Local Audit and Accountability Bill [HL]

Earl of Lytton Excerpts

Wednesday 22nd May 2013 Lords Chamber

[The Earl of Lytton]

My Lords, I start, as others have done, by declaring interests. I am the president of the National Association of Local Councils, which I will refer to as NALC, and I recently accepted an invitation to become one of the Local Government Association’s many vice-presidents, so I shall be in good company declaring that interest along with many of your Lordships. One of my children is employed by one of the big four accountancy and audit practices. It is only fair to point that out, but I am not a finance person and I look at the reality that sits behind this Bill in terms of everyday life.

NALC can be extremely pleased with the ongoing dialogue it has had with the department. I particularly thank the Minister for the helpful opportunities for discussion that this has generated. I hope that there may be the possibility, between this stage and the next, for some of the staff from NALC to come and meet her and her officials to bottom out some of the detail on this, which I think would be quite important. I shall concentrate fundamentally on the application to parish and town councils. Like many modern Bills, the principles are set out in the primary legislation, but we are left to deal with regulation at a later stage. However, we need to be particularly vigilant about what we lay the foundations for at this juncture.

There is a lot to welcome in this Bill. On audit, as has already been said, I accept that it is an absolutely basic tool for holding to account those who control and handle significant sums of taxpayers’ money, or, in the private sector, shareholders’ assets. The core ingredients, however, are that it should be purposeful, cost-efficient and proportionate. It does not make sense to remove centralist mechanisms by creating some dispersed arrangement that is complex or uncertain, fails to provide real transparency or is excessively costly. Like the noble Lord, Lord McKenzie, I fear that long-term there will be higher costs.

NALC has made it clear that it looks for six key factors on audit. The first is a proportionate and cost-effective but limited assurance audit regime for parish and town councils, with particular exemptions for very low-spending parish and town councils. Secondly, it feels that the national procurement of external audit—already mentioned—may well be the most efficient way of procuring audit on the most cost-effective basis. I think NALC is at one with the LGA on this. It then wants the establishment of a self-financing, sector-led body to undertake this audit procurement, particularly for smaller local public bodies, including parish and town councils.

NALC feels that it is vital that there is a right for electors to inspect the accounts of parish and town councils, but that any new transparency arrangements need to be proportionate. They need to be practical and cost-effective and there needs to be a financial safeguard for parish and town councils in the event of auditor-led scrutiny; in other words, to guard against parish funds being hijacked by those with some deconstructive agenda, of which the Minister will be well aware. While reading the Bill and the various bits of paperwork we received, I wondered how one would have an audit panel with a majority of independent members on it. In my limited knowledge of local government geometry, I wondered how that would work. I suppose it would have to come from these Benches.

Moving swiftly to the code of publicity, I understand that this is the “accountability” that sits behind the title of the Bill. I understand that the Government have consulted, but they are asking the House to agree these proposals without our knowing the outcome of that consultation. I should like to know what the outcome is and the Government’s response. I hope this was not an instance of setting out to canvass opinions when the decision was already made. Perhaps the Minister would clarify that at some juncture.

The proposals stand in considerable contrast to the direction of travel of the audit. It appears to be a transfer to the Secretary of State of significant additional statutory powers. I am bound to say that it walks and looks like a Henry VIII clause. It is a puzzle to me, because I am not aware—I echo other noble Lords—of any instance in which the Secretary of State has actually intervened under the current code of recommended practice. I have to ask where the objective need is for the statute?

I noticed the comment by the noble Lord, Lord Tope, about the issue of the regional press. I recall that my late father once christened a West Country local newspaper the “Trumpet of Truth”—not its real name —on account of its serial and culpable inaccuracies, bias and other mischief. I leave that particular point parked, but there is no particular evidence that parish and town councils compete unfairly with local newspapers and there is no reason why the code should be put into primary legislation. The existing code provides for action to be taken if there is evidence. Again, there have been no breaches of which I am aware. Giving more powers to the Secretary of State looks anti-localist, and we need to ask whether it is necessary for parliamentary time to be taken up by this and whether there is a problem in the first place.

This may be a lawyer’s matter—forgive me if I tread on others’ toes—but the code as it stands seems to be couched in nebulous terms. I wonder whether it is the right sort of document to form the basis of a statutory code? My final point concerns parish polls. In this respect, the Bill needs some strengthening. The Localism Act, as originally drafted, included provisions that were subsequently removed with other clauses on referendums. That leaves us with Schedule 12 to the Local Government Act 1972, which sets out the circumstances in which a poll at a parish meeting may be demanded. The trigger is unbelievably low: fewer than 10 electors or one-third of the local government electors present, whichever is the lower. This is far too lax. It is an open door for the vexatious use of parish polls on matters that may not even directly affect—or affect at all—the local area. The responsibilities of the parish and town councils are what should be in focus. If they are not, it is a waste of taxpayers’ money. I am concerned about a comment made by the Audit Commission that it could be a matter of an auditor deeming that the money so expended had not been correctly incurred. That is not very good if the thing happens after the accounting period is finished and you are in a parish council meeting and have to make a decision. The guidance needs to be a lot clearer so that everybody knows where they are up front.

I look forward to the further deliberations on the Bill. I sometimes wonder whether the philosophy and direction of travel of the Bill, and of localism more generally, is entirely coherent. On the Growth and Infrastructure Bill, the Government argued that businesses need certainty. I buy that to a considerable degree but so do municipalities and parishes. Uncertainty adds cost and risk, and in this case increases public expenditure. We need to do everything that we can to avoid falling into that trap. I wish this Bill in all other respects a good passage, and I am sure that we will have plenty of interesting times trying to knock it into slighter better shape that it is now.