Local Audit and Accountability Bill [HL]

Lord Palmer of Childs Hill Excerpts

Wednesday 26th June 2013 Grand Committee

[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.

Local Audit and Accountability Bill [HL]

Lord Palmer of Childs Hill Excerpts

Wednesday 19th June 2013 Grand Committee

[The Earl of Lytton]

My Lords, I shall speak to Amendment 14ZAA and its co-runner Amendment 14BZA, both of which are in my name and that of the noble Lord, Lord Tope.

The principle behind these two amendments is relatively simple; they seek to allow for a measure of delegation of the duty to appoint an auditor so that the actual procurement of auditors and their formal appointment can be made by another body on behalf of the authority. The issue arises by virtue of Clause 7(1), which states:

“A relevant authority must appoint an auditor”.

This, if taken literally, could be taken to mean the direct appointment of a named auditor in person on an exclusive and non-transferrable basis. I am sure that it is not intended to be quite as tight as that. It is certainly felt by the LGA, and others who have briefed me on this matter, that this might prevent any appointment as authorised proxy by an external person or body.

In reality, a firm is appointed to the task and nominates one of its number, often a partner or director, to head up a small team to handle the matter. The appointment of an auditor, to use that singular term of art, and as a specific named individual, is in any event customarily carried out per pro the authority by this means. For instance, most small charities and similar bodies appoint a firm rather than an individual. In the realms of a collective appointment via a national or sector-led service, this becomes more important. A large consultancy firm bidding for a sector-led contract will ultimately make an appointment itself of the named auditor as overseer and signatory to the auditor’s report

The gist of Amendment 14ZAA is quite simply to provide for the procurement of an auditor by way of a duly authorised proxy, including a large firm, a sector body or other similar large concern dealing with possibly several authorities. It does not make this mandatory, simply an option.

Amendment 14BZA follows from this. If the procurement is by way of another body charged with meeting the requirements of the Bill and thus delegated from the authority, it is unnecessary, or should be unnecessary, to have an audit panel, because the oversight of the auditor is carried out in accordance with the relevant rules of engagement via the proxy. The authority always remains responsible for whatever measures it has put in place. The appointed procurer of the audit service must observe all the criteria in the Bill for that activity.

The LGA, as I said, provided a useful brief on this and it is worth picking out a few salient points. The amendments would be consonant with the authorities’ need to have flexibility to procure their audit nationally, or in some form of grouped manner. It would make collaborative audit procurement more attractive and produce, as we heard on the previous day of this Committee, the potential for significant savings. That would be to the direct benefit of local finance. Some of the reasons why this is so have already been rehearsed, including the Audit Commission’s own modelling and its calculated saving of between £205 million and £250 million over a five-year period.

The Government’s own impact assessment does not refute this. Indeed, it concedes that local appointment may not procure the level of savings secured by the Audit Commission during its last procurement round. It seems obvious to me that each authority procuring its own auditors on a recurring basis replicates a cost base. There is an opportunity to save money here.

I will not go into the other details that have been discussed before, save to say that I agree that local appointment does not necessarily increase competition or cut costs. I have no proof of this, but my hunch is probably that not many firms would undertake a municipal audit in the first place. In reality one is probably looking at one of the larger firms, a point that we have heard before. I register the point made by the Minister on Monday. A paraphrase of her words is that there will be no recreation of the Audit Commission by the back door, but if the reality of this Bill’s proposals is to create some form of suboptimal procurement with waste by duplication, I have to say that I am against that as a principle. I hope the Minister will feel that subject to any safeguards that might be necessary to eliminate the risk of a “son of” Audit Commission coming about, the principle is acceptable, in which case we can work out the detail as we go forward. I beg to move.

[Lord Palmer of Childs Hill]

My Lords, I will speak to these amendments, although sitting next to me is my noble friend Lord Tope, in whose name Amendment 14ZA stands. I hope the noble Lord, Lord McKenzie, will confirm that we have already dealt with the collaborative basis and the fact of buying centrally. Even I was a late adherent to this, but I think we agree that in one form or another that is the way to go forward, however it can be arranged, although there were numerous alternatives. As the noble Earl, Lord Lytton, has said, there are going to be significant savings, which is something that we cannot ignore.

I have one question about a sentence in Amendment 14ZA on the appointment of a new auditor, or the re-appointment of an existing auditor, to,

“audit its accounts for a financial year not later than 31 December in the preceding financial year”.

Both the Bill and the amendment say that that appointment should be made not later than 31 December in the preceding year. I cannot work this out in practical terms. Let us say that KPMG is the auditor of a local authority or group of local authorities; it has not finished its accounts and the accounts will not be signed off until, at the earliest, the end of January the following year. That company could be under notice, according to the amendments, that it may not be, or could not be, the auditor for the ensuing year. While KMPG is finishing off its audit—the accounts will not have been finished and signed off by the relevant person in the local authority, who in my local authority is me, so I am told; I have done it three years in a row—a new auditor, PricewaterhouseCoopers, perhaps, will have been appointed.

I worry about how that will affect the mindset of the auditor who is being replaced. Enshrining within the Bill that the auditor has to be appointed by 31 December within that year will cause moral, and sometimes practical, difficulties. Perhaps the Minister will take this issue back and consider whether the wording should be “could be appointed by 31 December” or “as soon as possible by that date”. I worry how the changeover, if there be a changeover, will affect the performance of the outgoing auditor.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I thank both noble Lords for these amendments, which take up the points that we made on Monday about the possibility of a centralised audit process for both larger and smaller authorities. As I understand it, the larger authorities will be run, more or less, by the LGA and the smaller authorities by the NALC. I made it quite clear that we were content to have discussions with the LGA and the NALC, to whom we are talking already, on the strict understanding that there could not be, in either case, mandatory schemes. The amendments brought forward today by the noble Lord, Lord McKenzie, and the noble Earl, Lord Lytton, are flexible enough to take account of that. As I said on Monday, we are willing to continue the discussions that are already taking place. I am sure that we can come back to this issue at a later stage if anyone feels that they are not going in the right direction.

Amendment 14BZA would specifically exclude bodies that opted into such an arrangement from the need to have an auditor panel. We agree with that. If there is a centralised system it is plainly not sensible for those who are being helped by it to have their own audit panel. However, it is essential that if they are appointing their own auditor, independently or in conjunction perhaps, with another authority, they have to have an audit panel. We have discussed the make-up of an audit panel and its independent membership, and they would be required to do that.

The noble Lord, Lord Palmer, raised the question of the date of appointment of auditors. The reason behind the auditor needing to be appointed by 31 December is to ensure that if for some reason the local authority fails to make an appointment, there is time for the Secretary of State in particular to take action under Clause 12, which allows him either to direct a body to appoint or make an appointment on behalf of the authority. We will discuss this later, but it will certainly apply to health authorities, and I understand that the situation is similar in local authorities. I hear very clearly what the noble Lord says about the auditors possibly lacking the enthusiasm to carry on if they are about to be replaced, but I think the audit bodies are pretty professional, and they would need to continue.

We will discuss the appointment of auditors when we reach the amendments that are a couple of groups further on, but I think those are the main points that have been raised. As I said, I hope that we shall be able to return to this matter at the next stage with some further ideas on how the centralised but not mandatory system might work.

I hope that with those explanations, and if I have covered the points that were made, the noble Lord will withdraw his amendment.

--- Later in debate ---

[Lord Tope]

My Lords, I am slightly confused, because the group of amendments with which we are dealing is about the relationship between audit committees and auditor panels. The noble Lord, Lord McKenzie, as the mover of the amendments, will comment on that in a moment. However, I am quite sure that we will return to this issue, if only to seek clarification about the distinction and whether the two bodies should be, or have to be, separate. My noble friend Lord Wallace seemed almost to be saying that the auditor panel could in effect be a subcommittee of the audit committee. I do not think that that was quite what he meant, but maybe it was. We still need to clarify that role.

My confusion started when my noble friend went on to reply to Amendment 14BBA, which is not only in the name of the noble Earl, Lord Lytton, but in mine. That amendment has not been moved yet, so I am not quite sure whether we are dealing with it. If we are, and for the sake of preventing us from dealing with it later on—if and when it ever gets moved—perhaps I might say that the noble Earl is vastly more expert than me on the case of small bodies, such as parish councils and the like. However, the amendment comes from the Local Government Association, which represents primarily the larger authorities that do have these concerns. Personally, I have no great problem with majority independent members, but the LGA is concerned about it on a number of grounds.

First, the LGA quite rightly makes the point about the professional integrity of auditors, which the noble Baroness, Lady Eaton, has already made, as has the noble Lord, Lord True, and others, and which I think we all accept. They are already fully regulated, quite rightly and properly, and therefore the perception of independence is, in a sense, already covered to a considerable extent by the regulation.

Secondly, there is the rather more important, practical problem of whether in some areas it will be possible to find a significant number of truly independent people. That does not mean somebody elected to the council as being independent of a political party; it means somebody who is truly independent of the council in a way that is defined in the schedule. In some areas, it may not be possible to find sufficient people of relevant experience. That does not mean that they have a professional qualification necessarily, but that they have relevant experience and are also able and willing to put in the necessary time to serve on this. That may be less of a concern in some London boroughs that many of us know. However, I can well see that in more rural areas or smaller district councils, it may well be quite a significant difficulty. That is part of the concern that the LGA was raising and which we need to include in this debate, whichever amendment we are debating at this moment.

[Lord Palmer of Childs Hill]

Since we are not sure which amendment it is, perhaps the Committee will forgive me if I say just a word, having come in late on this section. I hope it will. I want to pick up on what the noble Lord, Lord Beecham, said about close friends. I feel that whatever legislation these Houses of Parliament pass should not be capable of ridicule. That must surely be paramount in people’s minds. Can one imagine the situation in which people vehemently deny that they are a close friend: “I am not a close friend, let me on it.”? It is quite nonsense. The idea of having to justify not being a close friend is capable of being ridiculed.

We are not putting these words into the Bill; we are trying to say that the relationship of someone in this position should not be such that they could influence the person on the panel. Imagine a court trying to decide whether this person was a close friend when they were denying it. Mr Saatchi and his wife might have problems saying whether they were close friends, given that he put his hands around her throat—he has been cautioned, so I think I can say that. It really is a worry. As I say, I understand what the Bill is trying to do and it is absolutely right to do so. However, to pick up on what the noble Lord, Lord Beecham, has said, the words are unfortunate.

[Lord McKenzie of Luton]

My Lords, I thank all noble Lords who have contributed to what was a wide-ranging debate in the event. I also thank the Minister for his reply, but I am bound to say that I do not feel reassured by it. There are two sorts of issues flowing through this debate. One is whether, as the amendment proposes, the audit committee could not take unto itself the role of the auditor panel. Then there is the separate but obviously related issue of composition, whether it is of the audit committee or the auditor panel, and whether that should be independent as defined, quite apart from the definition.

The noble Lord, Lord Wallace, asserted that 80% of local authorities have audit committees. I accept that. I know that it is not currently mandatory, but it is certainly encouraged and there has been a substantial development of them. Their role is not limited to internal audit, controls and processes. That is part of their role, but the CIPFA guidance makes clear that part of their role is reviewing the financial statements, the external auditor’s opinion, and reports to members, so they should already have an engagement with the external auditors and be able to take a view on how they should proceed.

--- Later in debate ---

[Lord Wallace of Saltaire]

My Lords, we are willing to look at that as well and I will write to the noble Lord. After all, we are talking about panels that may consist of two independents and one member of the audit committee. We are not talking about a vast number of people to be found outside. However, my understanding is that “independent” will exclude close political friendship. My experience of close political friendship also tends to mean close personal friendship, but we could discuss that in the bar or on another occasion.

[Lord Palmer of Childs Hill]

My Lords, perhaps I can come back on that because I am probably the only person in your Lordships’ House who is a chairman of an audit committee. The present situation in many audit committees, of which mine is one, where the chairman is a member of an opposition party, which I am, gives an incredible independence. You are not part of the ruling party and when we were in power we did the same the other way round.

As the noble Lord mentioned, we already have two independent members, which is very good. However, the trouble is that if you appoint an independent chairman or chairwoman of the committee, that person could well have a political affiliation. Therefore, when the controlling party in that local authority was looking for an independent chair of that committee or panel, not unnaturally it would look to people whom they know or know of. The current situation where the person is of an opposition party, where that is relevant, seems to get over that point because that person is not a close political friend. I just wanted to pick up that point from my personal experience as something to think about that when we are considering this point.

[Lord Tope]

My Lords, I think that we are trying to achieve the same thing here and therefore further discussion will be helpful. I pick up on the Minister’s example of an auditor panel that has two independent members, in the terms defined thus far, and a member from the audit commission. Whether they are friends by any definition, they could easily be members of the same political party. In a slightly different context, we said earlier that all of us are concerned that that should not happen in terms of elected members, with a majority party having a majority on the committee or sometimes even all the places on the committee. If we are talking about a small auditor panel, with the three members suggested, it is possible—this is not in the realms of fantasy in some areas of the country—that all three could be members of a political party. That does not necessarily imply a conspiracy or corruption; that is merely how it is in that area.

Thanks to the noble Lord, Lord True, we have moved to an area to which we may have to give greater thought if we are to achieve the objectives we all share.

--- Later in debate ---

[Baroness Hanham]

My Lords, this goes back to what we were discussing when we were talking about local authorities. If the clinical commissioning group has not appointed an auditor by December and has no reasonable expectation of employing one by the end of March, the Commissioning Board will have to notify the Secretary of State and he, NHS England or the commissioning group will have to ensure that an auditor is appointed. There is no question that the clinical commissioning group should not have an auditor in place at the beginning of the financial year.

[Lord Palmer of Childs Hill]

Perhaps I may ask the Minister for clarification. The Bill states:

“by the end of 25 March in the financial year preceding the financial year to which the accounts to be audited relate”.

So, if the relevant year is to 31 December 2012, as I understand it, the auditor will have to be in place by 25 March 2011 because that is the financial year preceding the financial year to which the accounts to be audited relate. Is that right? I would have thought it should be in the financial year to which the accounts to be audited relate, not the preceding year. This is bringing the date incredibly far forward and I wonder whether I have misunderstood it. Perhaps my noble friend the Minister can elucidate.

[Baroness Hanham]

My Lords, I have misled the Committee, for which I apologise. As the noble Lord said, it is the preceding year. If the clinical commissioning group fails to appoint an auditor in the preceding year at the end of March, the Commissioning Board will have to notify the Secretary of State. This gives time for an auditor to put in place the provisions for the following year. The Secretary of State has to be notified by the commissioning board by 25 March that the clinical commissioning group has failed to appoint an auditor. The provisions are intended to ensure that a clinical commissioning group has a local auditor in place in a way that is consistent with their respective roles. I agree with the noble Lord that nine months seems a long time to get someone in place.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, in seeking that Clause 14 should not stand part of the Bill, I should say that this is a probing measure to seek government assurances about the appropriateness of facilitating the limitation of local auditor liability arrangements. The impact assessment and other documentation records that the Audit Commission currently provides an indemnity to audit firms for certain aspects of their work. This is, presumably, their statutory audit function. It also appears that it covers irrecoverable legal costs. We are told that the indemnity has been used only twice over the past five years and that auditors have faced legal action four times over a five-year period. Perhaps the Minister will let us know the amounts involved in the use of the indemnity and how much was paid.

What benefits ensue from limited liability arrangements which relieve auditors of liability in respect of negligence, default or breach of trust when conducting an audit? What are the benefits of that? The limitation of auditors’ liability has been permitted under the Companies Acts since 2008, although reports suggest that there has been little take-up. I am indebted in this regard to a Mr James Herbert, who is a corporate partner in a law firm who wrote an interesting article in Accountancy Age back in 2009. I took the opportunity of speaking to him to see whether the view he expressed then had changed. It had not.

Part of the reason for little take-up of those arrangements is attributed to issues with the SEC prohibiting UK companies registered with them from entering into those arrangements. Under the Companies Acts, any limitation must be fair and reasonable. A separate agreement is reached for each year and each agreement must be approved by shareholders. On the face of it, there is no reason why auditors should be protected from the consequences of their negligence or default in the public or private sectors. However, one of the public policy objectives was to enhance competition in the UK audit market and to address concerns about auditor concentration. As we have discussed before, the big four have deep pockets, are better able to bear the risks and have more clout with professional indemnity insurers. There are concerns that the smaller and mid-tier firms have been least able to benefit from the agreements.

Another reason for allowing such agreements might be its impact on the price of an audit. If the risk on the audit firm is less, the cost of the audit should go down. However, it is difficult to gauge whether there will be any real downward pressure on fees in the public sector, particularly given the infrequent calls on the commission’s indemnity. We can see some merit in allowing limitation of liability agreements if tightly regulated and if they can be demonstrated to help to open up the markets and put downward pressure on fees. However, we are sceptical that they will deliver that outcome. Perhaps the Minister can say when we might see a draft of the proposed regulations referred to in Clause 14 or what else might be provided in the key elements in the regulations. How do the Government propose to monitor and assess the effects of the clause?

I emphasise that in my discussions with that particular lawyer, it appeared that limitation of liability agreements have simply not taken off, certainly not in the private sector, so one wonders about the merits of introducing them to the public sector.

We might wish to return to the matter on Report, but it seems to me that, at the very least, there may be an argument for a sunset clause on the provisions, or at least a very clear process of assessment so that one can see whether what should be the benefits—downward pressure on audit fees and an opening up of the market to smaller firms—is actually achieved. We remain sceptical.

[Lord Palmer of Childs Hill]

We have already mentioned that the number of accountancy firms capable of carrying out these audits is quite small—five to seven, probably. The maximum would be 13, and most of those would probably not achieve those audits. All of those in the top echelon of firms of audits are now limited liability partnerships. The days of my times in practice when we were personally liable have, for the large firms that we are considering, long departed.

I ask my noble friend: if there is a liability, where should it rest? Should it rest at the end with the Government as a short-stop? Should we say, at the end of the day, if things go sour, the Government will pick up the liability? Bearing in mind that no partner of one of those firms would be personally liable, and that they are firms of great size with considerable power, I wonder whether they should not bear that liability.

We had the example within the corporate sector of Arthur Andersen, which messed up on an audit—not a local authority audit but a public audit—and that ended with the demise of that firm. Are we trying to say that, in terms of local or public health authorities, these firms should have this protection, or are we saying that these are the professionals and they must do their audits, work correctly and cover themselves? We are not talking about anyone being responsible for fraud or errors within local authorities or the health service; we are talking about them not having carried out their work properly to an extent where they can cover themselves. I ask the Minister to reconsider whether the liability should ultimately rest with the Government, or whether it should rest with these five to seven very large limited liability concerns.

Israel and Palestine

Lord Palmer of Childs Hill Excerpts

Thursday 7th February 2013 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, my noble friend Lady Falkner asks an important Question. Civil society certainly has a role in promoting peace in Israel, the West Bank and Gaza. However, real and elusive peace can only be reached by the Israeli Government and the Palestinians sitting down at the negotiating table without any preconditions. Civil society can pave the way but is not of itself a solution. Civil society groups offer Israelis and Palestinians a focus of identity and a catalyst for empowerment on efforts for peace and coexistence. Their activity is a vital part of encouraging their respective societies to engage in renewed negotiations towards a two-state solution.

The effectiveness and prominence of civil society groups is very much contingent upon the political environment. As a free and open democracy, Israeli civil society organisations are able to operate in a wide range of fields, including those very critical of Israeli government policy. However, it must be said that the lack of freedoms in the Palestinian territories and the political atmosphere make it harder for pro two-state organisations to operate there.

We have heard from other noble Lords, and I am sure we will hear more, about the position in Gaza, so perhaps I will concentrate on the Israeli part here—other than to say that my perception of Hamas is that it appears to have suppressed the development of civil society in Gaza by closing down NGOs, voluntary groups and charities which are deemed critical of Hamas rule. If you agree with Hamas, the situation is fine, but it has castigated those organisations that support normalisation with Israel. The noble Lord, Lord Judd, commented on water, which is an incredibly important subject. The way forward on that issue is to secure peace with Israel and to build desalination plants, organised by Israel, on the waterfront of Gaza. Israel is now getting vast amounts of its water from desalination.

Bilateral civil society peace initiatives are bolstered by Israel’s domestic civil society and by those who are working to spread a culture of peace. In addition, the democratic political environment, including freedom of speech and of the press, helps to foster a vibrant Israeli civil society. We have seen this in the recent Israeli elections. By my count, 33 parties contested that election and 12 parties obtained seats in the Knesset.

Israeli law provides for freedom of speech and a diverse and free media. Israelis—Jew, Arab, Christian or whatever else they are—can disagree with the Government and still live freely. The country has 13 daily newspapers, at least 90 weekly newspapers, more than 250 periodicals and numerous internet news sites, many of them popular internationally. All are privately owned and managed. Among any three Israelis you will probably find at least four newspapers. In addition, there are no government restrictions on academic freedom or cultural events in Israel. What other countries in the region could host the gay pride celebrations?

Israel is an incredibly diverse country. While over 70% of Israelis are Jewish, they come from across the world. Approximately half of Israel’s citizens today were born outside the country. In addition, Israel is home to Arab Muslims, Christians, Druze and Samaritans, as well as other religious and ethnic minority groups. What other country in the region allows such diversity? However, there is room for improvement. Minorities in every country, including our own, suffer discrimination and exclusion. Arab Israelis have served as elected representatives of the Knesset since Israel was founded and were elected in the recent election. They also serve on Israel’s powerful Supreme Court, which a noble Lord mentioned previously. However, despite equality in the law, socioeconomic gaps remain—an issue which the Government of Israel, together with numerous Israeli civil society organisations, are rightly seeking to tackle. More needs to be done.

I will give one example which is relevant to previous comments. Hand in Hand runs a network of four bilingual Arabic/Hebrew schools that serve more than 800 Israeli Arab and Israeli Jewish students in Jerusalem, the Galilee, Wadi Ara and Beersheba. Students study in Hebrew and Arabic simultaneously and each classroom is taught by both Arab and Jewish teachers.

In the short time available, one cannot deal with all the things in civil society within the region. Civil society plays an incredible part in creating the right climate both in Israel and in the Palestinian territories. I hope that the Minister will say how the UK Government are going to foster those civil societies on either side of the border. I hope that my noble friend will also say that, ultimately, there is no substitute for the two sides sitting down at the negotiating table without preconditions. I hope that the current Obama Administration, with this country and the EU, will foster those talks.

Terezin Declaration: Holocaust Era Assets

Lord Palmer of Childs Hill Excerpts

Monday 26th March 2012 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, I will not take that as an invitation to speak for longer than I had originally intended. I want to make the important point that the restitution of wrongfully seized property is in no way a recompense for imprisonment, loss of life or genocide. Like other noble Lords, I thank the noble Baroness, Lady Deech, for tabling this debate and for summarising all that has happened and what it is hoped will happen.

Poland is the only major European country that has no law for the restitution of private property stolen during the Holocaust. Poland was part of the Terezin conference, although it did not sign the declaration. Before the war, there were 3 million Jews in Poland and afterwards only 300,000 were left. My late mother was one of the lucky ones. She and her brother sought sanctuary in Britain, coming here between the two great wars. My mother married a Geordie and was saved by the welcome that she received in this country. However, her mother, my maternal grandmother, and my aunt were never heard of again after 1944. They were part of that tragedy.

The family had been bakers in the town of Szrensk, which is between Warsaw and Gdansk, and I imagine that assets of some sort would have been lost by my family. Like the noble Baroness, Lady Deech, I have no records whatever. To me, that is all ancient history. I along with many others have made my way in this country, which many people here sadly take for granted. I do not look for monetary restitution. In fact, when I look back at those wars, I think more of my late father’s British war service, attached to the Eighth Army, and of my uncle, who was killed while serving with the Middlesex Regiment. However, there are those who rightly believe that they need and are entitled to restitution. Many survivors and their offspring live in straitened circumstances.

There are approximately 90,000 surviving claimants to property in Poland. The majority are non-Jewish, as has been mentioned by my noble friend Lord Boswell and the noble Baroness, Lady Deech. In some cases the confiscators were the Nazis, while in others they were the communists. Listening to other noble Lords, I thought that it might be useful to give one example. It is that of the Polish resistance fighter Jan Karski, who was on the run from the Gestapo. He was sheltered for months on a country estate owned by the Sawa family. Karski was eventually smuggled out of occupied Poland. Sadly, the Sawa family did not get out of the country and Karski later learnt that the entire family had been arrested by the Nazis, tortured and executed. The point of relevance to this debate is that the property of that non-Jewish family was added to the vast horde of loot stolen by the Nazis and never returned.

As the noble Baroness, Lady Deech, mentioned, there are at least 13 occasions when Poland has drafted legislation and then stuck it back on the shelf. The European Parliament, the Organisation for Security and Co-operation in Europe and the US Senate and Congress have all called on Poland to resolve the claims. Now it must be our turn in the UK to urge the Polish Government to ease the onerous conditions imposed on potential claimants who have to go to law, to give them access to records, to allow them to set up a modest central fund to resolve claims for religious and communal property and, lastly, to participate in the 2012 conference on Holocaust-era assets.

Armed Forces: Redundancies

Lord Palmer of Childs Hill Excerpts

Monday 26th March 2012 Lords Chamber

[Lord Wallace of Saltaire]

Of course, many of those who came in as young leaders in the armed services are already being trained in the Army in the sort of skills that are highly valuable in civilian life. There is a resettlement scheme in place which will provide transitional training. In recent times, 93 per cent of those who left the Army under the resettlement scheme have found jobs within six months and 97 per cent within 12 months. I am sure that people with good records in the Army will have much that sort of experience.

[Lord Palmer of Childs Hill]

My Lords, redundant personnel will have spent many years living and working in the Armed Forces. Are the Government going to give them training to enable them to find accommodation, food and other essentials? I also find it strange that, at the same time, there are advertisements on television for jobs in the Armed Forces. Can the Minister explain why?

[Lord Wallace of Saltaire]

My Lords, I think noble Lords will understand why continuing recruitment at a lower level needs to continue in order to maintain the correct balance of age groups and skills in the Armed Forces, even as they are reduced. There are opportunities for those selected for redundancy to apply for other skill training within the armed services, so it is not simply one out and another person in.

Gaza

Lord Palmer of Childs Hill Excerpts

Wednesday 8th February 2012 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, this Question for Short Debate, introduced by the noble Lord, Lord Warner, is like many questions and referenda. It is significant not only for what he asks but for what he does not ask and for the way in which the question is phrased—rather like the First Minister of Scotland’s suggested referendum question. The question seeks to put any blame on the state of Israel. When the Minister replies, I hope that he will also address the real sufferings of the peoples of Gaza because of the policies and belligerence of Hamas and Islamic Jihad.

Israel’s actions are a reaction to a real threat to Israel’s security by groups in Gaza which deny Israel’s right to exist and threaten the lives of Israeli citizens—Jew and non-Jew alike—on a daily basis. Since Israel withdrew from Gaza six years ago, withdrawing and removing from Gaza every single Israeli settler, terrorists have fired more than 7,000 rockets and mortars into Israel. Almost 1 million Israeli citizens are under threat from Quassam rockets, Grad rockets and mortars, which terrorise cities, schools and hospitals.

Do not get me wrong: there is suffering and deprivation in Gaza. But it is wrong to blame only Israel. The problem is not only of Israel’s making, as suggested by the Question of the debate. The people of Gaza suffer—and they do suffer—because of the belligerence and extremism of Hamas and Islamic Jihad. These organisations are not only anti-Israel; up until now they have also been anti-Fatah and anti the Palestinian Authority. When Hamas took control, they murdered and injured supporters of Fatah. So we look with interest at the agreement this week of a unity government, which could not even find a prime minister as well as a president. It is against this background that a large part of the problems exist.

Armed Forces: Housing

Lord Palmer of Childs Hill Excerpts

Wednesday 14th December 2011 Lords Chamber

[Lord Wallace of Saltaire]

My Lords, we are talking about around 1,000 houses. We very much hope that serious problems will not arise during this three-year pause. We are doing everything that we can to avoid that problem. As the noble Lord will know, one in eight service houses turns over every year, because there is a considerable churn in Army housing in particular. That requires a constant programme of minor refurbishment, which will of course continue.

[Lord Palmer of Childs Hill]

During the passage of the Armed Forces Bill, I raised the dire state of forces housing. I suggested that we look to fill the gap by the greater use of housing associations in garrison towns. I did not really get an answer, but the Minister did at that time say that the upgrades since May 2010 of service housing personnel was 900 units. Can the Minister—bearing in mind his previous response about 2013—give a number of the houses that will be upgraded by the end of 2012?

[Lord Wallace of Saltaire]

My Lords, I understand that there will be another 500 to 800 houses to be upgraded next year. I add that not all service families are living in service family accommodation; part of the intention of the new employment model currently under negotiation is that fewer service families will have to move as regularly as before. More will therefore be able to invest in their own homes. I was, indeed, asking some of the doorkeepers about their service accommodation and service life, and I was interested to hear how many of them had loans through the services to buy their own houses.

Poland: Restitution of Property

Lord Palmer of Childs Hill Excerpts

Monday 5th December 2011 Lords Chamber

[Lord Wallace of Saltaire]

My Lords, there are several complex issues in that supplementary question. Legislation has indeed been passed in all the other post-Communist countries although I am advised that its implementation has been patchy. Poland has suspended its legislation on the grounds that the €5 billion which it estimates would be the cost would take it above its current budgetary limit. We all understand that in current circumstances national Governments find these things difficult. I am very conscious that restitution in Poland is an unusually difficult issue after 80 years in which first Nazi and then Russian troops have rolled over Poland. There was confiscation and enormous destruction, then Communist confiscation, and a great deal of movement of boundaries and forced relocation of Poles, Germans and others.

[Lord Palmer of Childs Hill]

My Lords, I also declare a sort of interest in that one of my late grandmothers was Polish and did not come out of Poland at the end of the war. However, I will not be one of those seeking compensation. Further to what the noble Baroness, Lady Deech, has said, when and if Her Majesty’s Government press the Polish Government, will they ask them to ease the evidential requirements needed to make claims, which are very complicated, and assist people to access the records, as that assistance is not always given? My noble friend the Minister spoke of the financial difficulties that Poland is experiencing, but will the Government ask it in very strong terms to set up a central fund to at least meet a small percentage of the claims rather than blocking any claims whatever?

[Lord Wallace of Saltaire]

My Lords, Her Majesty’s Government have said on a number of occasions to the Polish Government that we regret the slow progress on this issue. We supported the 2010 Terezin declaration. We will be an active participant in the review conference next year and are actively engaged with other like-minded Governments on this issue. We do not have a formal position at present on the question of an EU representative for Holocaust restitution.

Government Procurement Policy

Lord Palmer of Childs Hill Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Palmer of Childs Hill]

My Lords, I, too, compliment the noble Lord, Lord Sugar, on securing this debate on government procurement policy. The trouble may be that there are a number of policies, most of which are not delivering what is required at the right price. I have seen this in local government, in defence procurement and in procurement in the construction industry—the industry which is supposed to contribute to leading us out of the recession.

The Strategic Defence and Security Review was published a year ago and said that it would fundamentally re-examine how the MoD was structured and managed. Nowhere is this more needed than in its procurement policies and their implementation. The MoD, in deciding its procurement policies, must have a clearer idea of what wars and battles it could be required to fight. There are large items of equipment in various war theatres, and we always end up with the difficult decision about what to do with the equipment at the end of the engagement. As an example of how not to do things, the building of two aircraft carriers which, it appears, no one knows what to do with—we do not have aircraft that can use them—is a prize example of poor procurement policy. The Member of Parliament for the area embracing one of the dockyards said:

“To rip up these contracts worth millions at this stage would not only be financial madness, but political suicide and I hope the coalition government sees sense”.

He is right, but because the previous Government made unbreakable contracts for ships that no one really wants, they will be built. Is that procurement policy or procurement madness? Our home-based defence industry complains, through its trade association, that the MoD has yet to define its indigenous capability requirements, which leaves the acquisition process unguided on what should be procured onshore, and industry with little on which to base investment plans.

The UK's requirement is for a continuously available critical mass of core skills in disciplines such as systems engineering, plus design and development engineering, that can rapidly be placed on a war footing. Assured off-shore access—which my noble friend Lord Lee describes as “buying off the shelf”—alone may be inappropriate for a number of reasons. It invites, as the noble Lord, Lord Sugar, said in another context, home-based inertia. It leads to the fading of skills. It jeopardises the need to maintain a critical mass in the support environment, and it could be subject to political restraints, legal challenges in other countries or third-party regulatory regimes which, together, cannot guarantee the necessary level needed in a national emergency.

ADS, the defence trade organisation, maintains that the majority of equipment costs for the MoD are now incurred in maintaining and upgrading existing systems through life, rather than in the acquisition phase. This means that “Through Life Capability Management” implications must be taken into account during acquisition. So what is needed is an effort to predict what could be needed in 2012 and beyond to work with UK industry to promote a holistic approach to decision-making. Short-termism does not help the MoD, the defence industry or the country.

Good procurement is needed not only in defence. The current economic crisis has created what some see as an opportunity to transform how our public infrastructure is procured and delivered. Much attention has been given to the future of the economic recovery, starting with the construction industry. At least one of the UK's largest construction businesses has strong beliefs on how the construction industry can help the Government to achieve our objectives of reducing the fiscal deficit while maintaining a platform of economic growth by actually reducing—reducing—the costs of construction. The basis of how to achieve this result is in how public infrastructure assets are procured.

Where possible, our Government should group its infrastructure procurement into programmes by geography and type, so that cost-reduction targets can be set over periods of five years. The Government should select the successful bidder or bidding teams on their ability to deliver the acceptable cost and their ability to deliver the cost reductions over a defined period. Bidders would need to accept that projects would not proceed unless the acceptable cost and cost reductions were achieved. The construction industry believes that, in that way, public sector procurement costs will be significantly reduced. Small and medium-sized enterprises will benefit through the supply chain and, with programmes of work defined over a future period, there will be significant opportunities for training and apprenticeships.

A number of noble Lords have referred to small and medium-sized enterprises. Listening to what other noble Lords have said, I throw into this debate that, since January, the Treasury has awarded a total of 16 contracts and put notices on the contracts finder, where there is a total of just over £12 million—none of which has been awarded to small or medium-sized enterprises. The Department of Transport has advertised 122 contracts with a value of more than £135 million on the contracts finder website since May 2010. Of those contracts, only £125,000 went to small businesses: under 1 per cent. Other figures are equally damning.

I never say that a project, be it in defence or construction, should take place purely to make employment, such as with useless aircraft carriers. However, where a contractor agrees to carry out the work and to employ local labour, it must surely weigh heavily in a successful bid. With such improvements in procurement processes, there could be guarantees in the use of SMEs, local employment and apprenticeships. If someone finds a way to do something cheaper and give better quality and value, be they SMEs or large enterprises, then they will prosper and increase market share—until, of course, their competitors catch up, seeing what they need to do in order to compete.

We must tackle why it costs a business twice as much to win a UK government contract as it costs to win a French government contract. We must ask why we often take sensible European laws and apply them overliterally, making the tendering process far more complicated than it needs to be.

Armed Forces: Accommodation

Lord Palmer of Childs Hill Excerpts

Thursday 15th September 2011 Lords Chamber

[Lord Wallace of Saltaire]

I assure the House that the Defence Secretary has not changed his mind, and I repeat: we should pay tribute to the previous Administration’s considerable efforts in recent years to upgrade service accommodation, which are continuing. A further 900 houses have already been upgraded since this Administration took office. We are very conscious of the importance of this programme. Perhaps I should also mention that alongside it, a substantial programme is to be undertaken in the next five years of service accommodation adjustment to accommodate troops who will be returning from Germany. That is not part of this pause.

[Lord Palmer of Childs Hill]

My Lords, as the Minister will be aware, at every stage of the Armed Forces Bill I have raised the dire state of houses for service personnel. I asked whether the Government could look at the use of housing associations in garrison towns to improve housing earlier than he has indicated. Will he confirm that they will urgently look at this in the light of recent revelations?

[Lord Wallace of Saltaire]

As I have indicated, the MoD recognises the importance of this to service welfare and is doing everything it can to ensure that the programme continues.