Clause 5 - Modification of Act in relation to smaller authorities

Part of Local Audit and AccountabilityBill [Lords] – in a Public Bill Committee at 3:30 pm on 5th November 2013.

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Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government) 3:30 pm, 5th November 2013

We broadly support the clause and do not envisage a stand-part debate, unless the Chair thinks it necessary. We also broadly support the amendments, although I do want to test the effect of those amendments, specifically in relation to our amendment 87 but also, more broadly, the cumulative effect of the other arrangements. As the Minister says, we will be having a debate about sector-led procurement, but certainly in relation to new clause 1, I envisage that our focus at that time will be more on principal authorities and therefore this is an opportunity to seek some assurances and clarifications from the Minister about how the Bill will apply to smaller authorities.

The Bill will affect about 9,000 parish and town councils around the country in different ways. There is a three-tier regime. There is an exemption for those with a turnover of under £25,000 a year. There is an intermediate level, which I think the Minister envisages all town and parish councils coming under, but will he confirm that? Does he have any current figures on which town and parish councils will not be considered to be the smaller authorities under £6.5 million? Then there are the larger authorities, with a turnover of more than £6.5 million. It is clearly sensible to make the arrangements for smaller authorities proportionate. We welcome the way in which the Government have sought to do that, which is set out in clauses 5 and 6. When we come to the debate on clause 6 I will have some questions on the qualifying areas.

The Government were encouraged by the Earl of Lytton, the president of the National Association of Local Councils, to set out why the £25,000 threshold was chosen. He made the interesting point in the other place that that is half the salary of a clerk. It is easy to see how a small authority that takes the simple measure of seeking to professionalise their clerk will find itself subject to having to prepare a proper audit, rather than being exempted and being subject to the much lighter touch arrangements that apply to the smaller authorities. Will the Minister explain why the threshold was set at £25,000, rather than £50,000, which might allow a local authority to carry out its core functions? Many parish councils do not provide direct services but do employ a clerk, rent an office and manage small services within villages and small communities. Some councils will be caught by the threshold and will have to take part in the sector-led body, or procure an independent audit. Will the Minister explain how the £25,000 threshold was arrived at? I do not necessarily oppose it. We all want to ensure that public money—even £25,000—is spent well, but I want to know what consideration the Minister has given to why that level is right and who it will capture.

The Minister presumably envisages these to be opt-in arrangements for smaller authorities, and in the spirit of localism, we support them. The amendments will  allow those opt-in arrangements to be developed. But what does he envisage will happen if an authority that has a turnover of £30,000 or £40,000, chooses—the Bill gives it the right to do so—not to participate in joint procurement because, in its view, it is not be priced attractively? As I understand it—the Minister can correct me if I am wrong—it would have to have an independent audit panel. Later, we will explore some of the challenges we foresee in setting up the independent audit panel, such as the cost. A small town or parish council may have to opt in to the joint procurement simply because the costs are prohibitive. I can foresee the practicalities being such a challenge that all smaller authorities will simply become part of a joint procurement arrangement. Has the Minister given assurance to the National Association of Local Councils, the Society of Local Council Clerks or any individual local authorities? I know he visited Sevenoaks parish council recently because he gave me an interesting written reply about his visit, and I know he is committed to this sector. What assurance has he given to smaller authorities that it will be in practice realistic for them to make a localist choice and not to opt in to the joint procure arrangements, given that they are subject to the other provisions in the Bill?

We had an interesting discussion earlier about joint procurement for principal authorities. Is it the Minister’s intention that NALC will be the co-ordinating body? It seems that it is the principal consultee at the moment, certainly from the Minister’s remarks and the submissions I have received from NALC. Does he envisage that NALC would lead the sector-led body or that some other form of arrangement might emerge?

I know NALC well, and declared an interest this morning as I have worked with it previously on extending the general power of competence and the power of well-being to town and parish councils. It is a light-touch, nimble and effective organisation, but is very small when compared with the Local Government Association in its annual turnover. If NALC is to lead the body, does the Minister consider that it would have the capacity and expertise to take on that leadership role? If not, who else is he looking at to develop that sector leadership?

Specifically in relation to smaller authorities, will the Minister comment on the transfer of the Audit Commission’s functions in relation to any outstanding contracts between 2015 and 2017 that relate to town and parish councils? That brings us back to my earlier question about which authorities would be captured, as the significance of those contracts relates to the size of town and parish councils. There will be some that are currently provided for by the contracts that have been let in the transitional arrangements. If contracts are transferred from the Audit Commission to the sector-led body for principal authorities, which was certainly the tenor of our conversation earlier and is the basis upon which the Minister is consulting the Local Government Association, for example—indeed, he has said that he does not want to set the details out in the Bill because the matter needs further work and there may need to be regulations—will there be separate arrangements for contracts to be transferred to the sector-led body for smaller authorities?

In either event, we need to consider the implications. For example, if the contracts are to be transferred to the joint procurement body for principal authorities, it could be done as part of arrangements in which the  body is building capacity to become the sector-led body and so there might not be the opportunity for smaller authorities to develop their own sector-led body. On the other hand, if those responsibilities are transferred to the National Association of Local Councils or some new sector-led body for joint procurement for smaller authorities, my concern would be whether, frankly, that body would have the capacity to manage those contracts, given the important statutory functions in the management of those contracts. I hope the Minister can offer some reassurance on that point.

Amendment 87 is designed to test the intention behind the clause, and we have an open mind. As I understand it, the issue here is a letter of objection from a local elector needing a response—if I have grasped the wrong end of the stick, the Minister will tell me. We are concerned about the cost implications of meeting that new obligation for very small councils. In some cases they have very limited resources—where their resources are not above £25,000 threshold for auditing, for example. It may be that some kind of insurance could be provided at a reasonable cost for all those smaller authorities whose resources are not above the audit threshold but which are, rightly, required to respond to electors about their accounts. Alternatively, perhaps some kind of scale of charges could apply according to the turnover of those authorities. I will be grateful for an assurance from the Minister that that has either been considered or will be in future dialogue with NALC and other representatives of the sector.