stands, those purposes do not include the prevention and detection of maladministration and error, as my hon. Friend the Member for Hayes and Harlington pointed out. We want to see that included in the Bill. We also want auditors to be covered by the Freedom of Information Act and will table amendments to that effect.

Does the Minister understand the concern that whistleblowers might feel uncomfortable approaching a private auditor that is employed by a local body or council? That is why we will propose that the audit committee should be named as a prescribed person in the Bill. I do not understand why the Government have resisted that. Perhaps the Minister will enlighten us.

My hon. Friend the Member for Hayes and Harlington highlighted concerns about corruption. I have read the important report that he mentioned. It is important that the new audit arrangements maintain independence, encourage probity, make appropriate provision for whistleblowers and ensure that it is possible to compare the relative performance of different authorities. He made wider points that we should explore further, including on the openness of council meetings, the use of commercial confidentiality and the role of scrutiny.

Perhaps the biggest disappointment with the Bill, as my right hon. Friend the Member for Leeds Central and my hon. Friend the Member for Derby North said, is that the proposed audit arrangements do not provide for the changing way in which public services are being managed and provided. The proposed arrangements require each local authority and other local bodies and public sector bodies to conduct separate audits. However, shared services, community budgets and combined authorities all demonstrate that there is a shift towards much stronger partnership working by local authorities, including with Government Departments. It is therefore a missed opportunity that the Bill focuses too narrowly on individual local authorities, rather than on arrangements that would enable auditors to follow the public pound through the system.

Many hon. Members have spoken about the provisions on local authority publicity. We support the code of recommended practice on local authority publicity and believe that it is broadly sensible. However, as my right hon. Friend the Member for Leeds Central said, there is no evidence to suggest that there are widespread breaches. No hon. Member has provided clear evidence of that today. The Government have taken no action to date under the code. Why not?

Clause 38 will allow the Secretary of State to issue a direction regardless of whether or not he thinks the authority is complying with the code. That is an extraordinary power grab that is worthy of the worst form of authoritarian government. The hon. Member for Bromley and Chislehurst revealed the true purpose of it. In seeking to support the Government, he listed a range of council publications, but gave no examples of where they had breached the code. The only common factor between the publications was that they were all from Labour-led councils. I know that in his heart he is a localist, as am I. Does he not agree that the way to deal with the problem is to fight the elections in those areas a little harder and to seek a Conservative majority, because it is clearly their political control that offends him, rather than the content of the magazines?

As for the wider controls on council publications, the Government suggest that local authority publications undermine the local press, but there is no evidence to prove that. Local papers are struggling for a variety of reasons. Indeed, as my hon. Friend the Member for Hayes and Harlington said, sometimes there is a welcome synergy between local newspapers and council papers. The Conservative-led LGA has complained, rightly, that the proposals are ill considered and not based on evidence or proper consultation—points echoed in the House of Lords by the Conservative peer Baroness Eaton, and the Liberal Democrat Lord Tope.

In my area, I have received many representations from residents in the smaller towns and villages of east Northamptonshire for whom the Nene Valley News—published, despite my best efforts, by the true blue local council—is a communications lifeline. Some residents of those villages feel so strongly about the issue that they tell me they will consider voting for me and my party for the first time because of the impact the measures will have on general well-being in those villages. That is surely not what the Secretary of State thought would follow from his nonsense claims about pocket Pravdas, which he cannot substantiate. We hope the

Government will see sense when we consider the Bill in Committee, and I hope we will have the support of the hon. Member for Mid Dorset and North Poole because, as she rightly said, this is using a sledgehammer to crack a nut.

When the Minister responds, will he say whether he accepts the comments made by his colleague, Baroness Eaton, a former leader of Bradford council, that the Bill centralises powers to the Secretary of State? Will he say how many local authorities in England publish magazines more than six times a year, and will he inform the House how many times the code of practice on local authority publicity has been breached? We are concerned that the third major area of the Bill on council tax referendums adds further uncertainty to council finances at a time when—as my hon. Friend the Member for Derby North said—councils face incredible challenges, and that that could lead to further reductions in essential local services.

Clause 39 means that councils may have to hold a referendum on council tax increases because of increases in levies due to agreements made in previous years or over which they have no control. As my right hon. Friend the Member for Leeds Central said, we are deeply concerned about the retrospective nature of those changes—a point pressed on the Minister by the hon. Member for Mid Dorset and North Poole in another sensible intervention.

A year ago the Government signed city deals to improve transport infrastructure and boost local growth by allowing specific transport authorities to raise money for specific schemes. A year on, that agreement is being torn up. That undermines confidence in the whole city deal process across government, and harms the certainty on which sound financial planning and private investment relies. In short, it is damaging for our cities and our economy. As the LGA said:

“There is a risk of perverse outcomes that will put growth generating investment at risk”.

That is absolutely right, and I hope the Minister will address that issue and think again.

There are other complications. Authorities have no powers to reject levies, yet they are obliged to hold referendums because of large levy rises imposed on them by other bodies. The actions of levying bodies could lead to council tax referendums in some authorities, but not in neighbouring authorities because some levying bodies cross local authority boundaries. I hope the Government recognise the serious problems with those proposals.

The Chartered Institute of Public Finance and Accountancy stated:

“The entire burden of any referendum is actually placed on major preceptors and billing authorities despite the fact that they have no ability either to directly influence the amount of individual levies or require a body to reduce its levy as a result of a referendum.”

Does the Minister accept that including levies in the amount used to trigger a council tax referendum will jeopardise the city deals his own Government have approved? If a council tax referendum is lost and the levying body refuses to reduce its levy, what does he expect a local authority to do?

Despite serious problems with the Bill, I will end on a positive note. The Government propose to introduce two new elements to the Bill: on parish polls and transparency of council meetings. As the Minister would expect, the Government will have to answer the justifiable criticism—not least from our friends in the other place—that those proposals are being introduced rather late in the day and have not had the scrutiny given to the rest of the Bill. However, we support the intentions behind the proposals, and stand ready to play catch-up and assist with detailed scrutiny of those proposals in Committee. I sincerely welcome assurances that the Government will address the concerns raised by my right hon. Friend the Member for Leeds Central about combined authority boundaries. I hope we can do that through the Bill, but we welcome the assurance that another way will also be sought.

Finally, I thank the Minister for the helpful dialogue we have had since my appointment, particularly over the instruction to extend the scope of the Bill, and for the way he has facilitated contact with officials at his Department involved with the Bill. I hope that he is under no illusions about the many holes in the Bill, but also that he is in no doubt that the Opposition will approach Committee stage constructively.

Photo of Brandon Lewis Brandon Lewis The Parliamentary Under-Secretary for Communities and Local Government 7:24 pm, 28th October 2013

Right hon. and hon. Members have raised a number of important points in the debate, and I look forward to discussing some of them in more detail during Committee as well as now. I will first respond to some of the main points raised, and then I will speak more generally and hopefully cover all the points Members have made.

A few comments have been made, not least by Hilary Benn, about an audit for a modern world and authorities working together—an understandable point as we are looking to modernise the way we all work. Auditors of local government bodies and health bodies are required to comply with the relevant code of audit practice, and are used to working together across organisations in both the public and private sectors. It is right, however, that auditors must assess the body responsible for the spending, which is why the Bill is worded in this way.

The right hon. Gentleman also raised data matching, and we are sympathetic to that issue and will no doubt discuss it in Committee. Andy Sawford mentioned a sector-led procurement body. We are open to allowing the establishment of a central procurement capacity, provided—this is key—that it is led by the sector, is not mandatory, and gives local authorities the choice and opportunity to take part or appoint locally. We will deal with that in Committee.

Comments have been made about independent audit committees, or auditor panels, and the approach in the Bill gives flexibility to local authorities. A body can use its existing audit committee to act as the auditor panel if the majority is independent, or it can establish a small separate auditor panel if it is not, thereby allowing for anything that might happen later with a centrally organised sector-led body.

Chris Williamson raised some issues, not least competition in the audit market. We are not creating new barriers; in fact, we are opening the local audit market and I hope it will develop even further. He also commented on whether council tax referendums are fair—other Members also made that point—and said that nobody wants this change. Councils such as Stockport, Liverpool and Newcastle—to name a few—might disagree with him, however, as they have all asked specifically for this change, which will put all local authorities on to a consistent footing. Currently, some local authorities undertake functions directly and in-house, and are therefore subject to referendum principles within that. Levying bodies are not, and therefore the proposals will bring things closer together.

My hon. Friend Robert Neill did an excellent job early in this Parliament on ending the Audit Commission—the quango and the way in which it worked with the comprehensive area assessment. He has huge experience in and understanding of local government, and how the Audit Commission worked. I appreciate the time he has given me since I took office to work through some of those issues. His huge experience has been a great asset in reaching the point we have with the Audit Commission. We have managed to save councils so much in officers’ time, and therefore taxpayers’ money, over the past couple of years, as my right hon. Friend the Secretary of State was able to take through the ending of the comprehensive area assessment. My hon. Friend the Member for Bromley and Chislehurst mentioned the publicity code and referendum principles, and I will touch on those in the main part of my speech.

I welcome the support of my hon. Friend Annette Brooke for parish polls and the modernising of transparency, as I do that of the hon. Member for Corby. My hon. Friend noted how important the council tax freeze has been for families, which is one reason why we think it so important for that freeze to be applied across the board, fairly and evenly, as I have outlined. She also mentioned statutory notices, which I will touch on in a moment.

John McDonnell touched on a range of issues that are probably outside the scope of the Bill. I must explain to him, however, that the Audit Commission has been contracting out a percentage of its work for some considerable time. He also touched on counter-fraud activities and outcomes, and we are clear that local government must tackle fraud. That is worth about £2 billion a year, and it is important for taxpayers that it be dealt with. We are actively supporting local government to tackle that issue, not least through the Fighting Fraud Locally strategy with the Local Government Association.

At the point of closure, the Audit Commission’s national fraud initiative will transfer in its current successful form to the Cabinet Office. We recognise the value of the Audit Commission’s other counterfoil tools and are working with it and other interested parties to develop recommendations on their future.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

May I suggest that the Minister meet Transparency International UK and go through its report? Perhaps he could offer advice in Committee after meeting that group.

Photo of Brandon Lewis Brandon Lewis The Parliamentary Under-Secretary for Communities and Local Government

As a general matter of principle, I am happy to meet anybody who wants to talk about any part of my brief. I obviously extend that invitation to Transparency International UK.

On the fairness of council tax referendums, my hon. Friend the Member for Mid Dorset and North Poole rightly outlined the anger of some areas and residents when they are faced with claims of a council tax freeze but receive spiralling bills from their authority. Clause 39 specifically addresses that—it ensures that claims of a freeze are based on the bill that hits doormats rather than any half-measures.

My hon. Friend George Hollingbery, who has a background in local government, spoke of his wide experience of comprehensive area assessments and gave a great outline of exactly why we need a firm ending of the Audit Commission, so there is no chance of it coming back in the format we have experienced. He touched on auditor appointments, on enforcing the publicity code, which I will deal with later, and on council tax referendums and levying bodies. He suggested a range of interesting opportunities to ensure that referendums are dealt with in a proper and fair manner for the authorities. I look forward to taking his suggestions forward in Committee.

Let me be clear why the Government have decided to proceed with the final abolition of the Audit Commission. The House has heard how our reforms to local audit will result in a more efficient audit system, with an estimated £1.2 billion of savings—I would not want to disappoint the hon. Member for Corby by not mentioning the £1.2 billion of savings. That is exactly why it is important to push forward and embed that to stop any chance of future Audit Commission mission creep.

The reforms are not just about saving money. They are about the Government’s drive to decentralise power and responsibility to local bodies, and giving local people better tools to hold bodies to account. By cutting out the middleman, local bodies will no longer be forced to foot the bill for Audit Commission costs. They will know exactly what they are paying for in their audits. Local bodies will be required to publish information about their auditor appointments and any public interest reports they receive from the auditor. People will therefore be able to find that information locally, rather than having to go to a remote central body.

The reforms improve local accountability. As many hon. Members, including Opposition Members, have said, the Audit Commission had lost its way, forcing councils to focus on Audit Commission priorities rather than priorities that matter to local residents. My hon. Friend the Member for Meon Valley outlined some of those. As a councillor, I remember sitting in meetings when officers told us what we should do—it was often to do with waste collection. The suggestions were not made because they were right for our residents, but because they ticked a box to please the Audit Commission, and the Government would punish us further down the line if we did not take that action. The Government’s impact assessment estimates that the cost to local authorities of complying with the CAA was around £25 million per year—that money could be better spent on other things that residents want and need and deserve to have delivered.

Let me reassure hon. Members who are concerned that the quality of audit will suffer. The Government are committed to ensuring that that does not happen. Private audit firms have long had a role to play in auditing public bodies. As I have said, the Audit Commission has contracted out some 30% of its audit contracts to private audit firms. Last year’s outsourcing exercise demonstrated that public audit can be carried out to the same high level but at a much lower cost to the taxpayer.

The Bill contains robust mechanisms to safeguard auditor independence. The work of the auditors remains largely unchanged and auditors will still be required to use their professional judgment to decide whether to make a report in the public interest if they believe something is amiss. To enshrine that important principle, the Bill allows auditors to recover costs for their time in making a public interest report or advisory notice. By amending existing secondary legislation, we will ensure that whistleblowers can make disclosures to local auditors directly or to the National Audit Office.

Many hon. Members have mentioned the publicity code. I want to make one point clearly at the outset: there is no change to the code. The measures contribute to the Government’s commitment to localism rather than run counter it. Given that the code is not changing, I am somewhat surprised that any hon. Member has a problem with it being put into statutory form. Opposition Members have complained that the Government have not enforced the voluntary code. By putting it in statute, we can make sure that it is enforced to ensure that taxpayers’ money is spent appropriately and properly, and not for political ends.

There have been exaggerated claims that provisions on the code will lead to central Government clamping down on, for instance, HS2 campaigning, which has been mentioned. That is nonsense. Councillors are free to campaign on behalf of their constituents. Indeed, the Government legislated in the Localism Act 2011 to give councillors the freedom to campaign. If any challenge is balanced and factually accurate, it will not contravene the code, unlike some publications. For example, Nottingham city council’s website seems unusually to mirror the Nottingham Labour party’s website. Residents might want to question expenditure on that sort of thing. If anything, the publicity code defends council communications from political interference and propaganda-pushing, as was outlined by my hon. Friend the Member for Bromley and Chislehurst, who gave a range of examples.

The Government have no intention of monitoring or censoring communications, but it is right for us to act when concerns are expressed that local authorities are in breach of a code approved by Parliament. It is certainly right to act when authorities use taxpayers’ money to fund publicity for political purposes.

Photo of Brandon Lewis Brandon Lewis The Parliamentary Under-Secretary for Communities and Local Government

The right hon. Gentleman keeps asking for evidence, but my hon. Friend the Member for Bromley and Chislehurst has given it to him. In addition, I suggest the right hon. Gentleman compare Leeds city council’s website with the Labour party website.

The Government are aware of the burden that placing statutory notices in newspapers can place on local authorities, and that some authorities believe there are cheaper and more effective ways of informing local people on issues that affect their lives. The Secretary of State has been clear that, in the internet age, commercial newspapers should expect, over time, less state advertising as more information is syndicated online for free. Local papers need to develop new business models to fit the

21st century, particularly as it does not make sense to cross-subsidise one industry with fees from another. However, that will take time.

The Government’s council tax referendum measure will give protection against large increases in taxes raised by levying authorities such as waste disposal, integrated transport and pension authorities. Some say that the measure is unfair. I dealt with that earlier in my speech, but let us be clear that local authorities and levying bodies can work together and have done so, both under the old Government capping procedure, and more recently through the referendum principle. Councils have long worked together to agree council tax levels. That was always the case under previous systems.

Photo of Chris Williamson Chris Williamson Labour, Derby North

Will the Minister at least acknowledge that levying bodies could, if the referendum goes against the council tax increase, result in even bigger cuts in the local authorities affected? Surely he must accept that.

Photo of Brandon Lewis Brandon Lewis The Parliamentary Under-Secretary for Communities and Local Government

I do not accept that. The hon. Gentleman tried to make a good argument for his point of view—he wants more councils to increase tax—but the Government believe in freezing council tax and in keeping the cost of council tax down for families. We are unlike the previous Government, under whom council tax doubled. He made the argument for letting council tax spiral yet again, but I am afraid the Government do not agree with him.

The Government have made it clear that there has been no agreement to allow excessive increases in council tax without a referendum as part of a city deal. City deals are important, but they are also subject to the referendum principles. The largest estimate for a city levy in Leeds is still well below the 2% referendum principle—it is between 0.2% and 0.9%.

The House will decide shortly whether it consents to the Government including measures in the Bill to modernise the rules governing parish polls and to increase the transparency of council meetings. At the request of the other place, we are seeking to amend the Bill to include measures on parish polls, because they need to be modernised to bring the archaic process up to date, and to ensure they provide a legitimate method for local communities to have a voice on issues that directly relate to parish matters.

The widening of the Bill’s scope creates the opportunity to tackle not only parish polls, but problems with the transparency of council meetings. Those important measures will increase local accountability, strengthen local democracy and save taxpayers money. I appreciate the co-operation of the hon. Member for Corby on the matter and how he has worked with the Government to bring the measures forward. We will doubtless have further discussions on them in Committee, but town hall doors should be open to bloggers, tweeters and those who want to film and report on meetings. We will discuss that further in a few minutes.

It is a pleasure to serve under your chairmanship, Madam Deputy Speaker—this is the first time I have spoken at the Dispatch Box with you in the Chair. I hope the House sees fit to support the Bill.

Question put and agreed to.

Bill accordingly read a Second time.