I beg to move amendment 53, in schedule 9, page 72, line 17, at end insert—
‘(10A) In this paragraph “enactment” includes—
(a) an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales,
(b) an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament, and
(c) an enactment contained in, or in an instrument made under, Northern Ireland legislation.’.
With this it will be convenient to discuss the following:
Government amendments 104 and 54.
Amendment 143, in schedule 9, page 74, line 1, at end insert—
‘(d) to assist in the prevention and detection of maladministration and error.’.
These amendments clarify and update the data-matching provisions in schedule 9 and add the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. Amendment 53 makes it clear that “enactment” in the context of schedule 9 includes primary or secondary legislation made under Measures or Acts of the National Assembly for Wales, Acts of the Scottish Parliament and Northern Ireland legislation.
Schedule 9, paragraph 4(8) makes it an offence for a person to disclose data, other than in specific circumstances. Paragraph 4(7) sets out where the onward disclosure of data may occur and in particular provides that disclosure is permitted under “an enactment”. The amendment clarifies that that term applies to enactments contained in, or instruments made under, devolved legislation. That also ensures consistency between schedules 9 and 11. Amendment 104 updates the definition of relevant NHS bodies in Northern Ireland for the purposes of data-matching exercises. The revised definition covers the full range of NHS bodies in Northern Ireland participating in data-matching exercises and is designed to be consistent with legislation in Northern Ireland, Scotland and Wales.
Amendment 54 adds the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. Lord McKenzie made a strong case for similar powers to be included in the Bill in the other place. At that time we considered that, although the Bill provides a timely opportunity for such an amendment to be made, especially given the national fraud initiative’s future home in the Cabinet Office, it was critical that we understood the implications of such a potential extension to ensure that the balance of risk and opportunity was properly assessed. Over the summer that is what we have done.
We consider that the amendment will allow the national fraud initiative to continue to undertake the ad hoc data-matching exercises that it does at present through the Audit Commission's wider powers once the NFI moves to the Cabinet Office. That means that all possible uses of the NFI to carry out data-matching exercises will be set out in the Bill. That will allow the possible extension of the data-matching powers to include the prevention and detection of crime, other than fraud; to assist in the apprehension and prosecution of offenders; to assist in the recovery of debt due to public bodies; as well as the prevention and detection of inaccuracy and error, which is the subject of the amendment.
I remind colleagues that, before adding any of these purposes, the Secretary of State must consult relevant authorities, their representatives and the bodies affected. In addition, those regulations will be subject to the affirmative resolution procedure. In our view, those safeguards will ensure that proper consideration is given to any extension to the initiative’s current powers.
If it helps, I can cover that quickly as well before the hon. Gentleman speaks. I shall be brief. Amendment 143 would require the addition of a fourth potential purpose for which data-matching exercises can be undertaken by the national fraud initiative to
“assist in the prevention and detection of maladministration and error”.
As I have outlined, Government amendment 54—I hope this will give the hon. Gentleman some satisfaction—adds the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. We consider that the amendment will allow the national fraud initiative to continue to undertake the ad hoc data-matching exercises that it does at present through the Audit Commission’s wider powers, once it has moved.
Although we felt that a good case was made by the Audit Commission for the inclusion of error, in our view there was insufficient evidence on how the investigation of maladministration over and above error might be used. Furthermore, maladministration has a strong association with the work of the local government ombudsman. We were concerned that its use here might cause confusion as it could result in another body looking at maladministration in local authorities. However, unlike the ombudsman, it would be unable to act on the findings, thus potentially adding to his burden while raising the potential for conflicting roles and responsibilities.
I hope that with that explanation the hon. Gentleman will not press his amendment.
I do not mean it in that respect, Sir Edward. The Government have listened, and that is to be welcomed. They have listened in respect of specifying where the national fraud initiative will go. Points were raised extensively in the House of Lords. The Government committed to setting out where it would go, and we now know that it will go to the Cabinet Office.
The Government have also listened to the point about error, but there is clearly some difference between us on the strength of Government amendment 54, which is to be welcomed in itself, compared with our own proposed amendment, which is supported by a wide range of stakeholders, so I wish to speak to why we believe it is necessary.
Our concern is that the data-matching exercises that the Audit Commission undertakes at present under its audit powers would not be available to any new body, as they would not fall within the additional purposes provided for. In tabling the amendments at this stage, the Minister has helpfully strengthened those elements of the Bill and gone some way to responding to our concern. We would all agree that prevention and detection of maladministration and error are particularly important. The context that my hon. Friend the Member for Derby North referred to—the financial challenges that the local authority faces—makes this as important as it has ever been.
We recognise that local authorities are being pressed to make tough, quick decisions. My hon. Friend made the point about reserves and the ability of local authorities to plan ahead as they see their finances being cut disproportionately to the rest of the public sector. Some authorities, notably those serving the most deprived communities in the country, are facing the most swingeing cuts. The consequences of the decisions that are being pressed upon them and the speed at which they are having to take decisions are huge in terms of the sound financial management that we would all hope to ensure is in place in local authorities, and ultimately there are consequences for the public that local authorities and other relevant authorities serve.
We want the Bill to be amended so that data-matching powers can be included in relation to maladministration and error. I will set out why. We have talked about the Audit Commission’s shortcomings—all hon. Members have been keen to point those out, especially Government Members—but its work through the national fraud initiative has identified around £1 billion worth of fraud, error and overpayments. Particularly at a time when local authorities are struggling for resources, we want to ensure that such amounts of money—£1 billion of public money—are adequately detected. The point in Government amendment 54 about error is well made.
On maladministration, the ad hoc Committee on the draft Local Audit Bill recommended amendment 143, as did the Audit Commission, which cited a range of ways in which such powers had been used. The Bill helpfully adds foundation trusts, and a range of other bodies, to the list of mandatory participants; the Government responded, in a welcome way, to points made about that in the other place. The Bill would therefore provide many more opportunities to detect maladministration and error across a much broader range of organisations.
Housing associations are an example of bodies that participate in data matching only if they choose to do so. That is despite clear evidence that data matching is a very powerful tool for helping bodies to detect potential tenancy fraud, and the increased focus on housing tenancy fraud over the past two years has led to significant savings for the public purse. We want housing associations, foundation trusts, local authorities—indeed, all bodies—and especially the public and the tenants whom those bodies serve to be protected from maladministration.
The Minister suggests that the powers in amendment 143 would overlap with the role of the local government ombudsman. He made an interesting observation about how the amendment would interplay with the ombudsman’s role; that is certainly something for us to go away and think about. When he responds, I hope that he will recognise that we broadly welcome the approach that he has taken, and that we think that the proposals are the result of good scrutiny. Many of the amendments were tabled because of the level of concern expressed, both in and outside Parliament.
There are a few questions to which I ask the Minister to respond. The ad hoc Committee heard suggestions that regardless of who owns the national fraud initiative—we now know that it will be the Cabinet Office—there should be a governance board representing key stakeholder interests to oversee the initiative’s development and operation. That seems a helpful and welcome suggestion. I ask the Minister to respond on that point.
It is not clear to me, or to other bodies—this point was made by the ad hoc Committee—what mechanism will be available to the Cabinet Office to ensure that participants in the data matching in the national fraud initiative follow up on data matches; perhaps the Minister can point me to the effect that any of the amendments in this group will have in that regard. To come back to the point about the baby and the bathwater—I recall your regret, Sir Edward, at the use of that language—the Audit Commission has a wide range of powers, some of which it has used to good effect; its appointed power to ensure that bodies subject to data matching follow up on data-matching exercises could be lost. If the Minister could assure us on what powers, if any, the Cabinet Office will have in that respect, it would be helpful.
Maladministration is the sticking point, as the Minister says. We will test the issue on Report, and hope that the Minister listens to our concerns that his amendment does not go far enough. Dealing with “errors and inaccuracies” is a more benign way to use the national fraud initiative, although clearly that can save substantial amounts of public money. Maladministration is quite different. That relates to points made to us by Transparency International about the potential for corruption in local government. We know of examples of significant maladministration by local authorities around the country; they are always regrettable, and they come from administrations of all types, sizes and political colours. The infamous “homes for votes” scandal is perhaps an example that will always be on the mind of people who are considering how effective audit is.
Clearly, through the data-matching exercise, maladministration may come to light. The effect of not giving any powers is that the Cabinet Office and authorities and auditors who are made aware of maladministration—it may have come to light through data matching—will have no powers to act upon it. The local government ombudsman might, by some other route, commence some kind of investigation, but, to our knowledge, there is no trigger from the data-matching exercise to the role of the Cabinet Office and any action by the local government ombudsman.
Could the Minister assure us, perhaps by some form of guidance or a letter to the Cabinet Office that he copies to us, that there would be an expectation that the local government ombudsman would act when there is evidence of maladministration or suspected maladministration—we would all hope that subsequent investigation finds simply error or inaccuracy rather than maladministration? Will he assure us that, when maladministration comes to light through data matching, action will be taken, if not in the more direct way in the Bill that we propose, then in an indirect way through the local government ombudsman? In the absence of such a trigger, we will need to press the matter to a vote.
I hope I can reassure the hon. Gentleman. Discussion on the arrangements for the governance of the national fraud initiative will continue with representation from interested parties. We are currently in discussion with the Cabinet Office and the Audit Commission to finalise those arrangements as part of the wider work on the transitional arrangements.
It also worth confirming that all public bodies that are subject to audit are required to participate in a bi-annual data-matching exercise carried out by the NFI. As the NFI charges those bodies a fee for any data matches supplied, it is unlikely that they would fail to follow them up. The success of the NFI in providing local government with such an effective tool to tackle fraud demonstrates the value of the exercises. Local government agrees.
We have to be aware of how important a tool that has been in the fight against fraud in local bodies. It has identified more than £1 billion since it was started in 1996. We are keen to ensure that it is able to carry on fighting the good fight in that respect while continuing to develop its capabilities in a fast-moving and fast-changing forward landscape. That is why, on 15 July, Lord Wallace announced that those powers will transfer to the Cabinet Office once the legislation is in place. The wider scope of public audit also means that the external auditor would need to be reassured that the body had suitable counter-fraud measures in place to protect public funds.
I should like to reassure the hon. Member for Corby that we have discussed the wording and scope of the amendment with the Audit Commission. It has confirmed that it is content that the measure enables the future owner of the NFI to run the types of data-matching exercises that it currently does. We believe that that gives the right cover. To be clear, the additional purposes we have outlined are on assisting in the prevention and detection of crime other than fraud, assisting in the apprehension and prosecution of offenders, and assisting in the recovery of debt owing to public bodies.
It is reassuring that the Audit Commission supports the Government’s approach in the schedule. As I have made clear, we welcome the way the Government have listened. We know that the Audit Commission supports many of the substantial concessions that the Government have made, but it does not support the Minister on the maladministration point. I have its most recent note to me, which I believe other members of the Committee will have received—it is a publicly available submission to the Committee. It clearly states that the purposes that should be added include:
“to assist in the prevention and detection of maladministration and error”.
The Audit Commission does not support the Government on that point. We cannot allow its welcome agreement with the Government and the Government’s welcome concessions to mask the fact that there is a clear disagreement on that point between the Government and everybody else, including the ad hoc Committee, the Audit Commission, the Opposition and their lordships.
I will not repeat everything I said in my core remarks on the role of the local government ombudsman in dealing with maladministration, fraud and error—the hon. Gentleman has said he will go away and look at them—but, as I have said, a relevant Minister would be required to consult widely before regulating, modifying or limiting any current powers that are subject to the affirmative procedure.
Amendments made: 104, page 72, line 28, in schedule 9, leave out paragraph (f) and insert—
(f) a health and social care body mentioned in paragraphs (a) to (e) of section 1(5) of the Health and Social Care (Reform) Act (Northern Ireland) 2009.’.
Amendment 54, page 73, line 44, in schedule 9, after ‘offenders,’ insert—
‘(ba) to assist in the prevention and detection of errors and inaccuracies,’.—(Brandon Lewis.)