Local Audit (Amendment of Definition of Smaller Authority) Regulations 2025

Lord Sikka Excerpts

Wednesday 3rd September 2025 Grand Committee

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

My Lords, these regulations were laid before the House on 16 June 2025.

Effective local audit is vital for local accountability and transparency. The Government are committed to reforming the local audit system, including by addressing long-standing concerns around proportionality and capacity. Smaller authorities include parish and town councils, internal drainage boards, port authorities and parish meetings. They provide valued local services, from running community halls and allotments to managing small ports and drainage systems, but they do not require the same extensive audit arrangements as larger public bodies.

Much of our reform programme is focused on fixing the principal authority regime, which we know faces serious challenges; I have spoken about this many times, both in my shadow role and in the ministerial role that I hold now. It is important that the audit system for smaller authorities remains sustainable and works well. These regulations, along with other measures, will help ensure that the system as a whole remains proportionate and responsive to feedback.

We are certainly not removing scrutiny or accountability for smaller authorities. That will continue to be provided through the annual governance and accountability return. We have also committed to reviewing the AGAR so that it continues to be effective by enhancing transparency while keeping administrative burdens proportionate.

Increasing the threshold for small authorities is designed to prevent smaller bodies being drawn into the principal audit regime in future. This would be wholly disproportionate, given their size and responsibilities. Raising the threshold to £15 million is not about reducing oversight; it is about ensuring that the regulatory framework remains fair, proportionate and suitable for purpose. This change will allow smaller authorities to focus their time and resources on delivering essential services rather than navigating financial reporting, assurance and audit requirements that are out of step with their scale and responsibilities.

The threshold for smaller authorities has not changed since it was introduced in 2014. More than a decade on, it no longer reflects today’s financial environment. What was once a sensible level is now outdated, creating unnecessary pressures for smaller authorities whose financial activity has grown over time. These smaller authorities do not have the same breadth of services, assets or liabilities as even the smallest district council, yet, under the current arrangements, they risk being subject to a full financial audit at a level that brings significant cost and resource implications and draws on scarce audit capacity that should be focused on principal authorities.

Our local audit reform strategy recognises the need for a more proportionate approach to audit arrangements that reflects an organisation’s functions and complexity rather than simply its size. Subject to parliamentary approval of the audit measures set out in the English Devolution and Community Empowerment Bill, the local audit office will work closely with the department to take that forward.

This instrument raises the audit threshold for smaller authorities to £15 million, applying from the 2025-26 financial year. This is a proportionate reform that reduces unnecessary audit requirements, helps to free up capacity in the principal audit market and ensures that auditors can concentrate on those areas where assurance is most needed. The regulations, if approved by Parliament, will be made under the enabling provision in the Local Audit and Accountability Act 2014 and will take effect the day after they are made.

I am sure that our discussion today will show that we share a common goal to ensure that audit arrangements remain proportionate to allow local authorities and other local bodies to focus on delivering for their communities. I look forward to answering any questions that noble Lords might have and to participating in our discussion on this instrument today. I therefore commend the draft regulations to the Committee. I hope that noble Lords will join me in supporting them.

[Lord Sikka (Lab)]

My Lords, the local authority audit system was wrecked by the previous Government. Electoral Commission data shows that in the period leading to the 2010 general election big accounting firms handed millions of pounds in cash and non-cash donations to the Conservative Party and got their wish, which was the abolition of the Audit Commission. The commission used to make considerable use of the district auditor service, as has been mentioned, and was reluctant to award auditor appointments to big accounting firms as they were not really considered to be fit for the purpose. The commission was a watchdog and a guide dog as it focused on efficiency and effectiveness and guaranteed auditor independence. Since then, we have had several local authority scandals, but big accounting firms have continued to collect millions of pounds in audit fees. I look forward to the English Devolution and Community Empowerment Bill when it comes, but meanwhile I have a number of concerns about local authority audit matters.

The Government’s 9 April 2025 paper Local Audit Reform: A Strategy for Overhauling the Local Audit System in England stated:

“Audited accounts are a vital and independent source of evidence of the sector’s financial health and value for money for residents, local bodies and elected members”.


It adds that audit provides,

“the only independent check on whether local bodies’ financial statements are true and fair. This is vital not only for good decision-making but for transparency and to enable local communities to hold their councils and other local bodies to account”.

However the statutory instrument in front of us actually dilutes the audit requirements for smaller authorities. Can the Minister explain how the Government’s claims of an “independent check” and “transparency” will be delivered in the absence of independent scrutiny, which the Minister just praised?

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[Baroness Taylor of Stevenage (Lab)]

I am grateful to the noble Lord for raising the issue and giving me the opportunity to clarify that.

The noble Lord, Lord Shipley, referred to the history of the abolition of the Audit Commission. He asked me about the 2014 threshold and there being no impact assessment. I cannot answer his specific question about how many authorities are taken out of this regime, but I will reply in writing to that question.

The way that this has been developed is that we have been very responsive to stakeholder feedback following the consultation that was initiated. The view of stakeholders is that £15 million will be the appropriate threshold ahead of the Secretary of State undertaking a wider review of audit regimes to make sure that they are all fit for purpose as we enter the new local audit office regime. I hope that answers the substantive question that he asked me.

Aligning audit thresholds with inflation in the future is an important issue. We need to make sure that we do not get ourselves into the same bind that we have before of audit regimes that get out of sync with what is happening in local authorities. Subject to parliamentary approval, the local audit office will work with the department to advance a more proportionate approach and remove the sorts of cliff edges that come from purely financial threshold-based approaches. Our intent is to work with the sector and the local audit office to change that approach.

The noble Lord, Lord Jamieson, asked about progress on implementation. This is a first step. Also picking up the points made by the noble Lord, Lord Fuller, about Salisbury City Council and Lindsey Marsh Drainage Board, our engagement with the sector demonstrates that uplifting the upper threshold should be prioritised ahead of the local audit office’s establishment, particularly given the issues with the authorities that noble Lords have mentioned, because they already exceed the upper threshold and they found it impossible to get auditors to do their audit. That is the reason why this has been done ahead of that, but progress on the local audit office is going through. We know that there was a Second Reading in the other place yesterday. I hope my response to the noble Lord, Lord Sikka, on local transparency helps to answer some of the questions from the noble Lord, Lord Jamieson.

[Lord Sikka (Lab)]

Can the Minister confirm that there is no cost-benefit analysis or impact statement in relation to this statutory instrument? I am particularly interested in what the cost of not doing the audits might be, whether financial or non-financial in terms of risks, impropriety, and so on. Can she confirm whether there is no analysis or whether the Government plan to do some? Either way, clarification would be helpful.

[Baroness Taylor of Stevenage (Lab)]

It is not usual to have an impact statement for an instrument such as this. There will be an impact statement for the Bill, of course, when it comes forward with the local audit office proposals. However, I can tell my noble friend that the assurance reviews to which smaller authorities are subject cost between £210 and £3,780.

On principal audits, anyone who has been part of a local authority knows that when the audit bill comes in every year, it is a significant cost to the local authority. It can range from £70,000 to more than £1 million. My local authority is a relatively small authority in Hertfordshire but, when I stepped down from it, the bill was already well over £130,000. That is an enormous cost on the taxpayer. If it is not proportionate and necessary, we should be taking that burden away from council tax payers and letting local authorities spend that money on the services that they need. I hope that partial response to my noble friend’s question helps.

The noble Lord, Lord Jamieson, asked whether debt levels will be taken into account. I feel fairly sure that the AGAR guidelines will include a way of determining whether the debt levels of an authority require additional attention to be drawn to that authority. I will come back to the noble Lord on that in writing because it is important. As we know, even relatively small authorities have seen significant debt levels in recent times, so that is an important issue, and I thank him for raising it.

The noble Lord asked about the publication of the AGAR guidelines. Again, I am pretty sure we will have guidelines on that, but I will respond more fully in writing, if that is okay.

I hope that I have picked up all noble Lords’ questions.

Cladding: High-rise Buildings

Lord Sikka Excerpts

Tuesday 17th June 2025 Lords Chamber

[Lord Khan of Burnley (Lab)]

Let me echo the sentiments expressed by the noble Baroness in relation to the victims of the Grenfell Tower tragedy. The Government are committed to taking the next steps respectfully and carefully. We have accepted all the inquiry’s findings and will take action on all 58 recommendations to build a more robust and trusted regulatory system to deliver safe, quality homes for everyone. I will write to the noble Baroness on the issue of funding.

[Lord Sikka (Lab)]

My Lords, on 15 June 2017, the Metropolitan Police began a criminal investigation into the Grenfell fire. Can the Minister tell the House how many individuals and corporations have been charged and prosecuted in the past eight years?

[Lord Khan of Burnley (Lab)]

I hope my noble friend understands that this is still a live criminal investigation, so it would be remiss of me comment. However, let me reassure him: this will take time, as the Met Police has said. It is one of the largest and most legally complex investigations ever conducted by the Met Police, with 180 officers and staff dedicated to the investigation. We fully support the police in their important work. On funding, I can also reassure my noble friend that the Home Office will provide the Met Police with up to £6.6 million in 2025-26 to support the cost of the investigation.

Building Homes

Lord Sikka Excerpts

Tuesday 17th December 2024 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

There are clear links between the new National Planning Policy Framework and the English devolution programme. The English Devolution White Paper, which was published yesterday, is a consultation document, and we will be taking views on it as time goes on. The noble Lord, Lord Young, is right to say that there is a proposal in that White Paper for mayors to have strategic spatial planning powers. Across those sub-regional areas—we are talking about areas with a population of around 1.5 million—they will be looking at transport, infra- structure, probably housing numbers across the whole area, and other issues that are strategic in nature.

I do not believe that this undermines in any way the status of local plans. Where there is local government reorganisation, there will be some consolidation of plans to make this work at the level of the new councils. The strength of the local plan will be retained in determining where the allocations in the strategic spatial plan will be located. I do not think the intention of spatial planning is to undermine local plans. I remember the days of regional planning; we are not going back to that, because people felt it was too big a scale. It makes a lot of sense to do this at sub-regional level. When planning an economy, infrastructure and housing growth, you start at sub-regional level and then the local plans fit in with that.

[Lord Sikka (Lab)]

My Lords, the average house price is 8.6 times the average household disposable income. Last week, the ONS said that only about 10% of the population could afford to buy a house. This means that the Government will have to find ways to drastically reduce property prices and/or drastically increase the workers’ share of GDP, which cannot be done without reducing the capital share of GDP. It would be helpful to know how the Government are going to proceed.

The second part of my question follows from a Question I asked last week. On 11 December, I drew attention to some of the resource constraints on housebuilding and asked the Minister to

“publish a detailed report showing how each of the constraints on housebuilding is to be alleviated”.—[Official Report, 11/12/24; col. 1762.]

The Minister did not directly answer that question. I am assuming that someone somewhere has done some kind of risk analysis. If so, can the Minister now assure the House that the report will be published?

[Baroness Taylor of Stevenage (Lab)]

I thank my noble friend for both his questions. We are very aware of the point he raises about the affordability of housing, which is why, in spite of a very difficult Budget round, we have put a great deal of money into enhancing the ability to deliver affordable housing and social housing—a total of around £1.3 billion, with £500 million announced in the Budget. Some of the changes we have made to the planning process—for example, to require local authorities to determine not just how many homes they need but the tenure of those homes—will help with that as well.

To identify the obstacles to housebuilding, the housing accelerator programme has, with the industry, local authorities and other stakeholders, looked at what the key barriers have been to delivering the homes we need. It is working with specific sites where building has stalled and more generally to look at the barriers and how we overcome them. We have identified capacity in the planning system as one of those barriers, which is why we have put in additional funding this year to improve the capability and capacity of planning departments. We will be working further with our colleagues in the Department for Education to improve the number of planners coming through the training system. We have made changes to the planning fee process as part of this which will increase the quantum of funding that local authorities will have available in the planning process. The new homes accelerator has looked across all those barriers.

New Homes

Lord Sikka Excerpts

Wednesday 11th December 2024 Lords Chamber

Asked by

[Lord Sikka]

To ask His Majesty’s Government what logistical and supply chain barriers they have identified to the possibility of building 1.5 million new homes by 2029.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

To deliver 1.5 million homes over this Parliament the housebuilding sector will need skilled and competent workers, efficient planning and a reliable materials supply chain, as well as certainty for the construction industry. We started on planning immediately, and we will publish the revised national framework tomorrow. We are working with industry to provide high-quality training opportunities and create a more diverse work force to build the homes that the country needs. The industry also needs access to sufficient quality safe materials. We have set a clear direction of growth for the housing sector, so suppliers can be confident in increasing their capacity to meet the demand.

[Lord Sikka (Lab)]

I thank the Minister for her reply. A target of 1.5 million homes is commendable, but Governments do not actually build houses, local councils are disempowered, and the private sector simply does not have the capacity. The UK is the world’s largest importer of bricks—about 500 million a year—30% to 40% of cement is imported, and the construction industry says it needs another 251,000 workers to get anywhere near the housebuilding target. In addition to the publication tomorrow, can the Minister also publish a detailed report showing how each of the constraints on housebuilding is to be alleviated?

[Baroness Taylor of Stevenage (Lab)]

I thank my noble friend. He is right, to the extent that we recognise the constraints. We spent a lot of time early in government identifying what they were, working with the sector. We expect housebuilding activity to double in four years, but the supply of construction materials would need to increase by only about 20% to meet the demand, because housebuilding makes up only about 20% of the construction sector. We expect demand for construction products primarily used in housing, such as bricks, and green tech, such as PV panels and heat pumps, to increase at a high rate, and we see that as an opportunity for great British innovators to get going and improve the supply chains with us.

Social Disorder

Lord Sikka Excerpts

Wednesday 4th September 2024 Lords Chamber

Asked by

[Lord Sikka]

To ask His Majesty’s Government what assessment they have made of the possible links between social disorder in major cities, and economic and social policies.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)]

My Lords, there is no excuse for violent disorder. The thuggery of a few contrasts with the inspiring unity that we have seen in response, with communities pulling together to rebuild after the violence. However, we must not ignore the fact that this violence occurred in places with broader social and economic challenges. In response, MHCLG is leading cross-government efforts to help places recover, working in partnership with communities and local stakeholders to rebuild, renew and address the deep-seated issues.

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[Lord Sikka (Lab)]

My Lords, I thank the Minister for his Answer. Social disorder is the outcome of despair arising from real wage cuts, poor housing, corporate profiteering, the erosion of living standards and the destruction of public services. That anger cannot be addressed by policing. Does the Minister agree that it requires a redistribution of income and wealth, direct state investment in public services, curbs on corporate profiteering, and the building of community centres, youth clubs and libraries? If so, when will we see the tangible results?

[Lord Khan of Burnley (Lab)]

Government policy plays a key role in supporting thriving and resilient communities. Under the Conservative Government, however, we saw a lack of investment in local authorities and public services. That has left our communities more vulnerable to cohesion challenges and wider economic and social deprivation challenges. The recent Khan review into social cohesion and resilience highlighted that communities with lower levels of cohesion were less resilient to the threats of extremism. The review called for a more institutionalised and coherent approach to social cohesion to address these issues. I reassure my noble friend that work is under way in my department to develop a stronger approach to support our communities and build resilience against challenges.