Local Audit and Accountability Bill [HL]

Earl of Lytton Excerpts

Monday 15th July 2013 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, this is a very interesting amendment. I just wanted to add one other perspective. Any local authority worth its salt, particularly in this time of outsourcing, when so much is being outsourced to outside companies and bodies, will insist—as I have always insisted in my own local authority—that it has a right within the contract with the outside contractor to be able to audit the documents of the outside contractor. The place to do all the things that my noble friend has suggested is very often within the contract between the local authority and the contractor.

How that works in practice is that the local authority and its internal auditors need to see what the audit processes are within that outside contractor. The idea that the auditor of the local authority will go in on a normal basis and delve into the detailed books and records of the outside contractor is probably stretching the imagination a bit. The trouble with audits—this is where the noble Lord, Lord Wills, really hits the nail on the head—is that they are, in general, historical and you are looking at what went wrong. The noble Lord, Lord Wills, gave two good examples of what went wrong. The question to the noble Lord, Lord Wills, is: if the Government or the local authority had the ability to go in and audit the sort of companies and organisations the noble Lord described, would they have found these particular problems at that stage?

The noble Lord, Lord Wills, is on to a very important point. But I believe—as I hope that my noble friend the Minister will tell your Lordships’ House—that those protections of being able to audit should be more properly contained within the contract between the local authority and the outside body to which it is contracting.

[The Earl of Lytton]

My Lords, I have some knowledge of procurement issues. I, too, declare my interest as a vice-president of the LGA, but my knowledge comes mainly from the All-Party Group for Excellence in the Built Environment, which last year looked at the question of public sector procurement.

One of the things that we identified was the difficulty that many local authority and public sector bodies have in getting these very complicated contractual arrangements right. If they were not got right, you had some form of mission creep. You had this wall of contractual arrangements that could not be looked at until long after the event; for instance, the provision of a sports centre or a school over quite a number of months. Things had gone wrong in a number of cases because there was not the ability to oversee the thing properly or the knowledge of these very complex matters within the particular procuring body—not necessarily local government—to get a real grip on these things. The question was raised as to whether there should be an external procurement adviser to steer the body through. As I say, it might have been a local authority or it might have been a charity or something like that.

The noble Lords, Lord Wills and Lord Palmer, have hit on a very important point here: at which point can you see through into the detail and at which point do you get to “thus far and no further” in terms of the audit not running into some sort of mission creep? It is plain to me that there must be safeguards. Some very significant sums of money are involved. The earlier that problems are picked up and the process can look at structures and get feedback, the sooner they can be put right or something put in place to limit damage.

If not necessarily for the same reasons, I think that the noble Lord, Lord Wills, has raised an extremely important point, and I hope the Minister will feel able to respond positively to that.

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This batch of amendments is an attempt to target the remedy, where remedy is needed, and not to cause the widespread concern that is currently held. I beg to move.

[The Earl of Lytton]

My Lords, I willingly gave my name to the amendments in this group. Like the noble Lord, Lord Tope, I did not feel that this was the right stage of the Bill to argue about whether Clause 38 should stand part, although I am aware of the LGA’s concern on that. It leaves hanging the question of justification, to which the noble Lord, Lord Tope, referred. The rule seems to be designed to deal with the very few, to the potential disadvantage of the many. That is a questionable approach. The purpose of Amendments 25 and 28 is to address this.

On Amendments 30 and 36, the period of 14 days is manifestly too short for the sort of notification and response that is required in this situation. I am advised that 28 days is regarded as appropriate and the norm. Will the Minister be kind enough to explain why the norm must be cut in half?

Amendments 33 and 35 concern the basis on which the Secretary of State will inform an authority—perhaps he might choose to do so by text message to the chief executive, or something like that—and the clarity of the procedures for that confirmation, which are worthy of being tightened up. I hope that there will be a favourable response to that suggestion as well.

On Amendment 37, it seems that the present code allows for latitude in what the authority shall “consider” or “have regard to”. It might be a value-for-money consideration or something like that. The question is whether, in transition from the current voluntary code to the proposed statutory code, the latitude will continue to be there. That is the nub of the question, and the bit that has not yet been answered satisfactorily. Having said that, I very much support the thrust of the amendments in this group.

[Lord Beecham]

My Lords, as I listened to the noble Lord, Lord Tope, moving his amendment—which, given an opportunity, we would support, faute de mieux—I was reminded of the remarkable film of the man who walked on a high wire between the Twin Towers in New York. It was an extraordinary experience. With this amendment, the noble Lord is navigating the gap between the Bill and the coalition agreement. I do not recommend that he emulates the high-wire artist, because he is very likely to fall precipitately to the ground, judging by what he has advanced tonight.

To begin with, the noble Lord assumes—he may be right—that the Government’s proposals are directed at unfair competition. That is the term used in the coalition agreement. It may be the case, but what constitutes unfair competition is far from clear. What the evidence is for unfair competition existing is even less clear. I will quote, as I did in Committee, from material supplied by the National Union of Journalists. One might have thought that it would be fairly sympathetic to the Government’s point of view, since journalists’ jobs are presumably more at risk if there is unfair competition in the newspaper industry than are the jobs of a handful of local government press officers. The NUJ pointed out:

“The last select committee charged with investigating the matter, observed that there was no evidence of a link between high-frequency local authority publications and the decline of ad revenue, circulation etc of the local press in the local authority catchment area”.

It also pointed out that the Audit Commission—perhaps this is one of the reasons that it is being abolished—in 2010,

“effectively debunked the assertion of newspaper proprietors that local authority publications represented unfair competition and were commercially damaging to other local newspapers”.

The Audit Commission found that the money spent by councils was not unreasonable, that few council publications were published sufficiently frequently to be a viable media for most local advertising, and—a matter to which no doubt we will return—that the current accountability framework would ensure that any misuse of public money could be dealt with.

Those are fairly strong views by an interested party that, one might have assumed, would be sympathetic to the Government’s position but is not. Its evidence is substantial in that respect. It also points out that the press began reducing its workforce many years ago, and that already something like 61% of local newspapers in the area it contacted had closed or struggled. One reason was the decline in advertising revenue, but it was not to be attributed to local authorities including advertising in their publications, because, as the Audit Commission pointed out, in almost all cases the publications were too infrequent to have that impact. Some 55% of newspapers cited competition from the new media.

It does not stop there. There are free newspapers in circulation. The Evening Standard is a free newspaper. I am not sure about the new paper launched by the Independent. It may be free, or cost a nominal amount. Some of the newspaper groups themselves publish freesheets. Metro is published by a newspaper group and carries advertising. Therefore, the notion that somehow local authorities are responsible for the difficulties is ludicrous.

Even if local authority publications constituted competition, to what extent would it be unfair? Is it unfair because the publication is free, or in some other way? Are advertisers not able to make a commercial judgment about what would suit them better? I should have thought that that was central to government policy. The proposal to dismiss the Government’s suggestions here would not constitute a breach of the coalition agreement because there is no evidence that the unfair competition part is at all relevant to what the Government are trying to do.

There is another issue. The Government’s proposals would apply to the code, but the code can change. We do not know what restrictions the next code will bring in. Most of the code, as it stands, is fairly reasonable and acceptable. I dispute the necessity to limit titles to four publications a year, but most of the rest is fairly balanced. What is to stop the Government tightening the code and deciding on a range of things beyond those that they now say should not be published—or, conversely, should be published—in local newspapers? This would give a blank cheque to a Secretary of State to tie the hands of democratically elected local authorities in terms of how they communicate to their electorate, who, after all, should have the final say in what is done locally.

Of all Secretaries of State, the present one is the last person I would like to see entrusted with those powers. I would be quite happy, or relatively happy, for the noble Baroness to have that power but I would not be at all happy to have the present Secretary of State exercising it. Nothing in the Bill would prevent him tightening up the code and using this mechanism to ensure that it is enforced. My preference is for the whole clause to go. I am anticipating what may be said, perhaps rather more briefly, in a subsequent debate. The noble Lord’s amendment would moderate the damage but in my view he should have stuck to his guns and his party’s principles and recognised that he would not breach the coalition in so doing. Then we could have perhaps exercised a bit more leverage on his coalition partners, for the time being, and improved the Bill rather than allowing it to go forward to the statute book in its present form.

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[Lord Shipley]

My Lords, I speak in support of Amendment 43, and will be brief. I agree with the noble Lord, Lord Beecham. I think it is bad policy to backdate the definition of an excessive council tax rise so that it includes a levy from April 2013. I understand that in January this year letters were sent out to local authorities suggesting that the Government might take this course of action. I will say two things about that. The first is that it is simply not enough notice. Council tax-setting takes much longer than just a few weeks. There is a requirement that council tax is effectively set by the beginning of March, so that bills can be sent out. In my view, given the lengthy periods of consultation that local authorities are required to undertake, a period of six months would have been more reasonable.

My second reason for objecting to the Bill as it stands is that one should have respect for the law at the time at which the law is applied. I believe that councils and levying authorities abided by the law at the time. As the noble Lord, Lord Beecham, quite rightly pointed out, it is a comparatively small problem. Retrospective change, whether or not there was a warning, seems to me to be wrong in principle, and should therefore be resisted. The noble Lord, Lord Beecham, said that he felt that the Government were overreacting. I concur with that, because I believe that it is an overreaction to backdate in the way the Government propose.

[The Earl of Lytton]

My Lords, since my name is to Amendment 43, I would like to voice my support for the point that has just been made, and was also made by the noble Lord, Lord Beecham, about the undesirability of retrospection. Notwithstanding the comments made by the Minister at a previous stage of the Bill, there is no question in my mind that Clause 39(15) and (16) are, beyond peradventure, retroactive in their effects. Apart from the self-evident difficulties that that will create within the continuum of local government finance, one supposes that there must be some reason why this has been put in the Bill. I would like to inquire what that reason is, because to date we seem to have had reassurance that there is no intention that this should be retrospective. I do not wish to work out how many angels dance on the head of a pin between retrospection and retroactivity, but I prefer the term “retroactive”.

It seems to me that this is almost calculatedly destabilising, and I cannot believe that that was really the intention. It seems to me that there is a necessity for some further words of qualification, so that the clause is targeted at whichever particular issue needs it, and it is not capable of any sort of generic destabilisation of previous years of local government finance settled business, or what should be settled business. I hope the noble Baroness will be able to give an explanation.