Lord Beecham
Main Page: Lord Beecham (Labour - Life peer)Local Audit and Accountability Bill [HL]
Lord Beecham Excerpts
Lord Beecham
My Lords, I declare an interest, as so many others have, as a vice-president of the LGA. I am also a member of Newcastle City Council and a member of its audit committee, which incidentally is independently chaired.
As my noble friend Lord McKenzie reminded us, it is nearly three years since the Government announced their intention to abolish the Audit Commission. Characteristically, in yet another demonstration of their contempt for the parliamentary process, they have effectively achieved their objective by virtue of pre-legislative implementation of a policy that they have not deigned to submit to parliamentary scrutiny. Parliament was not invited to the bedside of this apparently terminally ill patient. We have merely been called upon to act as pall-bearers at its internment.
I had my differences with the commission during the 25 years for which I served as vice-chairman and chairman, successively, of the Association of Metropolitan Authorities and the Local Government Association, not least over its propensity to reach for a headline when publishing its reports. Yet it played an important part in highlighting issues of efficiency, effectiveness and good governance, which made a significant contribution to making local government the most efficient part of the public sector. I recall that in his second incarnation as Secretary of State for the Environment, the noble Lord, Lord Heseltine, who is not in his place today, invited me to become a member of the commission. I declined because I thought that there might be a conflict with my role of chair of the AMA, although the offer was useful in rebutting claims from Conservative councillors in Newcastle that I was the leader of a profligate council. I note in parentheses that we have not had a Conservative council in Newcastle for the past 17 years.
Latterly, the commission had responsibility for health as well as local government, which was precisely what was needed given the overlap of responsibilities now recognised with the return to local government of the responsibility for public health removed in Sir Keith Joseph’s 1973 reorganisation of the NHS, and the provisions of the health and social care Bill now being launched in your Lordships’ House. So why has this legacy of the Thatcher era—one of its more benign bequests, as we were reminded by my noble friend Lord Christopher—been abandoned? The answer seems to be embodied largely in the person of the Secretary of State.
Your Lordships will perhaps be familiar with the distressing condition known as obsessive compulsive disorder. Mr Pickles seems to be afflicted with a kindred but more destructive condition: obsessive compulsion disorder. In addition to a long-standing obsession with the commission, which appears to date back to his brief period as leader of Bradford City Council—I pay tribute at least to one of his successors, the noble Baroness, Lady Eaton, for her contribution to this debate—the Bill reflects two other symptoms. They are the power to direct councils to comply with directions in the code of practice on local authority publicity, which, I remind your Lordships, is already restricted to four publications a year, and changes to the council tax referendum process, on which the Secretary of State is so keen, to include levy-making bodies—but in this case with the added ingredient of retrospection.
The position is well explained, appropriately, in the Explanatory Notes to the Bill. These provisions are contained in Clause 39, in subsections (14) to (16). The explanation given is that they,
“allow the Secretary of State to determine a category of authority on the basis of whether its relevant basic amount of council tax for … 2013-14 would have been excessive if the relevant basic amount in that year and 2012-13 had been calculated in accordance with the newly-amended legislation. In short, this explicitly allows the Secretary of State to consider the impact of previous levy increases when setting”,
referendum thresholds for 2014-15. I have drawn the attention of the noble Baroness, Lady Jay, as chair of the Constitution Committee, to this flagrant departure from normal and good practice. The effect of the provision could of course include councils, and therefore council tax payers, in the considerable expense of holding a referendum not on their own budget but on that of another body, over which they have no direct control. It could also lead to some authorities covered by a single levy-making body being required to hold a referendum and some not, depending on how close their council tax rate was to the threshold as determined.
The idiosyncratic nature of the Secretary of State was well illustrated earlier this year when he denounced councils for setting council tax just under the referendum threshold, as if they were somehow cheating the system. He seemed to threaten to lower the threshold accordingly next year. So go over the threshold this year and you will have a referendum; go just under it and you will have one next year. Will the Minister say whether there is any truth in the rumour that the next threshold will be a 0% increase?
Most of your Lordships, although not the noble Lord, Lord Shipley, regard the proposal about publicity in Clause 38 as equally objectionable. The original restrictions were partly based on the specious grounds that council newspapers or publications were somehow putting the local press out of business. That ignores the reality that all the print media are suffering from a combination of factors, including the growth of online media, free newspapers, which are often published by the local press, social media and local radio, and, of course, a decline in advertising, in part as a result of the recession. As has previously been mentioned in the debate, coverage of local government affairs has declined hugely in the past 20 years and the number of journalists has been cut. The noble Lord, Lord Palmer, certainly recognised that point.
As we have heard, the local press benefits hugely from council advertising to the extent of some £26 million a year, even without one of the unlamented features of the Audit Commission. That was a requirement proposed, I am sorry to say, by the previous Government, to publish annually some 200 performance indicators in a paid-for newspaper. That is not something that in my experience led to a significant increase in sales on the day of publication.
I suppose it is possible for some publications to stray into the political arena, but there are mechanisms to challenge such inappropriate behaviour without the Secretary of State setting himself up as a censor. By the way, when will the Government stop civil servants acting as spokesmen and using the personal pronoun, as many of them do, when defending government policies? It is not the job of civil servants to speak in that way about government policy.
Incidentally, I am challenged by the noble Lord, Lord Tope, to refer to Lambeth and Tower Hamlets. Tower Hamlets is not a Labour authority; it has the dubious benefit, as a result of one of the Government’s proposals, of having an elected mayor, who is not a Labour elected mayor.
Mr Pickles often talks of his early flirtation with communism. It appears he has not quite shed his belief in democratic centralism, the hallmark of the Lenin and Stalin regimes. I suppose we should be grateful that he has not required councils to act on his other obsessions, such as weekly bin collections, sacking chief executives, banning biscuits from council meetings or whatever else would appeal to such organisations as the TaxPayers’ Alliance or UKIP, or to the right-wing press.
As a final reference to the cavalier approach so often adopted by the Government as a whole and in particular by the Secretary of State, I remind the House that neither of these two measures, on referendums and publications, were included in the draft Bill which was considered by the ad hoc draft Bill committee in the House of Commons. Once again, extraneous and controversial measures have been spatchcocked into a Bill at short notice. The Government’s contempt for due process could not be clearer. My noble friend Lord Christopher was entirely right to draw attention to that.
Turning to the more prosaic and technical parts of the Bill, so lucidly analysed by my noble friend Lord McKenzie and other noble Lords, I regret the diminished capacity for value-for-money studies and the quality and improvement agendas which the Audit Commission was so effective in promoting. The National Audit Office will conduct only six value-for-money studies a year. Significantly, we learnt from a meeting that the noble Baroness kindly organised yesterday, that those studies will essentially be directed at the impact of central government spending, and will not, therefore, be likely to deal with such issues as the noble Lord, Lord Shipley, raised about the possible advantages of unitary government or the living wage. Those are not directly related to central government spending.
On the other hand, the commission conducted 16 such studies across the whole field. The potential of Total Place or, as it is now known, Community Budgets, will not be exploited fully on that partial basis. These are areas in which a cost-cutting approach to assessment ought to be made, involving both central and local government, and that is unlikely to take place under the auspices of the National Audit Office, if it is to carry out its responsibilities in the way that we learnt yesterday. That is particularly regrettable in the health and social care fields, which, after all, we in your Lordships’ House have begun debating and in which the need for closer working relationships is emphatically emphasised.
Health will now potentially have a separate field of auditors, although the same firm might end up auditing the clinical commissioning group and the local council, presumably with different staff. There is a notion, ventilated in the ad hoc sub-committee’s deliberations, that the Local Government Association will be able, in some respects, to replace the commission’s work and to sustain its improvement programme. I am afraid that is illusory. The Local Government Association has been the target of another of the Secretary of State’s obsessions. He has cut its funding, topsliced from the revenue support grant, from £41.3 million a year to £25.5 million, or by 38%. That has significant implications for its staffing and capacity to represent the sector and enhance its effectiveness. Interestingly, £25 million is the sum that local government is paying into the coffers of the local press for the statutory advertisements to which other noble Lords have referred.
As my noble friend Lord McKenzie has pointed out, the privatisation of district audit and the new tendering system leaves a handful of large accountancy firms, many of which have other services to sell to the councils that they are auditing, to have an effective oligopoly of the audit role, at least in the larger councils. The noble Lord, Lord Shipley, exaggerates the benefits of the change. There are not a large number of firms. Seven are accredited nationally, two of which are arms of just one organisation. Therefore, there are effectively six firms, one with a couple of branches. That does not offer a vast choice. There will be a requirement to retender every five years but your Lordships might think that it would be better if the requirement were to be a change of auditors every five years to ensure that there is a turn-around and that the relationship does not get too close. That is a matter that we can perhaps pursue in Committee.
This is in many respects a bad and unworthy Bill. I hope that all who proclaim themselves localists, who wish to promote informed debate and decision-making at a local and national level, and who are concerned at the manner and form in which this legislation comes to us, will combine to improve it. The Minister has a long and distinguished record in local government. She is looking somewhat sceptical. I have no intention of doing anything but praising her at this stage because she is a localist and has a relationship with local government that I can only wish other of her ministerial colleagues would share. We will work with her and I hope that across the House we will be able to improve the Bill—it certainly needs improvement.
Before I resume my place, there is another matter that I understand is also to be raised by the Minister. I wish to pay tribute to the outgoing Yeoman Usher, who performs his last day as an official in this House before his well deserved retirement. For someone who has both a royal function in this House and is responsible for the organisation of security he was, appropriately, a lieutenant-colonel in the Army Royal Logistics Corps.
Perhaps his most celebrated moment in the course of his activities was when, shortly after the last general election, he deputised for Black Rod at the State Opening of Parliament. I understand that he struck the Commons Chamber door in the correct place, which may take some doing, and then successfully ran the gauntlet of the traditional barbed wit of my honourable friend in the Commons, Dennis Skinner, which he deflected with extreme courtesy.
I am personally grateful to the Yeoman Usher for the very helpful induction he gave me, along with noble Lord, Lord Popat, before we were introduced into the House. We clearly owe our promotion to our respective Front Benches to his wise advice. Since joining this House as Yeoman Usher in 2009, he has always performed his role here with great aplomb, efficiency and courtesy. He will be missed by us all, and I am sure noble Lords will join me in wishing him well for the future.
Baroness Hanham
My Lords, I will follow what the noble Lord said about the Yeoman Usher. We do not like losing senior members of staff in this House. We always like them and he has been no exception. We, too, wish him well. I thank the noble Lord for giving the background to his appointment and time here. It saves me from having to do so, but I certainly endorse what he said and wish the Yeoman Usher well as he leaves this House. We will remember him fondly and affectionately for his time here.
The noble Lord, Lord Beecham, is looking slightly sceptical. He is always very kind, although there is usually a sting in the tail. I do not I accuse him of being a scorpion—
Baroness Hanham
That was a lucky hit.
We have had a long debate on three matters within one Bill. That was most unusual. Usually we have many more and we have managed to spend nearly two hours on these three matters. Noble Lords have raised a number of points and clearly we will come back to all of them. I hope that the noble Lords who spoke today will take part in Committee, because sometimes there is a tendency for people to come and deliver their thoughts but not carry them forward in Committee. I hope as many noble Lords as possible will do that.
I have no doubt that the noble Lords, Lord McKenzie and Lord Beecham, will be in their seats in Committee, and we will pick up many of the remarks and comments that have been made about the detail of what happens with the abolition of the Audit Commission. I did not get a sense of any great exasperation—except perhaps from the noble Lord, Lord Christopher—that the Audit Commission was coming to the end of its days. However, I understand that there are questions to be asked about how the process will go forward to ensure that local government has in place a proper system and that the integrity of the process of auditing is maintained.
I have sheaves of answers to questions and I do not want to go through all of them. Because of the time, everybody will want to go. I will deal with just one or two areas. The question was raised about the training and supervision of auditors. The noble Lord, Lord McKenzie, raised this point. Recognised supervisory bodies are being put into place and they will lay down the rules and the training that must be implicit in auditors applying to do work for local authorities. We can discuss this further, but we can be sure that there is an understanding that auditors must first understand local government finance, apart from anything else; that seems pretty basic. They will also have to be independent from the authority. This point was made by the noble Lord, Lord Palmer. There should be absolutely clear independence between the audit committee and the auditors. I think we shall be able to satisfy the noble Lord that this is what will happen.
A number of noble Lords raised the question of whether just four companies would bid for this audit. I said in my opening remarks that we expected considerably more than those four. Thirteen fulfilled the pre-qualification when it was put out. With the expectation that local authorities will seek auditors independently, or perhaps come together in a small cohort, there will be a requirement for more local auditors who are smaller companies. They will have to be properly qualified and be able to do their job, and while the suggestion is that for safety’s sake everybody will go for the big four, I hope and believe that there is an opening for others to take part.
The noble Lord, Lord McKenzie, asked about the difference between the auditor panel and audit committees. The noble Lord, Lord Palmer, was also interested in this aspect. The audit committees were clearly the supervisory committees of the councils’ own accounts and finance; they were in-house. The auditor panel will be there to ensure that auditors are selected and chosen properly against proper backgrounds. They will also be there to ensure that the external auditors carry out their role.
It is important to take a step away and have independent members in the majority. These committees do not have to be big. I should think that most authorities would be able to find two or three people who will fulfil the role of being independent and who have some idea of what it is all about. It is not unusual for local authorities to have to find independent members; they do it for standards boards and other things, and many of them have them on their pension fund committees as well. It is not beyond the wit of local authorities to find suitable people to sit on these committees to ensure the integrity of what is being done.
The internal audit is not in the Bill because it deals only with external audit arrangements. The requirements for local authorities to maintain effective internal audit has been included in the accounts regulations since 1974. A point was made by the noble Lord, Lord Palmer, who is obviously very experienced, and he will recognise that that is the situation. The regulations are made under the Audit Commission Act but we intend that those regulations made under Clause 31 will make similar provision in the future. The requirement for health service bodies to maintain the internal audit is dealt with separately under the National Health Service Acts.
The noble Lord, Lord McKenzie, asked about the national fraud investigation and what will happen when the Audit Commission is abolished. A final decision has not been made on where it will be placed but it is extremely important that it carries on the work that it is doing, so we will consider it very carefully. I am sure that we can discuss that.
The noble Lord, Lord Tope, asked why the opportunity to broaden the scope of the audit was not taken. We understand that the audit of public funds needs a broader scope than the audit of companies. After consultation we decided that the same scope of the audit provides a good balance between maintaining the high quality of audit and audit fees. The noble Lord, Lord Palmer, again with his experience, suggested that auditors will be reluctant to criticise that appointment for fear of not being reappointed. They have statutory duties to consider whether they need to make public interest reports; so they cannot be so biased in favour of the local authority that they do not do that. Local people have a right to appeal and they will have to deal with that as well. I do not think that they will be in a position to be reluctant; it will be part of their duties to ensure that they take those up.
We have dealt with the big four. The noble Lords, Lord Tope and Lord True, and the noble Baroness, Lady Eaton, asked how we would prevent mission creep in the National Audit Office’s role and said that it should not undertake studies that are not required. The National Audit Office already does studies on government spending. We expect it to add no more than about six to that, which will include local government on a wider scale rather than individual local authorities.
I shall turn to the other two areas on which we received some comments. On levying by external authorities, there are examples where those levies are a very substantial part of the council tax bill. Often, very little consideration is given by those bodies to what those levels are. It is important that they are taken account of.
On the question of retrospection and whether anything this year will be taken into account for next year, no decision has been taken at all about referendums yet. The principles for 2014 will be set out by the Secretary of State later on when he has taken into account all relevant factors, including the position of levies, in due course.
The issue of the principles that might trigger council referendums has long since passed; it was dealt with in previous legislation.
The noble Lord, Lord McKenzie, asked about levies and city deals, particularly with Manchester. Again, the Secretary of State can take account of this when he is looking at the principles that might trigger a referendum, but we intend that local people should have a say before any excessive bills are imposed upon them—in other words, with a referendum.
On publicity, there have been a number of triggers. One of them is that there has been pressure on the local press from local authority newspapers; the other is that some of them have been overtly political. There are examples of where local government publications are still within the political area, and also where they are being issued so often that they are becoming a pressure on the local press. We all agree that the local press is a very important part of being able to inform local people of what is going on, and what the councils are doing. It is worth pointing out that taking action about these papers was not only in the coalition agreement but was a pledge in the general manifestos of both the coalition partners. There is a publicity code already, as noble Lords know, and it will just be a question of giving the Secretary of State powers of direction where he thinks there is an overenthusiasm on the part of local authorities undertaking these publications.
The noble Earl, Lord Lytton, described the direction requiring compliance with the code as being nebulous. I am sure that we will have an opportunity to discuss that further in due course.
Finally, the noble Lord, Lord Tope, asked about statutory notices. We are aware of the burden that placing statutory notices in newspapers has on local authorities. The Secretary of State has stated that,
“in the internet age … commercial newspapers should expect that over time there will be less state advertising”.—[Official Report, Commons, Seventh Delegated Legislation Committee, 23/3/11; col. 18.]
That would imply that they can be carried out in other ways.
I know we are going to come back to many of these points. Noble Lords must forgive me if I have not specifically picked up any of the points that they have made. If they think that it would be helpful to have a reply before we go into Committee where I have not answered them I will make sure that happens. Otherwise, I look forward—