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Delegated Legislation Committee Debates

Draft Audit Commission (Borrowing Limit) Order 2002

Sixth Standing Committee on Delegated Legislation

Monday 11 March 2002

[Mr. James Cran in the Chair]

Draft Audit Commission
(Borrowing Limit)
Order 2002

4.30 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead): I beg to move,

    That the Committee has considered the draft Audit Commission (Borrowing Limit) Order 2002.

It is a pleasure to serve under your chairmanship this afternoon, Mr. Cran.

The Secretary of State for Transport, Local Government and the Regions is granted powers under the Audit Commission Act 1998 to make an order to allow the Audit Commission to borrow such sums as it may require to meet its obligations and discharge its functions. The commission has requested that it be allowed to increase the aggregate amount outstanding in respect of the principals of any of the sums borrowed by it to £12 million.

The 1998 Act provides that the commission may temporarily borrow from the Secretary of State or, with his permission, from any other person, such sums as it may require to meet its obligations and discharge its functions, by means of an overdraft or otherwise. Paragraph 9(2) of schedule 1 provides:

    ''The aggregate amount outstanding in respect of the principal of any sums borrowed by the Commission . . . shall not exceed £4 million''.

Mr. Malcolm Moss (North-East Cambridgeshire): On a point of order, Mr. Cran. I notice that the Minister is not supported by any of his departmental officials. If we were to ask many questions, he might not have a regular supply of appropriate answers. Is it in order for the Committee to proceed without such support?

The Chairman: The hon. Gentleman has made his point, but it is not a point of order. It is for the Minister to decide who supports him, not for any of us.

Dr. Whitehead: The Minister would be happy were the officials in their place. Should any elucidation be required, I would be happy to provide it from my vast background, understanding and knowledge of the subject. That was ironic, although it may not appear so in the report of our proceedings.

The order increases the Audit Commission's aggregate borrowing limit to £12 million. By virtue of section 52(2) of the 1998 Act, the order is laid in draft for approval by resolution of the House of Commons. The request for an increase in the sums that the Audit Commission is allowed to borrow reflects the changes in its remit and its increase in size since its inception in 1983. The current Treasury-

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guaranteed sum of £3.5 million represents nearly 25 per cent. of the 1983 income figure. By contrast, the commission's income for the year ending 31 October 2000 was about £144 million, so the £3.5 million overdraft covered only about 2.5 per cent. of that figure. The commission's gross income for the year ending 31 October 2001 was £178 million, which suggests a further drop in the cover provided by the £3.5 million.

Most organisations consider it prudent to have cover in cash or via an overdraft facility for at least a month's expenditure. For the Audit Commission, that sum would be about £12 million. The commission initially requested that the Secretary of State lay an order to authorise the maximum aggregate borrowing limit of £20 million permissible under the 1998 Act. Her Majesty's Treasury was not convinced that the commission had made a case strong enough to increase its aggregate borrowing to the maximum permitted limit, but gave its consent to the commission's being allowed a bank overdraft facility of up to £12 million.

I am satisfied that the order would comply with the Human Rights Act 1998. I commend it to the Committee.

4.35 pm

Mr. Malcolm Moss (North-East Cambridgeshire): It is a pleasure to serve under your chairmanship, Mr. Cran. We are delighted that the Minister has finally received his departmental support; that situation seems to be going from bad to worse.

The Minister mentioned a key point—the fact that the Audit Commission asked for £20 million, but the Treasury tossed a coin in order to decide on a figure between £5 million and £20 million and ended up with £12 million. However, he gave no real explanation as to why that amount was deemed to be more appropriate than £15 million or £20 million. It is not just the figure; the problem is the reason behind the borrowing requirement, which is that inspection regimes, many of which involve the commission, are increasing daily under this Government.

However, on 28 February we were promised, in a Cabinet Office press release from Lord Macdonald of Tradeston, that the Government would take control of the red tape issue and that that would free up front-line staff from paperwork and unnecessary bureaucratic processes. That promise was made the other week, yet the inspection regimes that now burden local government in one guise or another cost £600 million a year. Much of that covers the bureaucracy involved with best value, which has led to an excessively bureaucratic and centralising inspectorate regime.

It is not only that the regime that is expensive; the system is so complex that many Labour and Liberal Democrat councils are returning to the bad old days of unchallenged and uncompetitive in-house awards. The Government have allocated only £52 million a year for central best value administration and the Local Government Association calculates that it costs £175 million a year on top of that. Councils are having to find a huge amount of money from their grant resources and their council tax simply to implement

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the best value regime, with which the Audit Commission is heavily involved.

It is not only Conservatives who criticise the best value regime. The National Assembly for Wales has decided to abolish it. Mrs. Edwina Hart, its Minister for Finance, Local Government and Communities, has conceded that best value inspection has not really worked. Local authorities have been fed up with the bureaucracy and the fact that they have reports telling them that they cannot improve when the purpose of best value is to improve. The Labour leader of the Welsh Local Government Association, Sir Harry Jones, has stated that councils are spending more time on process than on service delivery.

The Government are also unhappy about the way in which best value has been introduced and monitored. No doubt the Audit Commission has views on the matter. It might have approached the Minister and his Department to say that the system is not working and that it should be reviewed and streamlined. The Minister announced a review of best value—in England only—in October 2001. That demonstrates that the scheme is fundamentally flawed. It has not been in place for long, yet a review is already being undertaken.

The local government White Paper, which was introduced at the back end of last year, outlined a significant increase in inspection regimes in local government. It is not surprising that the Audit Commission has asked for more borrowing powers; its budget is obviously on the increase. In the White Paper, the Government decided to grade councils into a series of performance categories. At the top end are high performing councils, followed by the striving, coasting and poor councils. The Government are obsessed with trying to pigeonhole local authorities, as is evident in the Countryside Agency's insulting labelling of one third of the parishes in England as ''barely active'' or ''sleeping''. The local government information unit has noted how so-called comprehensive performance assessments ''erode local choices'' and

    ''give too dominant a role to the Audit Commission as the sole arbiter of success for councils.''

The Government are not only giving more money and borrowing powers to the Audit Commission; they are giving it power over classification of local councils. That cannot be right. It is almost as if the Government cannot be bothered to get involved in such issues, so they are passing the responsibility to someone else. The local government information unit adds,

    ''to boil it all down into four crude categories is self-defeating. It will destroy staff morale and affect recruitment.''

That is becoming a common theme in all our public services, not only in local government, but in the police, the fire service and health and education. Labour's red tape and bureaucracy are not only ineffective, they are undermining the morale of public sector workers.

Finally, I come to the appointment of the next chair of the Audit Commission, who happens to be a Labour peer—not just any Labour peer, but a Labour peer who was special adviser to Jack Straw from

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1997–98. The post has been vacant since last year when Dame Helena Shovelton was sacked without being given any reason—hardly a model of best practice. We are concerned about that appointment, which seems to have been railroaded through against substantial opposition. That hardly smacks of a balanced, conciliatory approach towards those who are involved in local government, especially bearing in mind the involvement of that individual with the Labour Government from 1997–98. It is appropriate for the Minister to explain why, from all the distinguished people who could have been chosen to chair the Audit Commission, a special adviser to a Labour Minister was chosen.

This is not only a question of the Audit Commission being given additional borrowing powers worth £8 million; it is a question of the true cost of all the bureaucracy with which the commission is involved. The Minister quoted some figures earlier, and the sum of £175 million rings a bell. That is a huge sum, so we must ask whether it will be put to effective use. What are the Government getting in return? They are getting councillors, who are increasingly investing resources in best value only to be told at the end of the day something that they knew at the start. That is a complete waste of time and effort. The costs of the inspection are spiralling out of control and it will not be long before the Minister introduces another order to double the commission's borrowing requirement to £24 million. I shall be interested to hear the Minister's response to my points and shall reserve judgment on whether to vote against the order.

4.43 pm


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