Local Government Bill [Lords]

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Clause 84

Surcharge etc.

The Minister of State for Local Government and the Regions (Ms Hilary Armstrong): I beg to move amendment No. 518, in page 57, line 9, leave out `and (5)(b)' and insert—

    `(5)(b), (7) and (8)'.

The amendment relates to clause 84, which repeals the surcharge provisions in sections 17 and 18 of the Audit Commission Act 1998. It is a technical amendment to ensure that the appropriate provisions—

Mr. Don Foster (Bath): Can the Minister assure the Committee that she has checked the accuracy of the amendment? If she wants to omit subsection (8), can she tell me where it appears in the Audit Commission Act, 1998?

Ms Armstrong: I cannot go into too much detail. I never pretend that I know whether a technical amendment is correct. We employ parliamentary counsel to check such matters, which are frequently a mystery to me. However, I am told that subsection (8) was inserted into the Audit Commission Act by the Greater London Authority Act 1999.

Amendment No. 518 is a technical amendment to add a missed reference and ensure that all the appropriate subsections of section 17 are repealed.

10.45 am

Mr. Waterson: We accept that this is a purely technical amendment. However, it was a bit worrying that the Minister did not know the answer to that question. Committees are the last line of defence against sloppy legislation and I would hate to think that a court case could take place because nobody knew where the subsection was. However, I am sure that if a draftsman says that something is right, it must be so. I now flag up the possibility of a short stand part debate on the clause.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Ms Armstrong: In many senses, this is an historic occasion. We are repealing the surcharge provisions in the Audit Commission Act 1998 and the Secretary of State's power to sanction an item of account. Surcharge has caused much excitement over the years. We might best remember the issue from way back in the Clay Cross case. I will not mention the other case involving surcharge that people remember and about which they are concerned. All that I will say is that proceedings currently before courts will continue to be subject to the legislation that was current when those cases commenced.

The Nolan committee recommended the repeal of surcharge. The operation of surcharge allows financial penalties to be imposed that bear little relation to the gravity of individuals' misconduct. One of the many reasons for introducing the new ethical framework was to remove such anachronisms and eliminate the difference between local and central Government approaches to punishing financial wrongdoing.

Nolan recommended repealing surcharge because it was unfair for local government officers and members to be subject to surcharge when other public servants were not. The law was defective and although surcharge was in theory a means of restitution, that was not the case in practice. There were technical difficulties in calculating the relevant sums, which were often beyond the means of the individuals involved and bore no relation to people's ability to pay or their culpability.

We have considered those arguments and we agree that the surcharge provisions in sections 17 and 18 of the 1998 Act should be repealed. Removing the relevant surcharge provision from section 17 of the 1998 Act does not affect the auditor's ability to apply to the courts for a declaration that an item account is contrary to law. I have been deliberative about that point to ensure that the hon. Member for Eastbourne appreciates that the auditor will still have that power.

Under the new arrangement, the Standards Board and adjudication panel rather than the auditor will determine whether there has been misconduct and any issue subsequently will be pursued through them. These changes affect all the bodies to which surcharge provisions currently apply.

Mr. Waterson: I thought it was right for us to have a short debate on this because, to the untutored eye, these matters look fairly technical. We are, in a sense, drawing a line under a longish period of surcharging in English law and British local government. Not many tears will be shed at the wake, but it is important that we mark its passing in some way.

As I said a moment ago in a different context, it is common ground across parties and local government that the day of surcharging has gone, although the principle behind it is still important. There should be some mechanism for financial punishment of wrongdoing. The problem with surcharging, as the Minister said, has always been that it is a blunt instrument. Sometimes people can blunder into doing something and almost biblical punishment is rained down on them in the shape of surcharging.

It has also contributed to a large body of law on the issue of ultra vires. We spent much time on part I of the Bill debating the new power and the question of ultra vires. But the reason that it is engraved on the souls of most local councillors is, I suspect, mostly because of the dangers of surcharging. The Minister was delicate enough not to go into too many details about recent cases that have brought the concept into disrepute on grounds of procedure, cost and general inappropriateness to the needs of modern local government. We saw what happened in such places as Hammersmith and Fulham over interest swaps and so on, which seemed like a good idea at the time but went disastrously wrong.

At the moment, the district auditor has a duty to surcharge anyone who is responsible by wilful misconduct for a loss or deficiency. There is a great body of law also about the meaning of wilful misconduct and the Minister referred to the fact that the auditor will still have some power to deal with items that he or she does not find appropriate. However, clause 84 removes the ability to impose the surcharge. There remains the possibility of declaring an item of expenditure to be contrary to law but, according to the Library brief, it would be for the Standards Board and the adjudication panel to decide whether there had been misconduct and what, if any, action should be taken.

I am also informed that the amendment would remove the reasonable belief defence under the 1998 Act, which, again, many people consider is simply not sustainable in the modern world. It will be interesting to see whether the provisions that are being made in other parts of the Bill will fill the entire gap left by surcharging, but neither Opposition nor Government members of the Committee will shed a tear at its passing.

Question accordingly agreed to.

Clause 84, as amended, ordered to stand part of the Bill.

Clauses 85 and 78 ordered to stand part of the Bill.

Clause 79

Options for elections

Question proposed, That the clause stand part of the Bill.

Mr. Waterson: I thought that it might be appropriate to have a short debate on the options in the clause, although our main debate will be on clause 80.

The clause sets out three options for schemes for the election of councillors, two of which—elections every year and the all-out system—are already used by some councils. Having experienced both systems, I know their pluses and minuses. Many years ago, I was a councillor in Hammersmith and Fulham, which had the all-out election system that we will discuss in more detail on later clauses. It produces some certainty in council policy for a significant period because those in control of the council—assuming that someone is in control—can plan ahead and that is a good thing. However, it also means vast swings backwards and forwards. [Interruption.] I hear murmurs of assent, although they may have been the opposite, from former members of local government. In London, there were enormous swings, contrary to the swings in national politics at the time. Good, experienced councillors were swept out of office simply because the Government of the day were unpopular, or vice versa.

In Eastbourne, there are elections every year—we may discuss voter fatigue in more detail later. It is one way of keeping a finely honed, lean, mean, election-fighting machine going, but it causes problems on the local council because, for some of the year, councils do not necessarily behave as responsibly as they should in looking to the future. With Liberal Democrats on the other side, people are constantly jockeying for position and looking ahead to the next election, which will inevitably be the coming May. The Liberals of Eastbourne have now returned to opposition, probably with some relief, because it is their natural metier.

There are genuine problems with both systems; it is interesting that the Government are introducing a further option—the second option in clause 79—of a term of office of four years and elections every other year for half the council in each of those other-year elections. I hope that that has made it simple, straightforward and easy to understand. It is a new system. The Minister may tell us if it is an import from another country or countries and, if so, what is their experience of the system. It seems to be regarded as a half-way house between the two options, which is the only thing to commend it. I should like to know why the Minister recommends it as a third option when local government has happily existed with one of the previous two options for a long time.

Ms Beverley Hughes: I shall be brief because, as the hon. Gentleman said, there will be a more extensive debate on clauses 80 and 81.

I shall make two or three points now: first, I agree with the hon. Gentleman that different systems have different strengths and weaknesses. I am not sure that election turnout is the most relevant criterion for assessing the benefits of the systems, but different systems perhaps offer more accountability and transparency to the electorate. We shall doubtless debate that later.

11 am

Secondly, we are talking about an enabling power. The Government are not proposing in the Bill to bring those schemes into force. We recognise that a cautious approach is needed. The extent of the changes with which local authorities have already had to grapple means that it is sensible for us to take our time to consider whether the election schemes in particular areas should change.

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