Lord Beecham
Main Page: Lord Beecham (Labour - Life peer)Local Audit and Accountability Bill [HL]
Lord Beecham Excerpts
Lord Beecham
I certainly have a great deal of sympathy with the opposition to Clause 1 standing part expressed by my noble friend. As he himself conceded at the beginning, however, it is probably too late for that course to be taken. The Audit Commission is in an analogous condition to the famous parrot in the Monty Python sketch: it is in fact, to all intents and purposes, now an ex-commission. That is something, in my view, to be lamented, for many of the reasons that the noble Lord gave.
It is interesting to read the evidence given to the ad hoc Draft Local Audit Bill Committee, which considered these matters in great detail. My attention was particularly caught by the answer to a question raised by a Liberal Democrat MP, Mr Ian Swales, who is the MP for Redcar for the time being. He asked witnesses:
“Are you satisfied that, in this public interest area and so on, your organisations”—
three firms of accountants were represented—
“will have the mechanisms to do the kind of commentary and assessment that the Audit Commission is doing now?”.
The reply was given by Sarah Howard, who is a partner in the firm of Grant Thornton, which is not quite one of the big four firms, but nearly. She said:
“That is a really important point. Fragmentation and co-ordination are themes that have come through the various evidence sessions. How can we ensure that in the draft Bill? There does appear to be a gap there; that is a risk. One of the benefits of some form of national or regional procurement body is that it could fulfil some of those other functions and help address some of the other risks”.
That was interesting.
What was even more compelling was the evidence given by the noble Lord, Lord Heseltine, who, of course, created the Audit Commission in the first place. I am going to quote a number of his observations. He was asked by the chair of the committee, my right honourable friend Margaret Hodge:
“What are the key aspects that you will be looking at to ensure that the rationale for its creation, which probably has not changed, is maintained in the new arrangements?”—
that is to say, the creation of the Audit Commission. He replied succinctly:
“Independence of appointment to a central body, probity and value for money”.
Asked to comment on the feeling that it would be rather difficult to see how he will ensure the proper comparison across authorities and therefore be able to start getting a handle on value for money, he replied:
“I think your question answers itself. You have got to have a system that systemises the process of comparing value for money and like-for-like services. This is not the private sector, there is a vast range of different and complex services. There is no common means of evaluation and if you want to make comparisons authority by authority, you have to prescribe the information that you want to collect, and that can only be done centrally”.
The question was put:
“So in your view, the Audit Commission has not necessarily outlived its effectiveness?”
He answered:
“I have not seen any argument to suggest it has”.
He was asked again:
“Are you saying, essentially, that independence is necessarily compromised in cases where councils appoint their own auditors?”
He said:
“There is a pressure to get reappointed, and the language cannot avoid the word ‘compliance’. You do not want to get a reputation for being difficult”.
This is a matter to which I would like to return later as we discuss the Bill—the requirement that on a review of audit arrangements, after every five years it should not be possible to reappoint the existing auditor. I think that is consistent with the approach of the noble Lord, Lord Heseltine. However, he went on to say, and to foreshadow in a sense, the words of my noble friend:
“The work that the Audit Commission did in value-for-money studies created massive economies, and benefits therefore, simply by turning a spotlight on what you could achieve in a well-run authority. It has elevated the practice of the best to a standard that others could copy”.
That was a fairly persuasive argument.
However, other matters also arose in the course of his session. One of which is a matter that I have touched on in the Second Reading debate. The chair asked:
“Finally, the Department of Health has so far not put forward proposals as to how it is going to ensure accountability and allow us to follow the taxpayers’ pound in this new landscape”.
He was asked whether he had any thoughts about that. He said he did not know quite what was happening, but when asked whether it would be satisfactory, he said:
“As you describe it, of course not, but the way you describe it may not be the way the Government would describe it”.
It would be interesting to know how the Government would describe it. It seems to me that as with policing, health would be outside the remit of the new arrangements. There would be separate audit arrangements that would not be across sectoral reporting on value for money, which one might have expected.
As my noble friend has pointed out, there have been substantial savings generated by the Audit Commission from its value-for-money studies covering health and local government in particular. Indeed, the noble Lord, Lord Heseltine, having referred to those said:
“It would be interesting to know what the Audit Commission thought they had saved on their value-for-money services over an equivalent period”.
That is to say, the period in which the Government calculate £160 million will be saved, which will, in fact, be several years. My noble friend has already quoted a figure many times more than the amount that the present commission has identified.
At Second Reading, I voiced concern about the split, which is now to be institutionalised, between health and local government at the very time when the Care Bill is intended to bring considerable necessary integration in that key area of public social policy. It cannot make sense for that to happen between the two sectors. Even within the health sector, there are to be not two sets of auditors, as the noble Lord, Lord Shipley, said, but several, because clinical commissioning groups—there may be more than one in a given area—will have their own auditors. In addition, trusts will have their own auditors. In addition to that, somebody—presumably, the National Audit Office—will be auditing the National Commissioning Board, which has direct responsibility for, among other things, the commissioning of primary care and other elements of health provision. So there will be a range of auditors in the field of health when you would have thought that they should be brought together.
It is not only in the field of health that there is a need to look across different sectors. In local economies and arrangements for city deals, for example, or combined authorities, you could have a series of auditors reporting locally instead of having that overview. That is without mentioning community budgets, the new name for Total Place, where you should be looking at the pooling of public spending in an area across a range of national and local government services. How is that to be catered for? How are they to be evaluated? It is not simply a question of seeing that money is properly spent in terms of propriety; it is a question of effectiveness. After all, that is precisely the point that the move, slow though it may be, towards getting that cross-sectoral investment and pruning of budgets to achieve commonly agreed ends between a range of different partners. How is that to be evaluated in the new landscape?
I do not sense that the National Audit Office will have the resources to conduct all that alongside its manifold other obligations on mainline government expenditure. I understand that it is possible for the National Audit Office effectively to ask for more money through its parent body. I believe that there is a committee chaired by Sir Edward Leigh in the House of Commons which oversees that process. I am told that if it says that it needs more money, it will get it. That may be the case. It would be perhaps the only case in government where that would apply, and it would be welcome. One wonders whether in fact that outcome would be achieved.
There are very serious questions about whether the new arrangements will achieve what ought to be achieved in terms of a comprehensive overview of what is happening, of illustrating what can be achieved and what authorities and other partners—I repeat that the police and health are among others—should be doing to avoid cost-shunting to share benefits and, for that matter, basic overheads, back-office services and the like and, in particular, to achieve agreed outcomes for a given area. I do not see how that will be delivered under these arrangements. I think that it will be more difficult to deliver, as my noble friend has rightly pointed out. If there were a half chance of my noble friend’s Motion being delivered, I should be very much inclined to vote for it, but I fear that that is unlikely. Of course, it cannot happen in this Committee in any event, but it is unlikely to happen in the House when we reach Report. However, the issues will not go away. The danger is that we will see a decline in the sharing of information and the promotion of good practice across the board, which has been one of the more signal achievements of the commission.
Having said that, I share some of the reservations expressed by others. I shared them when I was in a position to do so as chairman of the Local Government Association. By the way, I should declare my interest as a vice-president of the association, as a serving member of Newcastle City Council and as a member of its independently chaired audit committee.
However, for all those reservations, the commission has in general done a good job and it is unfortunate that it is already falling off the perch and will shortly be interred without an adequate replacement having been devised.
Baroness Hanham
My Lords, the amendment would remove a regulation-making power to lift or modify the duties imposed by Clause 3 as they apply to particular bodies. Clause 3, as the noble Lord has said, requires relevant authorities other than health service bodies to keep adequate accounting records and prepare an annual statement of accounts. These are fundamental duties, and I can see why the noble Lord might question these powers. Nevertheless, there is a need for them.
Changes in the structure of local bodies may mean that the production of a statement of accounts is unnecessary or that financial accountability would be better served by including the financial transactions of an authority in the statement of another authority. To give an example of this, last year the police authorities were replaced by police and crime commissioners. In November, accountability for police finances was better served by the commissioners producing a single statement for the full year, including the transactions of the police authority. The police authorities were therefore relieved of their duty to produce published accounts for their final months, and the police commissioners thereby took on that responsibility.
I would expect the use of the power to be confined to such situations where there is a strong case that financial accountability would be better served by a modification of the duties in the clause. The accompanying power to modify the financial year has existed in audit legislation for many years but has rarely been used. I hope that that explanation will satisfy the noble Lord and enable him to withdraw his amendment.
Lord Beecham
I want to ask the Minister a question that I should perhaps have raised when speaking to the earlier amendment. The Comptroller and Auditor-General was quite critical of the proposals to take policing out of the Audit Commission framework. Given that the commission is going, to what extent have the Government responded to his concerns about the auditing of police authorities?
Baroness Hanham
My Lords, the police authorities are included in terms of this clause. Does that answer the noble Lord’s question? If it does not, perhaps the noble Lord will come back to me.