Clause 10 - Functions of auditor panel

Local Audit and Accountability Bill [Lords] – in a Public Bill Committee at 3:00 pm on 7th November 2013.

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Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission

With this it will be convenient to discuss the following:

Amendment 103, in clause 10, page 8, line 13, leave out subsection (11).

Amendment 101, in clause 10, page 8, line 17, leave out ‘any’.

Amendment 102, in clause 10, page 8, line 19, leave out ‘any’.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

As this is my first opportunity to do so, may I say what a pleasure it is to serve under your chairmanship, Sir Edward?

I would like the Minister to answer some questions about why police and crime commissioners are being dealt with differently from, for example, chief constables when it comes to the independence of relationships with auditors. That is very curious. Clause 10 states:

“A relevant authority’s auditor panel must advise the authority on the maintenance of an independent relationship with the local auditor appointed to audit its accounts.”

Under subsection (2), the advice that the police and crime commissioner gives to the chief constable must be to have an independent relationship with the auditor. Nothing is said about whether the police and crime commissioner should have an independent relationship with the auditor, which seems to be an omission.

Are the Government saying that anyone can carry out the audit of a police and crime commissioner’s office? Could the PCC’s husband, wife, sister, brother, granny, life-long friend, crony or indeed close friend—I will not go down that line again—carry out such an audit? Whom do the Government envisage carrying out the audit of police and crime commissioners? No information is provided in the Bill about how that will happen.

That is an important matter, because hundreds of thousands of pounds are going into the offices of police and crime commissioners. They are receiving money for their offices and for their staff, and they also receive moneys to provide grants to a range of local organisations. That prompts the question of why the Government do not want an independent audit of the police and crime commissioner’s office to be carried out. We particularly want to bring the matter into sharp focus in the light of the recent scandals surrounding the operation and lack of scrutiny of police and crime commissioners’ offices.

I would like to read into the record some examples, by way of evidence, of the scandals that have arisen recently, because they back up the Opposition’s assertion that independent audit is indeed necessary. The first case comes from the website “Liberal Democrat Voice”, and I am sure the Committee will agree that if we find something on “Liberal Democrat Voice”, it must be  true. The headline reads: “The ludicrous story of Northamptonshire’s new Police and Crime Commissioner”, and the article states:

“Across the country the controversial newly elected Police and Crime Commissioners are supposed to be getting down to business. The reality in several areas is that many are hitting the headlines for the wrong reasons, and nowhere is this truer than in the case of Adam Simmonds, the Northamptonshire PCC, who has stacked his new “sprawling” 17-person commission with his campaign staff…During the campaign Mr Simmonds refused to outline his plans for how he would run the police, saying that people would find out once he was elected. He did join the criticism of a new job advertised at the police authority at £70k as “management madness”. Upon taking office”— four days later—

“he appointed 4 assistant commissioners at £65,000 each”.

That is a huge amount of money. How are we to know if it has been spent effectively?

A second case related to the Secretary of State for the Home Department. Under the headline “Theresa May reads the riot act to police commissioners after expenses scandals”, The Independent reported:

“After a slew of allegations and mishaps involving chauffeur-driven trips funded by taxpayers and embarrassing rows over staffing, the country’s newly elected but already beleaguered police leaders have been called into Whitehall to be warned of their responsibilities.

Ministers have told their police and crime commissioners that they must detail their spending and hospitality arrangements online after a new round of damaging headlines about the Conservative law and order policy.”

I am sure we all agree that the Home Secretary took responsible action. I point out to her and the Minister, however, that when she called the police and crime commissioners in and explained to them how they had to behave properly and account for the money that they were spending, she could have had a word with the Secretary of State for Communities and Local Government and asked him to include independent and thorough audit arrangements for police and crime commissioners in this Bill.

We have many more examples that I could read out, but I will refer to just one—

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission 3:15 pm, 7th November 2013

Order. I am sure that the hon. Lady will not want to do so at any great length. She has made her point. It is slightly tendentious to the Bill to have a long discourse on the nature of police and crime commissioners. It is fair enough to make the point, but she can now move on, can she not?

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

Thank you, Sir Edward, I was just about to do so. I have the made the point that there are some real concerns in the public domain about how police and crime commissioners are operating—how their money is being spent—and we want to ensure proper audit arrangements. I hope that the Minister will tell me that I am worrying unnecessarily and that enough is being done to ensure independent audit.

There is already a great deal of confusion and lack of clarity about the role of police and crime commissioners. They would benefit from an audit process, which would make their value to the community clearly apparent and give the public some tools with which to judge the efficacy of their local police and crime commissioners. Such information and those tools for local communities do not appear to be in the public domain at the moment.  We would like them to be made available. If the Minister does not agree that police and crime commissioners should be subject to independent audit, perhaps he will tell us why.

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

These amendments concern the functions of the independent auditor panels, which will advise authorities on the independence of their auditors.

Amendments 101 and 102 deal specifically with “any guidance” issued by the Government on auditor panels and may reflect concerns about the Government’s intentions on further guidance on auditor appointment. I reassure the hon. Lady that any guidance issued under clause 10 will be limited to matters relating to the functions of the auditor panel and to authorities’ functions in relation to the panel. The guidance will therefore deal with issues such as how the auditor panel should fulfil its duty to oversee auditor independence or, in the case of the authorities’ functions, what skills or experience they might look for when appointing the panel.

The duty under clause 10 for panels and authorities to have regard to guidance issued by the Secretary of State would not apply to anything outside those matters—for example, the conduct of the audit and the statutory duties of the auditor. Such matters will be covered in the audit code of practice that will be issued by the National Audit Office and subject to parliamentary scrutiny.

It may also be helpful if I clarify our intentions regarding “any guidance” and the specific obligations of local authorities to follow it. The Bill requires that authorities have regard to guidance, which will be designed to be helpful rather than to set rigid requirements. More generally, I can reassure the hon. Lady that the Government’s intentions are well meaning.

During consultation, local authorities indicated that further guidance on the role of panels would be helpful. The Chartered Institute of Public Finance and Accountancy has also said that such guidance may be needed. The Government fully intends to work with local authorities and other interested parties in developing any guidance. Given that current contracts do not expire until 2017, the detailed work on this has not yet begun. We expect that any guidance will need to be finalised closer to 2015 when authorities begin putting arrangements in place for local employment.

As the hon. Lady outlined at great length, amendment 100 deals specifically with police bodies. It would clarify that advice to a police and crime commissioner from its auditor panel includes advice on the maintenance of an independent relationship between the local auditor and the police commissioner. We do not believe that the amendment is necessary, as the Bill already requires that a police and crime commissioner’s auditor panel advises the PCC on its relationship with the auditor. It may be helpful if I clarify that, in the case of police bodies, the Bill requires that chief constables are audited by the same auditor appointed to audit the PCC. As they will share an auditor, the PCC and chief constables will therefore share an audit panel. That panel will advise on the independence of the auditor with respect to both the PCC and the chief constable.

Amendment 103 would remove the requirement on a local authority to exclude material where disclosure would prejudice commercial confidentiality from any publication of advice from the auditor panel, unless there is an overriding public interest in favour of its  disclosure. There will be cases in which commercial confidentiality must be protected. Unlimited disclosure could hinder an authority’s ability to get good value for money in letting contracts. Bearing that in mind, the authority is best placed to make and be accountable for the decision whether to publish any item relating to commercial matters. Similar provisions in the Local Government Act 1972 and the Freedom of Information Act 2000 allow public access to local authority documents and information, except where that access may compromise the need for commercial information to be withheld in confidence. In both cases, that exemption is balanced by the need to take into account the public interest: whether the public interest in favour of releasing or publishing the information is outweighed by the public interest in withholding it. That is what we have also provided for in the Bill for consistency.

We consider, therefore, that the existing provision in the Bill provides transparency while protecting public money. With those reassurances, I hope that the hon. Lady will withdraw the amendment.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

I will deal first with amendments 101 and 102 on the issue of guidance. Our concern with the way in which clause 10 is written at the moment is that it gives carte blanche to the Secretary of State to produce guidance on anything and then require local authorities to act on that guidance. We feel that the power is still too wide-ranging. I would like the Minister to give us more information about what guarantee there would be that the guidance would be drawn up with the co-operation of local authorities. [ Interruption. ] Perhaps the Minister can intervene and say exactly where the co-operation with local government will be in the Bill.

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

I did give that confirmation in the words I used just a few moments ago, very specifically.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

What I think the Minister is suggesting is that his comments this afternoon are the guarantee that we have been looking for. We will go away and look at whether we think it is sufficient to ensure that something unreasonable will not be set out in the Secretary of State’s guidance that would not be able to be countered by the views of local authorities.

I will move on to amendment 100. I think the Minister was saying that both police and crime commissioners and the chief of police would share an auditor, but both those parties would need to ensure that they had an independent relationship with the auditor. We will go away, look at the Minister’s comments in more detail and ensure that we are certain that what was said will guarantee independence in that relationship.

On amendment 103, to a degree, we accept the Minister’s reassurances. We would ask him, however, what he thinks could be done to ensure that local authorities put as much information in the public domain as possible about auditors—how they are appointed, what they find out and how they come to their conclusions—so that public trust in the system is maintained. With those comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 ordered to stand part of the Bill.