Local Audit and Accountability Bill [HL]

Lord Shipley Excerpts

Monday 15th July 2013 Lords Chamber

The scandals of the past few weeks are regrettably unlikely to be the last such abuses in the public sector and in its relationship with the private sector. These are things that I hope Ministers will consider. In future, taxpayers and voters will wonder why, when Ministers had the opportunity to improve the transparency of these relationships, they refused to do so. Therefore, I urge Ministers to reconsider their position and get on the side of transparency. I fear they will come to regret it if they do not.

[Lord Shipley]

My Lords, I remind the House of my vice-presidency of the Local Government Association. I was unable to discuss this matter when it was raised by the noble Lord, Lord Wills, in Committee, but he is making a very powerful case. I hope Ministers will be able to respond in a way that meets the issues that he has so rightly raised.

It is clear in Amendment 18 that a private company that is contracted, let us say, to run a refuse collection service or to run a leisure centre will appoint its own auditors to carry out an audit of the service that it undertakes. However, I do not think that that will prove sufficient. The public interest requires, where public money is being spent on a service, that the auditor on behalf of the public sector should have access to information that lies with the body that is providing the service through a contract. This appears to be an attempt to prevent a local government auditor having access to information that would assist the undertaking of that audit because a service has been provided by a private sector company. That does not stand the test of public accountability.

The noble Lord, Lord Wills, has got it right with Amendment 18. It is reasonable to say:

“A local auditor has a right of access at all reasonable times to audit documents from private companies that the local authority have contracted services to during the last financial year”,

and it is reasonable to say:

“Local auditors only have a right of access to audit documents from private companies … that relate to the service provided to the local authority by that company”.

In both respects, that is a reasonable requirement for a local auditor to expect. The public interest is best served by the auditor having those powers because this is about contract compliance in financial matters and service delivery. It is a basic requirement if an audit is to be undertaken successfully. How else can the general public have confidence that public money is being efficiently and properly spent on their behalf? I hope that we will hear from the Minister something that will convince us that Amendment 18 is not necessary.

On Amendment 23, there should be no diminution in the rights under the Freedom of Information Act. When it comes to transparency, particularly in view of the matters that have occurred recently, of which the noble Lord, Lord Wills, reminded us, your Lordships’ House has a duty to ensure that transparency in public expenditure and the delivery of the public interest actually happen. I hope that the Minister can give us the assurance that the noble Lord, Lord Wills, is seeking.

[Lord Palmer of Childs Hill]

My Lords, this is a very interesting amendment. I just wanted to add one other perspective. Any local authority worth its salt, particularly in this time of outsourcing, when so much is being outsourced to outside companies and bodies, will insist—as I have always insisted in my own local authority—that it has a right within the contract with the outside contractor to be able to audit the documents of the outside contractor. The place to do all the things that my noble friend has suggested is very often within the contract between the local authority and the contractor.

How that works in practice is that the local authority and its internal auditors need to see what the audit processes are within that outside contractor. The idea that the auditor of the local authority will go in on a normal basis and delve into the detailed books and records of the outside contractor is probably stretching the imagination a bit. The trouble with audits—this is where the noble Lord, Lord Wills, really hits the nail on the head—is that they are, in general, historical and you are looking at what went wrong. The noble Lord, Lord Wills, gave two good examples of what went wrong. The question to the noble Lord, Lord Wills, is: if the Government or the local authority had the ability to go in and audit the sort of companies and organisations the noble Lord described, would they have found these particular problems at that stage?

The noble Lord, Lord Wills, is on to a very important point. But I believe—as I hope that my noble friend the Minister will tell your Lordships’ House—that those protections of being able to audit should be more properly contained within the contract between the local authority and the outside body to which it is contracting.

--- Later in debate ---

[Lord Beecham]

My Lords, this amendment refers to the Government’s proposal—which, again, was not subjected to scrutiny by the draft Bill committee—to introduce, effectively, an element of retrospection into the question of whether a referendum should be held. The Bill affects councils that have set council taxes for 2013-14 that would have been excessive if the clause becomes law, by virtue of the change that the Government are imposing in relation to levies by other organisations. Fortunately, it turns out that only a small number of authorities would be affected by the Government’s proposals. Those authorities are Wandsworth—an authority well known to the noble Baroness and other noble Lords—Bolton, Bury, Manchester, Oldham, Rochdale, Stockport and Tameside. There is clearly a clutch around the Greater Manchester area, which presumably relates to some joint organisation in that area which collects a levy. Why Wandsworth should be affected, I really cannot say, although that does not really matter.

In Committee, the Minister indicated that councils had been notified by, I think, 31 January, that this might happen. However, that is a very late stage in the budget-making process, and it would have been very difficult at that stage to have reduced their council tax to the level which, if the Government were to apply the new rules, would have been operative. I repeat that the problem is not about the council’s own budget, it is about the levy imposed by other organisations. Had it been a precepting authority, the precepting authority itself could have had to call and finance a referendum on its own budget.

Many of us are extremely unhappy about the whole concept of these compulsory referendums, which of course do not apply when the Government increase taxes, with a considerably greater effect on the household budget than a corresponding increase in council tax. A 2% VAT increase takes a lot more out of people’s pockets than a 2%, or even slightly higher, council tax increase. Be that as it may, the effect is curiously different between a levying body and a precepting body; a levying body simply passes the cost on. The total amount of money is not enormous and would seem to amount to some £7.3 million. If the councils had been able to reduce their council tax to match the levy that they have had to impose, that would have been the cost to them, to be taken out of services. Nevertheless, it is a significant encroachment and, of course, if that were now to trigger a referendum—because the referendum limit becomes lower in future and councils may feel that they have to go for one—the cost of that, across these authorities, is likely to be pretty much the amount of the total levy across all those authorities. It is a bizarre situation. Given that it is now clear that it applies only to a very small number of authorities, in one particular cluster—in what, by the look of it, must be the special circumstances of Greater Manchester—I hope that the Government will reconsider this matter.

I suppose the Government do not have to apply the provisions of the Bill. If they do not want to amend the Bill and they want to reserve the power, so be it, but I strongly urge the Minister to think again about imposing this. It is wrong in principle, and it is an unnecessary reaction to what turns out in any event to have been a pretty small problem in terms of the number of authorities and the cash affected. It would be a statesmanlike move on the part of the Government to accept that perhaps, in the circumstances, they rather overreacted, fearing worse than has actually transpired, and to indicate that at the very least they would reconsider whether to proceed with the implementation of the clause, if they insist on its standing part of the Bill. I beg to move.

[Lord Shipley]

My Lords, I speak in support of Amendment 43, and will be brief. I agree with the noble Lord, Lord Beecham. I think it is bad policy to backdate the definition of an excessive council tax rise so that it includes a levy from April 2013. I understand that in January this year letters were sent out to local authorities suggesting that the Government might take this course of action. I will say two things about that. The first is that it is simply not enough notice. Council tax-setting takes much longer than just a few weeks. There is a requirement that council tax is effectively set by the beginning of March, so that bills can be sent out. In my view, given the lengthy periods of consultation that local authorities are required to undertake, a period of six months would have been more reasonable.

My second reason for objecting to the Bill as it stands is that one should have respect for the law at the time at which the law is applied. I believe that councils and levying authorities abided by the law at the time. As the noble Lord, Lord Beecham, quite rightly pointed out, it is a comparatively small problem. Retrospective change, whether or not there was a warning, seems to me to be wrong in principle, and should therefore be resisted. The noble Lord, Lord Beecham, said that he felt that the Government were overreacting. I concur with that, because I believe that it is an overreaction to backdate in the way the Government propose.

[The Earl of Lytton]

My Lords, since my name is to Amendment 43, I would like to voice my support for the point that has just been made, and was also made by the noble Lord, Lord Beecham, about the undesirability of retrospection. Notwithstanding the comments made by the Minister at a previous stage of the Bill, there is no question in my mind that Clause 39(15) and (16) are, beyond peradventure, retroactive in their effects. Apart from the self-evident difficulties that that will create within the continuum of local government finance, one supposes that there must be some reason why this has been put in the Bill. I would like to inquire what that reason is, because to date we seem to have had reassurance that there is no intention that this should be retrospective. I do not wish to work out how many angels dance on the head of a pin between retrospection and retroactivity, but I prefer the term “retroactive”.

It seems to me that this is almost calculatedly destabilising, and I cannot believe that that was really the intention. It seems to me that there is a necessity for some further words of qualification, so that the clause is targeted at whichever particular issue needs it, and it is not capable of any sort of generic destabilisation of previous years of local government finance settled business, or what should be settled business. I hope the noble Baroness will be able to give an explanation.