Schedule 8 - Advisory notices

Local Audit and Accountability Bill [Lords] – in a Public Bill Committee at 8:55 am on 19th November 2013.

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Photo of Andy Sawford Andy Sawford Shadow Minister (Communities and Local Government) 8:55 am, 19th November 2013

I beg to move amendment 141, in schedule 8, page 67, line 22, leave out from ‘the’ to end of line and insert

‘addressed to the Chairperson or Mayor of the authority and the officer concerned’.

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

With this it will be convenient to discuss Government amendments 48 and 51.

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

It is a pleasure to see you back in the Chair, Sir Edward. I hope you saw that we made good progress in scrutinising the Bill last week.

The amendment concerns advisory notices that can be issued by the local auditor in respect of a decision by the authority that

“would involve the authority incurring unlawful expenditure”,

where an authority

“is about to take...a course of action which, if followed to its conclusion, would be unlawful and likely to cause a loss or deficiency”,

or where there is

“an item of account, the entry of which is unlawful.”

We broadly support the schedule and agree that the local auditor should have the power to issue advisory notices. Clearly, it is about tidying up arrangements to take forward powers previously exercised within the Audit Commission framework.

Our concern is about paragraph 1(2):

“An advisory notice is a notice which—

(a) is addressed to the authority or officer concerned.”

Our reading of the provision is that the authority could receive a notice, but it is not clear to whom it would be sent and who would act as the representative of the authority. It could be the monitoring officer, the finance officer, the chief executive of the council, or the mayor or chairperson of the council, depending on the type of local authority; it could be sent to the authority without a named person on the notice, or it could simply be sent to an officer. Can the Minister clarify whether there will be any further guidance on whom a notice should be sent to?

We also consider that the “or” in the provision is unhelpful and should be an “and”. In local authorities around the country, the overwhelming majority of their transactions are lawful, certainly in terms of their intent and motivation, but there are instances—some have been raised in Committee—where local authorities have taken unlawful action. Our concern relates to the advisory notice being addressed to an officer of the council. We could foresee a situation in which the officer was in  some way implicated by the advisory notice. It may, for example, be sent to the chief executive, the finance officer or the monitoring officer. Such individuals have at times been at fault—if we look at past public interest reports—when issues have come to light within the local authority.

We have suggested a simple amendment, so that the notice could be sent to the chairperson or mayor—it could be the chairperson of the board in some types of authorities—and the officer. Our view is that a belt-and-braces approach would ensure that whether it is members or officers who are part of the problem—in some cases, neither may be aware of the issue, and there might be a genuine, understandable reason why things have gone wrong in the authority—they would be aware of the advisory notice and the auditor’s concerns and could take appropriate action.

I hope that the Minister will reassure us that the current wording addresses my point—although it is difficult to see how we could be convinced by an “or” rather than an “and” in the sentence—or agree to take the provision away and look at it. That is not a political point, but a practical point about how local authorities work and about ensuring that the appropriate people receive the advisory notice so that appropriate action can be taken on behalf of the public.

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

Schedule 8 enables a local auditor to issue an advisory notice, if they consider that an authority or an officer has undertaken, or is about to undertake, unlawful action that has financial implications. An advisory notice must be sent to either the authority or an officer of that authority, whoever is thought to have taken or be planning to take the action. While an advisory notice has effect, schedule 8 makes it unlawful for the authority or officer to continue to take that action, unless the authority has given written notice to the auditor and the notice period has expired.

Amendment 141 changes the individual to whom an advisory notice needs to be sent. I do not consider that to be the best approach and therefore do not consider the amendment necessary. It specifies that an auditor serves an advisory notice by sending it to the chairperson or mayor of an authority, rather than to the authority. If an advisory notice is being served on an officer, it must also be sent to the authority, as in paragraph 2(1)(b).

I consider the amendment to define the individual to whom a notice would be sent too narrowly, because it does not enable service of advisory notices on authorities led by persons other than a mayor or chairman. The “authority” means “relevant authority” as defined in schedule 2 and applies regardless of the governance arrangements of the body. The Bill enables an auditor to issue an advisory notice to any of the bodies under schedule 2, except health sector bodies.

In law, if a document, such as an advisory notice, is served on an authority, it will in most cases be served on that authority in accordance with section 231 of the Local Government Act 1972. For example: an advisory notice to a local authority would be posted to the address of the principal office of the authority; an advisory notice to a parish meeting would be served on its chairman; and an advisory notice on a police and  crime commissioner would be served on the commissioner. The existing definition is preferable, and I hope that that means that we can convince the hon. Gentleman to withdraw his amendment.

I shall also speak to amendments 48 and 51. They are minor amendments, which apply the definition of “relevant authority concerned” when the auditor issues an advisory notice, to all of the provisions around advisory notices, rather than just paragraph 3 of the schedule. The “relevant authority concerned” means the relevant authority to which, or to any officer of which, an advisory notice is addressed.

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

I thank the Minister for his reply. I am not familiar with section 231 of the 1972 Act. I do not think that he has fully addressed our concerns. Given that we are talking about a range of relevant authorities, as set out in schedule 2 of the Bill, I take his point that specifying “Chairperson or Mayor” may not be appropriate to many of the relevant authorities. We may therefore move a simpler amendment on Report stating that the advisory notice should be sent to the authority and the officer concerned. In the meantime, I hope that the Minister will consider the matter further.

We are not talking about the overwhelming majority of cases, in which the intention or motivation of officers of local authorities is sound, but the incredibly rare exception where the officer of the authority in receipt of the notice might be the officer of the authority who is part of the problem. The Minister suggests that that could be the case—that that officer would be sent the notice—and our view is that it is clearly sensible for the authority to have that notice drawn to its attention at the same time. We will raise the issue again on Report. In the meantime, I ask the Minister to consider a small amendment to change “or” to “and”. Nothing would be lost and there is something is to be gained by doing so. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: 48, in schedule 8, page 68, line 31, at end insert—

‘(8) In this Schedule “the relevant authority concerned”, in relation to an advisory notice, means the relevant authority to which, or to any officer of which, the notice is addressed.’.

Amendment 49, in schedule 8, page 69, line 1, at end insert—

‘(2A) The condition in paragraph (a) of sub-paragraph (2) is met in relation to a parish meeting only if the matters referred to in that paragraph are considered by the parish meeting itself (and not by its chairman on behalf of the parish meeting).’.

Amendment 50, in schedule 8, page 69, line 7, leave out sub-paragraph (4) and insert—

‘(4) A local auditor may recover from a relevant authority—

(a) the reasonable costs of determining whether to issue an advisory notice to that authority or an officer of that authority, and

(b) the reasonable costs of issuing an advisory notice to that authority or an officer of that authority.

(4A) Sub-paragraph (4)(a) applies regardless of whether the notice is in fact issued.’.

Amendment 51, in schedule 8, page 69, line 10, leave out sub-paragraph (5).—(Brandon Lewis.)

Schedule 8, as amended, agreed to.

Clause 29 ordered to stand part of the Bill.