Local Audit and Accountability Bill [HL]
(11 years, 6 months ago)
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Lord Wallace of Saltaire
Lord Wallace of Saltaire
My Lords, in moving Amendment 18, which amends paragraph 4(9) of Schedule 9, I shall also speak to Amendment 19, which makes an identical amendment to paragraph 5(2) of Schedule 11. These are minor and technical amendments that ensure the provisions in the Bill which limit fines for unauthorised disclosure of information incorporate the changes being made to limits on fines by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, known lovingly to many noble Lords as the LASPO Act.
The Bill currently provides for what happens if the provisions in the 2012 Act come into force before the day on which the Bill is passed. It omits to provide for what happens if the 2012 Act comes into force on the same day as this Bill is passed. The amendments correct that omission. If commencement of this Bill precedes commencement of the relevant part of LASPO, that legislation provides for such changes to be applied to earlier legislation. This means that, once the provisions of the 2012 Act are in effect, which, among other things not relevant here, removes the upper limit—previously set at £5,000—on level 5 fines, any offences committed after that time which would be subject to such a fine would no longer be limited to a maximum fine of £5,000.
The effect of this part of the LASPO Act 2012 on the Bill is that it will ensure that offences relating to the unauthorised disclosure of audit information provided for data-matching exercises or the wrongful disclosure of information by an auditor or inspector or a person acting on their behalf will continue to be treated as seriously as other offences previously subject to level 5 fines, and will ensure that for more serious offences the punishment can better fit the crime. I therefore beg to move Amendment 18 and that Amendment 19 be moved at the appropriate time during discussion of Schedule 11.
Lord McKenzie of Luton
“(d) to assist in the prevention and detection of maladministration and error.”
Lord McKenzie of Luton
My Lords, this amendment refers to Schedule 9, and in particular paragraph 8(2).
The power to conduct data-matching exercises is currently exercisable for the purpose of assisting in the prevention and detection of fraud. However, a relevant Minister, which is the Secretary of State or Minister for the Cabinet Office, can add a purpose for which such exercises can be used provided they fall within the specified purposes. These are currently the prevention and detection of crimes other than fraud, apprehension and prosecution of offenders and recovery of debt owing to public bodies. The amendment would add another purpose,
“the prevention and detection of maladministration and error”.
It should be stressed that neither the further purposes described nor the additional one arising from this amendment can be a proper purpose of data matching until introduced by regulation following wide consultation.
The data-matching powers currently exercised by the Audit Commission through the national fraud initiative have been a considerable success, having identified nearly £1 billion of fraud, errors and overpayments since 1996. It is important that the NFI is found an appropriate home in the new regime and we understand and accept that discussions are under way to make this happen. Probing this is not the purpose of the amendment although if the Minister has an update for us it would be good to hear.
The amendment has been prompted by the Audit Commission, which has expressed concern that some of the data-matching exercises that it 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 Clause 8(2). However, it has instanced a data-matching exercise to assist with identifying maladministration which it undertook concerning GP lists. This was done as part of the national duplicate registration initiative and sought to identify such matters as deceased persons registrations or duplicate registrations. The two most recent exercises led to more than a quarter of a million patient registrations being removed—saving some £16 million—and some 30,000 patient records ending up with current rather than previous GPs.
This work targets error rather than fraud so would not be covered by the Bill as it stands. There is quite properly a sensitivity about data matching and we support the safeguards which are included in Schedule 9 restricting the use of such exercises and protecting certain data. There is also the code of data-matching practice which has been drawn up by the Audit Commission, the maintenance of which will become the responsibility of a relevant Minister under the Bill. Clearly, data matching has, as a matter of fact, been undertaken under powers which will seemingly not be available in the future under the Bill. Where does this leave exercises such as the national duplicate registration initiative in the future? Will the initiative be conducted, at least in part, by data matching, by whom and under what powers? The NDRI is just one example. Perhaps I may ask the Minister whether there have been discussions with the Audit Commission about the demise of its audit powers in this regard and how matters will be handled in the future.
There is a further matter concerning the extent to which those fall within the mandatory provisions of data requirements. The Bill retains this requirement for those currently required to do so and now includes foundation trusts. The Bill also enables the adding-in of other public bodies subject to consultation and regulation. Has any consideration been given to adding in any further public bodies? What assessment has been undertaken of this possibility? One possibility raised with us has been adding in housing associations which currently participate only on a voluntary basis. Data matching has proved to be a powerful tool in helping bodies to detect potential tenancy fraud and we are advised that just one RSL which participated in 2010-11 recovered 12 properties from illegal occupation which were able to be reallocated to general tenants. There is a continuing imperative for local authorities and RSLs to manage their stock in the most effective way given the housing crisis which faces the country and punitive measures such as the bedroom tax.
We have a shared interest in targeting fraud but also—I hope—in the prevention and detection of maladministration and error. This is all the more important given the huge cuts in local authority budgets and of course the further dreadful announcements from the Chancellor just a few hours ago. Data matching has a role to play provided there are robust safeguards. At the very least the Government should justify any diminution in the opportunity to use these as a result of the demise of the Audit Commission. I beg to move.
Lord Palmer of Childs Hill
My Lords, what worries me with this is the possibility of spreading the data protection rules and investigations even further than they are now. They are pretty strong already in the Bill and detection of maladministration and error is done by many local authorities—I am not sure about health authorities—in their internal and external audits. One of the main raisons d’être for that is to look for maladministration and error. As my noble friend will know, such audits are independent of the other departments of the local authority or health service.
I therefore ask the Minister to say how this is or is not already covered at present. What worries me is the creep of adding more and more things all the time in order to look behind what is happening. I understand the motives for that but this is perhaps going a step too far.
Lord McKenzie of Luton
Will the noble Lord accept that the purpose of the amendment is not to spread anything further but to preserve what is there? The point that the Audit Commission has made is that it can use its audit powers to do this data matching to achieve the objective at the moment. Obviously, once the commission disappears, it will not have those powers. If those powers are to go somewhere else, that is fine. I accept entirely that internal audit would be one means of helping to address the issue but data matching across bodies has proved to be effective. This is not about seeking to extend what currently happens but preserving what the Audit Commission is able to do under its audit powers.
Lord Palmer of Childs Hill
Let me give an example. If one is looking into housing fraud, one does not, as a local authority, look only at the housing department and benefits claims. I know that local authorities such as mine look towards the UK Border Agency, with which they have a great relationship. When they look into possible fraud, administration error and all the other things that the noble Lord spoke about, the powers already exist. I am asking whether they need to be enshrined in the Bill.
Lord Wallace of Saltaire
My Lords, for these purposes, I should remind noble Lords that I am the spokesman in the Lords and the Minister for the Cabinet Office and have spent long hours in this Room discussing data sharing and data matching during consideration of the Electoral Registration and Administration Act, when many similar issues came up. I must say that I had not appreciated how extensive data sharing was within the Audit Commission and local government. Central government has been approaching this matter with a rather greater degree of caution and hesitation. Perhaps I should phone the Guardian and tell it just what the Audit Commission has been doing in this regard. I am sure that that newspaper would like to make it a front-page spread.
I am very conscious that this whole issue of data matching and data sharing in the public and private sectors, given that they overlap, will occupy us all over the next three or four years. I have no doubt that at some stage, under whichever Government we have in two or three years’ time, we will be discussing some major new legislation in this area because the data revolution is moving so fast.
The possibilities for data matching and data sharing are increasing rapidly. I am conscious from my discussions around this issue within the Cabinet Office and with outside bodies, including the Information Commissioner’s Office, that national patient records are among the most sensitive issues for citizens as regards information sharing. As noble Lords will know, whether one can share limited information without allowing access to full information is one of the great issues in the area of data matching. Therefore, when one talks about data-matching success in local government—and I recognise, as we all do, that the detection of fraud and error is an extremely valuable and useful activity—we nevertheless all have to be aware that issues of privacy are very strong and powerful, and are protected by various lobbies in this country. We must therefore proceed with caution.
Discussions are well advanced on the issue of an appropriate home and we hope to be able to announce by Report stage that the matter will finally have been agreed. However, there are a number of final issues about accountability and management that still have to be settled within Whitehall.
Lord McKenzie of Luton
I am grateful to the Minister, and that we got two for the price of one with the Minister for the Cabinet Office as well, which is particularly apt. I am grateful, too, for the offer of a meeting, which I would be very happy to have. The noble Lord acknowledged the point that once the Audit Commission goes, some of the powers that it has used to do data matching will fall with it. Those will not automatically be picked up in the Bill or elsewhere, but that is the subject of ongoing discussion. I should just say in defence of the Audit Commission, if it needs it, that these data-matching exercises were not done in any sort of clandestine way. It published the results, particularly on this one initiative to show its benefits. I am grateful for the opportunity to discuss this point further.
I take the point entirely that there is already provision in the Bill for those who have to participate on a mandatory basis. I guess that part of my question was: is it intended in relation to housing associations to perhaps kick-start a consultation? Some do participate but I understand that it is quite a small percentage, and it looks as if some of the benefits could be quite significant for them to participate. That has nothing to do with extending the powers of data matching, but just extending the basis of those who are required to participate. Having said all that, I am grateful for what I take to be a positive response and beg leave to withdraw the amendment.
Lord Wallace of Saltaire
“Omit section 22(1) (Audit Commission).”
Lord Wallace of Saltaire
My Lords, in moving Amendment 18ZZA, which applies to paragraph 8 of Schedule 10, I shall also speak to Amendments 20, 21, 22 and 23, which make a range of minor and technical amendments to Schedule 12. These amendments remove redundant references to the Audit Commission and make clarifications to related provisions in existing legislation.
Amendment 18ZZA applies to paragraph 8 of Schedule 10. This is a consequential amendment to the Local Government Act 1999 to remove a reference to the Audit Commission. This has the effect of ensuring that the Audit Commission is no longer specified as having a role in relation to best value inspections.
Amendment 20 changes the definition of “local auditor” in the Social Security Administration Act 1992. This amends paragraph 23 of Schedule 12 and ensures that “local auditor” is now defined as within the meaning of the Local Audit and Accountability Act 2013—as it will be after Royal Assent—rather than simply within the context of any specific part of that Act.
Amendment 21 makes a consequential amendment to Section 125(2)(b) of the Greater London Authority Act 1999. This applies to paragraph 34 of Schedule 12 and has the effect of removing the provision allowing the Audit Commission to certify information provided by a functional body to the Mayor of London.
Amendments 22 and 23 make minor and consequential amendments to Section 212 of the Local Government and Public Involvement in Health Act 2007. These amend paragraph 66 of Schedule 12, which makes consequential amendments to that Act, and seek to clarify the Government’s intent that only the UK Secretary of State can make provision about entities connected with cross-border local authorities. These amendments also tighten the definition of “local authority” in this context.
These are minor and technical amendments that remove redundant references to the Audit Commission and make clarifications to related provisions in existing legislation. I beg to move.
The Earl of Lytton
The Earl of Lytton
My Lords, this amendment returns to an issue that was flagged up by more than one noble Lord at Second Reading—the question of mission creep.
One of the problems of local democracy is the perception that there is very little for the elector to influence beyond which party happens to rule the roost. The process of localism—and indeed the fruits of the Government’s initiatives on this—must surely be to redress this balance. That means having current, live and important issues, including matters of expenditure, at stake in local elections. I will return to this subject in respect of Clause 39, so I will leave it for the moment.
If the role of the National Audit Office is allowed to expand, as would be possible under this Bill, the question that the Local Government Association has asked—indeed, this amendment comes with its imprimatur—is: what is left for the voter to determine? Democracy and democratic accountability are clearly in point here.
The Local Government Association’s second question is: what is there to prevent the National Audit Office effectively replicating the investigative adventurism— my words, not those of the Local Government Association—of the Audit Commission? On our first day in Committee, the Minister said that a recreation of the Audit Commission by the back door is to be avoided and I entirely understand that. Just so, the recreation of its functions by an expansion of the National Audit Office is equally to be guarded against.
Amendment 18ZA would restrict the role of the National Audit Office to prevent this mission creep and the potential erosion of the proper function and role of local democracy. Its scrutiny would therefore apply to expenditure, principally that from central government. I will speak also to Amendment 18ZB, but on the detail of Amendment 18ZA I can see that the Minister may feel that this is too wide a get-out clause. However, if he could indicate whether the principle might be acceptable, I dare say that we could talk about the detail of the wording and how we can deal with that as the Bill proceeds.
Amendment 18ZB has been tabled, of course, to prevent mission creep, to which I have referred. It seems that the Bill effectively risks reintroducing some of the intrusive and costly activities that the abolition of the Audit Commission was supposed to have removed. Looking at the overall geometry, as the LGA would put it, the role of the National Audit Office would be restricted to evaluating expenditure that has a majority of its funding from the central government grant. It goes on to say that the NAO should be precluded from replicating the activities of the Audit Commission under its previous assessment and inspection regime.
I will leave it there. I dare say that the noble Lord, Lord Tope, may have some comments to make, as will other noble Lords. I beg to move.
Lord Tope
My Lords, I am grateful to the noble Earl, Lord Lytton, for moving his amendment, to which I have added my name. I endorse all that he said and, in deference to the Grand Committee, I will not repeat it; I will simply add a number of points.
The amendments of course come at the instigation of the Local Government Association, but reflect fairly widespread concern, based upon experience with the Audit Commission, about what is termed “mission creep”. Most, or perhaps all, of us would agree that the Audit Commission started very well. It did some very good work and continued to do so, but its mission and role expanded to such an extent that the Government, without too much objection elsewhere, have determined that it has now reached the end of its useful life. There is concern, whether well founded or not only time will tell, that the same experience could come to the National Audit Office—that having now got the limited role that was intended, over time, just as with the Audit Commission, the mission will expand.
I have had a useful briefing from the National Audit Office. It was mostly factual and very reassuring. Paragraph 2 states:
“The NAO considers that any future responsibilities it takes on within the Government’s new framework for local public audit should … align with the NAO’s core role of providing assurance to Parliament and holding Government to account over its use of resources”.
That is the intention behind Amendment 18ZA: to try to give effect to that. It may not be the best way of doing so; I do not know. However, the intention is there to say that if the NAO’s role is to Parliament in respect of the use of government resources, then those resources which are raised locally—which in some authorities are considerable; it varies—are outside the core role of the NAO as defined by Parliament and repeated by the NAO itself.
Lord Beecham
My Lords, I am a vice-president of the LGA but I am not sure that I will retain that position after what I have to say. I am afraid that I do not entirely concur with the sentiments and positions taken by the two noble Lords who have spoken thus far. I said in a previous Committee sitting that I had a concern that, although the Audit Commission was, in fairness, asked by the previous Government to over-regulate, overprescribe and over-report, it nevertheless performed a valuable role in looking particularly at the interface between services and the comparisons between different types of authority. Actually that information, contrary to what the noble Earl, Lord Lytton, said, should inform local debate. It does not supplant it. It should help to facilitate the citizens to hold their local authority to account, because they must have some comparative data to see how well or badly they are doing in relation to other authorities. That will be one of the things that we will miss. I express a hope—or, put another way, a fear—that with only six value-for-money studies to be carried out by the NAO, which I understand is the position, we would lose that independent assessment of what local authorities are doing.
I am a great supporter of peer review and of the work that the LGA has done in promoting improvements across the sector, and it has done very well in that regard, but when it comes to an objective assessment, the perception will be that that is an in-house job. It is better in my view that there should be a role for a body like the Audit Commission was—and currently still is, temporarily—or the National Audit Office will be. That is something that this amendment would very much restrict. Yet the formulation here depends on a division of resources, and whence comes the money? Of course, increasingly we will see national organisations, be it in the health service or other bodies—the Chancellor again mentioned what was called “total place” and is now called whole community budgeting—
Lord Beecham
Yes, whole place. It is playing with words, and of course Labour words such as “total” are not acceptable. Within these areas there will of course be collaboration, and the proportion of funding will vary considerably. For example, in public health, less than 50% of government money will be coming in, so the Audit Commission would presumably be prohibited from taking a look at the effectiveness of that. It is not an audit job in that sense, but it is particularly desirable that it should address the issues of effectiveness and outcome, not purely in financial terms but across the piece as well, and that in itself should facilitate the work that the LGA and individual local authorities are doing, particularly in their scrutiny functions, to see how they are faring relative to others, and for that information to be communicated to the people who elect them. So I certainly could not support these amendments. I understand what the noble Lords are saying, but I think that a mission creep has overtaken their amendments as well. They were going too far in the interests of local democracy and the effectiveness of local government.
Lord McKenzie of Luton
My Lords, like my noble friend who was unable to support these amendments from the noble Earl, Lord Lytton, and the noble Lord, Lord Tope, I understand that—apart from the issue around this 50% funding—the Bill does what they are seeking to achieve. If you look particularly at paragraph 117 of the Explanatory Notes to the Bill, it says:
“These powers do not enable examinations of individual relevant authorities and are not designed to produce assessment of the performance of individual relevant authorities or comparative analyses in the form of published league tables”.
Unless that wording is defective—doubtless the Minister can help us on that—it achieves what the noble Lords want. As my noble friend says, whether it achieves what we want is another matter.
In relation to the other test in Amendment 18ZA—that is, an authority,
“who receives more than half their income from government funds”—
I can see that, for certain bodies, it is a test that is currently relatively straightforward to determine. However, if you seek to apply it to a local authority you can imagine the sort of criteria that you would have to unpick and examine. Presumably it is not part of government funds to take account of its income which comes from council tax. What happens when you come to the business rate? Is it part of its income? Do you look at the gross amount or the 50% under business retention that goes to central government and then comes back? Is that still government funding? Does it originate with the local authorities? All the issues around how tariffs, top-ups and safety nets work just from that regime itself could make that particular test in the context of local authorities extremely difficult to apply. It would be easy in some cases where either they would be clearly in or clearly out but I would be surprised if there were not a whole range where it would be extremely problematic.
The test at the moment, as I understand it, is that the Auditor-General can carry out examinations of bodies when more than half of their income comes from public funds and where they are appointed by or on behalf of the Crown. I am not quite sure how you translate that into the local authority context but it seems to me that the basic proposition which the noble Lords are seeking to achieve in terms of avoiding mission creep and certainly league tables is already in the Bill.
If that is right—and for that reason some of the comparative stuff to which my noble friend was referring is not available—it raises again the question we discussed earlier about the value-for-money profiles, the guardian of which is currently the Audit Commission. We discussed who was going to maintain those profiles, which I think would be part of the data that my noble friend and I would be looking for. We do not yet know where that is going to end up and how those profiles are going to be maintained, but I think that that is a slightly different issue from the one pursued by the noble Lord, Lord Tope.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, it is not very often that the noble Lord, Lord McKenzie, makes my case for me, and I am delighted to be in this unusual situation. Perhaps I should sit down without going any further. As always, however, the noble Lord provides a sting in the tail somewhere. On this occasion it was in his final question—to which I may not, even now, be able to give him an answer, but we will try.
Under the National Audit Act 1983 the Comptroller and Auditor-General can undertake examinations into the economy, efficiency and effectiveness or value for money with which a government department it audits has used its resources. He or she can also undertake these examinations in relation to bodies that receive more than half their income from public funds and which are appointed by or on behalf of the Crown.
Clause 34 broadens the Comptroller and Auditor-General’s powers to enable the National Audit Office to undertake examinations on groups of relevant authorities, enabling a more end-to-end view on the use of public money. The powers in Clause 34 have been designed deliberately to support the National Audit Office in undertaking its core roles. It enables examinations that support the National Audit Office either in holding the Government to account to Parliament or in providing analysis and advice that is useful to the sector. By definition, this does not mean that the NAO will be examining or reporting on individual authorities. It means that the comptroller can look at what is going on in a local authority but only in relevance to a wider group or area in relation to the money coming from Parliament.
The amendment would limit these powers to enable the Comptroller and Auditor-General to undertake examinations only on groups of relevant authorities that received more than half their funds from government. I think that that is where the noble Lord, Lord McKenzie, has stepped in and given a pretty clear explanation of why this is not going to work. The amendment is overly restrictive and would not support the National Audit Office in fulfilling its core roles. The Audit Commission currently has powers to undertake examinations in relation to all relevant authorities. Removing relevant authorities that receive less than half their resources from the Government would mean that the National Audit Office could not look across the whole spectrum and thus do its job. The amendment would also reduce the level of scrutiny of public spending that the NAO could carry out, including all the other elements mentioned by the noble Lord regarding the way that grants are paid and the money that goes into local authorities.
Amendment 18ZB would prevent the Comptroller and Auditor-General from undertaking examinations for the purpose of assessing the performance of individual authorities or the production of league tables. Clause 34(2) already provides for the first part of this. It states that a value-for-money examination must relate either to all authorities or to a particular description of relevant authority, and it is extremely unlikely that an individual authority would meet those criteria. An individual authority could be looked at but only in relation to a group and could not be identified as one authority. The Explanatory Notes set out that these powers are not designed for the National Audit Office to produce an assessment of the performance of individual authorities or comparative analyses in the form of published league tables. The Government do not wish to see a return to the comprehensive area assessment of local authorities. The NAO’s evidence to the pre-legislative scrutiny committee on the draft Bill confirmed that it is seeking neither to audit individual local authorities nor to interfere with the primary accountability of local authorities to the local electorate.
However, the clause does not prohibit comparisons of individual authorities during the course of the examination. This is because such group or overall analysis is necessary in order for the National Audit Office to make conclusions about the economy, efficiency and effectiveness with which authorities in a particular group are using resources, or to provide evaluation, commentary and advice to relevant authorities. We believe that the Clause 34 will give the National Audit Office a strengthened role in the assessment of value for money, which the Government said we wanted to achieve when we announced the intention to close the Audit Commission. I know that that intention has received a great deal of parliamentary support, including from the Communities and Local Government Select Committee, the committee which undertook scrutiny of the draft local audit Bill last autumn, and from many noble Lords during our discussions.
However, I understand—and I know that the National Audit Office does too—the concerns that have been expressed about the risks of scope drift or expansion of the programme beyond what is intended. I believe that there are safeguards in the Bill that mitigate against these risks. I emphasise that it is not the Government’s intention to replicate the Audit Commission’s programme of studies. The powers are narrower than the Audit Commission’s and there will be fewer studies. Although the examinations programme is ultimately a matter for the Comptroller and Auditor-General, Parliament undertakes a full and thorough scrutiny of the National Audit Office’s strategy and budget. The House of Commons Public Accounts Committee scrutinises the strategy and budget annually, including the balance of work between different roles, before approving the National Audit Office’s budget for the year ahead.
The Earl of Lytton
My Lords, first, I thank the noble Lord, Lord Tope, for his support and the noble Lords, Lord McKenzie and Lord Beecham, for their comments. All three have a much greater knowledge of local government matters than I can claim to possess but I would say to the noble Lord, Lord Beecham, in particular that it is important not to take amendments of this sort at this stage of the Bill too literally. The intention was to try to probe the parameters and get that on the record so that we know where we are.
Turning to the Minister’s comments, I hope I did not say that there would necessarily be mission creep, damage to democracy or any of the other things; only if it is uncontrolled and unconstrained could there be circumstances in which such things arise. But I am very comforted by what she said, particularly about the safeguards already in the Bill in connection with Amendment 18ZB.
It is my view that audit is a right and proper process. I am not suggesting for one minute that it should be removed, far from it; I do not think that anybody would advance that. However, it needs to be consistent with cost efficiency and done in a way that is not intrusive or that displaces other proper avenues of choice. I will leave it there for the time being but may return to it at a later stage.
Lord McKenzie of Luton
Before the noble Earl withdraws his amendment, can the Minister tell us any more about the value-for-money profiles, and in particular what the plans are to maintain those? Obviously that requires the compilation of data and comparative data.
Baroness Hanham
We are currently considering the future management of the Audit Commission’s value for money—the question asked. I cannot say anything more today but we will come back to this before Report, I hope, and I will certainly make sure that noble Lords are kept in touch with progress, which I think is what I said last time.
The Earl of Lytton
Not to prolong the matter, I beg leave to withdraw the amendment.
Baroness Hanham
“Local authority publicity requirements
(1) The enactments set out in Schedule (Local authority publicity requirements) shall have effect as follows.
(2) Any requirement for a local authority (in whatever capacity) to publish a notice, an advertisement or any other matter in a newspaper shall cease to have effect.
(3) Instead, the local authority shall publish the notice, advertisement or other matter in question in such a manner as the local authority thinks is likely to bring it to the attention of persons who live in its area.
(4) The Secretary of State may be regulations amend Schedule (Local authority publicity requirements) by adding or removing enactments.
(5) In this section, “local authority” means—
(a) a county council in England or Wales,(b) a district council,(c) a London borough council,(d) the Common Council of the City of London in its capacity as a local authority,(e) a county borough council in Wales,(f) the Council of the Isles of Scilly,(g) a parish council, or(h) a community council.”
Lord Tope
My Lords, in moving Amendment 19B I shall also speak to Amendment 19E, which must be the longest amendment I have ever tabled in 19 years in your Lordships’ House.
Amendment 19B would remove the statutory requirement to publish certain notices in the local press, and Amendment 19E, which runs to nine pages, lists the 163 enactments that require publication of statutory notices in the local press. I am grateful, I assume, to the Local Government Association for that list of 163—it certainly was not my homework. Subsection (2) of the proposed new clause would remove the statutory requirement to publish in a newspaper. Subsection (3) still requires a local authority to,
“publish the notice, advertisement or other matter in question in such a manner as the local authority thinks is likely to bring it to the attention of persons who live in its area”.
The requirement to publish statutory notices in the local newspaper was introduced in 1972. We lived in a completely different world 40 years ago where we would not have envisaged the enormous changes in communication and media opportunities that have taken place over that time. In 1972 a statutory notice in a well-read local newspaper quite probably was the most effective way of communicating with residents. In 2013, I would suggest that a frankly rather boring, hard-to-read notice published somewhere in the middle and back pages of, perhaps sadly, a much less well-read local newspaper, is the least effective way of all the opportunities now available to communicate any information to anybody, whether they be local residents or people with professional or organisational interests.
It is high time for us to remove that statutory requirement, something which has long been championed by local government. Indeed, a survey by the Local Government Association indicated that 84% of councils believe that there are less expensive and/or more effective ways to disseminate information contained in public notices. The only surprise to me is that 16% of authorities apparently do not share that view, although I suspect that they might be in the “did not respond “or “do not know” categories.
I have yet to meet members of the public who regularly look for and read statutory notices in the local newspaper. I will leave for another day the question of how widely read and circulated local newspapers now are, certainly in London, and how wide their reach is. Again, the Local Government Association’s survey suggests that in 54% of council areas—not London in particular, but council areas generally—local newspapers reach less than 40% of the population. Of that 40%, very few will be reading statutory notices. If this amendment were enacted, it would still of course be possible for a local authority to place a public notice in a local newspaper if it wished to. It may on occasion think that that is a desirable thing to do, but it would no longer be a statutory requirement.
We all know the considerable financial pressure facing local authorities, which is no doubt increased with today’s announcements. However, local authorities have spent a little over £26 million in the past year paying local newspapers for the cost not of general advertising but of statutory notices. They pay another £17 million, voluntarily and entirely properly, for general advertising. That is something that they can do of their own volition, but the £26 million is something that they are required to do by the 163 statutory enactments listed in Amendment 19E. I can think of little greater waste of money. I have said earlier that statutory notices are possibly the least effective means of communication. They must certainly be the least cost-effective means of communication.
Some of this is born of the understandable concern over the demise of many local papers. The demise of the regional press is an important issue which we have debated previously; it is not really a debate for this context. However, I do not think, and I do not think that anyone else thinks, that requiring the publication of statutory notices—in effect requiring local authorities to provide a £26 million-a-year subsidy to local newspapers—is in any sense the answer to the demise of and difficulties facing local media due to the changing world of communications. That is a much bigger force than that with which we are here to deal. Continuing this requirement seems rather Canute-like, facing the incoming tide of the change in how people receive their communications, which is no longer through statutory notices.
Rather more concerning to me—and something of which I was less well aware—is the fact that the LGA survey to which I referred found that 42% of local councils are charged by their local newspapers a higher rate for public notices, which they have no choice but to publish in the local newspaper, than exists for general advertising. That is perhaps a matter between the local authority and the local media, but nearly half of local authorities in the country have found that to be the situation. There is, again, something seriously wrong there.
We raised this issue at Second Reading and the Minister kindly wrote to the noble Lord, Lord McKenzie, and sent a copy to all of us who took part in the debate. There was an interesting section headed “Statutory notice”, in which she responded to some of the points that I had made. She said that it was a contentious issue, but I am not sure that it is. It is in the sense that local authorities have long said that this is a waste of money and they do not want to do it, but whether that is contentious or agreed by 84%—but not, perhaps, by the newspaper industry for understandable reasons—may be another matter. She concluded that section of her letter with the following comments. I want to quote from it because I would like to expand her remarks. She wrote:
“This is an issue that the Government continues to take seriously and look at. The Government will continue to work with those who have an interest in the future of statutory notices to better understand the key issues and evidence. We are currently exploring the scale of current requirements placed on public bodies”—
I hope that my Amendment 19E gives some indication of the scale of the requirement—
“and other sectors to put notices in newspapers. However, the Government has no plans, at this stage, to include anything on statutory notices in the Bill. It is more important that we take time to properly consider this complex subject rather than reach rushed conclusions”.
I am not sure that we are rushing this as the matter has been under consideration for many years. However, what we have before us now is the fairly rare legislative opportunity to repeal a very outdated statutory requirement and replace it with one which better reflects the 21st century complexities of communication in a multimedia society.
I hope that before the Bill concludes its passage in the other place and perhaps returns to this place—which may well occur towards the end of this year—the Government will reach conclusions on something which is hardly a new or surprising issue and take the legislative opportunity provided by the Bill to repeal that out-of-date 1972 requirement. I beg to move.
Lord Beecham
My Lords, I have a certain sympathy with the amendment moved by the noble Lord. It is a long time since I recall seeing a notice about the provision of a cattle grid, a busker’s licence or even acupuncture, which feature among the interesting series of regulations which apparently apply, and it seems that an overhaul of the requirement is long overdue. However, I do not completely follow the line he has taken. We must not forget that a significant proportion of the population are still not involved with modern communications and are therefore not able to log on to a council website, for example. Moreover, if you log on to a council website, generally speaking you are looking for something, whereas if you are perusing a newspaper you are more likely to come across things. The question is: what things ought to be included in this provision? That is a perfectly legitimate point which the Government need to address to reduce substantially the scope of the present requirement.
However, I do not have too much sympathy with local authorities which complain that they are being charged a differential rate as the answer is in their own hands. They should threaten to withdraw the relevant advertising from the local paper if they do not get better terms. I should think that that would be a pretty powerful sanction. I think that my authority spends £88,000 a year on statutory notice advertising. There is ample scope to reduce that with a more sensible list but I would not like to see the requirement go altogether. Certain other things also have to be published by way of statutory notice—for example, in the realm of probate, licensing matters and things of that kind. Certain things in this enormously long list ought to be retained. I am with the noble Lord in hoping that the Government review this issue and come forward with a much reduced list which would make more sense and perhaps reduce the cost. However, I would not go all the way with him and support the amendment as it stands.
The Earl of Lytton
My Lords, I will follow what the noble Lord, Lord Beecham, said, in the same vein, because I think that getting rid of the requirement altogether would create all sorts of difficulties, which the noble Lord, Lord Beecham, has referred to.
I cannot help commenting that for all the money that is spent on these things, they seem to be reproduced in the smallest print and in the most insignificant parts of the relevant newspaper. One always wonders whether a local authority chooses its moment to stick in an important announcement when the local football team has been moved up to the next division or whatever it happens to be, and nobody is going to read the small print in the public notices part of the paper. Maybe it is because they are being charged so much that the print is so small so they need to cram it into a smaller number of column inches in order to get value for money—but that is speculation on my part.
I agree that better and more efficient ways should increasingly be used to disseminate this information. Very often I hear about things not through the pages of the press, where they are carefully hidden, but because the parish council or some other organisation sends a round robin e-mail and I happen to be on the circulation list and that is how I get to know about it. I think that must be the experience of many noble Lords and many members of the public. So I support the general purpose here. Certainly, I would not necessarily support the removal of public advertising in the press for every single thing that is on the list of the noble Lord, Lord Tope.
Baroness Hanham
My Lords, happily, noble Lords have not quite agreed on this again, which is always very useful as far as I am concerned, but they have raised issues that are important and I want to acknowledge that.
The purpose of statutory notices is to inform the public about decisions that will affect their lives, their property and their amenity. There are 162 aspects they will need to be informed about but they are all relevant to local people, either individually or in groups. The amendment does not consider the effect on the public or on business and other groups, and would potentially put local people in the dark. We must acknowledge that there are still people who do not access information other than through newspapers. The local paper, where it exists, still fulfils a very public duty in that regard.
Removing statutory notices from the requirement to publish for local authorities would also stifle local transparency and the rights of local people to challenge decisions that impact upon their lives, because they would not know about them. This is a complex and contentious issue, as my letter to the noble Lord, Lord Tope, acknowledged. I do not believe there is any consensus about taking them out of local newspapers even if they cost a small amount to put in.
The burden of statutory advertising is one that we acknowledge, and the Communities and Local Government Select Committee’s recommendation a couple of years ago for a review of publication requirements for statutory notices cannot be ignored in the long term. Against this background, local newspapers remain an important part of local democracy, ensuring that local people are informed about the decisions that affect their daily lives. It is essential that local people have free and open access to information that can affect them or impinge upon them rather than having to rely on other means. I acknowledge that the requirement to publish some notices in newspapers comes from an age which has long since gone—1972 was a very different time from now—and they could perhaps be removed. However, other requirements remain as valid today as they always have been.
Looking at planning applications, there is a limited amount of time for local residents to make representations, yet applications can and do affect their and their neighbours’ quality of life and property. The previous Administration consulted in 2009 on removing the statutory requirements to publish planning notices in newspapers. It was not well received. The noble Lord, Lord McKenzie, may remember that.
The then Government concluded that it was clear from responses that some members of the public and community groups relied on the statutory notices in newspapers to learn about planning applications in their area. There was no conviction that good alternative arrangements could readily be rolled out. The effect of this amendment would therefore be to reduce public scrutiny regarding, for example, planning decisions, the provision of sex shops, bus-lane fines, casinos, betting shops and councillor allowances, among myriad others. I acknowledge that all 162 are laid out in Amendment 19E, but I have understandably mentioned a few which are important. Although some may be willing to see all these go, we would ask whether the blanket removal of a huge swathe of statutory notices is really in the public interest or ideal. That does not stop us looking at the statutory notices under initiatives such as the Red Tape Challenge, but they are currently as listed.
It is vital that we understand how local people receive and use information in the 21st century. Some make use of innovative technology, and everyone here sits with their little iPads making sure they know exactly what is going on at home when they are sitting here taking important decisions about legislation. However, not everyone is as privileged and not everybody has, or wants, easy access to technology. They like reading what they want in papers and we cannot disregard that.
It is also true that the money that pays for these statutory notices helps to keep local newspapers in existence. That is important to ensure that those who are not going to be tied up to the internet have ready access to information not only about statutory notices but about what is going on their local area. The newspaper industry is clear that competition with local authority newspapers for advertising revenue is damaging their primary source of revenue and preventing newspapers reporting on what local authorities are doing on behalf of local people.
It would be unfair to remove statutory notices in such a blanket way as proposed, particularly while independent newspapers are—as the noble Lord, Lord Tope, acknowledged—under threat and need to be kept in business. A small contribution to that is through the statutory notices, which seems a good use of public money. We would not wish to accept the amendment. With the comments I have made, and with the understanding that the coalition agreement was that we would try to protect local newspapers, I would ask the noble Lord to withdraw his amendment.
Lord Tope
My Lords, I am searching for the words in the coalition agreement which certainly comply with the amendment. I am, of course, grateful to all noble Lords who have spoken in the debate. Perhaps it was the way in which I introduced it; there seems to be some misunderstanding. There is nothing in what I am seeking, nothing in this amendment, which removes the requirement to publish statutory notices. What I am seeking to remove is the requirement to publish them in local newspapers; that is an important difference. I entirely agree, and wholly sympathise, with the view expressed by several speakers that by no means everybody accesses the web or electronic means of communications. The noble Earl, Lord Lytton, may well receive his parish notices by e-mail, but I suspect that not all in the parish study the parish e-mails. Maybe one day that will be the case, but it is not yet and I do not suggest that it should be.
This amendment would still require local authorities to publish their statutory notices, but it would require them to do so in a way that they thought likely to bring them to the attention of persons who live in the area. That could be in the local newspaper—perhaps in a better form than most statutory notices—by e-mail or on their website. Possibly the most effective way is still on a piece of paper put through the letterbox, which is still, I suspect, where many people get their information on planning applications and other matters of direct interest to their immediate vicinity. It is for the local authority to decide, depending on the circumstances of its own area, which is the most effective and cost-effective way of meeting a statutory requirement to publish public notices. Among the least effective ways is this statutory notice—with which we are all familiar but which is seldom read—published in the back pages of a newspaper.
Lord Beecham
“(3) In section 4 of the Local Government Act 1986 (codes of recommended practice as regards publicity) after subsection 8 insert—
“(9) In respect of the characteristics set out in section 4 of the Equality Act 2010, nothing in section 38 shall restrict the rights of authorities in pursuance of their obligations under section 149 of the Equalities Act 2010 to publish at any time factual material by way of correction or rebuttal of inaccurate statements which promote discrimination, harassment or promotes or constitutes other unlawful acts.”
Lord Beecham
My Lords, this rather intimidating-looking amendment is a probing amendment. It arises somewhat curiously from my membership of a committee set up by the All-Party Inquiry into Electoral Conduct, which is preparing a report on material produced in elections that might be racist or discriminatory in one way or another. In the course of discussions, some doubts were expressed about whether, under the present code of practice, it is possible for authorities to publish statements of fact correcting statements of that kind. I put it no higher than that there is a doubt about that. There is a legal opinion that it is perfectly legitimate to do so but certain reservations are held in the world of community relations and local government that it may not be permissible to make clear that what other people are saying is wrong in particular areas.
The reference here to the characteristics set out in the Equality Act cover the following areas: race, gender, age, gender reassignment, sexual orientation, and religion and belief. The concern is that particularly—but not exclusively—around the time of elections we may get significant misstatements which can be calculated to mislead people and may indeed in themselves be unlawful. The amendment seeks to clarify the position. The Minister may be able to say today or subsequently that, having taken advice from government lawyers, the position is okay and authorities are able to correct such misstatements.
To illustrate the kind of problem that one might face, a ludicrous urban myth is currently developing around the infamous bedroom tax, purporting to say that if you are a Muslim householder, you can describe one of your rooms as a prayer room and that will avoid the bedroom tax. This is complete nonsense but one can see how statements of that kind can cause considerable problems and, in the context of an election, be influential.
Therefore, the amendment seeks simply to sanction or confirm, if it is indeed the case, that it is permissible for authorities to publish,
“factual material by way of correction or rebuttal of inaccurate statements that promote discrimination, harassment or promotes or constitutes other unlawful acts”,
in the areas to which I referred. It is particularly important that it be made clear that that is permissible during the purdah of an election period because that is precisely when it may be that those with a particular axe to grind will be most likely to produce such material. It is important that it be rebutted, not in a party or political sense but in a purely factual sense, as quickly as possible in order that the situation should not be inflamed.
I hope that the Minister can assure me that the advice is that such publicity is permissible, including during an election period. If not, I invite the Minister to consider the position further and see whether the amendment or something along the same lines can be incorporated into the Bill. It is an area where, particularly given present tensions, councils acting responsibly can correct factual misstatements, thereby helping to promote community cohesion and avoid any discrimination or harassment of any of the groups identifiable within the characteristics listed in the Equalities Act. Of course, authorities have a duty under that Act; the question is whether we can confirm that that duty will allow them to take the steps to which I referred. I beg to move.
Baroness Hanham
My Lords, I just want to check for the noble Lord the exact position regarding elections because that is probably the most salient purpose of the amendment. Perhaps I may first reply in general.
As the noble Lord has acknowledged, Section 149 of the Equity Act 2010 places a duty on local authorities to tackle discrimination in all the areas that he mentioned. The Code of Recommended Practice on Local Authority Publicity, to which local authorities have a statutory requirement to have regard, sets out the seven principles that local authorities must abide by when producing any publicity. Publicity must be, lawful, cost-effective, objective, even-handed, appropriate, have regard to equality and diversity, and be issued with care during periods of heightened sensitivity.
The publicity code, in its guidance on the principle of publicity about equality and diversity, is clear that local authorities may seek to influence the attitudes of local people or public behaviour in relation to matters including race relations, equality, diversity and community matters. The provisions in the Bill relating to the publicity code allow the Secretary of State to make a direction requiring a local authority or group of local authorities to comply with some or all of the publicity code. As I understand it, the amendment is intended to ensure that any direction about compliance with the code would not prevent a local authority from exercising its obligations under Section 149 of the Equality Act. The code makes provision for just this sort of publicity; a direction to comply with the code would serve only to put the guidance on a statutory footing.
Paragraph 35 in the current code states:
“It is acceptable to publish material relating to the subject matter of a referendum, for example to correct any factual inaccuracies which have appeared in publicity produced by third parties, so long as this is even-handed and objective and does not support or oppose any of the options which are the subject of the vote”.
I think that that clears up the matter as regards being able to respond during elections, in particular.
Lord Beecham
Is an election to be treated the same as a referendum because a referendum is putting an issue? I am not sure that that is right. If that is the intention and that can be confirmed, that would be sufficient.
Baroness Hanham
My Lords, this is an important point. If the noble Lord withdraws the amendment, perhaps we can discuss this further before the next stage and identify whether, in parliamentary terms, a referendum would cover elections. If that is so, the noble Lord is right—the issue is not covered. Is the noble Lord happy to withdraw the amendment with that assurance?
Lord Beecham
Yes. I am grateful for the assurance and I beg leave to withdraw the amendment.
Lord Tope
My Lords, I gave notice of my intention to oppose Clause 38 standing part of the Bill, and I did so to enable us to have a debate on what for many in local government is arguably the most contentious part of the Bill, or certainly one of the most contentious. I did not wish to try to amend the clause; I simply wanted to facilitate a debate to enable the Minister to give us the evidence that the abuse of the voluntary publicity code is sufficiently serious and widespread, and indeed is a prime cause of the threat to local newspapers, as to justify giving very considerable powers to the Secretary of State over the local publicity that councils can undertake.
I have been supplied with the wording of the coalition agreement which relates to this issue rather more than to the statutory notice one. The agreement states:
“We will impose tougher rules to stop unfair competition by local authority newspapers”.
For added value, the Liberal Democrat manifesto stated that we:
“Support a diverse regional and local media. We will help to maintain independent local sources of news and information by enabling partnerships between TV, radio and newspaper companies to reduce costs, and by limiting publicly-subsidised competition for paid advertising from local council free-sheets”.
I will leave it to the Minister to tell us what the Conservative Party’s 2010 manifesto stated, as I am sure she knows it off by heart.
As I said, I am asking the Minister for the evidence on which the Government are basing what I consider to be fairly draconian measures. I ought to say that I entirely agree with that section of the coalition agreement and, indeed, with that part of my own party’s manifesto. I believe that I am sitting next to the author of that, so I have little choice but to agree. However, I do agree. I offer no personal or political support for that tiny number of local authorities—I believe that it is a tiny number—which have gone too far in a party-political sense when publishing newspapers, magazines or other material. That criticism applies whichever party is involved or even, in one case, no party. I think that we all hold that view. However, is that abuse so widespread and general as to justify legislating to give the Secretary of State this power? I am not sure which words to use as I do not want to say, “power to control the publicity output of local authorities”, but that is where this is leading.
The measure gives the Secretary of State power to intervene even if a local authority has complied with the currently voluntary publicity code. I find that worrying. I have never believed that a small number of abuses, however wrong or undesirable or however much we all oppose them, is ever sufficient justification to legislate for everybody. However, that is what I think we are doing. I believe that the vast majority of publications, of whatever nature—magazines, newspapers, newssheets, letters from the leader—comply with the voluntary code. Of course, people may or may not agree with some of the comments but they give no cause for general concern and certainly no requirement for legislation.
Clearly, my Government take a different view so, by enabling this debate today, I am asking the Minister to give us more widespread evidence—rather than two or three perhaps misguided local authorities—that this is a problem that needs to be tackled in this way. I also wonder whether the continuing budget cuts are actually proving a far more effective restraint on local authority publications, whatever their content, than anything that we may legislate for; that may be something that we need to examine further.
I will pause now and give the Minister the opportunity to provide the evidence that many of us are seeking.
Lord Beecham
My Lords, perhaps I can give the Minister a few more minutes to assemble her thoughts.
Once again we are dealing with one of Mr Pickles’s little obsessions. It is unfortunate that so often our parliamentary time is taken up with dealing with these notions of his. I entirely support the amendment and the sentiments with which the noble Lord, Lord Tope, has moved it.
It is interesting to look at the justification—perhaps that is the wrong word; the explanation—for the proposals in the government document, which describes their objectives in revising the code. The code speaks of competition but of course it does not deal with competition, which can and should be dealt with by the appropriate legislation. The department, however, considers that the publicity code is,
“the right vehicle for imposing tougher rules to stop unfair competition by local authority newspapers”.
That is quite extraordinary. It goes on to say:
“The Department’s view is that the proliferation of council newspapers can have the effect of reducing the impact of independent local newspapers. A healthy free press is important in providing information to the public to hold their local authority to account”.
I could not agree more. I deplore the decline in the coverage of the affairs of my council and many others, which has gone on now, to my certain knowledge, for 20 years. Those sentiments are quite right but the statement goes on, risibly, to suggest:
“Council newspapers, issued frequently and designed to resemble a local newspaper can mislead members of the public reading them that they are local newspapers covering council events and give communities a biased view of the activities of the council”.
So the residents of Newcastle are so dim as not to be able to distinguish between the Evening Chronicle or the Newcastle Journal and the occasional distribution of the council’s Citylife? This is a ludicrous proposition.
The suggestion that somehow the terrible decline in the newspaper industry, local newspapers in particular, is the responsibility of local government is just absurd. I can quote some figures about that. Trinity Mirror, which runs papers in my part of the world, employed 6,000 production and editorial staff in 2004; the figure is now fewer than 2,700. The Daily Mail has shed a quarter of its 3,000-strong workforce since 2010. This is not because people are rushing out to get hold of a council newspaper, or waiting eagerly for it to arrive through the door, and therefore no longer need to read these other papers, it is because of the changes in the industry; it is because we now have the internet and social media; and it is perhaps because people are less interested in news.
Certainly, in my experience, local newspapers are much less interested in covering council affairs than they ever were. That process is still going on and I regret it. When I was leader of the council—this is going back a long time—I used to get daily calls from a newspaper correspondent. That stopped before I finished as leader, which was in 1994. They do not come to council meetings and never cover scrutiny meetings, because the industry is in an altogether different position now.
One of the more useful briefings that some of us have received has come from the National Union of Journalists. It opposes this government stance and this clause. As it puts it:
“The NUJ has no difficulty with additional guidance being issued to local authorities and councils. However, the new publicity code ‘includes specific guidance about the frequency, content and appearance of local authority newspapers, including recommending that principal local authorities limit the publication’”—
well, we know about that. The journalists go on to say:
“We do not believe that this element of guidance reflects the needs of many communities, nor the practicalities of providing prompt, accurate advice and information to communities”.
That is, of course, right. They also make the point that it is perfectly possible that if authorities stray into the area of political propaganda—which they should not—they can be,
“referred to the appropriate body for investigating improper use of council funds for political aims”.
Proper officers of the council should be keeping an eye precisely on that sort of area. If they do not, perhaps the auditors should be doing so. They presumably will be getting copies of any civic newspaper while they are about their business.
The Audit Commission itself, three years ago, rebutted the suggestion by newspaper proprietors that local authority publications represented unfair competition. It found that the money spent by councils was not unreasonable, that few council publications were published sufficiently frequently to be viable media for most local advertising—which is where the press think that they are being deprived of revenues—and that the current accountability framework is adequate. That seems a pretty unanswerable case. The position that the Government are adopting bears no relationship to the reality.
However, that is only publications and the press. There is another aspect to this code, which the noble Lord has not mentioned—the question of lobbying and the effective injunction against councils employing firms to lobby on their behalf. Again, if there were any suggestion that the lobbying was of a political nature, that would be caught in exactly the same way as any political material in a newspaper. But why should a council not seek to use lobbyists—preferably registered ones, which I hope will come, even if we have not got round to it yet—to develop an argument with Members of this House or the other House, or to influence government or public opinion? There is nothing wrong with that provided it is not a political exercise. However, that is also excluded under the revised code of practice.
Again, too much power is accruing in the hands of the Secretary of State, who in this case is being set up as a censor or inquisitor prepared to put something on the index of prohibited publications. That is not the function of the Secretary of State. This is an intrusion into local democracy under the specious argument that somehow local council publications are undermining the press. It is an absurd proposition and I support the noble Lord.
The Earl of Lytton
My Lords, the noble Lord, Lord Tope, will be pleased to know that the National Association of Local Councils supports the thrust of what he has advanced here. It does not believe that there is a problem, nor does it see a need to change the present code status. It is not aware of a single instance of the Secretary of State intervening in a parish council publicity matter. It says that the taking of additional powers by the Secretary of State is distinctly non-localist, and there are some concerns at the potential longer-term implications for parish newsletters. It certainly does not think that this is a legislative priority. I am at one with what has been said on this.
I have a separate concern that I expressed at Second Reading on the suitability of the present code to become a statutory code at all. When I put this to the Local Government Association, it agreed with me that the current drafting appears to be less than precise and said that it was a matter on which the LGA had taken some advice. However, that is not to say that the general thrust of the code is wrong. It actually contains some good principles but is qualified by all sorts of terms, mainly prefaced by the word “should”, and includes phrases such as “likely to be perceived”. There are also imperatives about there being no,
“commentary on contentious areas of public policy”,
and positions being presented “in a fair manner”. Authorities should not do anything,
“designed to influence members of political parties”.
Paragraph 13 of the code states:
“The purchase of advertising space should not be used as a method of subsidising voluntary, public or commercial organisations”.
That begs the question: when is a subsidy merely part of a cost contribution? I note also that the definition of what might be unreasonably partisan, contentious, sensitive or likely to have an influence if not even-handed is probably not a constant between Parliament at this level and the parish pump at that level. I certainly question whether it applies in equal manner to everything in between. How would making this code statutory improve things? Would it be simply an avenue for contention whereby the matter would have to be thrashed out in the courts—the Secretary of State versus some borough, parish or other?
Is that a profitable way to go forward, bearing in mind that there do not seem to have been any substantial problems? It is said there have been one or two in some London boroughs but I do not know whether they are regarded as being typical or whether those boroughs that have had the finger wagged at them have failed to observe the wagging finger. Other noble Lords may know more about than I do, but it seems to me that the case for the clause is not made.
Baroness Hanham
My Lords, I recognise that the Room is not with me but it is none the less extremely important that the clause stands part of the Bill.
The code of recommended practice, agreed by both Houses of Parliament, is the guidance to which local authorities must have regard when producing their publicity. It sets out the seven principles that local authorities have to abide by when producing their publicity. We know what they are and I shall not read them out. The publicity code is necessary because local authority publicity can be expensive and contentious. We acknowledge that the majority of local authorities abide by the guidance in the publicity code. However, there are some that do not. There are examples of local authorities that still produce weekly newspapers that are highly contentious and political. While there may be only one or two authorities that have done this, it is proper that someone is able to make sure that that does not happen.
Clause 38 provides the Secretary of State with the power to take action where a local authority is not complying with the publicity code. This would be taking action by direction. The Secretary of State can direct a local authority or a group of local authorities to fulfil or take notice of the publicity code and can require compliance. Such directions do not require all local authorities to comply—although it could do so, which would make the power statutory, if there were to be a real outbreak across every single local authority.
However, that is not what this clause is directed at. It is directed at the one or two authorities that are still not conforming to the publicity code. If a publicity notice is excessive and people complain, it enables the Secretary of State to direct the local authority to comply with that code. The clause sets out the procedures to be followed before a direction is given and these require the Secretary of State to give proper notice of the proposed direction and for an authority to make representations within 14 days.
Lord Beecham
Lord Beecham
My Lords, with the leave of the Committee, I will speak to both this amendment and the following one, Amendment 19BC, since they both relate to council tax referendums, which is a highly contentious issue—to use the noble Baroness’s phrase—about which no doubt several authorities would be only too pleased to be able to lobby. I do not think a telephone call would suffice to deal with this issue.
Amendment 19BB deals with a particularly objectionable part of the Government’s proposals. I remind your Lordships that the ad hoc committee on the Bill had no opportunity of considering these amendments, or indeed the code of practice that we have just discussed, because these matters came very late in the day and were added to the Bill as a convenient vehicle for the Secretary of State’s obsessions, to which I have already referred. In terms of the council tax referendum, what is particularly objectionable is that there is a potentially retrospective effect here, because decisions already taken in the past can be used as the basis for requiring a referendum in the future. That is particularly objectionable where the decisions might have been taken by a body that is not actually the individual local authority. If it is a precepting authority or, as this Bill is seeking to require, a levying authority, that is even more objectionable. There is no justification whatever for this element of retrospectivity and I hope that on reflection the Government will see that it is a departure from normal practice and one that cannot be justified except in the most exceptional circumstances. In my submission these simply do not arise.
Amendment 19BC acknowledges—as do both amendments—the fact that we are living with a provision about council tax referendums. Many of us opposed them when they were inserted into what is now the Local Government Act but they are there and we have to live with that. What this amendment deals with is the position that might arise as a result of not simply a decision in the past but a decision in the past with a continuing effect on expenditure. So, for example there are authorities—I understand that Leeds has raised this—with city deals that have entered arrangements which would require expenditure over a period which, if the current referendum provision is applied, might severely impact on the schemes to which the Government are party.
The city deal, which one welcomes, is an opportunity for the Government, local government and private sector partners to work together. It involves a commitment of expenditure on all parts. If such decisions are not to be thwarted, given the ever tightening situation affecting local authorities, at the very least the Government should be making transitional provision to ensure that decisions fairly recently arrived at, but which will have a continuing impact, will not merely be on the finances but on the economic state of the area with which these arrangements are very largely concerned. The Government’s proposed changes could cause very severe problems, whether they are over transport—which I think was the case in Leeds—or about city deals such as that in which my own authority has been involved. No doubt we shall hear from my noble friend Lord Smith about Greater Manchester Combined Authority and its arrangements.
Referendums are both costly and unpredictable in their outcome. You cannot have that situation when you are dealing with third parties and have entered into arrangements that could be disrupted as a result of the change which is now being proposed. I think that the Government should take both of these matters back. The first point is really a matter of principle about retrospective legislation and requirements. The second is to deal with what appears potentially to be a significant issue for a number of authorities which are endeavouring to do their best in many respects to work with government on agreed programmes that could be rendered difficult—no doubt unintended—as a result of the provisions. I beg to move.
Lord Smith of Leigh
My Lords, before I speak on this matter I shall declare my interests. I am a vice-president of the LGA and also, as my noble friend indicated, the chairman of the Greater Manchester Combined Authority. Greater Manchester is one of the areas where the Secretary of State was somewhat upset by the level of council tax rises which were entirely consistent with the law as it stood. Before I begin I would like to quote from a document published by DCLG on 12 January 2012 on council tax referendums.
“The definition of ‘relevant basic amount of council tax’ . . . is essentially an adjusted Band D amount which is derived from a calculation of the authority’s basic amount of council tax. This amount is modified by omitting local precepts issued to or anticipated by a local authority, and levies issued to or anticipated by an authority, from the calculation. This is to ensure that increases in levies, over which authorities have minimal or no control, are not a factor in triggering a council tax referendum”.
Those were the words of the department in issuing guidance on council tax. As my noble friend indicated, levies come in to local authorities in a number of different guises. In Greater Manchester last year, two particular things impacted on the levy situation. First, not quite like Leeds, we had an agreement between authorities on transport expenditure, which will put a 3% increase above the day-to-day spending needs of the transport authority to invest in transport infrastructure. That programme began in 2009 with the commitment of the 10 authorities in Greater Manchester—which took some getting, I assure you, but we got there—to put that money in for six years. When we went to the Government and negotiated our city deal—we were the first conurbation to get a city deal—this transport expenditure was seized upon by the Government as an innovative way forward for local authority spending. It has taken some time, but we have devised an earn-back model and have now agreed that the Treasury will reallocate some of the increased taxation back to Greater Manchester. We will be able to spend that money on future investment. It is a good deal, and I understand that it will be part of the announcement on the public spending review.
Last year, the increase for the Greater Manchester transport levy was 3.6%. In other words, it was 0.6% for day-to-day transport needs—the cost of fuel and other things; this meant that there were big impacts on costs. The other 3% was that commitment made back in 2009, which continues to roll forward in future years—a contribution to investment and transport. We can prove that the transport investment is taking place. If noble Lords go to Manchester, they will see that the new Metrolink system is up and running, and new bus ways beginning in my area. There are all sorts of things going on which meet our commitment, and government commitments, to reduce greenhouse gases and all sorts of things. We thought that we would agree that with the Government but, obviously, they pushed up the levy.
I step back slightly from the second impact because Wigan is not part of the Greater Manchester waste disposal authority. The waste disposal authority signed a new PFI deal a couple of years ago because it did not have the facilities to deal with modern waste and needed expenditure on a new facility. So often with PFI deals, the early years have a really high cost which inevitably falls over future years. The effect on the waste disposal levy was 4.5%; obviously a very big increase for those authorities. A number of authorities in Greater Manchester therefore raised their council tax by more than the 2%, which the Secretary of State said would trigger a referendum. This was entirely legitimate within the rules of council tax referendums as they then were. In fact, the ironic thing was that a number of authorities, including those which seemed to have the biggest increase, actually reduced the proportion of the council tax take for their own services to meet the needs of external levies. That means that if this clause goes through, then the threat of the Secretary of State—the revenge of Eric Pickles—will be that any authority which raised its council tax by, say, 3.5% while the guideline figure remained at 2% can only increase its council tax next year by 0.5%. The rules have changed.
Who knows what would have happened if the council had known that that was the situation last year? Different decisions might have been made. How can we predict the mind of the Secretary of State and the mind of the department when it wants to change the rules in this manner? It is grossly unfair that some authorities, in addition to the awful amount of cuts that they are taking on board, will have to make savage cutbacks in services to cope with this part of Clause 39. This is bad and retrospective legislation and the Committee should think very carefully before it commits to Clause 39.
Lord Tope
My Lords, I, too, have some concerns about this clause although I am a little unsure about whether to raise these concerns on these amendments or perhaps in a few minutes in the debate on whether the clause should stand part of the Bill. However, I will deal specifically with Amendment 19BB, which deals with the issue of retrospection. The case has been well made with particular instances. I have concerns about the retrospective nature of subsection (15) on rather practical grounds. By the time this Bill is enacted, all attention will be focused on the next financial year and not the current one. For the Secretary of State, whoever that may be at that time, to be penalising authorities at that stage for acting lawfully at the time when they took the action in respect of this current financial year seems to be both wrong and impractical. Should the Secretary of State take that view, what will be the practical implications by the time we are very nearly through the current financial year? I hope that when the Minister responds in a moment she will at least be able to give us some reassurance on the particular issue of retrospection, which is causing quite proper practical concern as well as political and philosophical concern.
Baroness Hanham
My Lords, as I understand it, the noble Lord has grouped together Amendments 19BB and 19BC. Amendment 19BB challenges the Secretary of State’s power to determine categories of authority and to set excessiveness principles which apply to them accordingly. Subsection (15) makes it explicit that, in doing so, he may differentiate between authorities on the basis of past council tax decisions. The amendment would remove subsection (15) because of concerns, as raised in our discussion, about retrospection and about it providing much wider powers to the Secretary of State when setting excessiveness principles.
I am happy to confirm that subsection (15) does not apply referendum principles retrospectively. It does not make any changes to the setting of council tax in previous years or change the referendum limits that applied. The Government were clear before council tax and levies were set for 2013-14 that they would take into account the decisions taken by local authorities on council tax in setting future principles. As already stated, no changes will be made to those principles that applied in 2013-14 or, indeed, to any other year. Both authorities and levying bodies can continue to plan accordingly.
In light of the fact that local authorities have had a pretty clear indication that their decisions for 2013-14 would be taken into account—what they did, where and why—in setting future principles, there is no argument that authorities were not aware of the Government’s intentions or justification for accusations of unfairness, given the Written Ministerial Statement of 30 January 2013, followed by an information note sent to all to local authorities on 8 February. Decisions taken on council tax increases for 2013-14 were taken in full knowledge of those warnings. Subsection (15) does not radically extend the Secretary of State’s existing powers. It clarifies those powers and removes any doubt as to whether they allow him to continue to take into account past council tax decisions when making decisions on the following year.
Amendment 19BC would provide that during a transitional period specified expenditure could be exempt from inclusion within the calculation on whether a council tax increase was excessive. The noble Lord will be aware that the excessiveness principles, which are set annually, already allow for different principles to be set for different categories of authority. For this reason, I assume this amendment is intended to press the case for the additional flexibility that we have been talking about.
It is intended that the detailed excessiveness principles for 2014-15 will be made later in the year. However, the principle will remain that local taxpayers should be protected from unwanted excessive council tax increases. It is local residents who should have the final say on whether to accept an excessive increase. We recognise that there may be specific reasons as to why a particular local authority may wish to set an increase above that level; the noble Lord, Lord Beecham, referred to the city deal in Leeds, and the noble Lord, Lord Smith, referred to Manchester. The city deal with Leeds on private sector investment has been predicated on increases in levies from the West Yorkshire Integrated Transport Authority. It is right that the levy set by the 22 elected councillors from the five district councils that manage the authority should be treated in exactly the same way as the costs of every other local authority investing in local transport projects. The Government accept that neither this nor any other city deal is dependent on setting an excessive council tax increase, nor that excessive increases in levies were agreed as part of the deal. The chair of the West Yorkshire Integrated Transport Authority put it well himself. He said that,
“transport will be managed locally rather than from Whitehall, with decision making to suit local needs, accountability to Council Tax-payers and creating a transport network fit for purpose”.
Local decision-making and local accountability to council taxpayers are what the current clause would provide by extending the transparency of decisions taken by bodies funded from council tax receipts and ensuring that local residents have their say when those decisions would require larger increases. In summary, the Secretary Of State already has flexibility to set referendum principles that address particular situations and the right to take into account the 2013-14 council tax level. With those explanations, I hope that the noble Lord will be willing to withdraw his amendments.
Lord Beecham
My Lords, of course I am not going to seek to test the opinion of the Committee today, but this is a matter to which I and other noble Lords from different parts of the House will want to return. I confess that I used the word “sophistry” to my noble friend to describe some of the assertions made by the noble Baroness—assertions no doubt made at the behest of those in somewhat higher positions within the department. This is not a satisfactory position. We will clearly need to look in detail at what she said but the reality is that decisions were taken in good faith, along with the Government, to establish a range of agreed policies without the expectation that these would somehow be affected by decisions of the kind to which the noble Baroness referred. If those agreements reached with government and other partners are to be sustained, it will, on the basis of the Government’s announced policy, be at the expense of core services. That was not envisaged at the time these deals were entered into, and it will make councils extremely reluctant to enter into any further arrangements with government when that could have the impact that it appears is now facing a number of significant authorities that are doing their best to work with government. It is an unsatisfactory position to which we will no doubt return on Report, but I beg leave to withdraw the amendment.
The Deputy Speaker (Lord Geddes)
It may assist the Grand Committee if I advise that this is not an amendment as such but an opportunity for one or more noble Lords to voice their opposition to the Question that the clause stand part of the Bill.
The Earl of Lytton
My Lords, my entire purpose in objecting to the clause came not only at the request of the LGA but as a result of a question that I put to it about the interface between the council tax referendum regime on the one hand and local democracy on the other. It felt, as do I, that the Government’s position needed further explanation. The National Association of Local Councils has also raised doubts about the wisdom of this part of the Bill, so here I am opening up the point for debate.
The Committee will know better than I about the frequency of local elections, depending on the type of authority and whether all the seats are up for election—a third, a half, or whatever, depending on the type of authority. The authorities that seem to have the least frequent elections seem to be the shire counties and the London boroughs, according to a potted account with which I have been provided by the LGA. The unitary and district authorities obviously have a different range of election frequencies and proportions of those standing for election, so the only slightly tongue-in-cheek question is this: how many council tax referenda equate to an election? As I say, that is slightly tongue in cheek.
I accept that a council tax referendum may be advanced on a narrower basis than a local election but it seems to be obvious that if a council is elected and starts to implement its programme, but is then subject to a further check on progress via a referendum on the logical outcomes of its policies, it begins to look like a recipe for potential gridlock. Giving the electorate the right to chop and change midway through an electoral cycle is curious. I suggest that the open-ended nature of that needs to be looked at. I do not necessarily say that the principle of intervening in council tax referenda is wrong or anything like that, but they do not necessarily coincide with the normal electoral cycle, and there is therefore the possibility of such referenda being quite disruptive.
As I said earlier, in order to galvanise the local electorate, which is sorely needed in some cases, it is necessary to have matters of substance and of relevance to the electors on which their votes can make a difference. That is a very important point. The LGA certainly feels—I noted the comments of the noble Baroness in another context—that the referendum provision risks compromising the thrust of local democracy in certain circumstances and that the main decision should be via the normal electoral ballot box. That is certainly the view of the LGA. As I say, we cannot guarantee that a referendum and a local election will coincide. A further explanation is needed from the Government.
In terms of forward investments, I noted what the noble Baroness said a few minutes ago about the way in which the previous amendments might be brought to bear on this whole matter. I did not quite understand the thread that a longer-term investment process would necessarily be proof against the effects of a referendum. That was my intention at this stage. I noted that no other noble Lord had added their name to the amendment and therefore anticipated that I might be in a minority of one standing before the Committee. On the broader principle, however, I should be interested to hear the Minister’s comments and those of other noble Lords.
Lord Tope
I begin by reassuring the noble Earl, Lord Lytton, that he may be in a minority of two. I share his concerns and would ask the Minister a question for clarification. Is it the case that, if a referendum on what is deemed to be an excessive levy is lost, that so-called excessive levy will still apply but the local council will have to cut its own budget in order to levy an appropriate council tax to meet the levy demand? Noble Lords opposite are saying yes; that is clearly the answer I am going to get and I want it to be clear and specific on the record. If so, we need to understand the implications of what we are doing. I can pick many examples, but flood defences might be appropriate. One can well understand where a drainage board wishes to put in a so-called excessive levy for particular work in a particular area and the public at large, who pay the council tax, may well feel that they do not want to contribute to that. As others have said, it can lead to unforeseen and undesirable consequences.
In addition to supporting the noble Earl, I also rise because my noble friend Lady Eaton is unable to be here today; she is at the Council of Europe. She has asked me to raise an issue in respect of the West Yorkshire transport fund. I will read into the record the contents of an e-mail she has received from the director of finance of the City of Bradford:
“You asked about the implications of the proposal that rises in levies, as well as Council Tax levels, could trigger a referendum.
The most significant implication for Bradford relates to current plans across the Leeds City Region to create a West Yorkshire Transport Fund. This fund is planned to grow to a total of £1bn by 2025/26 to pay for investment in the transport infrastructure. It will comprise, roughly, £150m from Dept for Transport, £100m from Local Transport Plan, £750m from the participating Councils, each of whom will contribute an increasing amount each year, by way of a levy. The current plan means that Bradford Council would put in £1.2m in Year 1, £2.4m in Year 2, £3.6m in Year 3 etc. The total investment over the period to 2025/26 from Bradford would be £161m.
It’s worth pointing out that the Transport Fund is a central plan in the Leeds City Deal, a key part of the Government's regional policy. While the Transport Fund is not the only element, it provides the underpinning infrastructure investment on which other investment activity builds.
Now, before the proposal to treat the levy by the same referendum rules as Council Tax, this plan held good. For citizens, the plan did of course mean that, while the Council Tax element of their bill would be restrained at below 2%, they would pay an increasing amount for transport investment. (And leaving aside the referendum issue, the decision to create and sustain the Fund ranks among the most significant decisions in the next budgeting rounds for participating Councils.)
The Bill’s proposal means that the Transport Fund can only be afforded in its current form if offsetting reductions are made across other services in the Council. So, by Year 3, for example, savings in other services would need to be roughly £2.4m higher than otherwise, for Bradford to afford its currently planned contribution of £3.6m in that year.
From a financial perspective, the proposal means … If investment in transport remains a priority, and the planned regional-level investment makes sense, there is now much sharper trade-off between transport and other choices. … If investment in transport has to be significantly reined in to satisfy the ‘below 2% rise’ rule, the investment returns will be significantly curtailed, with the reduced economic impact (which in turn would expect to feed through to a weaker taxation base of citizens in work and firms in business paying rates) ... For individual citizens/households, a lower aggregate taxation burden than they otherwise would face”.
That ends the quote from the director of finance at the City of Bradford, which I undertook to raise today. I hope the Minister is able to respond, if not today then later, particularly to the noble Baroness, Lady Eaton, on whose behalf I have raised this.
Lord Smith of Leigh
My Lords, I agree with the noble Earl about the problems of the electoral cycle. It was a bit disappointing that this is the fallow year for metropolitan authorities so we did not have elections. Noble Lords may recall that Wigan won the FA Cup and the feel-good factor was particularly good; obviously there have been fantastic comments on social media, but unfortunately we did not have any local elections to take advantage of that.
It was really interesting that the noble Lord, Lord Tope, read out the views of the director of finance from Bradford. The answer that the Minister gave to the earlier amendment was that, under Clause 39, the current provisions of the Localism Act, which define the relevant basic amount of council tax increase, will change from being what the council itself sets to include levies and other charges. Therefore, decisions that were entirely within the law as it stood earlier this year in March will be affected.
We had a debate earlier on the council tax referendum principle. The Government say they are not capping but actually they are. In my long experience of local government, I cannot believe that once the Secretary of State sets out the guidelines to which a referendum will apply, any local authority would want to set an amount of council tax increase above that guideline. If it does, it is on to an absolute loser. There is no way it will win a referendum on that. Which council tax payer is going to vote for higher council tax? They are not asking, “What services are being cut?”. It is a simple referendum on the increase in council tax and nobody wants it. The Secretary of State may want and need that part of it but effectively it is capping local authorities.
Capping does not always have the longer-term political impact that Governments may think. When capping was first introduced, my authority was one of the 22 Labour authorities that were all capped at once; no Conservative authorities were. We set a budget, but the Government said we could not and that we had to reset it and make significant cuts. When we came to the elections that May, we had a really big increase in our majority, so it did not have any negative political impact. I have great sympathy with the noble Earl’s position. Do we need this clause? I do not think so.
Lord Beecham
My Lords, I shall be brief. The position is a curious one in relation to what the Government regard as an area of excessive increases and what they regard as something else. An increase of more than 2% in council tax is excessive but an increase of 5.8% in social housing rents is acceptable. Indeed, the Chancellor has said today that social rents will increase by CPI plus 1% a year for virtually a decade. That actually will be rather less than the increases imposed in this past year but whichever way you look at it, it means that what is an unacceptable increase for council tax payers is well below what social housing tenants will be expected to pay. It is an interesting anomaly.
However, on the referendum point, it should be noted that three sets of organisations are involved in local government finance at the local level—the council, the levying bodies and the precepting bodies such as police commissioners. Several police commissioners increased their levies by significantly more than the 2% figure. That was acceptable because it did not raise the overall increase significantly. On the other hand, technically, their regime is rather different and rather more generous in terms of potential increases. However, if they breach the limit for precepting authorities, I understand that they would have to have a referendum. Therefore, there are two referendum systems here, as it were. It is odd that there are in effect two external bodies—some bodies, admittedly, comprise a combination of local authorities, but many do not—which can, by means of a levy, potentially force the council to have a referendum on its overall council tax levy, whereas precepting authorities are in a different category. That anomaly certainly raises questions to which we may want to return on Report.
I anticipate that the noble Earl will not seek to test the opinion of the Committee tonight. Given the fact that referendums are now, unfortunately, part of the system, despite the opposition of many of us when the Local Government Bill went through, I am not sure that we will get very far in that regard on Report. However, in this curious area of anomalous situations and differential rates of what is acceptable and what is not, we might at least provoke the Government into thinking about the system they are creating and the degree to which it is being made more elaborate, complex and, ultimately, less accountable to people with every successive announcement.
Baroness Hanham
My Lords, I thank noble Lords who have contributed to this debate. I shall try to deal with one or two specific questions at the end of my remarks. I shall lay out the purpose behind Clause 39 and pick up some of the questions as I go along.
Clause 39 amends the calculation that authorities must make each year to determine whether their council tax increase is excessive and therefore requires the approval of local people in a referendum. It changes the definition of excessiveness from an amount that excludes levies to one including levies. It will ensure that people get the final say over an excessive increase in the total council tax charged by an authority. The noble Lord, Lord Beecham, properly drew attention to the fact that precepts are already part of the local government charge. Currently, the excessiveness calculation is based on the relevant basic amount of council tax, defined so as to exclude changes in levies raised on an authority by levying bodies. The level of levies varies in different areas, but can make up more than 50% of an authority’s council tax requirement. This year, many council tax payers have seen their total bill increase by a higher percentage than they might have expected due to the impact of levies, with the overall increase appearing to be above the referendum threshold set by the Secretary of State and approved by the other place.
In short, a levy is a demand for payment by a levying body on a local authority. A large number of organisations and bodies have historically been granted the power to issue levies. Some of these are relatively small organisations but others are much larger. We have discussed more recent creations such as integrated transport authorities and joint waste disposal bodies, which carry out substantial functions across cities or regions.
Combined authorities can bring together a number of others to pool their resources and make savings, removing duplication and giving them an opportunity to make sure that the levy is not as much as it would otherwise be. However, we are clear that levying bodies are part of the local government landscape; they are funded to varying degrees by local council tax payers. We discussed the levies briefly. They were removed from the provisions of the Localism Bill, and it is partly an attempt now to exempt certain types of expenditure from the excessiveness calculation, such as that which has been approved by a local referendum. I have missed a page and shall go back.
Baroness Hanham
I was trying to be brief; it is always a mistake.
I want to make it clear that the Secretary of State is able to set excessiveness principles which compare council tax figures in 2013-14 with 2014-15, using the methods set out in this clause, and now including the cost of levies. This remains consistent with current arrangements, where the Secretary of State takes into account all relevant factors, including previous council tax levels. Noble Lords will be aware that the effect of the clause is to reinstate the model for council tax referendums contained in the Localism Bill when it was introduced to Parliament in 2010. Not one objection was raised to the inclusion of levies during the consultation or the parliamentary debate on council tax referendums. The concept of taking account of those is familiar, having been part of the consideration of the excessiveness under the old capping regime, to which reference has been made.
Levies were removed from the provisions of the Localism Bill as part of an effort to keep certain types of expenditure from the excessiveness calculation, such as expenditure which was approved by referendum or which was not under the direct control of the authority. However, since the passing of the Localism Act, there have been two developments. First, the rate of levy increases has outstripped the national increase in council tax. In total, the levy increased by 4.1% in 2011-12 at the time of an overall council tax freeze. The coalition Government have been clear from the outset about their wish to protect people from excessive council tax increases, and the inclusion of levies in the referendum legislation supports that. Secondly, authorities have shown themselves to be consistently capable of working with levying bodies in setting them and considering the cumulative pressure on council tax. Local authorities are well represented on the majority of boards of levying authorities, and there are hundreds of examples of councils and levying bodies already meeting the terms of the schemes which require a freeze or reduction in the overall council tax bill.
The Government do not accept that local councils will simply have an excessive increase forced on them by levying bodies. We have had representations that this clause could constrain authorities that have already come together to collaborate and pool resources. We must be clear about this, too. In many areas, transport and waste disposal are run by local authorities—the noble Lord, Lord Smith, drew attention to that—and are funded through the council tax, which is subject to referendum principles. In larger metropolitan areas, these functions are carried out by joint waste and transport authorities, funded by levies that are not currently subject to the referendum principles. It is right that the spending by these large organisations, with budgets in the hundreds of millions of pounds, should be subject to the same scrutiny and accountability as happens elsewhere in the country.
I should like to make it clear that a number of authorities lobbied for this change. One was Liverpool City Council, which approached the department last year, making the case for increased consistency in the treatment of different classes of local authority. That council may be alone, but it has been done.
The question was asked about elections, including those for thirds. Decisions on council tax and on the amount of council tax charges are taken in March and local elections take place in May. If there was a referendum at the same time, local electors would be very clear what the situation was and what they were voting on. I hope that that will, if not satisfy noble Lords, clarify the points raised, and as a result I beg to move that this clause stand part of the Bill.
The Earl of Lytton
“Parish polls
(1) The Secretary of State may by order amend Schedule 12 to the Local Government Act 1972 to provide for the circumstances in which a parish poll may be demanded in relation to parish financial matters.
(2) An order under this section may make provision for—
(a) different requirements having regard to the purposes for which a parish poll is sought;(b) different requirements having regard to smaller authorities or authorities with electorates below a threshold to be specified in the order;(c) safeguarding an authority against misuse or disproportionate costs of a parish poll, including circumstances in which the authority may require reimbursement of the cost of a poll; and(d) the circumstances in which a demand for a poll gives rise to a mandatory or discretionary requirement to comply.”
The Earl of Lytton
My Lords, I tabled this amendment in order to raise the wider issues of parish polls. In order to do that, and in order to get it underneath the clerical radar in the Public Bill Office, I had to specify that the amendment related to such polls only on matters of parish finance, but the Minister will know very well where I am coming from on this. I recognise that the wider issues may well fall outside the scope of this Bill, but none the less the principle is very important and applies to financial matters also that will clearly fall within the scope of this Bill.
The Committee may well recall that the original draft of what is now the Localism Act included a provision in Clause 53 for the Secretary of State to amend the parish polls regime by regulation. This unfortunately was deleted along with other clauses on referendums during the passage of the Act. In particular it said:
“Regulations under this section may (a) apply or reproduce, with or without modifications, any provision of, or any provision made under, this Chapter; (b) amend, repeal or revoke any enactment (whenever passed or made)”.
It goes on in the next subsection:
“The Secretary of State may make or arrange for the making of payments to parish councils to enable them to meet the additional expenditure they incur as a result of regulations under this section”.
In Committee in another place the Minister’s right honourable friend Andrew Stunell confirmed the situation in debate on Clause 53, saying that this was clearly a problem that needed to be addressed. He said that he wished to modernise the existing regime to make it fit for purpose in the modern world and he intended to work with key partners such as the National Association of Local Councils and the Society of Local Council Clerks. That would have been fine had there been an order-making provision that survived the course of that Bill but it did not.
The situation there remains that Schedule 12 of the Local Government Act 1972 governs the circumstances in which a parish poll may be demanded. That, in short, means that at a parish meeting either the chairman or 10 members or one-third of the electors present can force a parish poll. It is whichever is the less, so it may be a very small number indeed. Once triggered, of course, the process kicks in and the principal authority then holds the poll and the cost is rechargeable by that principal authority to the parish. The potential for making payments to parishes which was lost as part of the Clause 53 issues in the original draft of the Localism Act was an important omission.
Apart from that, the poll must be about a “parish matter”, but “parish matter” unfortunately is not defined in law. There are therefore no mechanisms to prevent vexatious use of this particular provision. Moreover if a poll is demanded and it cannot at that particular stage be shown to be a non-parish matter—sometimes these things are bounced on parish councils—but subsequently may so be shown, the auditor may disallow the expenditure and that probably occurs many months after the event. Furthermore, the poll result is not even legally binding. There are enormous financial consequences and is an enormous potential, as will be apparent, for vexatious pursuit of various hobby-horses.
Action for Communities in Rural England—ACRE—produced an excellent briefing note in 2010 on the process and the outcomes. It referred to a number of case studies and identified some typical cost elements. For instance, it identified ones listed for them by Shropshire Council under the following headings: “Staff charges”, “Publicity” and,
“Hire and fitting up of premises”.
Staff charges related to posts such as presiding officers, poll clerks, counting supervisors and so on. Many examples of parish costs have been produced, some quite recently. According to the briefing:
“Newark Town Council estimated the costs of a recent poll at £3,900 … An estimate of between £3,000 and £4,000 to cover costs was submitted to Whitby Town Council by their local authority for a poll that eventually resulted in a turnout of 5.27% of electors … Haydon Wick Parish Council with 14,000 electors estimated the cost of a contested election (roughly equivalent to the costs of a poll) at £4,500”—
it was extrapolating the information from something similar—
“South Marston Parish Council, with 600 electors, estimates the cost of a poll at £1,500 which represents around 8% of their annual income”.
Those sorts of figures tend to be fairly typical.
I have further information that reveals the same sort of thing: sadly, a very similar pattern of voter disenchantment or a complete lack of results. Parish polls were triggered in several town councils—Hythe, Sandgate and Folkestone—in 2010 on a district council parking strategy. For Hythe Town Council, with an electorate of 8,000, a population of 14,000 and a precept of £300,000, the cost was around £9,000. For Folkestone Town Council it was £20,000—it has an electorate of 15,000, a population of 50,000 and a precept of around £500,000.
These are not insignificant sums of money. If they happened only sporadically and on rare occasions, that might not matter. However, it begins to look as if this is the route of preference for certain people to try to get their particular view across. Never mind the fact that there may have been a poll in a normal election process and that a council, having been given a mandate, should be given a fair crack of the whip to try to get on with and deliver some of its policies. The list goes on and I will provide it to the Minister because it is important that some of this is known. The point I am making here is that clearly the problem has not gone away.
The questions I need to ask are as follows. First, is the Minister able to suggest anything in the context of this Bill? As I said earlier, clearly the principle applies to parish finance matters and is a legitimate subject for consideration even though the concept of parish polls applies to a much wider category of activity.
Secondly, and probably most importantly, do the Government remain committed to the comments raised by Andrew Stunnell in Committee in another place? If so, the National Association of Local Councils and the Society of Local Council Clerks would appreciate further dialogue.
Thirdly, on the wider issues to which parish polls can be applied, I appreciate that I am taking this outside the scope of the Bill but it is important to ask whether we can look forward to the measures of which the Minister spoke so warmly in Committee in another place being introduced. If they can be, could it please be fairly soon?
That is all I have to say on these things. As we know from the announcement today, we all now have to do as much, if not more, with a great deal less. The question of parish polls is a drain on community endeavour. It is a drain on financial resources. It is a drain on human volunteer resources. It seems that something needs to be addressed here for good order at the parish council level. I beg to move.
Lord Beecham
My Lords, the noble Earl has made a compelling case. We seem to be moving from the high politics of Greater Manchester and West Yorkshire to Clochmerle or Eatanswill. There is nevertheless a real issue here, of which I was certainly unaware. The ridiculous numbers involved to call a poll, the non-binding nature of the result and the financial cost all seem to add up to a pretty lethal cocktail which ought to be addressed. I hope that the Minister will give the noble Earl an indication that the Government will look at this and seek, either on the basis of his amendment or in some other way, to deal with what looks like a highly anomalous situation in which a tiny handful of people—even fewer than voted in police commissioner elections—can wreak havoc in a local community.
Lord Wallace of Saltaire
My Lords, I was unaware of the parish poll dimension. I say from the outset that, although we are very much on the outer edges of the scope of the Bill, the noble Earl’s points are clearly of importance for the modernisation of parish polls, which has rather fallen through the net. The questions of the threshold for triggering the poll and what a legitimate subject for a poll should be are issues to which we would be happy to give further consideration. We would happy to meet the noble Earl to discuss this further. I am rapidly turning over in my mind the question of how one deals with that. Even though this is a relatively limited area, it might be the sort of thing that is appropriate for a Private Member’s Bill in a future Session, which might be given a fair wind. It is a relatively self-contained set of issues.
We are aware of the issue of whether one could institute postal or proxy votes. Certainly, we should be lengthening the time during which a vote could be cast and modifying regulations about the threshold for triggering a parish poll. All those issues really need to be considered.
I understand that the provisions of the regulations limit the content of polls to matters which have been considered by the parish meeting, which means that the person chairing a parish meeting could rule out of order any attempt to discuss matters which are not parish affairs and so prevent parish polls on, for example, EU referendums, or whatever it may be. However, we are all conscious that different parishes and local communities are often dominated by different small groups. This is one of the problems we have with getting back to community self-government. I am often conscious that I am extremely lucky to live in the community of Saltaire, which has far too many people who are highly educated. We are overstuffed with activists, and there are other areas around Bradford which are not so blessed with local activists willing to turn up to lengthy committee meetings in the evenings and take part in local community activities. With that assurance and that offer to talk further on this small but important issue, I hope that the noble Lord will feel able to withdraw his amendment.
The Earl of Lytton
My Lords, it was not my intention to press the amendment, particularly as we are in Grand Committee, but I am extremely grateful to the Minister for his comments and for his offer at any rate to look into the matter further and have a further discussion. It is a narrow but important issue, and it will be even more important if what I might call the fruits of the localism agenda in terms of expanding the number of organisations that operate at this level—perhaps not in name but effectively as parish and town councils—are set to increase. I hope that it will become the model of preference at community level. The matter is not without ongoing consequence and I will certainly forward to the Minister some of my paperwork. That will do for this evening and I beg leave to withdraw the amendment.
Lord McKenzie of Luton
“Report to Parliament on the new audit regime
Within three years of the passing of this Act, the Secretary of State shall report to Parliament on the effectiveness of the new audit regime, covering in particular—(a) how the regime is being coordinated across government departments,(b) how the proposed arrangements are enabling accounting officers and Parliament to obtain assurance that the audit regime is performing effectively, (c) assurance that the independence of audit and quality of audit is being maintained,(d) the extent of diversity of provision in the audit market, and(e) the application of the regime for all relevant authorities including health bodies and smaller authorities.”
Lord McKenzie of Luton
My Lords, the amendment calls for a report to Parliament on the impact of the new audit regime and for this to be made within three years of the passing of the Act.
Let me acknowledge at the start the undertaking given by the Government on a post-implementation review but its objectives appear to be somewhat narrowly based and do not address some of the fundamental issues. The Bill provides for arrangements that are significantly different from the current regime whereby the Audit Commission effectively acts as regulator, commissioner and provider of audit. As the pre-legislative scrutiny committee report sets out, the new regime is more complex and certainly more fragmented. The regulation of local audit will transfer to the Financial Reporting Council, professional accounting bodies and the National Audit Office. Commissioning of local audit will transfer to local public bodies, and the provision of local audit will go to private sector firms. Research and value for money will be picked up by the NAO to a limited extent and by the sector’s own self-improvement. The National Fraud Initiative’s ultimate destination has yet to be determined, as we have discussed, and the co-ordination of grant certification remains a little vague.
Although some of the bases have been covered, potential gaps remain. Some of the bodies that are subject to the new regime are accountable to government departments other than CLG. How is this to be co-ordinated across government? Audited bodies themselves will have to liaise with government departments, the NAO and auditors because the commission will not be on hand to act as an intermediary. The role of accounting officers within departments is fundamental to the management and control of resources. They are currently able to draw on information on the outcome of audits, implementation of major initiatives and value for money outcomes analysed by the Audit Commission. How is this all to happen in the future? Unless the Minister can tell us otherwise, there appears to be no organisation that will be publishing the outputs of more than £200 billion of public expenditure.
Clearly, quality of audits is paramount. The role of the FRC as overall regulator and its specific role in providing quality assurance to just a few “major audits” has been the cause of some concern. We hear the government assurances on this but consider that Parliament is entitled to a more formal report on how this is working in practice. Can the Minister confirm that the reports of the recognised supervisory bodies monitoring auditor performance outside major audits will be in the public domain?
There is also the need for oversight on how this is working for all “relevant authorities”, including health bodies and smaller authorities. Many of the provisions in the Bill are not applicable to health service bodies because equivalent provision is made in other legislation. We have not thus far sought to compare or contrast these provisions with those applicable to other relevant authorities. Contemplating consolidation may give the Ministers a nightmare at the moment but the Bill does not give us a sense of how joined up this is all going to be in practice. A report to Parliament would cover this. I beg to move.
Lord Wallace of Saltaire
My Lords, the Government support the intention behind this amendment. Post-implementation review is acknowledged good practice. It will provide the assurances that Parliament and the general public will want that the new audit arrangements are achieving the outcomes that we expect, and it will identify how policies might be improved if they prove to be less effective than we anticipate. For these reasons, the Government have already committed to undertake such a review. This is set out in the impact assessment, at Section K.
However, I am not persuaded that the timeframe envisaged in the amendment is the right one. The commitment in the impact assessment is to a review within three to five years of Royal Assent. This is in line with the Government’s general commitment to post-legislative review. The reason for preferring a slightly longer period in the case of this legislation relates to the implementation of local auditor appointment.
Assuming that this Act is passed in early 2014, the amendment would require a report in early 2017. As noble Lords are aware, the earliest date at which local auditor appointment would begin is 2017. It would seem to make sense to include some assessment of the move to local appointment in the proposed review. This would enable a robust assessment of audit quality and auditor independence in the new regime, and of the impact of local appointment on the audit supply market.
Nevertheless, government departments, through the accounting officer, are accountable to Parliament annually for the money voted to them. Where this money is distributed to others, accounting officers need to be able to demonstrate that appropriate accountability arrangements are in place, usually through an accountability systems statement. The external audit of local bodies is one of the evidence sources that will help to demonstrate whether the system is working effectively. We will ensure that the necessary assurance can be provided to accounting officers and to Parliament.
The provisions for the audit regime of health bodies have been designed to provide at least the same level of assurance to the Department of Health accounting officer and Parliament on the use of resources by the health sector as current arrangements. All the health bodies covered by this Bill are included in the annual accounts of the Department of Health. The department reviews the outcome of the audits and annual governance statements of all health bodies and the NAO also uses these to inform its audit of the departmental accounts.
Finally, I would like to say a few words of reassurance about the scope of the proposed post-implementation review. The impact assessment explains that the review will look at how well the core objectives of the local audit reforms are being met. I remind noble Lords that these objectives are: to deliver greater localism, decentralisation and transparency; to maintain competitive audit fees; and to uphold high standards of auditing.
There does not appear to be anything in the list of specific requirements in the amendment which is obviously out of scope. The impact assessment makes a commitment that we will work up the detail of the review with representatives from local government and other interested parties. I hope that these reassurances will satisfy the noble Lord and he will be willing to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the noble Lord for his response. Of course, I will withdraw the amendment.
As I said in moving the amendment, I was aware of the proposal to have a post-implementation review. I accept the point about the timeframe. If it was done within three years, we would not have had any—or certainly many—local appointments of auditors so would not be able to judge the ramifications.
I do not know whether the noble Lord can help me on a further point, or write to me on it. In considering the Bill, I do not think that we have done enough work on how the regime for health bodies and other relevant bodies fits together. They are all defined as being relevant authorities. However, a whole raft of provisions appear to apply to relevant authorities other than health bodies. We may not have an overall view of how that fits together but one would hope that any review of how the measure will work in practice would pick up what the inconsistencies and consistencies of the regimes are and what lessons can be learnt from one stream which could benefit the other. That aspect appears to have received less attention than many other aspects of the Bill. However, I accept the undertaking that there will be a post-implementation review based on consultation with relevant bodies. I accept the point about a three to five-year timescale rather than within three years. That seems to me entirely reasonable. I do not know whether the noble Lord can say anything further on the health bodies point.
Lord Wallace of Saltaire
I take the point about health bodies. This clearly is an important part of the arrangement. We, of course, intend to include health service bodies in the post-implementation review. If there are other matters about the health bodies that the noble Lord would like to discuss between Committee and Report, I am very happy to do so. We recognise that this is an important part of the whole shift.
Lord McKenzie of Luton
I welcome that and would like to take up that opportunity. In the mean time, I beg leave to withdraw the amendment.
Lord Wallace of Saltaire
“In section 125(2) (certification of information)—
(a) omit “in one or both of the following ways”, and(b) omit paragraph (b), and the “and” which precedes it.”
“( ) in the definition of “English local authority” after “England” insert “, and includes a local authority which exercises functions in relation to an area which is partly in England and partly in Wales”,”
Lord Wallace of Saltaire
“(1) Section 210A (extraordinary report: local authorities) is amended as follows.
(2) In subsection (1), for the words from “the Audit Commission” to the end substitute “the regulator may require the local authority to allow its accounts, so far as they relate to the provision of social housing, to be audited by a local auditor appointed by the regulator.”
(3) After subsection (1) insert—
“(1A) The regulator may not appoint a local auditor to audit the accounts of a local authority if that person—
(a) is the person (or one of the persons) appointed under or by virtue of the Local Audit and Accountability Act 2013 to audit the authority’s accounts, or(b) was the person (or one of the persons) who carried out the most recent completed audit of the authority’s accounts under or by virtue of that Act.“(1B) Sections 19(1), (2), (5) and (6), 21 and 22 of the Local Audit and Accountability Act 2013 (local auditors’ general duties and right to documents etc.) apply in relation to an audit under this section as they apply in relation to an audit of the local authority under or by virtue of that Act.
(1C) On completion of the audit under this section, the local auditor must report to the regulator about such matters and in such form as the regulator determines.”
(4) Omit subsections (2) and (3).
(5) In subsection (4) for “Audit Commission’s costs of preparing the report” substitute “costs of the audit (including the local auditor’s remuneration)”.
(6) For subsection (5) substitute—
“(5) In this section—
“accounts” has the meaning given by section 4 of the Local Audit and Accountability Act 2013;“local auditor” means a person who is eligible for appointment under or by virtue of the Local Audit and Accountability Act 2013 as an auditor of the local authority’s accounts.”(7) In the heading, for “report” substitute “audit”.
In section 249(1) (management transfer) after “section 210” insert “or 210A”.”
Lord Wallace of Saltaire
Amendment 23A would add new provisions within Schedule 12. The purpose of this amendment is to include local authority social housing providers within the Homes and Communities Agency’s existing powers to require a separate audit report into social housing accounts, once the Audit Commission has been abolished.
Currently, Section 210 of the Housing and Regeneration Act 2008 gives the Homes and Communities Agency a power to order an extraordinary audit as part of an inquiry under Section 206 of that Act in respect of a private registered provider of social housing where it has serious concerns that a housing provider has mismanaged its affairs. The agency can require the registered provider to allow its accounts and balance sheet to be audited by a qualified auditor appointed by the regulator.
Section 210A applies this regime to local authority housing providers by placing a duty on the Audit Commission, if asked by the regulator, to provide a report on the local authority’s accounts, so far as they relate to the authority’s provision of social housing. Amendment 23A ensures that local authority social housing accounts continue—upon closure of the Audit Commission—to be subject to examination as part of a Section 206 inquiry by enabling the Homes and Communities Agency to appoint an auditor which is on the register held by the recognised supervisory body to undertake an extraordinary audit. I therefore beg to move this amendment.
Lord Wallace of Saltaire
“Charities Act 2011 (c. 25)99A The Charities Act 2011 is amended as follows.
99B (1) Section 149 (audit or examination of English NHS charity accounts) is amended as follows.
(2) In subsection (2) for “a person appointed by the Audit Commission” substitute “a person who—
(a) is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006,(b) is eligible for appointment as a local auditor (see Part 4 of the Local Audit and Accountability Act 2013), or(c) is a member of a body for the time being specified in regulations under section 154 and is under the rules of that body eligible for appointment as auditor of the charity.”(3) In subsection (3)—
(a) for “the Audit Commission” (where it first occurs) substitute “the charity trustees”,(b) in paragraph (a) for “a person appointed by the Audit Commission” substitute “a person who is within subsection (2)(a), (b) or (c)”, and(c) in paragraph (b) for “a person so appointed” substitute “a person who is qualified to be an independent examiner”. (4) After subsection (3) insert—
“(3A) For the purposes of subsection (3)(b), a person is qualified to be an independent examiner if (and only if)—
(a) the person is independent,(b) the charity trustees reasonably believe that the person has the requisite ability and practical experience to carry out a competent examination of the accounts, and(c) the person—(i) falls within a description of person for the time being included in the list in section 145(3), or(ii) is eligible for appointment as a local auditor (see Part 4 of the Local Audit and Accountability Act 2013).”(5) Omit subsection (4).
(6) For subsection (5) substitute—
“(5) The Commission may—
(a) give guidance to charity trustees of an English NHS charity in connection with the selection of a person for appointment as an independent examiner;(b) give such directions as it thinks appropriate with respect to the carrying out of an examination in pursuance of subsection (3)(b);and any such guidance or directions may either be of general application or apply to a particular charity only.”(7) Omit subsection (8).
99C (1) Section 151 (audit of accounts of larger groups) is amended as follows.
(2) In subsection (4)(b), for “a person appointed by the Audit Commission” substitute “a person, appointed by the charity trustees of the parent charity, who is within section 149(2)(a), (b) or (c)”.
(3) In subsection (6)—
(a) for “Subsections (4) and (6) of section 149 apply” substitute “Section 149(6) applies”, and(b) for “they apply” substitute “it applies”. 99D (1) Section 152 (examination of accounts an option for smaller groups) is amended as follows.
(2) In subsection (6)—
(a) for the words from “the Audit Commission” (where it first occurs) to “so appointed” substitute “the charity trustees of the parent charity be audited by a person, appointed by those trustees, who is within section 149(2)(a), (b) or (c); or examined by a person, appointed by those trustees, who is qualified to be an independent examiner”,(b) for “(4) to (6)” substitute “(3A), (5) and (6)”, and(c) after “section 149(3)” insert “; except that in subsection (3A)(b) of that section the reference to “the charity trustees” is to be read as a reference to “the charity trustees of the parent charity”.”99E In section 154(1) (regulations relating to audits and examinations) after paragraph (a) insert—
“(aa) specifying one or more bodies for the purposes of section 149(2)(c);”.”
Lord Wallace of Saltaire
My Lords, as Cabinet Office spokesman in the Lords with some responsibility for charities, this is another amendment on which I shall speak. This is, indeed, about health service charities.
Amendment 24 makes changes to the Charities Act 2011 in respect of English NHS charities as a result of the abolition of the Audit Commission. Currently, the auditors of English NHS charities are appointed by the Audit Commission, so this amendment ensures that arrangements are in place for the audit of English NHS charities’ accounts after its abolition.
The trustees of English NHS charities will be able to appoint a person who is eligible to act as an auditor under the Companies Act 2006, this Bill or regulations under the Charities Act 2011. The amendment allows smaller English NHS charities, with income of between £25,000 and £500,000 in the year in question, to opt for an examination of their accounts as an alternative to audit, which is intended to minimise costs of producing accounts to the charities. This is consistent with the way smaller non-NHS charities are treated in the Charities Act 2011.
The criteria for who may undertake such examinations are set out in the amendment. An examiner of an English NHS charity’s accounts must be independent and the charity’s trustees must reasonably believe that the person has the requisite ability and experience to carry out a competent examination of the accounts. The examiner of an English NHS charity’s accounts must also be a member of a professional body as set out in Section 145(3) of the Charities Act 2011 if the gross income of the English NHS charity is between £250,000 and £500,000 a year, or be eligible under the Local Audit and Accountability Bill, once enacted.
The amendment enables the Charity Commission to give guidance to NHS charity trustees on the selection of an independent examiner and directions as to how an examination is to be carried out. The amendment also applies the same provisions to the group accounts of a parent NHS charity as have been set out for individual NHS charities. I beg to move.
Lord McKenzie of Luton
I have only one question for the noble Lord which concerns his reference to an independent examiner and a person who is independent. Can he remind us which definition of “independent” we are dealing with here?
Lord Wallace of Saltaire
I think we are referring back to the definition as in the Charities Act 2011. Since we have batted forward and back on the question of what exactly “independent” means in this respect, I may need to write to the noble Lord just to confirm the exact definition being used here.