Local Government Bill [Lords]

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Mr. Nigel Waterson (Eastbourne): We shall be here all morning.

Mr. Loughton: I shall give a potted account of events in Doncaster, but I should say that my point about councils' code of conduct concerns using the whole of part III to prevent, or intervene in, various abuses of local government.

The scope of corruption in Doncaster first came to light in a report by the district auditor in January 1997, which accused councillors of abusing trips, expenses, gifts and hospitality. In March 1997, the fraud squad was called in, and a month later a specialist team of police officers was set up to carry out the investigation. It emerged that councillors had inappropriate relationships with developers, who profited from key planning decisions on green-belt sites.

The Minister of State for Local Government and the Regions (Ms Hilary Armstrong): There have not been any prosecutions.

Mr. Loughton: The Minister says that there have been no prosecutions and that is a good point. However, in what way would the 32 clauses in part III have prevented such incidents, or enabled intervention or criminal prosecution? She will have plenty of opportunity to illustrate that point.

Sir Paul Beresford (Mole Valley): I hope that my hon. Friend has on his list Preston, which is a classic example of connivance between members and officers, which is the real concern that the Bill should address. As the Bill is drafted, such individuals might not be discovered, because secrecy could be maintained in respect of their performance.

Mr. Loughton: I am grateful to my hon. Friend for bringing up a relevant point, to which I hope he will return. Because of the enormous volume of such cases--they occur almost exclusively in Labour councils--I had to be selective according to quality and seriousness. Otherwise, we would indeed be here all day.

The Doncaster case makes interesting reading. Malcolm Glover, who took over the leadership in January 1997 with a mandate to clean up the council, has resigned following his arrest on charges of making false expenses. The entire Doncaster Labour party was suspended by the Labour party's national executive committee in July 1997. Those suspensions were internal Labour party matters, and the codes of conduct that we are considering would not apply to them directly.

Ms Beverley Hughes: How did the Tories deal with Westminster?

Mr. Loughton: I think that we are striking a few sensitive nerves. I hope that the Under-Secretary will bear in mind such cases when she considers the relevant provisions.

The Doncaster affair has rumbled on since 1997, and the police have launched a major fraud investigation into grant payments totalling 400,000 for home improvements. It is alleged that, although grants were paid for several years up to 1996, no work was carried out, that homes received two grants for the same work and that some tenders were approved at a cost that was well above the going rate. Councillor Jack Meredith has become the latest Labour member to be arrested, joining a list of 30 people, 17 of whom are sitting or former Labour councillors, who have been arrested since the police launched their inquiry in 1997. The Doncaster case is obviously slightly worrying.

We need to consider the perception of local government that such episodes give to the public. The Rotherham Advertiser gave the headline, "Here we go again" to an article about Irene Furnell, who was sent in to clean up the situation but who was herself suspended. Other headlines include, "Disgraced council unit to be wound up" and "Boss suspended"; they do not inspire much confidence. What will the Labour party do to stop the problem, and where will it intervene? I now turn to--

The Parliamentary Under-Secretary of State for Wales (Mr. David Hanson): Westminster?

Mr. Loughton: Peterborough, in fact. The Liberal Democrats should take an interest in this case--it is another example of criminal corruption.

Ms Armstrong: Then the hon. Gentleman should discuss Westminster.

Mr. Loughton: The Minister is perfectly free to mention any council she wants. So far, Labour Members have mostly mentioned one council, which happens to be Conservative. Many dozens are relevant, and we are not keeping a score.

In Peterborough, the Liberal Democrat councillor Michael Jackson has just been jailed for eight months after pleading guilty to 19 charges of defrauding the Department of Social Security and of fiddling council expenses. He was terribly innovative: apparently, he claimed allowances for 21 community health council meetings that he never attended, claimed cash for a meeting in the city when he was at the Liberal Democrat party conference in Eastbourne, made attendance claims for two different meetings that were held the same time, and inflated his mileage claims by as much as half as much again. When asked by the police to account for such matters, he put them down to administrative errors.

The examples that I have given so far are of obvious criminal corruption which, in some instances, resulted in criminal proceedings against and jail sentences for the relevant councillors. I move on to a less clear situation, which cannot be described as criminal but which can be perceived as involving an "abuse"--I use the word with inverted commas--of councillors' positions. I shall give examples from Leeds and Brent.

A few months ago, an Ofsted report in Leeds made some interesting revelations. The Daily Mail reported:

    A failing Labour education authority allowed individual councillors to channel thousands of pounds to schools in their own wards...While one Leeds school was given 45,000 to improve facilities last year, others gained nothing, a damning report by Ofsted inspectors revealed...Ofsted found that political interference by councillors had also been a key factor in the city's failure to appoint a director of education for four years, leading to drift and decline in its services to schools. One was finally appointed 15 months ago.

Similar comments were made about Sheffield. Elected members have been heavily involved for many years in the management of education in Leeds, and they were able to influence the provision of additional funds to schools in their wards. That caused the strong perception in the public's mind that there was political interference. Political interference in the schools of electors' children raises serious concerns. [Interruption.] The Minister is muttering again. If she wants to intervene, she is welcome to do so.

I should like to move on to Brent--we are getting closer to home--which represents another example of what has been perceived as an abuse of councillors' powers. Brent council has decided that one third of its 320 million pension fund is to be managed internally by officers, who are not investment experts.

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Against advice--including that of Conservative councillors--the Labour administration invested 250,000 of local authority pension fund money in Owen Oyston's Sunday newspaper--he who is still in jail, and a major Labour benefactor. Shortly afterwards, the newspaper went into liquidation and the 250,000 was lost. Towards the end of the 1980s, the council entrusted 2 million of pension fund money, on an index basis, to a Japanese investment manager, who lost $1 million in six months in a falling market. As if it had not had its fingers burnt sufficiently, the council has also lost 2.5 million by investing in the falling euro. Those councillors set themselves up as investment managers with no competence so to do, and I wonder why they did not fall foul of the predecessors of the Financial Services Authority. Their actions have resulted in a large-scale loss of funds to the council tax payers of that borough.

My final example is Nottingham county council, which has used the staff pension fund to send councillors abroad on fact-finding trips, to a total value of 400,000. Those trips included a 28,000 visit by four councillors to Hong Kong and Australia and a 36,000 tour of the United States. That smacks of junkets for councillors, and the perception of electors is that they are not doing the jobs for which they were elected.

The acid test of this part of the Bill--and, to large extent, of the whole Bill--is whether, after it is enacted, examples such as those that I have cited will either be prevented from happening in the first place, or the new structures will intervene at an early stage to ensure that further damage is not done and to deal with the situation before it becomes a criminal matter for the police. The proof its success will lie in whether, in the perception of electors, all local government abuse has been cleaned up, because they will consequently have more enthusiasm for local government, and vote and stand as candidates in greater numbers in local government elections.

As we proceed, Ministers might like to refer to the examples that I have given in order to clarify how this part of the Bill will succeed in its aims without imposing an enormous amount of addition regulations on perfectly clean councillors or deterring prospective councillors from wanting to stand for public office.

Mr. Don Foster (Bath): I rise briefly to refer to part III in the context of the stand part debate.

The hon. Gentleman referred to the complexity of the situation. I confess that I find it so, and therefore want to ask the Minister a simple question to check whether my understanding of the arrangements is correct.

My understanding is that a local authority will establish a standards committee. One of that committee's functions will be to monitor the operation of the authority's code of conduct. Concern about the actions of individuals or of the authority under the code of conduct would be sent to the Standards Board. The board in turn would send the matter to an ethical standards officer, who could then refer it to the local authority's monitoring officer. Once the matter had been dealt with, it would go to the Adjudication Panel, which would establish a case tribunal, possibly on an interim basis, under the supervision of the Council on Tribunals. After that process had been completed, there would a mechanism for an appeal arrangement, which, I confess, I have not fully comprehended. Is that what the Government purpose?

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