Local Audit and Accountability Bill [Lords]

Debate between Brandon Lewis and John McDonnell

Tuesday 17th December 2013 Commons Chamber

[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.

Local Audit and Accountability Bill [Lords]

Debate between Brandon Lewis and John McDonnell

Monday 28th October 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

Right hon. and hon. Members have raised a number of important points in the debate, and I look forward to discussing some of them in more detail during Committee as well as now. I will first respond to some of the main points raised, and then I will speak more generally and hopefully cover all the points Members have made.

A few comments have been made, not least by the right hon. Member for Leeds Central (Hilary Benn), about an audit for a modern world and authorities working together—an understandable point as we are looking to modernise the way we all work. Auditors of local government bodies and health bodies are required to comply with the relevant code of audit practice, and are used to working together across organisations in both the public and private sectors. It is right, however, that auditors must assess the body responsible for the spending, which is why the Bill is worded in this way.

The right hon. Gentleman also raised data matching, and we are sympathetic to that issue and will no doubt discuss it in Committee. The hon. Member for Corby (Andy Sawford) mentioned a sector-led procurement body. We are open to allowing the establishment of a central procurement capacity, provided—this is key—that it is led by the sector, is not mandatory, and gives local authorities the choice and opportunity to take part or appoint locally. We will deal with that in Committee.

Comments have been made about independent audit committees, or auditor panels, and the approach in the Bill gives flexibility to local authorities. A body can use its existing audit committee to act as the auditor panel if the majority is independent, or it can establish a small separate auditor panel if it is not, thereby allowing for anything that might happen later with a centrally organised sector-led body.

The hon. Member for Derby North (Chris Williamson) raised some issues, not least competition in the audit market. We are not creating new barriers; in fact, we are opening the local audit market and I hope it will develop even further. He also commented on whether council tax referendums are fair—other Members also made that point—and said that nobody wants this change. Councils such as Stockport, Liverpool and Newcastle—to name a few—might disagree with him, however, as they have all asked specifically for this change, which will put all local authorities on to a consistent footing. Currently, some local authorities undertake functions directly and in-house, and are therefore subject to referendum principles within that. Levying bodies are not, and therefore the proposals will bring things closer together.

My hon. Friend the Member for Bromley and Chislehurst (Robert Neill) did an excellent job early in this Parliament on ending the Audit Commission—the quango and the way in which it worked with the comprehensive area assessment. He has huge experience in and understanding of local government, and how the Audit Commission worked. I appreciate the time he has given me since I took office to work through some of those issues. His huge experience has been a great asset in reaching the point we have with the Audit Commission. We have managed to save councils so much in officers’ time, and therefore taxpayers’ money, over the past couple of years, as my right hon. Friend the Secretary of State was able to take through the ending of the comprehensive area assessment. My hon. Friend the Member for Bromley and Chislehurst mentioned the publicity code and referendum principles, and I will touch on those in the main part of my speech.

I welcome the support of my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) for parish polls and the modernising of transparency, as I do that of the hon. Member for Corby. My hon. Friend noted how important the council tax freeze has been for families, which is one reason why we think it so important for that freeze to be applied across the board, fairly and evenly, as I have outlined. She also mentioned statutory notices, which I will touch on in a moment.

The hon. Member for Hayes and Harlington (John McDonnell) touched on a range of issues that are probably outside the scope of the Bill. I must explain to him, however, that the Audit Commission has been contracting out a percentage of its work for some considerable time. He also touched on counter-fraud activities and outcomes, and we are clear that local government must tackle fraud. That is worth about £2 billion a year, and it is important for taxpayers that it be dealt with. We are actively supporting local government to tackle that issue, not least through the Fighting Fraud Locally strategy with the Local Government Association.

At the point of closure, the Audit Commission’s national fraud initiative will transfer in its current successful form to the Cabinet Office. We recognise the value of the Audit Commission’s other counterfoil tools and are working with it and other interested parties to develop recommendations on their future.

[John McDonnell]

May I suggest that the Minister meet Transparency International UK and go through its report? Perhaps he could offer advice in Committee after meeting that group.

[Brandon Lewis]

As a general matter of principle, I am happy to meet anybody who wants to talk about any part of my brief. I obviously extend that invitation to Transparency International UK.

On the fairness of council tax referendums, my hon. Friend the Member for Mid Dorset and North Poole rightly outlined the anger of some areas and residents when they are faced with claims of a council tax freeze but receive spiralling bills from their authority. Clause 39 specifically addresses that—it ensures that claims of a freeze are based on the bill that hits doormats rather than any half-measures.

My hon. Friend the Member for Meon Valley (George Hollingbery), who has a background in local government, spoke of his wide experience of comprehensive area assessments and gave a great outline of exactly why we need a firm ending of the Audit Commission, so there is no chance of it coming back in the format we have experienced. He touched on auditor appointments, on enforcing the publicity code, which I will deal with later, and on council tax referendums and levying bodies. He suggested a range of interesting opportunities to ensure that referendums are dealt with in a proper and fair manner for the authorities. I look forward to taking his suggestions forward in Committee.

Let me be clear why the Government have decided to proceed with the final abolition of the Audit Commission. The House has heard how our reforms to local audit will result in a more efficient audit system, with an estimated £1.2 billion of savings—I would not want to disappoint the hon. Member for Corby by not mentioning the £1.2 billion of savings. That is exactly why it is important to push forward and embed that to stop any chance of future Audit Commission mission creep.

The reforms are not just about saving money. They are about the Government’s drive to decentralise power and responsibility to local bodies, and giving local people better tools to hold bodies to account. By cutting out the middleman, local bodies will no longer be forced to foot the bill for Audit Commission costs. They will know exactly what they are paying for in their audits. Local bodies will be required to publish information about their auditor appointments and any public interest reports they receive from the auditor. People will therefore be able to find that information locally, rather than having to go to a remote central body.

The reforms improve local accountability. As many hon. Members, including Opposition Members, have said, the Audit Commission had lost its way, forcing councils to focus on Audit Commission priorities rather than priorities that matter to local residents. My hon. Friend the Member for Meon Valley outlined some of those. As a councillor, I remember sitting in meetings when officers told us what we should do—it was often to do with waste collection. The suggestions were not made because they were right for our residents, but because they ticked a box to please the Audit Commission, and the Government would punish us further down the line if we did not take that action. The Government’s impact assessment estimates that the cost to local authorities of complying with the CAA was around £25 million per year—that money could be better spent on other things that residents want and need and deserve to have delivered.

Let me reassure hon. Members who are concerned that the quality of audit will suffer. The Government are committed to ensuring that that does not happen. Private audit firms have long had a role to play in auditing public bodies. As I have said, the Audit Commission has contracted out some 30% of its audit contracts to private audit firms. Last year’s outsourcing exercise demonstrated that public audit can be carried out to the same high level but at a much lower cost to the taxpayer.

The Bill contains robust mechanisms to safeguard auditor independence. The work of the auditors remains largely unchanged and auditors will still be required to use their professional judgment to decide whether to make a report in the public interest if they believe something is amiss. To enshrine that important principle, the Bill allows auditors to recover costs for their time in making a public interest report or advisory notice. By amending existing secondary legislation, we will ensure that whistleblowers can make disclosures to local auditors directly or to the National Audit Office.

Many hon. Members have mentioned the publicity code. I want to make one point clearly at the outset: there is no change to the code. The measures contribute to the Government’s commitment to localism rather than run counter it. Given that the code is not changing, I am somewhat surprised that any hon. Member has a problem with it being put into statutory form. Opposition Members have complained that the Government have not enforced the voluntary code. By putting it in statute, we can make sure that it is enforced to ensure that taxpayers’ money is spent appropriately and properly, and not for political ends.

There have been exaggerated claims that provisions on the code will lead to central Government clamping down on, for instance, HS2 campaigning, which has been mentioned. That is nonsense. Councillors are free to campaign on behalf of their constituents. Indeed, the Government legislated in the Localism Act 2011 to give councillors the freedom to campaign. If any challenge is balanced and factually accurate, it will not contravene the code, unlike some publications. For example, Nottingham city council’s website seems unusually to mirror the Nottingham Labour party’s website. Residents might want to question expenditure on that sort of thing. If anything, the publicity code defends council communications from political interference and propaganda-pushing, as was outlined by my hon. Friend the Member for Bromley and Chislehurst, who gave a range of examples.

The Government have no intention of monitoring or censoring communications, but it is right for us to act when concerns are expressed that local authorities are in breach of a code approved by Parliament. It is certainly right to act when authorities use taxpayers’ money to fund publicity for political purposes.

CPI/RPI Pensions Uprating

Debate between Brandon Lewis and John McDonnell

Thursday 1st March 2012 Commons Chamber

[John McDonnell]

Those most in need and those who saved the most will be the mostly greatly affected. My hon. Friend’s constituency, like mine, is a working-class constituency in which many people suffer from deprivation. They will now suffer that deprivation long into their retirement as a result of this measure.

To return to the point raised by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) about the impact on the stability of future schemes, it is quite clear that if fewer people are saving for their retirement, there will be a greater cost to the Exchequer as more people become dependent on means-tested benefits. Similarly, if fewer people are paying into the schemes, it will put those schemes at risk—thus thrusting many more on to state benefits. As I said, this decision is so short-term.

[Brandon Lewis (Great Yarmouth) (Con)]

The hon. Gentleman is generous with his time. He refers to people not paying into pension schemes, but does he agree that the Government’s move to auto-enrolment will mean that there will not be that big a drop, as the organisations involved have said? The fact that the schemes will be sustainable will be a part of the bigger picture—one of benefit in the long run.

[John McDonnell]

I support auto-enrolment, which is a good thing. What these pensions do is enable people to have an element of security in the future. The auto-enrolment process will work out over time; unfortunately, a number of these pensions will be caught in that gap as a result of the significant cuts being made.

I know that the cuts are said to be necessary because we have a deficit, but there is a straightforward, fair and equitable alternative, namely to make those who caused the crisis—and who benefited most in the boom years—pay for it.

Welfare Reform Bill

Debate between Brandon Lewis and John McDonnell

Wednesday 15th June 2011 Commons Chamber

[John McDonnell]

I appreciate that argument, but there is a difference between having a national system and having a complete free-for-all at the local level. There is a midway point, which would involve the Government setting clear criteria and guidelines, backed up with statutory force, so that when the changes are introduced locally, funds are not diverted but go to people who need them, and local authorities do not face high administrative costs. What I am searching for is Government action to reach a compromise and achieve a balance between national distribution and local distribution, thereby avoiding a free-for-all.

[Brandon Lewis (Great Yarmouth) (Con)]

I appreciate the hon. Gentleman’s generosity in giving way, but I would query what he is describing. Would it not go against the ethos of the Localism Bill, which is about trusting authorities with the responsibility to do what is right for their areas, and trusting the electorate to keep them in check so that they do just that?

[John McDonnell]

I understand, and, coming from a local government background—both as a councillor and as a local government officer—I very much support the localist agenda of freeing up local authorities to do as much as they can to reflect the direct wishes of the local electorate. However, we are talking about people in severe poverty, and one of the overall duties of government at every level is to ensure that people in our communities are not put at risk as a result of that poverty. Therefore, there is a danger in the localist agenda, which I support, of allowing a free-for-all. Without establishing national standards and monitoring, we could have a number of local authorities failing to fulfil their responsibilities as we would wish. Although I agree with the hon. Gentleman that the local electorate should hold those authorities to account, we have unfortunately had numerous examples—I speak as an advocate of local government—of that mechanism for keeping local authorities in check not being effective, particularly on the detail of administering such schemes. I am sure that we can all cite examples of that on a cross-party basis, no matter who has been in control.

I am not talking about just my individual concerns. Virtually every organisation dealing with the poor in this country has expressed its concerns about this element of the legislation. My local citizens advice bureau has provided me with numerous examples—which I will not take the House through—of the benefits of both social loans, particularly crisis loans, and community care grants. I would like to take this opportunity to thank Heather Brown, director of the Hillingdon CAB, and all her team for their hard work. They have emphasised the need to explore all the implications locally and nationally before the Government leap into a new system.

Shelter and Crisis, the housing charities, have undertaken their own assessments of the process. Crisis surveyed 250 of its housing advisers. Numerous Members across all parties work closely with Crisis, and we have the greatest of respect for its work. That survey showed that 69% of clients used crisis loans for rent in advance, with 87% using them to help furnish their properties. In its briefing, which many Members will have seen, Crisis quotes one person as saying that unless we have a system that is at least as effective as the social fund, the effect on efforts to get people to move into independent accommodation would be “catastrophic”. Anxieties have been expressed across the board about the fact that we have not yet had that assurance.

I am concerned about the lack of analysis in the Government’s proposals of people’s needs. There is also a lack of detail on how the proposals will work. My worry is that poor and vulnerable people will be put at risk as a result. It therefore behoves us as a House in discussing this Bill, as well as the Government, to come forward rapidly with detailed proposals that have statutory backing, in order to assure our constituents and all those working in the field that we will have a system to provide emergency support to people who are poor and vulnerable, but not one in which local decision making risks diverting those resources away from where they are needed. It is on that basis that I have tabled this amendment for discussion. I hope that, as a result of this debate, we will at least gain a clear understanding of how the Government are going to address these issues—and address them fairly urgently—given that they are causing considerable concern.