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4.29 pm
Mr. Tim Smith (Beaconsfield): The hon. Member for Holborn and St. Pancras (Mr. Dobson) started his speech by saying that he did not want to be party political, and recognised that Labour as well as Conservative councils were guilty of fraud, corruption and inefficiency, but he then spent almost his entire speech criticising pretty well the only Conservative council that has had difficulties in recent times.
Mr. Boateng: Is the hon. Gentleman not aware of the appalling abuses of power that have occurred in the London borough of Brent, bringing local government generally into disrepute? To pretend that Westminster is the only borough affected by scandal is to live in cloud cuckoo land. Brent is certainly among those boroughs, and so is Wandsworth.
Mr. Smith: There is, however, a much longer list of Labour councils that have been guilty of fraud, dishonesty, corruption and gross inefficiency. If we were a little more objective, we might recognise the existence of faults and difficulties in councils of all complexions. We should be concerned with trying to establish a system that will get to grips with those problems.
I agree with the hon. Member for Holborn and St. Pancras about that, but I do not agree with his contention that the Audit Commission, or the district audit service, has been at fault. I think that, when the investigation into the current series of scandals has been completed, we shall need to establish what is wrong with the system, but I think that the present system and the present law are inadequate. The hon. Gentleman recognised that. The present system is not based on the Local Government Finance Act 1982; it predates that considerably. I believe that the right of objection to local authority accounts goes back to the last century, and I doubt that the present system is capable of dealing with the complexity of inquiries such as the one that is going on now.
Local government expenditure accounts for 25 per cent. of all public spending, so large sums are involved. We shall need to examine all aspects of these matters. For example, I think it wrong that the district audit service can--as it did in Westminster--reach a preliminary conclusion, and effectively find councillors guilty before they have an opportunity to put their side of the case.
Mr. Dobson:
Is the hon. Gentleman not aware that, before the district auditor reached his preliminary conclusion, he had innumerable meetings with those whom he subsequently accused of wasting money? They were heard, at enormous length--when they finally turned up in Britain to be heard.
Mr. Smith:
I was aware of that, but I still consider the present arrangements inadequate. The findings were preliminary, but they were presented in a way that suggested that those councillors were guilty, period. The system is not satisfactory. A much more satisfactory system operates in relation to inquiries into companies: indepen dent inspectors are appointed to whom, under the Maxwell rules, the case against those involved must be put on more than one occasion. It may not be appropriate to transfer that system in its entirety to local authorities; I am merely saying that I believe that the system requires thorough examination to establish what changes need to be made.
The hon. Member for Holborn and St Pancras did not seem to recognise the existence of a constitutional difficulty in relation to the independence, or autonomy, of local authorities. He advanced a series of proposals that might compromise that independence considerably. As it happens, I agree with what he said about the independence of the Audit Commission and the district auditor. It is important that that independence is preserved, and is not compromised by the provisions in the Bill which concern the social services inspectorate.
The fact that the Bill adds to the Audit Commission's obligations and duties is recognition of the fact that, since its establishment in 1982, the commission has done an extremely effective job. The district audit service has always conducted a regularity audit of local government accounts; it is the addition of a "value for money" element that has been so important. In 1982, for the first time, the Audit Commission was obliged to conduct value-for-money studies of local councils. It has done an enormous amount of good work and contributed substantially to the improvement in the quality of local government services.
In 1990, the health service was added to that. That was clear recognition by the Government that the Audit Commission had been doing valuable work in local government. Now the commission does a great deal of useful work in the national health service, examining what can be done to improve value for money, to establish performance indicators between one part of the service and another and between one hospital and another.
I pay tribute to the work of the first two Audit Commission controllers, Sir John Banham and his successor Howard Davies, both of whom went on to become director general of the Confederation of British Industry and both of whom came from Mckinsey and adopted a Mckinsey-type approach to the commission's management. That was important because the commission has no sanctions when it comes to trying to ensure that its recommendations are implemented. It was important therefore that it should have a high profile and obtain a lot of publicity for its recommendations. It has achieved that and succeeded in putting pressure on local councils to pick up the recommendations and implement them. There is no way in which it can require local authorities to do so. It must do so by force of persuasion.
I also pay tribute to Sir David Cooksey, who recently retired as Audit Commission chairman. His contribution to its work should not be underestimated either. Anyone who has read his valedictory report in the latest annual commission report will know that he had considerable command over the commission's work during the years that he served as its distinguished chairman.
The commission has brought an interesting and attractive new approach to value-for-money audit in government. Until its advent, we simply had the National Audit Office, which has a different approach. It tends to consider central Government from the top downwards, whereas the Audit Commission tends to consider local government from the bottom upwards, considering what goes on in individual local authorities and drawing its conclusion from many different examples.
I consider that to be an extremely constructive approach. It was well exemplified when, six or seven years ago, both bodies decided to investigate the management of police forces in England and Wales. The NAO concluded that yet more Home Office interference in the management of police forces was needed, that more obligations and more duties should be placed on Her Majesty's inspectorate of constabulary, and that that would ensure that the quality of management and of service to the public by local police forces improved.
The Audit Commission, considering precisely the same questions, came to precisely the opposite conclusion, which was that there was too much interference by the Home Office and that, instead of the Home Office telling each police force precisely how many constables it could employ each year and so on, we needed to give chief constables far more management autonomy, to tell them to get on with the job and to assess their performance against whatever targets were set subsequently. That is the path that the Government chose. The law has been reformed so that police grant is paid in that way, starting from 1 April last year. As time goes on, considerable improvements in value for money will take place in local police forces. That was directly as a result of an Audit Commission recommendation.
There is a need for more co-operation between the National Audit Office and the Audit Commission. There tends to be rivalry, which is fine as long as it is healthy. The Public Accounts Committee recently considered an NAO report on the Metropolitan police's response to 999 calls.
It is anomalous that the PAC can investigate the Metropolitan police but no other police force in England and Wales simply because the Met is funded directly by the Home Office while other police forces are funded indirectly though local authorities. In this case there was some co-operation between the National Audit Office and the Audit Commission. Information was obtained from the Audit Commission about the response by other police forces to 999 calls. It could have gone further. The Audit Commission could have produced a report covering all other police forces at the same time, and that could have been considered simultaneously.
There is a question about parliamentary accountability of the Audit Commission. In an appendix to the Butler report on the commission it is stated that the commission is accountable to Parliament, and the appendix sets out various ways in which that occurs in practice. It would be a good idea for Parliament to take more interest in the commission's reports and to follow them up. We ensure that central Government is operating properly by allowing the PAC to investigate National Audit Office reports and to publish a report. The Treasury has to respond by saying what is being done to ensure that the recommendations are being implemented. In the context of the Audit Commission I am concerned that there is no similar mechanism.
For the reasons that I gave earlier relating to the independence of local councils, it would not be easy for Parliament to start investigating council matters. But we could make a start with the health service because there is no question of comparable local accountability. The Audit Commission produces excellent reports on the NHS and the Public Accounts Committee or some other committee could consider the reports and call the chief executive of the NHS management team to give evidence. It could produce a report and could try to ensure that some of the recommendations were implemented.
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