Clause 27 - Declaration that item of account is unlawful

Local Audit and AccountabilityBill [Lords] – in a Public Bill Committee at 4:15 pm on 12th November 2013.

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Photo of Brandon Lewis Brandon Lewis The Parliamentary Under-Secretary for Communities and Local Government 4:15 pm, 12th November 2013

I beg to move amendment 44, in clause 27, page 19, line 6, leave out from ‘may’ to end of line 7.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

With this it will be convenient to discuss Government amendments 45 and 46.

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

The amendments clarify the process and time scales for a local elector to make an appeal following an auditor’s decision not to make an application to the court that an item of account is unlawful. The amendments reflect the current process under the Audit Commission Act 1998.

Clause 27 currently enables a local auditor to apply to the court if they consider that an item of account is unlawful. If an elector has raised such an objection with the auditor but the auditor has decided not to apply to the court, the elector has six weeks during which they can require the auditor to provide written reasons for their decision and appeal the auditor’s decision to the court.

The Bill as drafted was intended to reflect the provisions in the 1998 Act on time scales to appeal against the auditor’s decision, but after further discussions we have concluded that the existing arrangements were not sufficiently clear and so have decided to set the matter out in the Bill. The amendments make the legislative provision clear by setting out the time periods in the Bill. The local elector first has six weeks to require the auditor to provide a statement of reasons for their decision not to apply to the court, and then, once that has been received, a further 21 days to appeal the auditor’s decision to court. The 21-day period is consistent with that set out in the Civil Procedure Rules 1998.

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

We have commented on where we think prescription is unhelpful and unnecessary in the Bill, so it would be inconsistent of us not to welcome prescription in the Bill that is in the public’s interest because it ensures that they are able to make objections at audit and know what the process for that is. In that spirit, we will not oppose the Government’s amendments.

Amendment 44 agreed to.

Amendments made: 45, in clause 27, page 19, line 8, after ‘(a)’ insert

‘within the period of 6 weeks beginning with the day after that on which the person is notified of the decision,’.

Amendment 46, in clause 27, page 19, line 9, after ‘(b)’ insert

‘within the period of 21 days beginning with the day after that on which the person receives those written reasons,’.—(Brandon Lewis.)

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

I beg to move amendment 47, in clause 27, page 19, line 16, at end insert—

‘(5A) Subsection (5B) applies if a local auditor of the accounts of a relevant authority incurs costs in determining whether to make an application under this section in relation to the authority, but the application is not in fact made.

(5B) The local auditor may recover the reasonable costs so incurred from the relevant authority.’.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

With this it will be convenient to discuss Government amendments 50 and 52.

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

I should like to thank the hon. Member for Corby for his support on the previous amendment. It helps us to tidy up the provision and make things clear for electors, which is hopefully helpful for people in the public domain.

The Government amendments will enable local auditors to recover costs of their time in undertaking their additional statutory audit duties under the Bill where that work does not result in any formal action being taken. We expect that the contracts between authorities and auditors will set out how auditors’ costs are to be recovered. Following pre-legislative scrutiny of the draft Bill, we amended the Bill to give auditors an explicit right to recover reasonable cost from the auditor body for their time in exercising some of their statutory duties. These further amendments will enable auditors to recover reasonable costs for their time in investigating—but ultimately deciding not to take action—three of their statutory functions: first, whether to make an application to the court that an item of account is unlawful; secondly, whether to issue an advisory notice; and thirdly, whether to apply for a judicial review of an authority’s decision. The Bill already makes similar provision for auditors who investigate issues that lead them to make public interest reports and written recommendations.

The amendments would ensure consistency in treatment of cost recovery for such functions and enable local auditors to recover reasonable costs incurred in investigating issues that could result in them exercising their main statutory functions under the Bill.

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

I find myself with slightly conflicting views about the implications of the clause, and I think the Minister will understand why when I say that on the one hand we clearly want to ensure that the auditor can carry out his statutory duties, particularly in relation to the more serious points that the clause seeks to address around unlawful practice; and on the other hand, we are all acutely conscious that local authorities are trying to manage budgets in a difficult environment in which they will not want to face unreasonable costs. Whether we support the amendment, or certainly do not move to oppose it, depends on the Minister giving us some assurance regarding the word “reasonable”. It is not so much about a definition in the Bill, because the term  “reasonable” is widely used in law and in legislation; it is more about the Minister indicating whether he envisages that the scale of charges might be negotiated up front by the joint procurement body or by the independent audit panel appointing auditors.

We all know from various parts of our lives, whether that is seeking legal advice, conveyancing or banking charges, that we can at times be surprised by the charges that we find ourselves having to meet. We would not want local authorities to be prey to the perhaps exceptional situation where the auditor has not been reasonable in placing charges on the authority. It would be helpful if the Minister commented on whether there could be some kind of scale of charges or something to create a framework, because that would give us more assurance that this issue will not get out of hand.

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

Obviously, if there were a sector-led body, it would be logical to assume that it would look into tying all these things into the wider contract for the  sector, but that would be a matter for the sector and that body. We expect that contracts between auditors and relevant authorities will specify what costs auditors can recover from the relevant authority. That recovery will effectively be up front, as the hon. Gentleman said, and include the costs of any external advice that the auditors sought in investigating the matter and deciding whether to exercise the statutory function.

Amendment 47 agreed to.

Clause 27, as amended, ordered to stand part of the Bill.

Clause 28 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Claire Perry.)

Adjourned till Tuesday 19 November at five minutes to Nine o’clock.

 Written evidence to be reported to the House

LAA 05 John Brace

LAA 06 Karen Heath