English Devolution and Community Empowerment Bill (Eleventh sitting)

Paul Holmes Excerpts

Committee stage
Tuesday 28th October 2025 Public Bill Committees

[Miatta Fahnbulleh]

The local audit system is broken. There is consensus about that across the House and within this Committee. It is fragmented and has significant capacity and capability challenges. The problems in local government reporting and the backlog of unaudited accounts have led to the disclaimed opinion on the whole of Government accounts for the past two years. This provides no assurance to Parliament, and puts public accountability and trust in the system at risk.

The Government are leading the most transformative programme of audit reform in over a decade. Clause 61 will enable the Local Audit Office, a new statutory and independent body, to be established by autumn 2026. The LAO will have an oversight, regulatory and appointing role in the local audit sector. It will cover a wide range of public sector bodies responsible for delivering essential services and managing public funds, as well as oversight of aspects of the NHS audit system.

The LAO will be instrumental in overhauling the local audit system and will play a crucial role in ensuring that reforms are effectively implemented to provide better value for taxpayers and support economic growth. The LAO will be vital to rebuilding transparency, accountability and public trust in local government, and will restore a crucial part of the early warning system for local authorities.

Schedule 28 sets out the core elements of the LAO’s constitution and governance to enable this new organisation to be established. Part 1 establishes the requirements for the board, as proper constitution of the LAO is critical to establishing its authority, ensuring operational readiness and enabling it to deliver its objectives. Part 1 also covers other provisions that are integral to the successful set-up and operating function of the LAO.

Part 2 of the schedule allows the Secretary of State to put schemes in place to legally and properly transfer employees who are currently performing functions that the LAO will be responsible for after it is established.

[Paul Holmes (Hamble Valley) (Con)]

Good morning, Sir John. I am asking for a genuine point of clarification from the Minister. The Library briefing says:

“If an MP were appointed”

to one of these boards,

“they would be disqualified from membership of the House of Commons”.

Why have the Government chosen to do that? There is no motivation behind my question; this is just for clarification.

[Miatta Fahnbulleh]

That is a very niche question. I will have to write back to the hon. Member to clarify.

[Paul Holmes]

I do not expect the Minister to know the answer this morning, but if she could write to me before the end of our sittings this week, I would be grateful. The reason I ask the question is that these are local audit offices for local authorities. The Secretary of State is appointing these boards, and there is obviously political oversight of those appointments, but it would seem sensible to have the expertise of someone representing the area. If this is a devolution Bill, appointing MPs would seem to be perfectly fine, so I am not sure why the Government are disqualifying them. If she could come back to me on that point, I would be most grateful.

[Miatta Fahnbulleh]

I am happy to write to clarify that key point.

Everything that we are doing through these new clauses and this reform package is in order to ensure that we have a system that is fit for purpose, fair and operates so that we can build trust and accountability within public bodies at the local level. Committee members will appreciate the importance of providing certainty to the people who have worked to maintain the local audit over the years, which is why we are putting in place these two provisions.

New clause 9 will provide the Secretary of State with a new power to require the LAO to conduct a review of local bodies’ financial reporting and audit arrangements. The LAO will have the power, through contract management and quality oversight, to monitor timeliness in the sector, and will have levers to hold firm account where audits are late. Those statutory reviews will address the accountability gap by providing a way to understand whether individual local bodies have adequately supported the audit process. We believe that those reviews are vital to restoring public accountability, providing assurance at each stage of the audit process and rebuilding our early warning system. They are an integral part of a much bigger reform that we think is both necessary and long overdue. I commend the new clause to the Committee.