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Mr. Malcolm Chisholm (Edinburgh, North and Leith): What reason does the hon. Gentleman have to suppose that the Accounts Commission is not an independent body?

Mr. Letwin: I make no such accusation. The Accounts Commission is an independent body but it is restricted by statute. It can investigate only a narrow range of financial matters. The Secretary of State was at pains to point out that his objection to the motion, which he would otherwise have accepted, was precisely that we were seeking to widen the scope of the inquiry. I repeat the question: how can a Government and party devoted to openness and to cleaning up and improving local government resist an independent inquiry of wider scope?

On 12 July 1997, a right hon. Gentleman who does not often appear in the House but is of more importance than we poor mortals who do, the Prime Minister, told a Labour party conference:

"But we are on trial. Deliver our promises, repay the people's trust, and we will be rewarded with more of their confidence. Go back on those promises, return to old ways, and we will lose that trust."

He was right. There is a sort of trial, but, alas, it closely resembles Kafka's trial. The Prime Minister, as Prime Minister, is judge. As leader of the Government, he is

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foreman of the jury. Most important, as leader of the Labour party, he is the plaintiff. That is not open government.

Mr. Browne: The hon. Gentleman's vocabulary is slightly wrong. The debate is about Scotland, where we say "accused", not "plaintiff".

Mr. Letwin: I am well aware of the hon. Gentleman's credentials. He has explained to the Competition Bill Committee that he is not a lawyer but a notary. I do not regard either point as material to the debate.

If we do not have an inquiry, it will do lasting damage not only to local government in Scotland and the Labour party but to the structure of democracy in this kingdom. It will do damage because the Labour party--I apologise to hon. Members who represent the Scottish National party--is likely, often if not immediately, to form the new Government of Scotland. I thought that the Secretary of State might appreciate those remarks. No doubt SNP Members are quietly fuming, but the people of Scotland may well elect Labour to the new Government of Scotland.

Mr. Salmond: I do not mind the hon. Gentleman conceding defeat for the Conservative party, but can he leave us out?

Mr. Letwin: The issue is not the frivolous debating point of whether Labour will win, but that it may win. It is therefore of the utmost importance to the electorate not only of Scotland but of the United Kingdom to know that the Labour party in Scotland has been cleared of what the Secretary of State claims are overblown allegations. He can do that only by commissioning a full, independent inquiry. At that point, the problem will disappear. Until then, we have what was accurately described by Kafka as

"a blend of fog and smoke filling"

the Chamber

"with a faint smell of burning soot".

Mr. Wallace: Will the hon. Gentleman clarify his motion? Is it for an independent inquiry into the allegations that have been made, or, as appears in the Order Paper, into the conduct of local government in Scotland, in which the whole of local government in Scotland is tarred with the same brush?

Mr. Letwin: The sad fact is that the dominance of the Labour party in local government in Scotland, especially in the councils under discussion, is so nearly complete that the difference evaporates. It is a difference without a distinction.

We are asking whether it is true, as is alleged in press report after press report, that the culture of the Labour party in dominating local government in Scotland has reached a point at which it needs investigation. That question can be answered only by such an investigation.

Mr. Dewar: As the hon. Gentleman is talking, as many hon. Members have talked, about Renfrewshire council and its dominance by the Labour party, could he tell us what the political make-up of Renfrewshire council is?

Mr. Letwin: I have no intention of spending the last half-minute of my speech doing that. I shall, as the Secretary of State himself would say, write to the right hon. Gentleman on the matter.

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The question at issue is clear: will the Secretary of State open local government in Scotland to the kind of inquiry that it deserves and needs, following those allegations? If, in the winding-up speech, we are to be told that the answer to that question is no, we must be told why not. Why will those claims made by the Labour party before, during and after the general election not be applied in this case, by means of a full, independent and open inquiry?

9.49 pm

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): Despite its ups and downs, this has been a useful debate on the whole, and has made some things, at least, a wee bit clearer. First, there is agreement that, in two cases, direct labour organisations in Scottish local councils made unacceptably high losses, and revealed serious problems within management and control. As my right hon. Friend the Secretary of State made plain, serious failure of that magnitude is not acceptable, and will not be tolerated.

Secondly, as several hon. Members have said, it is clear that my right hon. Friend acted swiftly and promptly in response to the problems when they emerged. He instantly activated the statutory procedure, issued notices to the two councils, and called for reports from all councils on the financial status of their DLOs. He has also asked the Accounts Commission to prepare a high-level audit of all councils in July, not only on the operation of their DLOs but on the client side.

It is important to point out, as my hon. Friend the Member for Edinburgh, North and Leith (Mr. Chisholm) has just suggested, that the Accounts Commission is independent. Its findings will be made public, and in the course of its investigations it can ascribe responsibility for the various things that have gone wrong.

The action that my right hon. Friend has already taken is, I believe, unparalleled in its speed. He has made clear his intention to act effectively and swiftly in the statutory process that he has started. He has also made it clear that, if similar problems emerge in other Scottish councils, he will not hesitate to take similar action.

The third factor that has emerged in the course of the debate is the paucity of constructive suggestions from the Conservatives to tackle the crisis that they affect to describe. It has become clear that it is the Government who have the constructive agenda for reform and modernisation of local government. The proposals for a new ethical framework, for the appointment of the McIntosh commission with a radical and far-ranging brief, and for the development of a new system of best value to replace the discredited policy of compulsory competitive tendering, are all evidence of the Government's drive to improve and modernise.

To pick up some of the specific points that have been made in the debate--

Dr. Fox: Did not the failings of the two councils whose DLOs gave rise to the problem occur within what the Government have described as best value practice?

Mr. Macdonald: The contracts that the DLOs now have were secured by competitive tendering. The competitive tendering was not compulsory, but it was entered into voluntarily by the local authorities, which followed the exact procedures that the Conservative

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Government laid down. Those are the procedures that produced the contracts that led to the problems for the local authorities.

During the debate, some hon. Members advanced constructive proposals for reform and improvement in local government. My hon. Friend the Member for Ayr (Ms Osborne) mentioned the value of systems of decentralisation, and of the establishment by various local authorities of citizens' juries. Local authorities have pioneered several different decentralisation schemes, which have been submitted to the Scottish Office. While they are not actually gathering dust, the Government have no power to dictate to local authorities how to operate such schemes, which is right, because there must be space for local flexibility. The existence and experience of those schemes will be a valuable resource for the McIntosh commission.

The hon. and learned Member for Orkney and Shetland (Mr. Wallace) turned to his favourite remedy for all ills--proportional representation. We have asked the McIntosh commission to take a fundamental look at how to enhance accountability within local government, including asking questions about why people do not turn out to vote and how best to elect councillors.

I concede that there is a case for some form of proportional representation in local government elections, albeit not an unanswerable case, and my right hon. Friend the Secretary of State recognised that case in his recent Richard Stewart memorial lecture. As the hon. and learned Gentleman knows, I am not opposed in principle to proportional representation, and nor are the Government; we have introduced it for European elections and for elections to the Scottish Parliament, but we remain agnostic about its suitability for local government.

Mr. Wallace: I did not say that proportional representation was necessarily a panacea for all problems--in fact, an important aspect of the relationship between central Government and local government, which influences the strength of local government, is the financial relationship between the two. Will the Minister explain why the financial relationship between the Scottish Parliament and Scottish local government is not within the remit of the McIntosh commission?

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