Local Audit and Accountability Bill [HL]
Debate between Lord Smith of Leigh and Lord Palmer of Childs Hill
Lord Smith of Leigh
My Lords, I first declare my interest. I am leader of Wigan Council and the chairman of the Greater Manchester Combined Authority—which I notice is covered in Schedule 2. I am also a vice-president of the LGA. I apologise to noble Lords for missing the Second Reading. Unfortunately it clashed with the annual meeting of my council. As I am the executive leader of the council and had to choose which meeting to go to, I think that I probably made the right choice.
I want to speak in support of my colleague Lord McKenzie of Luton and particularly to expand on what he rather dismissively described as his Amendment 13, which removes those three little words. What puzzles me is that the Government are—I believe rightly—encouraging a lot of joint working with local authorities to deliver lots of services, in many cases allowing joint appointments for senior officers, particularly for smaller authorities. As we know, in many cases it is a financial necessity to do this. As we have discovered in Greater Manchester, which is working on the community budgets pilot, joint working is essential if we are to deliver the Government’s agenda of reforming public services. We are working with 10 authorities in Greater Manchester. The three boroughs in London and so on are also good examples of places working very closely together. However, if joint work is going on, where is the audit taking place? The sensible thing would be to have a joint audit—to have someone who can audit all of the activity in a simple and straightforward way.
Given my noble friend’s knowledge of the accountancy profession he addressed the power of large audit firms and the way in which that might operate unfairly in the market. One way of reducing that power would be to allow local authorities to procure jointly. That would give them greater power in the market, enable them to get larger contracts and—one hopes, with the economies of scale—help them to get reductions in fees. I think that Amendment 13 is important and I hope the Minister responds to it.
Lord Palmer of Childs Hill
My Lords, I also must declare that I am a member of the Institute of Chartered Accountants in England and Wales. I am also chairman of a local authority audit committee at the London Borough of Barnet, and am a councillor in that borough. I also thank the Local Government Association for its very informative description of the various options available. I have been quite nervous about centralising the acquisition of external auditors. I feel that the role of the internal audits tends not to be recognised by external auditors who, from my research, seem to do a lot of substantive work which in many ways shows that they are not relying on the work in internal audit that the local authorities are paying for. That is what is happening at the moment.
As much as I would like there to be local acquisition of external auditors, I am happy to go along with making this option available. I believe that the way that the centralised body performs will depend on how the local authorities react and whether they are getting a good deal. I also believe that the wording in the amendment is right. The danger of not permitting this centralised option is that local authorities, and the auditors themselves, will cherry pick the audits they want, and that the local authorities will cherry pick the auditors they want. That arrangement could be too cosy. This issue arises and has become imperative because of the ending of the Audit Commission. We are examining what can be done due to that change in circumstances. The comment about taking out only one or two words was absolutely right. Without removing the word “authority”, Amendment 1 will not carry the same weight. From our Benches I support both amendments in this group.