Brandon Lewis
Main Page: Brandon Lewis (Conservative - Great Yarmouth)Local Audit and Accountability Bill [Lords]
Brandon Lewis Excerpts
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
I will respond first to the new clauses tabled by the hon. Member for Corby (Andy Sawford) before addressing those tabled by the hon. Member for Hayes and Harlington (John McDonnell). I will then consider the Government amendments in this group.
New clauses 1 and 2 and amendments 13 and 12 cover familiar ground which, as the hon. Member for Corby noted, we debated at some length in Committee. New clause 1 returns to the issue of integrated audit and seeks to enable auditors to work across local authorities with the National Audit Office. I support the principle of audits being undertaken efficiently and effectively, but I do not consider that the new clauses are the right approach, or that they are necessary to support bodies in working jointly or sharing services or budgets.
The public audit framework is designed to provide assurance about how each public body has used its resources. Individual public bodies are separately accountable, and because each is accountable for its decisions and expenditure, every one is required to produce a set of accounts and have an independent audit. I do not believe that the current accountability structure prevents local auditors from auditing relevant authorities cost effectively, or that it prevents authorities from working together to share services or budgets. The requirement to have a separate audit has not been highlighted as a problem in the four areas with which the Government have been working to explore service transformation and joint working via a community budget. Neither did the Public Accounts Committee raise external audit as a barrier in its report on integrated working by Government Departments and via community budgets.
Auditors are already required by the code of audit practice to have regard to partnership working that local government and health service bodies operate, to share information and co-operate with other auditors, and to minimise the burden of regulation on audited bodies. The Financial Reporting Council’s auditing standards also state that auditors should rely on the work of other auditors where appropriate, and guidance is available to support auditors making that judgment.
The National Audit Office supports Parliament to hold Government Departments to account. It does not have a role in auditing expenditure by local public bodies, and it does not wish to have one. The NAO already carries out a number of national value-for-money examinations under existing legislation, and the Bill broadens its powers to enable it to examine all or groups of relevant authorities. That will enable a more end-to-end view on the use of public money. It will not enable the NAO to undertake examinations of individual authorities, but it will be able to look at any thematic or systemic issues across a number of relevant authorities. For those reasons, we consider that the new clause is not needed.
There has been a lot of discussion about provisions in new clause 2, both in the other place and in Committee. As I said in Committee, we believe the new clause is not necessary to enable auditors to access all the information they need because the Bill already does that. Clause 22 mirrors the provision in the Audit Commission Act 1998, and enables auditors to access every document they need in order to undertake their statutory functions. That includes all documents held by local authority contractors which the auditor considers necessary to undertake an audit.
The Government also believe that it is not necessary to apply the Freedom of Information Act to documents an auditor has obtained from a contractor. Rather than extending that Act to documents an auditor has obtained from a contractor, the Government’s preferred approach is through the transparency agenda, existing rights of local people, and our planned revision to the freedom of information code of guidance. Local people can already access information about contracts. The Bill maintains local people’s current extensive rights to inspect detailed accounts, accounting records and audit information, and to ask the auditor questions and raise objections. Those rights enable local people to access more information than the proposed new clause would.
Chris Williamson
Does the Minister agree that perception is important, and that by not subjecting private sector auditors to the Freedom of Information Act, the wider general public could feel that they will not be able to access information that was previously available under the Audit Commission? Does the Minister believe he has an obligation to be seen to be doing the right thing, as well as giving those assurances at the Dispatch Box?
Brandon Lewis
What is important—I think this is what the hon. Gentleman was trying to say in a roundabout way—is to do the right thing, not what might look like the right thing but may not be. Local authorities are subject to the Freedom of Information Act, but I will continue my remarks so that he fully understands the point about how people can get to information.
It is absolutely right that the Government are driving forward the transparency agenda so that auditors have access to the information they want. That is why it is important that if people ask questions, the auditor may gather even more documentation to investigate the issues. That goes further than the Freedom of Information Act, which would require the auditor to provide information it holds but not lead it to seek additional material.
Last week, the Government published their response to the consultation on the transparency code. It set out their intention to make regulations requiring local authorities to publish specified pieces of information, including contract details exceeding £5,000. Local authorities also monitor the delivery of their contracts and are subject to the Freedom of Information Act 2000. The Government consider that a better approach would be for contracts to include provisions that require contractors to assist local authorities in meeting their Freedom of Information Act obligations—thereby satisfying the point raised by the hon. Gentleman. That decision was taken following the Justice Committee’s post-legislative scrutiny of the Freedom of Information Act, which recommended that greater transparency through contracts would provide a more practical approach than extending that Act to companies directly.
Mr Clive Betts (Sheffield South East) (Lab)
I have heard what the Minister has said about transparency of contracts, but is he saying that if a local authority goes about formulating a contract in the right way, the public—it is they who are important—could be entitled to as much information about the spending of their money through a contracting process as they would be if the service was delivered by a local authority directly?
Brandon Lewis
It is not for me to prejudge a contract that a local authority might agree to, but it is true that people can access the Freedom of Information Act through the local authority, and the auditor can go further in its inquiries to ensure it has all the documents it needs.
Mr Betts
That has not answered my question—I was not asking what local authorities should do. If a local authority went about this correctly and formulated a contract correctly, could the public have as much information on the spending of their money through a contracting process as they could if the service were delivered directly by the local authority?
Brandon Lewis
In principle, yes, but it is not for me to prejudge how a local authority would contract. If it chose to contract in that way, of course that would be a matter for it. It would be entirely possible.
Chris Williamson
That response is instructive. I think the Minister is saying that in certain circumstances that information will not be available in the way it is currently available. It seems it will be down to the local authority. He said he met with Transparency International. I wonder if he would comment on its key recommendation:
“Amendment should be made to the Bill to ensure that the work conducted by auditors will be subject to the Freedom of Information Act, and that auditors will be allowed to access documents from significant private contractors that a local authority has used.”
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Interventions need to be shorter, but I certainly do not need instruction from Back Benchers.
Brandon Lewis
As I said, the Freedom of Information Act applies to local authorities, but we are not extending it to cover private companies. I am happy categorically to make the point, as I did in Committee, as the hon. Gentleman will see if he looks in Hansard, that we are not going to extend the provision to private companies; it is the local authority that will be accountable. He will have to take that as outlined.
We will issue a revised code of practice encouraging public authorities to include and enforce provisions in contracts to ensure that openness and accountability are maintained by encouraging the release of a wider range of information about contract delivery. This approach will be monitored by the Government and the Information Commissioner. If contractors or public authorities do not comply with this guidance, the Government will consider what other mechanisms might be necessary, including the possible extension of the Freedom of Information Act to service providers.
Brandon Lewis
I will not prejudge the guidance before we publish it, but I am sure that the hon. Gentleman, if he is not happy with what we do, will want to raise it with me at Question Time or through the Select Committee.
Following our debate on amendment 13 in Committee, I wrote to the hon. Member for Corby providing further details. I can assure the House that this amendment is not necessary, as sufficient safeguards are already, and will continue to be, in place to ensure the independence of the auditor. First, the Financial Reporting Council’s ethical standards require audit firms to establish policies and procedures to ensure that auditors act with integrity, objectivity and independence. There are specific limitations on audit firms providing non-audit services.
The ethical standards require the lead auditor to assess any threats to the auditor’s objectivity. Before accepting an engagement to provide non-audit services, it must consider whether doing so could threaten the firm’s actual or perceived objectivity or independence. The ethical standards do not prohibit audit firms from undertaking non-audit work, but they do require them to introduce safeguards that would eliminate these threats or reduce them to an acceptable level. This is where a reasonable and informed third party would probably not conclude that an auditor’s objectivity was or could be impaired. If the firm cannot introduce sufficient safeguards to reduce the threats to an acceptable level, it must not accept the non-audit engagement or it must withdraw from the audit.
Secondly, auditors must comply with international standards setting out the ethical requirements for financial statements audits and requiring lead auditors to report on compliance with independence requirements and audit firms to ensure that their quality control systems comply with professional standards and regulatory and ethical requirements. The international standards also require firms to put in place procedures for the acceptance and continuance of specific engagements, including whether compliance with ethical requirements can be achieved.
Thirdly, recognised supervisory bodies will have rules to ensure that local auditors conduct work properly and with integrity and that they do not accept appointments where a conflict of interest would prevent that. They must record threats to independence and the steps taken to safeguard independence and ensure that remuneration is not influenced by the local auditor providing other services. That is consistent with the established framework in the companies sector. In addition, we expect the independent auditor panels to advise the authority on the adoption and content of a policy on awarding non-audit work to the auditor. A note to the annual accounts is required if the audit firm undertakes non-audit work.
Those safeguards will protect the actual and perceived independence and integrity of the auditor. If objectivity is prejudiced, the firm must withdraw from either the audit or the non-audit work. We consider this approach preferable to the amendment tabled, which would not remove the potential conflict of interest. If the audit firm were required to subcontract to another firm, it would still be accountable for the audit opinion and any other work undertaken by the subcontractors.
John McDonnell
I am grateful to the Minister for that information and for his offer of co-operation. Does he have figures for the number of staff employed to investigate fraud in local government in, say, 2007-08 compared with the number employed in that area during the past year?
Brandon Lewis
I cannot give the hon. Gentleman those figures off the top of my head, but I will come back to him on that if he will bear with me.
New clause 6 would require the Secretary of State to report to Parliament on the use by local authorities of compromise agreements that involve confidentiality clauses in relation to staff exiting their organisation. I know that the hon. Gentleman feels strongly about this issue and that he raised it on Second Reading. During that debate, he expressed concern that, if used inappropriately, confidentiality clauses could unreasonably restrict officers’ ability to provide full and frank advice to local members and to protect the public interest. Officers, including those exiting an organisation, must have proper opportunities to provide such advice and to raise concerns. The Secretary of State has made clear his view that so-called gagging clauses should not be used to undermine that principle, and I am happy to reiterate that view today.
The use of compromise agreements in the public sector was recently the subject of a report by the National Audit Office and was also scrutinised by the Public Accounts Committee. Further to this, the Government agreed that there should be greater transparency and accountability on the use of compromise agreements across the whole of the public sector, including local authorities. Importantly, the law is quite clear that compromise agreements—in which an agreement is reached to contract out of statutory employment rights—can be made only when the employee has had access to independent advice on the terms and effect of the proposed agreement.
Furthermore, confidentiality clauses cannot be used to prevent a protected disclosure under the Public Interest Disclosure Act 1998. The Government have recently undertaken a call for evidence to look at whistleblowing, and specifically at whether there is enough support for people who wish to report wrongdoing. The Government will respond to the call for evidence early in the new year. I hope that I have been able to reassure the House that the Government take this matter seriously and are taking action on it.
John McDonnell
I am grateful for that information, but may I suggest that that review of whistleblowing should pay specific attention to the use of compromise agreements, particularly within local government? I do not think that that has been explored or taken into account sufficiently so far.
Brandon Lewis
The hon. Gentleman makes a fair point, and he will appreciate that it is now noted and on record. I hope that I have been able to provide sufficient assurances to persuade him not to press his new clauses and amendments to a vote.
I shall not detain the House for long on Government amendments 1 to 5. Amendment 1 would require an authority to include the period of the auditor’s appointment in the public notice confirming the appointment of the auditor. Clause 8 requires authorities to publish such a notice within 28 days of making the appointment. The hon. Member for Corby will recall that he tabled a similar amendment in Committee and suggested that it would be helpful for the public to know the term of the auditor’s appointment. It was also suggested that knowing when the existing contract would end would be useful to potential bidders for any new appointment.
There was a similar discussion in the other place, where Lord McKenzie tabled an amendment to require that information on the term of appointment should be included in the published notice. At the time, the Government expressed sympathy with the intentions of the amendment, but questioned whether such a requirement needed to be set out in legislation, because it could simply be a matter of good practice and guidance. However, having considered the case further, and in the light of the points made by the hon. Member for Corby in Committee, the Government accept that it might be useful to put the matter beyond doubt through this amendment.
Amendment 2 is a minor and technical amendment to ensure that references throughout the Bill cover subordinate legislation made under part 42 of the Companies Act 2006, as applied by schedule 5 to the Bill. It will make it clear that provisions on eligibility and regulation apply to the whole local audit regime.
Amendment 3 removes from schedule 2 internal drainage boards that are partly in England and partly in Wales. There are two such boards: Powysland and Lower Wye. Both are mainly in Wales but currently fall under the Audit Commission regime. The local audit provisions in the Bill will therefore not apply to those cross-border internal drainage boards after the Audit Commission is abolished. The Welsh Government intend to transfer the functions of the two cross-border IDBs, along with the functions of one IDB that is wholly in Wales, to a single body, Natural Resources Wales, and to bring them under the Welsh audit system. They intend to do this by the time the Audit Commission is abolished—by April 2015. Both bodies will continue to fall under the Audit Commission regime until then.
The Welsh Government supported a legislative consent motion to make audit arrangements for the two bodies under the 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. As a result, in line with the devolution settlement, the amendment removes these two bodies from schedule 2. Welsh Ministers have agreed that we should 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, and would require consent from the National Assembly for Wales.
Amendment 4 is a minor amendment to clarify that paragraph 6(1) of schedule 4 does not apply in the case of health bodies. The paragraph currently provides that, when an authority uses an existing committee as its auditor panel, wider enactments that usually apply to committees of a local authority do not apply. A corresponding power in paragraph 5 then allows such enactments to be positively applied to the panel, to ensure that arrangements remain proportionate, given the panel’s limited role.
In the case of health bodies, however, their audit committees are covered by a specific existing framework, which is different from that applied to local authority committees. That framework reflects the different governance framework for health bodies such as clinical commissioning groups, and will need to continue to apply in full, even when the committee is acting as the panel. As drafted, paragraph 6 of schedule 4 could have the unintended consequence of disapplying that existing framework for audit committees within health bodies when they are acting as the auditor panel. The amendment therefore excludes health bodies from this provision.
Amendment 5 further modifies schedule 10 to the Companies Act 2006, as applied by schedule 5, in respect of auditors qualified in other European economic area countries. It has two main effects in respect of those individuals. First, it will enable the recognised supervisory bodies for local audit to recognise the qualifications of those auditors who hold the equivalent of a UK local audit qualification obtained elsewhere in the EEA. This is necessary to comply with the requirements of the recognition of professional qualifications directive, 2005/36/EC.
Secondly, the amendment specifies that recognised supervisory bodies can require an EEA statutory auditor to pass an aptitude test only if the auditor is seeking to become established as a local auditor in the UK on a permanent basis. The audit directive, which makes provision for an aptitude test, applies only to statutory audit. Unlike the audit directive, however, the recognition of professional qualifications directive does not permit the imposition of an aptitude test if an individual is seeking to provide services on a temporary and occasional basis. The amendment therefore seeks to align the regulatory frameworks for statutory and local auditors, as far as is permitted.
The amendment will also ensure that any indirect discrimination against EEA auditors is avoided and that the requirements for EEA local auditors and EEA statutory auditors are as consistent as possible. It will also ensure that a firm is qualified if it is eligible for appointment as a local or statutory auditor or is eligible for a corresponding appointment. I urge the House to support the Government’s amendments.
Andy Sawford
Thank you, Madam Deputy Speaker, for allowing me a moment to reply.
The amendments, particularly new clause 2, have had strong support from my hon. Friends and I am grateful to them for putting their views on record. I welcome the Minister’s statement that the Government will publish guidance to private sector contractors. He went further, saying that if that is not effective, the Government will consider extending freedom of information contracts to private suppliers. I consider that to be a significant move forward, certainly from where we were in Committee. It is a win for my hon. Friend the Member for Derby North (Chris Williamson) and others who have championed this. We very much look forward to seeing that guidance, but we also commit to taking the issue forward ourselves.
Brandon Lewis
First, let me be clear that good communication between a local authority and the public is important. Let me also be clear that what clause 39 delivers is a manifesto pledge by both coalition parties. Local authority publicity can be expensive and it can be controversial, so it is important that local authorities get it right.
In Committee I outlined our intentions and explained exactly what the clause seeks to achieve. We should be conscious of the fact that localism is about empowering local people to be able to challenge and see, transparently, what their local authority is doing. This is about true localism and making sure that we are also able to do our bit to defend the independent local press.
The code of recommended practice on local authority publicity ensures that publicity is, among other things, cost-effective, objective, even-handed and appropriate, and Labour Members have agreed in principle with the voluntary code. It ensures that taxpayers’ money is not wasted on issuing inappropriate publicity or publicity that political parties themselves should be issuing, rather than a local council using taxpayers’ money to do it. The code has been in place since 2011. It was debated and approved by both Houses of Parliament.
Andy Sawford
The Minister is right to say that the code seeks to prevent money being used on things that are politicised, but does he not see that his argument is not consistent with a Department that is sending out puff pieces about its Secretary of State for local authorities to issue?
Brandon Lewis
I suspect that deep down inside, the hon. Gentleman—we almost became hon. Friends in Committee—probably realises that there is a world of difference between a template press release sent to independent local journalists and a municipal taxpayer-funded newspaper that takes away the competition of a local independent press. None of the provisions in the Bill makes any changes to the publicity code.
Let me give a very clear example of how the process might work for a local authority publishing a weekly newspaper—such as Nene Valley News, which was mentioned by the hon. Gentleman—in direct competition to the local independent press that is so important in holding councils to account. Under the provisions, the Secretary of State, after advising the local authority that he intends to do so and giving it time to make any representations it wishes—such as that there is no other local paper—may, if he thinks fit, issue a direction requiring that the local authority comply with some or all of the code, but particularly, let us say, the part advising local authorities that council newsletters should be issued no more than quarterly. If the Secretary of State considers that a group of local authorities, or even all local authorities in England, should be required to follow the guidance in the code, he must of course make an order, which would need to be debated and agreed by both Houses of Parliament.
Alex Cunningham
Will the Minister tell us the name of one newspaper group that has approached the Department to claim that local authority publications are undermining and threatening its business?
Brandon Lewis
I suggest that the hon. Gentleman looks at Hansard for the reports of our proceedings in Committee, where we outlined the evidence—including from the Newspaper Society, which complained about exactly that issue—particularly, as was noted, in relation to Tower Hamlets.
Amendment 14 confuses the very clear and necessary provision that the Secretary of State may direct a local authority to comply with some or all of the publicity code. The amendment would achieve little in practice, as the Secretary of State may of course issue more than one individual direction. Amendment 15 would also be far from beneficial. It would add layers of complexity and bureaucracy to what should be a straightforward procedure to allow the Secretary of State rapidly to address incidences of the guidance in the code not being observed.
Brandon Lewis
No, I shall make a little progress. The hon. Gentleman was keen to make progress during his speech.
Any local authority that already—rightly—complies with the guidance in the code would be wholly unaffected by a direction. Amendment 15 would remove sensible, proportionate measures and put in place a gold-plated bureaucratic process that requires the publication of not one, but two reports by the Secretary of State, all while taxpayers’ money might continue to be wasted.
Amendment 16 seeks to remove the provisions to ensure that a group of local authorities, or all local authorities in England, comply with the guidance in the code. We have sensibly decided to make provision for the Secretary of State to require compliance with the code not only by an individual local authority, but by a number of them or even, if necessary, by all local authorities in England.
The Secretary of State can issue an individual direction to an authority, but to require a group of local authorities or even all local authorities in England to comply with the code, the Secretary of State must make an order subject to the agreement of both Houses of Parliament. That was a recommendation of the Delegated Powers and Regulatory Reform Committee, and we were happy to amend the Bill to give effect to it. Amendment 16 would quite wrongly undo the power and the recommendation, leaving a ridiculous situation in which if the Secretary of State wanted to act to address widespread non-compliance by a group of councils, he might have to issue hundreds of individual directions. The amendment would also remove parliamentary scrutiny of the process.
We are obliged to make the provisions because although the vast majority of local authorities comply with the code, a very few do not; we accept that there are very few. It is to address that abuse of council resource and waste of taxpayers’ money that we have rightly decided to act. The provisions are important, proportionate and necessary.
Alex Cunningham
The Minister is making some sweeping comments. I would be interested to know whether he can tell us of one local authority that the Secretary of State has found it necessary to take action against under the existing code, which is adequate for the purpose that he is outlining? I think we already know the answer.
Brandon Lewis
I am sure that the hon. Gentleman will have done his homework and will realise that for the Government to take action under the voluntary code, there would have to be a long and expensive judicial review.
The provisions are the right way in which to move forward so that we can enforce the code effectively, efficiently and swiftly. It is slightly baffling that the Opposition claim that they have no problem with the voluntary code agreed by Parliament and support it, but do not want it to be enforced. That just does not make sense, has no credibility and does not add up. The provisions ensure that we can protect the good, local independent press, and that taxpayers’ money is used efficiently and effectively, and not wasted on town hall Pravdas. I encourage hon. Members to resist the amendments.
Andy Sawford
What a shocking response. We will not press amendments 14 and 16, but we will press amendment 15 to the vote.
Amendment 15 would place a very simple expectation on the Secretary of State: that he would act on the receipt of evidence, that he would share that evidence with the local authority and that he would ask it to comment. As the Minister says, these matters should be subject to local discretion as well as to national direction. The Secretary of State would simply have to say, in taking enforcement action against a local authority, that he had found a breach of the code. It would be incredibly simple, straightforward and right to make that amendment if the Secretary of State feels that it is necessary to take these extraordinary powers, even though we do not.
The Minister’s response, as at each stage of the passage of the Bill, has made us far more concerned, not less, about the intention behind this very worrying and deeply anti-democratic clause.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 15, page 26, line 25, leave out subsection (4) and insert—
‘(4) A direction can only be made by the Secretary of State if—
(a) evidence of a breach of a code has been published by the Secretary of State to the local authority;
(b) a local authority, on receipt of a letter from the Secretary of State notifying them of evidence which purports to demonstrate a breach of the code has made a response to the Secretary of State within 28 days; and
(c) upon receiving any response the Secretary of State has published a report detailing his conclusions.’.—(Andy Sawford.)
Question put, That the amendment be made.
Madam Deputy Speaker (Dawn Primarolo)
We now come to the next group of amendments. The hon. Member for North East Cambridgeshire (Stephen Barclay) is not here to move lead amendment 17. I call the Minister to move amendment 6.
Clause 41
Council tax referendums
Brandon Lewis
I beg to move amendment 6, page 30, line 32, at end insert—
‘(13A) Subsections (14) to (16) apply (and subsections (18) to (20) do not apply) if, in accordance with section 49(2A), this section comes into force on the day on which this Act is passed.’.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
Government amendments 7 and 8.
Amendment 18, page 31, line 2, at end insert—
‘(17) The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.’.
Government amendments 9 to 11.
Brandon Lewis
Our amendments are precautionary measures to remove the risk of local authority budgeting being adversely impacted in the event of a delay to the Bill taking effect. Clause 41 currently provides that the council tax referendum calculations will take account of levies from 1 April 2014. The referendum principles, which we intend to publish in draft very shortly, will be put to this House for approval in February as normal. Those principles will take account of levies, but will be subject to the will of Parliament and the Bill, which will have come into force by then.
The amendments have a relatively simple effect. Together, amendments 6, 9, 10 and 11 provide that if the Bill is passed by 5 February—the likely date by which the referendum principles must be laid before Parliament—the provisions in clause 41 will take effect immediately and the changes to the referendum provisions will take effect for the 2014-15 financial year. Otherwise, the changes will take effect by order from 2015-16. There is no reason to believe that the provisions will not be in force before the referendum principles are approved, but we are tabling this group of amendments to give local authorities advance certainty over timings so that they can be confident that any delay in Parliament would not impact on their budget-setting timetable.
Amendment 7 is a minor amendment clarifying that the clause does not alter the existing discretion of the Secretary of State when determining categories of authority for 2014-15. Amendment 8 addresses the ability of the Secretary of State to determine categories of local authorities on the basis of whether their 2013-14 council tax increase would have been excessive had levies been taken into account. The clause puts this existing ability beyond question and does not extend it further. Similarly, the amendment does not extend that existing ability, but updates the references to increases in 2013-14 to include references to increases in 2014-15, should the provisions take effect from 2015-16. The current transitional provisions in subsections (14) to (16) ensure that council tax comparisons between 2013-14 and 2014-15 are made on a like-for-like basis. An amendment must be made to ensure that this protection for authorities still exists if levies are to be included from 2015-16. Subsections (18) to (20) in amendment 8 provide that protection.
In summary, these amendments are precautionary measures only and, apart from clarifications and restatements of existing legislation, have one purpose: to ensure that in the event of any unpredicted delay, local authorities will continue to be treated consistently and to benefit from the transitional protections already in the clause.
Andy Sawford
Our amendment 18 would give the Secretary of State some discretion to prevent any unintended consequences arising out of the levy changes from affecting city deals. The amendment states:
“The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.”
We are concerned that the provisions to include levying bodies could affect those city deals that have been agreed around the country.
Andy Sawford
My hon. Friend has considerable expertise in this and he is right. If a drainage board needed to take emergency action, clearly it would not be in the interests of communities—the very people who, during a cost of living crisis caused by the Government, we agree we want to protect from excessive council taxes—to leave them exposed to flood risk if we know that we can take emergency action to address that.
There are issues with pension authorities, particularly in some metropolitan counties and in London, which operates the legacy pension schemes of the Greater London Council. As with the rest of the local government pension scheme, there is little control over the costs of these, which are increasing with each successive valuation. Indeed, more levying bodies may be created in the future as a consequence of the pension governance reforms that the Department is considering.
In short, these proposals have not been thought through. We do not disagree with the fundamental intention behind them—to keep council tax down—but we do disagree about how they are being introduced, without further thought or consultation, and particularly about some of the issues that arise from retrospection as it affects drainage boards and city deals. We would urge the Government to go back to the drawing board. With the leave of the House, we will seek to press amendment 18 to a vote.
Brandon Lewis
Before dealing with amendment 18, let me touch on the issue of internal drainage boards, which some hon. Members have raised. IDB levels are not being singled out. This Bill will ensure consistent and fair treatment between all local authorities.
I shall now turn directly to amendment 18, which relates to local authorities that have collectively entered into “city deals”—agreements with the Government on additional freedoms and financial certainties in order to promote local growth and skills—before the Bill’s commencement. This area was touched upon on Second Reading and debated in more depth in Committee, where the hon. Member for Corby (Andy Sawford)was content to take away and consider the clarifications and assurances I gave in response to a similar amendment.
Since this amendment has been tabled, I am happy to repeat some of the points discussed in Committee and to provide hon. Members more widely with any further expansion I can give. Although the amendment would have a wider effect, I understand that its intent is to address a single specific case—that of the Leeds city region deal— where there are plans to create a transport investment fund that would allow about £1 billion to be raised from grants, contributions from stakeholders and borrowing. Repayment of that borrowing will be met by the constituent authorities via modest increases in the transport levy over the next decade. This arrangement is novel. It will provide much-needed investment in the region and remains an arrangement that the Government are committed to and happy to support. However, the figures generated by Leeds and the other authorities taking part show that if those levy increases were passed straight on to local taxpayers in the form of higher bills, it would be affordable without the need for a referendum. It would amount to an increase of between 0.2% to 0.9% per year.
Andy Sawford
I understand the Minister’s point, which he made in Committee. It is a fair point, but does he accept that the consequence would be to restrict the ability of local authorities across that area, in a way that they never imagined, to raise council tax in a way that local authorities outside the city deal could? The amount that would trigger the referendum would mean that they were limited?
Brandon Lewis
I will come on to that very point in a few seconds.
I have to say that there is no basis for suggesting that these levies would result in authorities being forced to hold referendums. Given the relatively small increases involved, I would urge those authorities to freeze their council tax instead and take advantage of the grants we are making available to support them in doing so, thus holding down council tax for hard-working people.
Let me gently suggest to Labour Members that this is an area where the facts do not support the claims being made. It is right for the Opposition to test and challenge the statements of the Government of the day, but where there is shown to be no basis for criticism, we should move on and focus our attention elsewhere. In this case, we are proceeding over ground already debated several times here and in the other place, and the figures involved are not disputed by the Opposition or the authorities themselves. However, in the same manner as for any other authority, if Leeds, Bradford or any other council wishes to make representations about how the proposed referendum principles will apply to their particular circumstances, the Secretary of State would take them into account when asking the House to approve the final principles in 2014.
Huw Irranca-Davies
I am listening carefully to the Minister and I am genuinely probing because this is a matter of concern. Can he give a categorical assurance that where emergency funding is needed for an area, as advised by an IDB, it would trigger the referendum and would not delay the essential work being done? Can he give that categorical assurance and, if so, how?
Brandon Lewis
The hon. Gentleman makes a cogent point. My constituency of Great Yarmouth has been heavily affected by the east coast weather, with 9,000 evacuations and some homes lost in Hemsby, where the community is working phenomenally well together. What happens in the event of floods or other major disruptive events is that the Government look to support authorities facing major unexpected problems in the usual ways—through the building scheme, for example, or other appropriate bespoke approaches. Inclusion of levies in council tax legislation will have no effect on those procedures.
Brandon Lewis
I want to make some progress, but I am happy to talk to the hon. Gentleman further about Bellwin.
The other claim made in Committee and on Second Reading was that the Government were reneging on their agreements with authorities and that they gave their approval for large council tax increases as part of the Leeds city deal. That is not correct. The Leeds city deal was not agreed on the basis that it meant large council tax increases for local people or on the basis of denying them their say if Leeds or other authorities wished further to increase council tax—for instance, to increase investment and go beyond what is set out in the deal itself. That could happen only so long as local taxpayers, who will have to bear the burden, are willing to accept it. It is a matter for them. With those reassurances, I hope that the hon. Member for Corby will not press his amendment to the vote. If he does, I encourage Members to resist it.
Amendment 6 agreed to.
Amendments made: 7, page 30, line 37, after ‘may’, insert ‘, in particular,’.
Amendment 8, page 31, line 2, at end insert—
‘(17) Subsections (18) to (20) apply (and subsections (14) to (16) do not apply) if this section comes into force on a day appointed by the Secretary of State by order under section 49(2A).
(18) Section 52ZC of the Local Government Finance Act 1992 applies with the following modifications to the determination of a set of principles for the financial year beginning with 1 April 2015.
(19) The Secretary of State may, in particular, determine categories of authority for that financial year—
(a) on the basis of whether an authority’s relevant basic amount of council tax for the financial year beginning with 1 April 2013 would have been excessive if that amount for that year and for the immediately preceding financial year had been determined under section 52ZX of the Local Government Finance Act 1992 as amended by this section,
(b) on the basis of whether an authority’s relevant basic amount of council tax for the financial year beginning with 1 April 2014 would have been excessive if that amount for that year and for the immediately preceding financial year had been determined under that section as so amended, or
(c) on the basis set out in paragraph (a) and on the basis set out in paragraph (b).
(20) In subsection (3)(b) of section 52ZC the reference to an authority’s relevant basic amount of council tax for the financial year immediately preceding the year under consideration is to the amount that would have been calculated by the authority for that year under section 52ZX of the Local Government Finance Act 1992 if the amendments made to it by this section had been in force for that year.’.—(Brandon Lewis.)
Amendment proposed: 18, page 31, line 2, at end insert—
‘(17) The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.’.—(Andy Sawford.)
Question put, That the amendment be made.
Brandon Lewis
I beg to move, That the Bill be now read the Third time.
Let me begin by thanking the members of the Public Bill Committee, who did such an excellent job in ensuring that the Bill was subjected to thorough scrutiny. We benefited from the wide range of experience that a number of colleagues from all parties had of working in and being part of local government and I thank them for committing their expertise to the Bill.
In particular, I should like to thank the hon. Member for Corby (Andy Sawford), who fulfilled his commitment to give the Bill robust but fair scrutiny. In the other place, Lord McKenzie commented that audit is sometimes considered “boring but important”. I would say that the often passionate critique put forward by the Opposition in the course of this Bill’s passage certainly proves the latter while arguably testing the former assertion. I am particularly grateful to the hon. Gentleman and his Opposition colleagues for their support in helping us to introduce new measures into the Bill in Committee.
The new provisions to modernise parish polls respond to amendments from the Earl of Lytton, who, in his role as president of the National Association of Local Councils, highlighted the urgent need to reform that outdated legislation. The measures to open up local council meetings will break down the doors of town halls and increase the transparency of local decision making. I am pleased that we have achieved consensus on that as it shows that in this digital age, as the way the public consumes information changes, it is no longer right that decisions should be made out of the sight of local taxpayers. We will, of course, work closely with interested parties to ensure that, as we agreed in Committee, we strike the right balance in the regulations between allowing members of the public to film council meetings and minimising disruption.
The Bill is the culmination of a great deal of work with a number of third parties, particularly the Audit Commission, which I would also like to thank for its support and healthy challenge throughout this process. During the Bill’s passage through the House, we have made, as has been noted, a number of amendments to strengthen it. In addition to the two new measures we have added, we have also made amendments to enable the sector to set up collective procurement arrangements, through which relevant authorities can choose to have an auditor appointed on their behalf. That has been welcomed by the Local Government Association and we will continue to work with it in developing the regulations that will set out the approach in more detail.
Also prompted by debates in the other place, we have amended the Bill to extend the purposes for which data-matching exercises may be used. That will enable the future owner of the national fraud initiative to continue to undertake data-matching exercises on the detection of errors and inaccuracies, as the Audit Commission can under its existing powers.
In addition, we have made a number of other technical and clarifying amendments to several of the local audit provisions, which will ensure the smooth and effective operation of the new audit regime after the Audit Commission’s demise. In addition to the amendment we have made today to support the transparency of the auditor appointment process, we have also clarified how the provisions apply to parish meetings, the qualifications and eligibility criteria for local auditors and how local auditors will recover costs for undertaking all their statutory functions.
We have had a lengthy debate about the local government publicity code. I think it is safe to say that we are all agreed on the content of the code, but that there is a difference of opinion about how that code should be enforced. I say again that it is right that action should be taken when authorities are failing to comply with the code. By ensuring compliance, the Bill will support local accountability by protecting the local free press from unfair competition and preventing taxpayers’ hard-earned money from being squandered on propaganda and competing with the local independent press.
The Bill further protects the taxpayers’ pound by ensuring that levies will be included within the council tax referendum principles. No longer will a local authority be able to raise council tax through back door levy increases, making taxpayers pay more for services that councils down the road do in-house and within the referendum principles. That levels the playing field for local authorities and the amendment we have made today will provide certainty for those authorities.
In conclusion, the Bill is another important step in delivering the Government’s localist agenda. It deals with some of the fundamental principles of good governance and good government, it promotes responsible and robust public accounting, it drives decision making down to the local level and it protects local taxpayers and defends local democracy. To return to my opening remarks, it is an important—and I would say interesting—Bill and I commend it to the House.
Hilary Benn (Leeds Central) (Lab)
The Bill certainly has generated a great deal of debate—more, I suspect, than either the Minister or others who thought it was just about audit might have anticipated. That is in no small measure, as the Minister has just acknowledged, due to the skill and forensic arguments put forward by my hon. Friend the Member for Corby (Andy Sawford), who did sterling work in Committee, as he has done today, ably assisted by my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) and also my hon. Friend the Member for Derby North (Chris Williamson), from whom we heard today.
I join the Minister in expressing thanks to all Members who served on the Bill Committee, all those who gave evidence to the ad hoc Joint Committee, and my colleagues the noble Lords McKenzie and Beecham for the work they did in scrutinising the Bill in another place.
As we know, this is a Bill that arises from a very early decision that the Secretary of State took, which was to abolish the Audit Commission. When we heard from him on Second Reading, he was convinced that it was the right thing to do. We all recognise that the commission is going, but only time will tell whether it was right for the Secretary of State not to take the advice of the noble Lord Heseltine, who originally introduced the Audit Commission because he thought it was wrong for local government to appoint the people who audit it.
What is striking about the Bill, however, is that the quality of some of the content we have debated at length has not benefited from the length of time it has taken the Government to bring it forward, in part because of the complexity of what has been removed and therefore the need to construct arrangements to replace it. I acknowledge that the Government moved on the issue of joint procurement, and I am grateful to the Minister for listening to the arguments made by local government and by my hon. Friend the Member for Corby, but I am genuinely sorry that the Minister either has not wanted to get the arguments that we made or has not properly understood the consequences of the Bill failing to anticipate the new world in which local authorities have to work. That is particularly surprising, given that Ministers often lecture local government about the need to make changes.
On access to information, the amendments that we argued for were all about the public’s right to know. As we are aware, the Audit Commission is covered by the Freedom of Information Act; private auditors in general are not. As councils change the way in which they work, it is very important that the public have the right to understand what is happening and have access to information. Listening to the Minister this afternoon, the more he protested that our amendment was not necessary, the more puzzled I became. Then there was a moment of what I hope was conversion. I am delighted by what he had to say when pressed by my hon. Friends. We will hold him to what he said about ensuring that the public has exactly the same right as it currently has using the Freedom of Information Act to get access to information that auditors and private companies have about contracts that they are undertaking on behalf of local authorities.
I am very sorry that the Government have not made provision for auditing that will be fit for purpose for the years ahead. The Minister did not do justice to the argument that we advanced. We did not suggest that the Bill prevents local authorities from working together with each other or with central Government—for example, through the troubled families initiative. That is not our argument. Our argument is that when the Whitehall and the local pound are brought together to provide services at a local level, there will continue to be different audit arrangements.
I say to the Minister, and I hope he will reflect on it even when the Bill has become an Act, that that does not make sense. An audit, especially when the Bill gives us a chance to set it on a new footing, must take account of the changing way in which public money is spent, particularly as community budgets develop. It does not make sense if there is a community budget for different bodies, with the NAO trying to chase the Whitehall pound down the road and the local authority auditor looking at the local pound.
One clause that was dissected and then comprehensively savaged by my hon. Friend the Member for Corby, both in Committee and earlier today, is clause 39, which deals with the code of practice for local authority publicity. I was interested to hear that the Liberal Democrats apparently could not bring themselves to vote for it in Committee, because they were absent when it was discussed. I do not blame them, because they are right to be embarrassed by what is a most illiberal piece of legislation.
The hon. Member for Mid Dorset and North Poole (Annette Brooke) described that provision as a sledgehammer. If I may coin a new phrase, I think that it is a sledgehammer of a blunderbuss, and it has been constructed on the back of a lot of ministerial complaining about Pravda-like publications. I have not read quite so many local authority publications since Second Reading, but I have still found no figures on tractor production, which I continue to be disappointed about.
Basically, no evidence has been advanced on local authority publications. It is no good the Minister in the other place saying, “I could give you the names of 12 authorities, but I don’t think that would be helpful.” We have heard the Minister give one example, that of “East End Life”. The really damning revelation is that for all the complaints, concerns and denunciations of breaches of the code, he tries to suggest that what the Bill offers is true localism, and in three years the Government have not even contacted a single local authority, which is astounding. They could not be bothered to write a letter to a single authority, but they could be bothered to draft a shoddy clause that will give the Secretary of State the right to control every single local council publication, every website, leaflet and bit of content—the lot.
The Secretary of State, if he takes offence, will be able to tell councils, “You’re not allowed to refer to the bedroom tax as the bedroom tax. You have to call it something else.” If he feels like it, he will be able to stop councils commenting on spending cuts and the way they affect the local authority area. He could stop them commenting on airports, HS2 or NHS changes. He can even tell local parish councils that they cannot produce 12 double-sided A4 sheets a year. He will be able to do anything he wants. Censors the world over might think that is a jolly good clause, but the House was unconvinced.
Brandon Lewis
I appreciate the right hon. Gentleman giving way at this stage, when I would not normally seek to intervene, but I just want to point out gently that parish councils can still produce 12 such publications a year—one a month.
Hilary Benn
Absolutely, but the problem with the clause is that they cannot publish any more than that. If they want to bring out a special edition on their Christmas celebrations, for example, having had their 12, that would not be allowed, because the Secretary of State is taking the power to prevent that.
The clause states that the Secretary of State can exercise all those powers regardless of whether he thinks that the local authority is complying with the code of conduct, which is extraordinary. I read with great care the arguments that the Minister tried to advance in Committee, but I am afraid that I found none that justified that. The truth is that Ministers ought to be really careful with the great big blue pencil they are about to get hold of.
On referendums and levying bodies, I must say that I was unconvinced by the Minister’s arguments in relation to the Leeds city region deal, described by his ministerial colleagues as a watershed moment, which was signed before the new policy was announced. The Minister has still not answered the question I asked the Secretary of State on Second Reading, and which was asked again today by my hon. Friend the Member for Corby, so I will put it slightly differently.
The city deal was signed towards the end of the year and the announcement of the new policy on referendums and levying bodies was announced at the beginning of the new year. Knowing how long it takes to decide on these things in government, I think that it is inconceivable that Ministers were not privately discussing changing the rules at the very moment when they were discussing the Leeds city region deal. If that is the case—I will give way to the Minister on this point—why did he not tell the people they were negotiating with? He does not want to intervene, so for the third time we have had no answer to the question, and some people will draw the conclusion that they do not want to answer it.
The Minister will have seen the letter mentioned by my hon. Friend the Member for Corby that the Leeds city region sent to the Deputy Prime Minister on 6 December asking the Government to solve the problem they created by changing the rules after the agreement was signed. The Minister knows very well how important the transport infrastructure fund is to the Leeds city region deal; indeed, it is the main thing that the city region got out of city deals, which, as he knows, I support. The letter is signed not only by the chair of the combined city region which is to become an authority—the leader of Leeds city council—but by the chair of the local LEP. They are not persuaded by the Minister’s arguments, because they say:
“As it stands, the Local Audit and Accountability Bill makes the Fund impossible to deliver.”
I listened carefully to what the Minister said, and I do not know whether there is a chink of light there, but he has a responsibility to sort this out.
Apart from doing justice to the Leeds city region, there is another argument for why the Minister has a responsibility to deal with this. If the Government go back on a done deal, which is what has happened in this case, they undermine confidence in the city deal process, undermine the certainty on which financial planning has to be based, and undermine the confidence of those who will negotiate with them in future, who will ask themselves, “Hey, look what happened to the Leeds city region—how do we know they aren’t going to change the rules for us after we’ve signed our names in ink on a piece of paper?” It needs to be sorted out.
As the Minister knows, we support the other changes that were made in this House on parish polls and councils allowing recording and videoing of council and committee meetings. In this day and age, with the very big changes in technology that enable every citizen to become a reporter, all of us in this House, whichever side we sit on, want more people to take an interest in what our local authorities are doing, by going to meetings and reporting them to spread the news and make sure that more people can see what is going on.
We will not oppose the Bill given that provision has to be made for a replacement for the Audit Commission, which is on its way out, but in some respects it is a lost opportunity. For all the words that the Secretary of State, in particular, is fond of saying about localism, once again this Bill proves that the longer he is in office the more he cannot resist using legislation to tell local councils what to do.