Police Reform and Social Responsibility Bill — Report (1st Day) (Continued)

Part of the debate – in the House of Lords at 9:30 pm on 29th June 2011.

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Photo of Lord Harris of Haringey Lord Harris of Haringey Labour 9:30 pm, 29th June 2011

My Lords, first I must apologise to the House. This is an extremely complicated group of amendments and I am sure that the rapid rate at which your Lordships are leaving the Chamber is an indication of how much people are looking forward to this particular discussion. I also want to apologise for the fact that because it is so complicated I have got the groupings slightly wrong. In this group we should be debating Amendment 84, which is in the next group; Amendments 204 and 205 would more comfortably sit with Amendment 203 at some much later stage, because it is a really quite separate debate; and I am not going to speak to Amendment 25 because some of the other amendments more than cover that point.

Therefore, I am speaking to Amendments 8 to 13, 24 to 28, 30 to 32, 65, 84, 268 and 269, 274 to 290, 294 and 295. These all relate to creating corporation sole status for chief constables and the Commissioner of Police of the Metropolis and deal with the implications arising from that. They would allow the local policing body to delegate functions to a chief officer, to enable the day-to-day management of police resources without having to create a separate legal identity for chief officers. The amendments also deal with audit implications, in that chief officers do not need to employ a separate statutory financial officer to undertake this function as all audit responsibilities will remain with the local policing body.

The other amendments confirm that chief officers will not be able to enter contracts, acquire or dispose of property and land or borrow money in their own right, but that they could do so under the terms of a delegation agreement from the local policing body. There are also amendments that would deal with the status quo in relation to police staff; they provide that although the employing body is the governing body, chief officers would have direction and control of all staff employed solely to assist the police force. Finally, there are amendments which deal with accounting and audit issues. Again, they reinstate the status quo and provide a simplified system of governance.

This is a brief summary but I want to explain why these are so critically important. We are in real danger here. Without these amendments I fear that we will create, frankly, little understood structures that will prove unworkable in practice. When we come to the review that the noble Baroness has just promised us in 2017-or rather, I fear, several years before that-we will realise that these arrangements are unworkable and we will have to revisit them. What is more, they will produce additional paralysing bureaucracy-something that I thought this Government did not think was a terribly good idea. It will produce unnecessary duplication-again, something I thought this Government did not agree with. What is worse, it will produce confusion about who is responsible and accountable for the £12 billion police budget.

I understand-at least I think I do-that the Government's motivation in these proposals is to separate clearly the functions of the governing body from that of the force. I am not convinced that that will actually be the end result. On the contrary, I believe the proposals will result in a confused landscape rather than a simplified one. There is a great deal of concern, as demonstrated in Committee in this House, about the whole concept of corporations sole. I am sure that Ministers are looking forward to explaining it to us yet again in a few minutes. At the moment, the Bill, as amended, contains proposals that the governing body-the police commission or whatever it will be called-is a corporate body and only chief officers are corporations sole. But if, as many of us expect, the Bill should revert to PCCs being corporations sole once it returns to the other place, my comments about the principle of using a corporation sole would apply equally to PCCs.

At an earlier stage of the Bill, my noble friend Lady Henig raised a number of concerns about this. The Minister responded with a short list of bodies which were existing corporations sole. These included the sovereign, some but not all bishops, the Treasury Solicitor, the Information Commissioner and the Children's Commissioner. But the Minister did not answer the questions that had been asked about the powers and the norms and practices in relation to corporations sole. We remain none the wiser and we do not know the answers to questions such as: what laws set rules about corporate governance within corporations sole? We do not know what general powers and duties these laws give the incumbent or what those laws say about the accountability of the incumbent for those powers and duties; nor do we know if any of those laws or any other common practice within corporations sole conflict with what is being proposed in this Bill. We are in a vacuum.

Since the Minister was unable, or perhaps unwilling, to answer these questions, I have tried to do some research. I have to say that it is not possible to find out a great deal about corporations sole. The fact that the information is so scarce rings serious alarm bells as far as I am concerned. A quick search on Google will verify the identity of a number of corporations sole. It also yields some helpful information about the historical context of that. I am pleased to tell your Lordships that the concept is rooted in the medieval church. It was about a desire to separate bequests to the church from those to its priests personally, which no doubt was a very laudable intention.

However, I have to ask noble Lords whether a medieval construct to avoid priests getting their hands on money which was intended for the mother church is something we want for a modern police service. I just wonder where this strange idea came from and why it was suddenly decided that this was the model that we want in terms of governance for a police service in the 21st century.

This medieval background tells us nothing about the powers or norms of practice of corporations sole. I eventually managed to establish that for the most part where people have been institutionalised as corporations sole, it is to enable them to do a specific thing. It does not often seem to be for the purpose of giving them general corporate powers as individuals. But the Bill does not specify that tightly enough. For instance, I understand that bishops are generally corporations sole only for the purpose of holding land and that some of the other bodies are corporations sole only for the purpose of holding things in trust. Where it gives more general corporate powers to individuals, concerns seem frequently to be expressed about accountability and transparency.

I think that it is the Office of the Children's Commissioner which has most recently been given corporation sole status. When she submitted the review of her own office in September 2010, the Children's Commissioner concluded that,

"as a Corporation Sole, the Commissioner is not accountable"-

I repeat, "not accountable"-

"for his/her decisions and so can do anything he/she chooses within the remit set out for the role in the Children Act".

She then talks about some of the pressures in terms of being a non-departmental public body, but I do not know whether that will apply in these cases. She continued that the Office of the Children's Commissioner,

"is governed by a mix of little accountability and much bureaucracy".

And that is what the Government want to impose on our police service. I understood that it was supposed to be the opposite but that is what the Government are doing and what this means.

I do not want to reopen the debates on the amendments I moved earlier, but the Children's Commissioner was led to conclude that:

"The need to ... allay concerns regarding proper management and decision-making has led us to conclude that the Corporation Sole model is inappropriate and that", there should be,

"a Board to scrutinise the Commissioner's work and provide strategic advice".

However, her message is clear; it is an inappropriate model, yet we are going to have it for the police service. Frankly, if we do not deal with this issue now, we shall be saying much the same thing about policing in a very short time indeed. We will have to revisit it, and probably not as far off as 2017.

I am particularly alarmed about the comments of the Children's Commissioner on the perceived lack of accountability of a corporation sole's status. Perhaps above all other services, it is essential that the public have confidence in the accountability arrangements for policing, but I am deeply worried that the Bill will achieve the opposite. For this reason, Amendments 8 and 24 would remove the status of corporation sole from chief officers, while Amendments 12, 13 and 30 to 32 would then remove certain generic corporate powers from chief officers, such as the ability to make contracts and acquire and dispose of property.

Aside from my general concern about transparency and accountability, there are also specific issues about who is accountable for public money under the proposals in the Bill. In theory, and certainly under the current arrangements, this ought to be the governing body. That is surely also fundamental to the Government's rationale in proposing police and crime commissioners in the first place. If we accept that an elected police and crime commissioner should have a mandate on behalf of local people to determine how their taxes are spent, surely we should have transparency of governance, but that is not here under the current arrangements.

This is going to be entirely inconsistent with what will happen in practice under the current wording of the Bill. It envisages that the police fund, both that provided through central government funding and that provided through the police precept of local council tax, would go initially to the governing body. That is straightforward, and so far, so good, but the governing body would then make grants. The vast majority would be a grant for chief officers of police as a separate corporation sole to enable him or her to manage the police force and police operations, although smaller grants might be made to other bodies.

At this point, any funding granted to the police will have passed from one corporation sole to another corporation sole. When that happens, it looks very much as though the funding has passed out of the jurisdiction and influence of the governing body. I do not think that that is what the Government intend, but that is the consequence. The money is passed over and it goes across to a new corporation sole, which is then responsible for it. How will the proposed new governance arrangements safeguard public money? It is not clear that they will because there will be a separate corporation sole.

It is unclear what leverage the governing body is going to have, or even what financial information it can access to influence how the money is being spent. Certainly it will be able to see audit information after it is finalised and published each year because that is a public document, but this is completely useless for exercising any leverage whatever over how the money is used before it is spent. That is a very strange system of accountability. It radically changes the way in which things work at the moment, which enables the governing body to have a clear grip on strategic financial matters. That is achieved through a police authority delegating certain functions to chief officers, particularly those relevant to day-to-day financial management. It retains clear lines of accountability back to the governing body, which remains ultimately responsible and is the auditable body. The mechanism enables a police authority to give the chief officer the freedom to exercise their professionalism in managing force resources, but can restrict or grant this according to local circumstances. More important, it gives the governing body the final say about how public money is spent.

By contrast, the arrangements in the Bill are completely unclear, and it is not at all certain who has the final say. These amendments would resolve the problem by reinstating the ability of the governing body to delegate functions. The other side of creating two separate corporations for one police fund is that it creates two separate auditable bodies and a need to duplicate chief financial officers. That is not sensible, but it is a direct consequence of creating two corporations sole. If it were just a matter of saying that both the force and the governing body needed suitably qualified financial officers, that would be less of a concern, but it does more than that.

The wording in the Bill, by relating the finance post to the Local Government Finance Act 1988, gives both financial officers statutory powers. There will be two financial officers, both with statutory powers, leading to duplication, conflict, confusion and lack of transparency. I am sure that that is what the Government intend, and no doubt the Minister will assure me that that is the case. Having two financial officers is a recipe for confusion and tension, particularly if they deliver different professional judgments. By all principles of good governance, the power to stop expenditure should rest with the governing body, not with a person who is in effect accountable only to the chief operating officer, which frankly distorts ultimate accountability.

The creation of two statutory finance officers also has the consequence of creating two separate auditable bodies in each area for what is in essence one police fund. This is confirmed through some changes to Schedule 16 that reinforce the creation of two separate auditable bodies. Again, I have to ask the Government whether that is what they really want. Do they want two separate auditable bodies? I can think of no other context in which you would audit the same money twice. It has the inevitable consequence of duplicating effort and adding significantly to bureaucracy.

Audit and the other activities that sit alongside it are important tools of financial governance, such as the power of the relevant financial officer to prevent expenditure where it is unlawful and the ability to check how public money is being spent. To ensure that these powers are conducted in a manner consistent with good governance, other public bodies such as local authorities have statutory obligations to establish audit committees. These are usually set up with a degree of independent input to provide a credible check and balance on audit activity. The Bill is completely silent about this requirement for either-not one, but both-of the auditable bodies it establishes. I am tempted to say that this is medieval, but at any rate it has to be seen as a serious flaw in the legislation, which is inconsistent with any modern practice on audit and financial governance.

To resolve these problems, amendments in this group refer to a proper independent audit committee within the police and crime panel; there are amendments that remove references to a statutory financial officer for the force and separate audit arrangements for the chief officer.

I do not want to be accused of being naughty again, but there are also amendments here that deal with police staff and the transfers involved. I know that the Minister will be bursting to come back to this subject when she tables the mysterious amendment that is in the process of being drafted. I shall not burden the House with going through all that in any great detail, but serious complications will be involved in transfers of staff to the new bodies proposed in the Bill.

The Government envisage the majority of assets other than people in any event residing with the PCC, although that is not yet properly reflected in the Bill's wording. They see the majority of staff eventually being transferred to the chief officer as a corporation sole. It is pertinent here that the key driver for creating chief officers as corporations sole was precisely to enable them to employ and manage their own staff. However, resolving the issue of staff with dual roles will be a source of considerable tension between chief officers and the governing body-a point I referred to earlier. Whether that debate happens before or after implementation, it is a real problem that will take some real effort to resolve in any detail.

I accept that two-stage transfer arrangements are the only way in which the Government will have a fighting chance of implementing any of their proposals by next May. However, they create other significant problems. The biggest of these is the additional uncertainty imposed on police staff about their future. This will occur at precisely the time that the Winsor review is being implemented and other efficiencies bite. As further austerity measures are introduced, they are likely to have a disproportionate impact on police staff relative to police officers, who have more statutory protection against redundancy.

Many of us in this House have received or seen communications from Unison on behalf of police staff. Essentially, they are alarmed about this transfer process and see it as providing an opportunity to rationalise the numbers of police staff and several opportunities to erode their pension rights. This is not a good time to be testing the resilience of policing in this way and diminishing staff morale.

All these difficulties could be resolved in one sweep: by removing the status of corporations sole for chief officers and broadly reinstating the status quo as to who is responsible. It would also strengthen police accountability, which I understood was the intention of the legislation.

The exact method of doing this and putting in place satisfactory alternative arrangements can be examined through changes to the structures and governance mechanisms proposed through other amendments. However, all the other solutions would rely on creating a corporate body in which employment, contractual, financial and accountability rights and responsibilities are vested. It is after all the most tried and tested model in this country and we know that it works. It is not going back to the medieval church to tell us how best to organise it. What on earth are we doing resorting to other models in the form of corporations sole?

We have no idea whether this would ultimately work in a policing context. We have just heard the Minister speak powerfully against the concept of pilots to see whether it would work. I suggest that policing is not a good area in which to experiment with corporate structures that are so little understood. It is particularly the case when even bodies that are existing corporations sole are expressing doubts about their own governance and accountability and concluding that a corporate body is a far more robust structure.

We know that the arrangements that the Government are proposing would create duplication, bureaucracy and tension, and we have good reason to infer from similar models that accountability in governance would be opaque and suspect. It is astonishing that if the Government's stated intention was to replace weak,

"invisible and unaccountable police authorities", they managed to come up with an arcane replacement of dubious transparency, confused accountability and eroded powers to determine strategic resourcing decisions. Can this really be progress? We should not be creating corporations sole at all. I beg to move.