Local Audit and Accountability Bill [HL]

Lord McKenzie of Luton Excerpts

Tuesday 21st January 2014 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, let me welcome the Minister, the noble Baroness, Lady Stowell, to her first, and probably last, foray into the delights of the Bill. I am sure, deep down, she regrets not having had the opportunity to be engaged in our earlier detailed debates.

Perhaps, before a more detailed comment on this group of Commons amendments, I should acknowledge that much of what is before us this afternoon springs from matters that were pressed on the Government by noble Lords—Lib Dems, as well as ourselves and others. Like others, we pay tribute to the noble Baroness, Lady Hanham, for the way in which she was receptive to these matters and to the Government for fulfilling the commitments made by that Minister.

These amendments also bear the hallmark of the diligence of my honourable friend Andy Sawford in another place. A key amendment in this group is Amendment 17, which as the Minister has explained gives the Secretary of State the power to introduce regulations for the development of a sector-led approach to collective procurement. Amendment 31 properly requires the regulations to follow the affirmative procedure.

The retention of a collective procurement capability was one of the major issues that we debated. Of course, the detail of what might be forthcoming will have to await the regulations. It was pressed, among others, by the LGA and the National Association of Local Councils. This impetus was driven by the significant savings that the Audit Commission had achieved in its outsourcing of audit contracts. Of course, the contracts in question run to 2017 and can be extended. I do not know whether the Minister can confirm, under these proposed arrangements, who will make the decision about the extension of those contracts. Any different arrangements will happen some time in the future.

It is understood that the Government’s position is that they will not themselves use these regulations to set up another entity, but will respond to any sector-led approach that might arise. Discussions have already taken place with the LGA.

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[Lord McKenzie of Luton]

My Lords, as we have heard, this group of amendments addresses the application of the Bill to a parish meeting where there is no separate parish council. A parish meeting has only one elected member—its chairman—although it is suggested that all local government electors in the parish who are entitled to vote are members. There are more than 11,000 parish meetings for which the Audit Commission currently appoints auditors.

We accept the necessity of clarifying how various functions created by the Bill should be applied to parish meetings, and the principle adopted—that administrative functions should be exercised by the chairman on behalf of the parish meeting, and deliberative or decision-making functions should be exercised by the parish meeting itself—has our support. We note that NALC supports the amendments, and we do, too.

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[Lord Shipley (LD)]

My Lords, I shall speak specifically to Amendment 18. I refer to the Explanatory Notes on the Commons amendments that have been published, and in particular to that on Amendment 18 in relation to health service bodies, which says that,

“an auditor will have to provide an opinion on value for money only if the auditor is not satisfied in respect of that matter”.

I want to raise the issue of health and well-being boards, which are shared across the health service and local authorities, in terms of identifying how they can work more closely together and how best value can be achieved.

My question is: who audits the health and well-being boards? They have a clear role in driving improved health outcomes. I realise that different bodies are spending money, and are therefore audited for that role, but there is a broader question about how those boards steer policy and make good decisions that reflect acknowledged best practice, and achievements in other areas by other health and well-being boards. I would like to think that an auditor has a clear role in identifying whether value for money is being achieved by individual boards—I suspect that this will become important over the next two to three years, as the success of those boards is assessed—and whether, indeed, the health service investment and the sum of money available to local authorities are adequate for purpose.

To this end, I suggest to my noble friend the Minister that one of the National Audit Office’s thematic studies that are promised as part of the Bill could look at the joining point between local authorities and the health service, specifically in relation to adult social care but more generally in terms of improving health, preventing a decline in health and to reduce inequalities in health outcomes. I think that there is a role for an auditor in that area. An auditor would have to provide only an opinion on value for money if he or she is not satisfied in respect of a specific matter. I think that the issue goes a little further than this. I would like to think that some strongly proactive work would be undertaken by the National Audit Office and auditors who are looking at the role of health service bodies and local authorities’ work in the health field.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for her detailed explanation of the amendments in this group. Our discussion on them has been widened by a very pertinent inquiry from the noble Lord, Lord Shipley. We have generally seen these amendments as tidying up and consequential measures. We have issues around: the duty of auditors of health bodies to prepare a report; the provision of sequencing of electors’ rights concerning unlawful items of accounts; the procedures for auditors to be able to recover costs when there is no formal action they can take; copies of recommendations or public interest reports of functional bodies of the GLA to be sent to the GLA; and the drafting changes arising from the fact that the Mayor’s Office for Policing and Crime will cease to be a connected entity of the GLA. We have gone through these measures and are content with them.

[Baroness Stowell of Beeston]

I am very grateful to the noble Lord, Lord McKenzie, for confirming that he is content with these amendments. As regards the query of my noble friend Lord Shipley about the health and well-being boards, the arrangements for reporting on the accounts and the value for money conclusion, I shall give him what I have and, if I need to, perhaps we can follow up the matter after the debate.

The Bill places auditors of both health and local government bodies under a duty to satisfy themselves that the body has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources, which is known as the value for money conclusion. Unlike local government, the accounts of health bodies are consolidated within their sponsor Whitehall department resource account. Local authorities, on the other hand, are directly accountable to the local electorate in a way that health service bodies are not. Because of the different accountability arrangements for health service bodies, the Government consider it necessary to put the requirement to have opinions on the accounts in the Bill rather than in the code of audit practice, to provide assurance to the accounting officer and Parliament that budgets have been used for the purposes Parliament intended. We believe that it is unnecessary to do this for non-health service bodies because of the statutory power for local auditors to apply to the courts for a declaration that an item of account is unlawful. Furthermore, for non-health service bodies, we expect the code of audit practice will set out what auditors must report against this duty, as is currently the position under the code produced by the Audit Commission. Overall, we consider that this allows for greater flexibility in reporting for non-health service bodies, but for health bodies the different parliamentary accounting framework includes a strict requirement for regularity to be reported on.

I have just been reminded that the health and well-being boards are not included under the provisions of the Bill but I hope that what I have just read out has reassured the noble Lord and your Lordships’ House that value for money is very much part of the consideration of the auditors who will be looking at the health and local government bodies.

I have just been passed another note which I hope may be helpful because I am not sure how much of what I have already read out is entirely helpful to the noble Lord. The provisions in the Local Audit and Accountability Bill on value for money inspections do not cover health service bodies. I think we know that. The NAO’s existing powers in relation to value for money inspections are wider than those in the Bill, so the latter does not need to include provision on this in relation to health service bodies. I think that is the killer point that I have finally got to. On the basis of that additional information, I beg to move.

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[Lord Shipley (LD)]

My Lords, could I make a brief point about Amendment 27 and the group as a whole? It relates to the issue of principle, which it is important that we restate. I do not like centrally imposed targets for increases in local taxation. The reason is simply this: there is a principle that localism means local decision-making, and those who are elected at local elections should make those decisions. We have various definitions now of what is seen to be relevant expenditure. Is it spending power? If you compare spending power to the amount of government grant, or to the amount of money paid on average by council tax payers or at band D by council tax payers, you get very different sums. In the end, we are reliant on the ballot box in each council area to decide who represents a ward, who then come together and make decisions about how that council is to be run. In my view, that includes the level of council tax.

I understand that we have debated that before and that debate has no doubt been held in the other place. I hope that somebody will decide to hold a referendum on the issue of council tax and the proposal that there should be a higher increase than the amount that the Secretary of State would prefer.

Therefore, this remains an issue of principle: local authorities are the people who should decide the level of council tax and they should be responsible to their electors, on the principle of localism. They will stand or fall at their ballot boxes by the decisions that they themselves take.

[Lord McKenzie of Luton]

My Lords, this amendment takes us back to the thorny issue of council tax at referendums. We have just heard from the noble Lord, Lord Shipley, about his opposition to centrally imposed targets; he has been very consistent on that issue. The fundamental policy change provided for in the Bill is the inclusion of the definition of a relevant amount of council tax—certain levies. Previously, any increase in council tax resulting from an increase in levies could not have caused a determination that the level of council tax was excessive, and would not have triggered a referendum requirement.

Debates in your Lordships’ House and in the other place highlighted a number of concerns, namely that the referendum regime places the burden on major preceptors and billing authorities who have no direct ability to influence the amount of the levy or to cause a levy body to reduce its levy; that factoring in 2013-14 council tax increases into referendum criteria introduces an element of retrospection potentially penalising authorities for decisions made before the Bill was introduced; and that it would undermine certain infrastructure projects that relied on an increase in levy stream and that were negotiated as part of a city deal. The example of Leeds has been cited in this regard.

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[The Earl of Lytton]

I particularly welcome this amendment for all the reasons recited by the noble Baroness. I think that it will substantially modernise, improve and streamline the work of parish councils and make them more open, without having the negative impediments that have previously been associated with parish polls. I very much welcome this. In doing so, as I expressed when this was before us previously, I thank other noble Lords who supported this; the noble Baroness’s predecessor, the noble Baroness, Lady Hanham, who readily took this away; and the Bill team for the work that it did to fashion it and get it approved by the other place. I warmly welcome this measure for all the reasons given. It is very much a success all round, for which I claim only minority credit for having raised the matter in the first place.

[Lord McKenzie of Luton]

My Lords, we should thank the noble Earl, Lord Lytton, for raising this matter in the first place, and he should certainly claim a substantial amount of credit for it. He regaled us in Committee with some of the anomalies and archaic processes concerning parish meetings. Voting only between 4 pm and 9 pm with no provision for proxy or postal voting is hardly the stuff of inclusion. The noble Earl was convincing on the need to modernise arrangements, and the Government responded by providing for the Secretary of State to have the power to make regulations about the conduct of parish polls. We consented in the other place, as the Minister acknowledged, in widening the scope of the Bill to facilitate this.

The Government gave undertakings in another place—they have been reiterated tonight—about continued collaboration with the National Association of Local Councils and with the noble Earl, and we trust that the promised wide consultation on draft regulations will now proceed apace. This is an opportunity, as has been said, to provide a method for local communities to have a voice on issues directly related to parish matters, and it has our support.

[Baroness Stowell of Beeston]

My Lords, I am grateful to the noble Lord, Lord McKenzie, for his support for these amendments and I certainly join him in paying tribute to the noble Earl for all his work on the matter. I have nothing further to add but my thanks to all noble Lords for allowing us to respond so constructively to this proposal from the noble Earl.

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With these clarifications, I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of this quite large group of amendments. I believe they cover quite minor and technical matters. Generally, we have no issues to raise on them. When I was first going through the amendments, I did wonder about Amendments 51 and 52, which replace the power of the Secretary of State to make regulations with provisions in the Bill. As the noble Earl explained, this is to do with which existing qualifications will be recognised. It is unusual for Governments to take something from regulations and put it in a Bill, but I understand the rationale.

Amendment 56 clarifies that no aptitude test is required if an individual is providing services on a temporary or occasional basis, and it is accepted that this is to be judged by reference to duration, frequency, regularity and continuity. The Minister will be relieved to know that I do not intend to press further detailed explanations of how those terms might be interpreted. We have no further points to raise on this group of amendments.

[Earl Attlee]

My Lords, I thank the noble Lord for his support for these amendments.

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[Earl Attlee]

My Lords, Amendment 43 removes internal drainage boards which are partly in England and partly in Wales from the local audit provisions in the Bill. There are two such internal drainage boards: Powysland and Lower Wye. Both are mainly in Wales but currently fall under the Audit Commission regime. Last November, the Welsh Government announced their intention to transfer the functions of the two cross-border IDBs, along with the functions of one IDB that is wholly in Wales, to Natural Resources Wales, and to bring them under the Welsh audit system. The Welsh Government subsequently supported a legislative consent Motion to make audit arrangements for these two bodies under this Bill as a stopgap measure until the new governance arrangements are in place. However, the legislative consent Motion was not passed by the National Assembly for Wales. In line with the devolution settlement, the amendment therefore removes these two bodies from Schedule 2. Schedule 2 lists the relevant authorities that would fall under the new audit regime.

It is the Welsh Government’s intention that the new governance arrangements will be in place by the time the Audit Commission is abolished, by 2015, and preparations for this are in hand. The Welsh Government are also working with Defra to agree a way forward with regard to the future management of the areas in England covered by the two cross-border internal drainage boards. Both cross-border bodies will continue to fall under the Audit Commission regime until then.

Welsh Ministers have agreed that we retain the power in Clause 2 as a backstop power to add cross-border bodies back into Schedule 2 by regulations at a later date, should the transfer of functions take longer than expected. Regulations made under this power will be subject to consultation and the affirmative procedure. They would also require consent from the National Assembly for Wales. With this explanation, I hope noble Lords will accept this amendment. I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of this amendment. I accept that it is consequent upon decisions of the Welsh Government and their intention to transfer the functions of the two cross-border bodies to Natural Resources Wales and to bring them under the Welsh audit system. I understand also that it is the intention that the new governance arrangements will be in place by the time the Audit Commission closes, but that a backstop has been retained should that not actually have occurred. We are content with this amendment and happy to support it.

[Earl Attlee]

My Lords, I am grateful for the noble Lord’s support.

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[Baroness Stowell of Beeston]

My Lords, these amendments extend the potential purposes for which a data-matching exercise can be carried out by the National Fraud Initiative and make minor clarifications and updates to the data-matching provisions in Schedule 9. Following the helpful amendments of the noble Lord, Lord McKenzie, when the Bill was last in this House concerning data-matching exercises, the Government introduced Amendment 76. This amendment would add the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the National Fraud Initiative.

The amendment would allow the National Fraud Initiative to undertake the ad hoc data-matching exercises that it does at present through the Audit Commission’s wider powers once it moves over to the Cabinet Office. If your Lordships’ House agrees, the amendment would allow the possible extension of the National Fraud Initiative’s potential data-matching powers to include: the prevention and detection of crime other than fraud; assisting in the apprehension and prosecution of offenders; assisting in the recovery of debt owing to public bodies; and the prevention and detection of inaccuracy and error, which is the subject of this amendment.

The noble Lord, Lord McKenzie, proposed an alternative amendment relating to the prevention and detection of maladministration and error when the Bill was previously here in Committee, which we undertook to consider. However, although we felt that a good case had been made for the inclusion of “error”, we concluded that there was insufficient evidence as to how the investigation of maladministration over and above error might be used. Furthermore, “maladministration” has a strong association with the work of the Local Government Ombudsman. We were concerned that its use here might raise the potential for conflicting roles and responsibilities. We therefore considered that the term “error and inaccuracies” was both more appropriate and indeed wider than the amendment proposed originally. We hope that the noble Lord, Lord McKenzie, concurs with that, and I thank him for bringing forward the original proposal that has led to this amendment.

Before enacting any of these purposes, the Secretary of State must consult relevant authorities, their representatives and the bodies affected. In addition, those regulations would be subject to the affirmative resolution procedure. In our view, these safeguards will ensure that proper consideration is given to any extension to the initiative’s current powers.

Commons Amendments 74 and 75 are minor and technical amendments made purely to ensure consistency with other, similar provisions in the Bill or with other legislation. With these assurances, I hope your Lordships will feel able to approve these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for her explanation of these amendments and her kind remarks. As has been noted, we had an extensive debate around data matching when the Bill was originally before us, prompted in particular by concerns that data matching undertaken by the Audit Commission under its audit powers would be lost with the demise of the Audit Commission. These powers were not covered by data-matching powers exercisable for the prevention and detection of fraud. Nor were they included in the list of items which, after due process, could be added to those powers. We pressed the case to add data matching for the purpose of detection of maladministration and error to the list of those powers which could be introduced. As the Minister has explained, we highlighted information provided by the Audit Commission as to how its powers had been used to identify problems with GP lists, for example, which would be lost without an amendment to the data-matching provisions. The Minister handling the amendment, the noble Lord, Lord Wallace of Saltaire, who coincidentally had Lords responsibility for Cabinet Office matters, rightly stressed the need for sensitivity around data matching but said that the Government would reflect. The point we pressed was that we were not seeking an extension of data-matching powers, leading to preservation of those that would be lost with the Audit Commission. We are delighted to note that the Government have responded positively on these matters and proposed the addition of,

“prevention and detection of errors and inaccuracies”.

We are told that this formulation will allow the National Fraud Initiative to undertake the ad hoc data-matching exercises it does at present through the Audit Commission under its powers once the NFI moves to the Cabinet Office.

The Minister will be aware of the amendment that we and colleagues in the Commons pressed about the prevention and detection of maladministration and error. As we have heard, there was some debate around excluding maladministration from the amendment, but the main thrust of the Government’s position was the overlap with the ombudsman’s responsibilities to look at this. I do not propose to rerun the arguments advanced by Andy Sawford about the omission of maladministration being a lost opportunity. However, we understand that the Audit Commission has confirmed that the Government’s amendment would enable the NFI to carry on the data matching it conducts through other powers—I think the Minister has actually confirmed that. This was our key starting point, so although we are a tad disappointed at the omission of maladministration, we are grateful that the Government have responded to our arguments and will not press the matter further today. Can the Minister say when it is planned to take the steps, including the necessary consultation, to add these purposes to the NFI’s powers to data match? We accept that Amendments 74 and 75 maintain the status quo in relation to the cross-boundary work of the NFI and we have no points to raise on that. We are happy, indeed pleased, to support these amendments.

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[Baroness Stowell of Beeston]

My Lords, Commons Amendments 77 to 101 make a number of minor and technical related and consequential amendments to Schedules 10 and 12 to the Bill.

Commons Amendments 77 to 79 and 81 to 84, to Schedule 10, simply remove redundant references or make clarifications to related provisions in existing legislation. They are the result of amendments to the Local Government Act 1999 made by the Public Audit (Wales) Act 2013, which removed or amended provisions relating to the Auditor-General for Wales.

Commons Amendment 80 will amend Section 25(2)(a) of the Local Government Act 1999. The amendment ensures that inspectors and assistant inspectors of best value authorities will continue, as they do now, to have regard to any guidance issued by the Secretary of State when carrying out investigations or inspections of best value authorities once the Audit Commission is abolished.

Commons Amendments 85 to 101, to Schedule 12, will remove redundant references to the Audit Commission in a range of other Acts and, where necessary, replace them with reference to auditors appointed in accordance with this Bill, and amend provisions already in the Bill to avoid unintended outcomes once the Audit Commission has been abolished. I hope that I have been able to give noble Lords the assurances they need that these are technical, minor and consequential amendments.

In case this is the final time I am on my feet speaking about this Bill, I thank all noble Lords who have participated in this evening’s debate and I am grateful for the support I have received from noble Lords for these various amendments. I would also like to take this opportunity to thank the Bill team for their consistent hard work on this piece of legislation. It has been my privilege to work with them only for this very final stage of the Bill, but I know that they have had a long and hard-working journey through both Houses. My predecessor would, I am sure, want me to relay her thanks to the Bill team. I beg to move.

[Lord McKenzie of Luton]

My Lords, we accept that these are minor and technical amendments and have no points to raise.

This is my final utterance on this Bill so I, too, would like to take the opportunity to thank all those who have been involved, particularly the Bill team, who have been helpful during the passage of the Bill and in focusing on these amendments. I thank the stalwarts of our debates, the noble Lords, Lord Tope and Lord Shipley, the noble Earl, Lord Lytton, and my noble friend Lord Beecham, who brings with him not only a very serious understanding of local government and its challenges but the fantastic ability to deliver his thoughts in a light-hearted and challenging way. I also thank the noble Baroness, Lady Stowell, the noble Earl, Lord Attlee, and the noble Baroness’s predecessor, the noble Baroness, Lady Hanham.

[The Earl of Lytton]

My Lords, I follow the noble Lord in thanking the noble Baroness for her unfailing courtesy, and that of her Bill team, and particularly for keeping me in the loop as matters have proceeded through the other place. That was very welcome and I am extremely grateful for that, and I am sure I can say the same for the parish and town council movement for her consideration and care over this matter.