Clause 22 - Interpretation

52.     Clause 22 contains interpretation provisions. In relation to e-petitions it provides that such petitions are “made” to the authority - and thus potentially trigger the obligations specified in clauses 14, 15 and 16 - on a date specified by the e-petition organiser, rather than on the date the organiser asks the authority to host the e-petition, or the date when it is first opened for signature. If an e-petition organiser does not specify a date, it is for the principal local authority to specify in its petition scheme when the e-petition is deemed to be “made”.

CHAPTER 3: DUTIES OF PUBLIC AUTHORITIES

Clause 23 - Duty of public authorities to secure involvement

53.     Subsection (1) places a duty on those authorities listed in subsection (2) to involve representatives of interested persons in the exercise of their functions, where they consider that it is appropriate to do so. It sets out that those authorities will need to consider each of three ways of securing such involvement, namely informing the representatives, consulting them and involving them in other ways.

54.     Subsection (2) lists the affected authorities and subsection (3) explains that, with the exception of the Secretary of State, the relevant functions of the authorities listed are all functions they exercise in respect of or in relation to England. In respect of the Secretary of State, subsection (3)(b) provides that the relevant functions are limited to those specified (arrangements with respect to obtaining employment or employees and for the provision of probation services), in so far as they are exercisable in relation to England. Subsection (8) makes the Secretary of State’s functions under subsection (3)(b)(ii) “probation provision” for the purposes of Part 1 of the Offender Management Act 2007 (see in particular section 3 of that Act (power to make arrangements for the provision of probation services by another person as provider of probation services)).

55.     Subsection (4) provides that the duty to involve representatives of interested persons does not grant an authority any additional powers. Where there is a conflict between this duty and another duty, the latter takes precedence.

56.     Subsections (5) and (6) enable the Secretary of State to provide exemptions from the duty by secondary legislation subject to the negative resolution procedure.

Clause 24 - Duty of public authorities to secure involvement: guidance

57.     Clause 24(1) provides that the Secretary of State may issue guidance on the discharge of the duties under clause 23. Subsection (2) sets out that the guidance may be general or for a particular authority, may be different for different authorities and must be published. Subsection (3) requires the Secretary of State to consult authorities to which the guidance relates before it is issued. Subsection (4) states that an authority must have regard to any such guidance that relates to it.

CHAPTER 4: HOUSING

Clause 25 - Establishment and assistance of bodies representing tenants etc

58.     Clause 25 makes provision for the Secretary of State to establish and give financial or other support to a body that will represent the interests, at national level, of housing tenants in England.

59.     Subsection (1) provides powers to the Secretary of State to create such a body, to provide funding to others to create such a body, or to fund an existing body (or a body newly created using other powers) capable of providing national representation of tenants.

60.     Subsections (2) to (4) define the bodies in relation to which the Secretary of State may exercise powers in subsection (1). They outline the functions such a body must have: representing, or facilitating the representation of, the views and interests of tenants; conducting and commissioning research into issues affecting tenants, and promoting other bodies to represent tenants.

Clause 26 - Consultation of bodies representing tenants etc

61.     Clause 26 amends the Housing and Regeneration Act 2008.

62.     Subsection (2) inserts a new section 278A into the Act. The new section provides a power to the Secretary of State to nominate a body representing the interests of social housing tenants for the purposes of consultation in connection with certain functions carried out by the social housing regulator (established by Part 2 of the 2008 Act) and the Secretary of State and set out elsewhere in the Act (and which subsection (1) of the inserted section lists).

63.     Subsection (2) of the inserted section requires the Secretary of State to notify the regulator of any such nomination and the withdrawal of any such nomination.

64.     Subsections (3) to (6) amend those parts of the Act listed in subsection (1) of the inserted section by adding the nominated body to the list of those whom the regulator or Secretary of State must consult before exercising those functions. This means, specifically, the requirement on the regulator to consult on:

• —     the criteria for the registration of providers of social housing;

• —     the disposal of dwellings by registered providers of social housing;

• —     standards etc for registered providers of social housing;

• —     guidance to registered providers of social housing;

• and the requirement on the Secretary of State to consult on directions to the regulator on the setting of standards for registered providers of social housing.

CHAPTER 5: LOCAL FREEDOMS AND HONORARY TITLES

Introduction and background

65.     This Chapter makes amendments to provisions in the Local Government Act 1972 concerning freemen (local freedoms), and honorary aldermen and honorary freemen (honorary titles).

Clause 27 - Local freedoms

66.     The status of “freeman”, derives from the historic traditions of certain towns and cities in England and Wales, and admission as a freeman is dependent on local rules often based on heredity, apprenticeship or marriage. In some towns and cities the freemen, and certain persons related to or associated with them, have property or other rights.

67.     Each guild of freemen has its own rules of admission, which may be contained in Charters, local Acts or secondary legislation or enshrined in ancient custom and practice. While some guilds have found sufficient flexibility in their rules to enable them to admit women or to make other amendments to their admissions practices, others have not been able to because the sources from which their rules derive have no simple process for amendment. These guilds now face difficulties in maintaining their numbers and in revising their rules to reflect changing times. Clause 27, which amends section 248 of the Local Government Act 1972 and inserts a new Schedule 28A into that Act, addresses this problem by allowing the laws relating to the admission of freemen to be more easily amended.

68.     New Schedule 28A makes provision for the laws relating to freedom of a city or town to be amended by, or pursuant to, a resolution of the freemen. Paragraph 2 contains powers to enable laws to be amended by, or pursuant to, a resolution of the freemen for certain, specified purposes. These are: firstly, to provide for the right for women to be admitted to the freedom of a city or town except where the effect of the amendment would be to deprive a man of the right to be admitted; secondly, to enable a woman admitted to freedom of a city or town to use the title freewoman; and, thirdly, to put a civil partner (or surviving civil partner) of a freeman in the same position as a spouse (for instance, if the relevant law confers on the surviving spouse of a freeman the right to an annual payment, the new provision will allow that right to be extended to surviving civil partners).

69.     Paragraph 2 goes on to provide that the freemen may amend any enactment (other than an Act of Parliament) or the law established by custom for any of the purposes set out above, simply by passing a “qualifying resolution”. A qualifying resolution is a resolution passed in accordance with the procedure set out in paragraphs 7 to 10 of the schedule. However, if the law which the freemen wish to amend for any of the purposes set out above is contained in an Act of Parliament then the Secretary of State or the Welsh Ministers, as the case may be, will need to make the amendments by Order once the freemen have proposed the amendment in a qualifying resolution. If the Act of Parliament concerned is a public general Act, not a local Act, then the Order will need to be made using the negative resolution procedure.

70.     Paragraph 3 provides a power for any amendment (not just an amendment for one of the purposes set out in paragraph 2) to be made to the law relating to rights of admission where the law is contained in a royal charter. The amendment must first be proposed in a qualifying resolution and the amendment must be made by Order in Council.

71.     Paragraph 4 provides a power for the freemen to amend, simply by passing a qualifying resolution, the law relating to rights of admission of freemen so far as that law is established by custom. However, where the amendment to customary law being made is for one of the purposes set out in paragraph 2, the amendment should be made under paragraph 2(3) and not paragraph 4.

72.     Paragraphs 5 and 6 provide that the powers set out in paragraphs 2, 3 and 4 for the freemen to amend the law relating to rights of admission include a power to make consequential amendments using the relevant procedure. So, for example, where the principal amendment - the “admissions amendment” — is to a charter by Order in Council any consequential amendments will be made by Order in Council, even if the law amended is established by custom. This is subject, however, to paragraph 5(3) which provides that any consequential amendment which is made to an Act of Parliament must be made by an Order made by the Secretary of State or the Welsh Ministers, as the case may be, once a qualifying resolution proposing the amendment has been passed by the freemen.

73.     Paragraph 7 sets out the procedure to be followed by a freeman or freemen who propose an amendment to the law relating to rights of admission of freemen in their area. Under this paragraph a resolution to make an amendment is passed if it meets the conditions and procedural requirements set out in paragraphs 8 and 9.

Clause 28 - Honorary titles

74.     Clause 28 amends section 249 of the Local Government Act 1972 in respect of both honorary freemen and honorary aldermen.

75.     The title of “honorary freeman” is different from the status of freeman. As the name suggests, the status is purely honorary in nature, and confers no rights on the person so recognised.

76.     Section 249 allows certain local authorities to confer the title ‘honorary freeman’ on persons of distinction and persons who have rendered eminent services to the local area. The local authorities who may currently exercise this power are the council of a London borough or a district having the status of a city, borough or royal borough or any parish or community having by grant under the royal prerogative the status of city and any parish or community entitled by such grant to be called and styled a royal town. The power is also exercisable by principal councils in Wales.

77.     The amendments made to section 249 by clause 28 will extend the power to confer the title “honorary freeman” under section 249 to all principal councils, parish and community councils, and charter trustees in England. The amendments will also allow councils to confer the title “honorary freewoman” where appropriate.

78.     Section 249 also contains a power for principal councils to confer the title ‘honorary alderman’ on former members of the council who have rendered eminent services to that council. Clause 28 amends section 249 to enable principal councils who are exercising that power to confer the title “honorary alderwoman” where appropriate.

CHAPTER 6: MEMBERSHIP OF LOCAL AUTHORITIES

Clause 29 - Politically restricted posts

79.     Certain local authority employees in positions of seniority or influence (for instance the chief executive of the authority) are restricted from undertaking certain political activities, such as standing for election or speaking publicly in support of a particular political party. As well as specific posts being politically restricted, employees with a salary of £36,730 or above are deemed to hold a politically restricted post. These political restrictions were introduced to address concerns about political impartiality and conflicts of interest. These so-called “Widdicombe rules” sought to ensure that authority members are confident that the advice they receive from their senior staff is impartial.

80.     Subsection (2) removes the requirement imposed by section 2 of the Local Government and Housing Act 1989 for local authorities to prepare and maintain a list of posts that exceed a specified salary, and which as a consequence mean that the post-holder is subject to political restrictions. Subsections (3) and (4) make amendments consequential to this.

PART 2: LOCAL AUTHORITIES — GOVERNANCE AND AUDIT

CHAPTER 1: GOVERNANCE

Clause 30 - Scrutiny officers

81.     Each local authority operating executive arrangements is required by section 21 of the Local Government Act 2000 to have at least one overview and scrutiny committee to review or scrutinise decisions made, and to make reports and recommendations about matters whether or not they are the responsibility of the Executive; and to make reports or recommendations on matters which affect the authority’s area. Clause 30 inserts new a section into the Local Government Act 2000 requiring local authorities, with the exception of district councils in areas where there is a county council, to designate one of their officers as a scrutiny officer to support the work of the authority’s overview and scrutiny committee(s).

82.     Subsection (2) sets out the functions that a scrutiny officer may undertake. Typically, a scrutiny officer will promote the scrutiny function generally within the authority and local government partners more widely, and provide advice and support to members of the authority’s committee(s) in undertaking their work. This may include the provision, or management, of committee secretariat services, research, analysis of data and report preparation for example.

83.     Subsections (3) to (5) specify the title of the role, those officers who may not be designated by the authority as the scrutiny officer, and the types of authority who are not required to designate an officer in this manner.

Clause 31 - Joint overview & scrutiny committees

84.     Section 123 of the Local Government and Public Involvement in Health Act 2007 (the “2007 Act”) currently allows the Secretary of State to make regulations enabling a county council in a two tier area to establish a joint overview and scrutiny committee with one or more district councils in its area, for the purpose of making reports and recommendations relating to the attainment of “local improvement targets” as defined in Part 5 of that Act. Such regulations may also make provision for information relating to local improvement targets to be provided to joint overview and scrutiny committees by certain ‘associated authorities’.

85.     The purpose of clause 31 is to broaden the scope of joint overview and scrutiny arrangements so that:

• joint overview and scrutiny committees may be set up by any two or more local authorities;

• such committees may make reports and recommendations on any matter (other than an excluded matter);

• associated authorities may be required to provide any information to joint overview and scrutiny committees (other than that relating to crime and disorder matters) and not just that relevant to local improvement targets.

86.     Clause 31 achieves this by replacing section 123 of the 2007 Act with a new section 123.

87.      Subsection (1) of new section 123 allows the Secretary of State to make regulations enabling any two or more local authorities in England to appoint a joint overview and scrutiny committee.

88.     Subsections (1)(b) and (2) mean that such joint overview and scrutiny committees may be given the power to make reports and recommendations on any matter, other than an excluded matter. Subsection (3) provides that certain crime and disorder matters are “excluded matters”. This is because Police and Justice Act 2006 makes separate provision for scrutiny of crime and disorder matters, and for the appointment of joint committees in relation to crime and disorder scrutiny functions.

89.     Subsection (5) provides the detail as to what regulations made under the new section 123 may do, mainly by reference to the provisions of the Local Government Act 2000 that apply to normal (non-joint) overview and scrutiny committees. The provision that can be made is broadly the same as for those overview and scrutiny committees, with the exception that there is no power to make provision for councillors or officers of an authority to be required to attend before a joint overview and scrutiny committee to answer questions. Provision may also be made that is equivalent to or applies section 246 of, and schedule 17 to, the National Health Service Act 2006. These provisions are concerned with the exclusion of the public from meetings at which certain health related information is under consideration.

90.     Subsection (5) also allows regulations to make provision as to the information which an “associated authority” of an appointing authority must provide or may not disclose to a joint committee. This is no longer limited to information relating to local improvement targets.

Clause 32 - Powers of National Assembly for Wales

91.     Clause 32 amends the Government of Wales Act 2006 (“the 2006 Act”). The clause extends the legislative competence of the National Assembly for Wales to make laws known as Measures of the National Assembly for Wales (referred to in the 2006 Act as “Assembly Measures”). The legislative competence conferred by the clause is subject to general limitations on the exercise of that legislative competence, which apply by virtue of section 94 of, and Schedule 5 to, the 2006 Act.

92.     Subsection (1) provides for amendments to Schedule 5 to the 2006 Act that will introduce a number of matters into “Field 12: local government”.

93.     Subsections (2) and (3) insert matters 12.6 and 12.7 into Field 12: local government” in Part 1 of Schedule 5 to the 2006 Act.

94.     Matter 12.6 is about decision-making structures of county and county borough councils, including executive arrangements. The matter does not include direct elections to executives of county or county borough councils or the creation of a form of executive requiring direct elections.

95.     Matter 12.7 is about committees of county or county borough councils with functions of review or scrutiny or making reports or recommendations. Committees under section 19 of the Police and Justice Act 2006 (crime and disorder committees) are not included in this matter.

CHAPTER 2: AUDIT OF ENTITIES CONNECTED WITH LOCAL AUTHORITIES

Introduction

96.     This Chapter provides for an audit authority to appoint an auditor to an entity connected to one or more local authorities in England and Wales and for the auditor to issue a public interest report where it is in the public interest to do so. For the purposes of this Chapter an “audit authority” is the Audit Commission in England (“the Commission”) and the Auditor General for Wales in Wales (“AGW”). An entity which has an auditor appointed in this way can appoint the same auditor, at no additional cost, to carry out the statutory audit which it is required to have carried out. The entity remains free, however, to appoint a different auditor to carry out the statutory audit - in which case the audit authority-appointed auditor will carry out an audit which is identical to the statutory audit.

97.     This takes forward recommendations from Lord Sharman’s independent review into the audit and accountability of public money Holding to Account: The Review of Audit and Accountability for Central Government (2001). ⁵ Lord Sharman recommended that, among other things, the Comptroller and Auditor General (and Auditors General for Wales and Scotland and the Comptroller and Auditor General for Northern Ireland) should be appointed as the auditors of Non-Departmental Public Bodies (NDPBs) which are companies, and be eligible for appointment as auditors of those companies where Departments or NDPBs have a substantial stake or influence. This endorses one of the key principles of the Public Audit Forum on the independence of public sector auditors from the organisations being audited.

98.     The Government accepted the principles of this recommendation and Parliament gave it statutory backing in the Companies Act 2006. Lord Sharman also recommended that similar arrangements should apply to local government entities. This Chapter implements that recommendation in relation to companies, limited liability partnerships and industrial and provident societies that are connected with local authorities.

Clause 33 - Overview; Clause 34 - Notification duties of local authorities; and Clause 50 - Regulations

99.     Clause 33 provides that the relevant audit authority may appoint a person to carry out audit functions in relation to a local authority entity which meets certain qualifying criteria. An entity for the purposes of this Chapter is a company, a limited liability partnership (“LLP”), or an industrial and provident society (“I&PS”). The qualifying criteria are that the entity is connected with a local authority and that it meets other conditions specified in regulations made by the Secretary of State in England or by Welsh Ministers in Wales. A local authority is as defined in the Local Government Act 2003, and is required by accounting and auditing regulations to prepare statements of accounts. The smaller parish councils are excluded from the provisions for whilst they are covered by the 2003 Act definition, they are not required to prepare statements of accounts. The intention is for the qualifying criteria to refer to proper practices to define the relationship between the local authority and the entity according to the Code of Practice on Local Authority Accounting in the United Kingdom — A Statement of Recommended Practice (“SORP”) as published by the Chartered Institute of Public Finance and Accounting (“CIPFA”). This will ensure consistency with Part 12 of the Local Government and Public Involvement in Health Act 2007 (entities controlled by local authorities) which provides powers to place propriety controls on local authority entities. Clause 50 allows for this.

100.     Clause 34 provides that a local authority in England or Wales must notify the entity and the relevant audit authority if an entity meets, or ceases to meet, the qualifying conditions or ceases to be connected with the authority. Notification must be made within 21 days of the matter coming to the attention of the local authority.

Clauses 35 - Power to appoint auditor; Clause 36 - Power to appoint replacement auditor; and Clause 37 - Exclusions

101.      Clause 35 provides that the audit authority may appoint a person to carry out an audit of a local authority entity where the entity appears to the audit authority to meet the qualifying criteria. The audit authority must consult the entity before making the appointment; and, after making the appointment, the audit authority must notify the relevant local authority. The appointment is made for a financial year of the entity and must be made before the start of that year. In the case of an appointment to a qualifying entity for its first financial year, an appointment may be made during the year.

102.     Clause 36 provides that where an appointed auditor dies, is dismissed, or is unable or unwilling to act, the audit authority may appoint a replacement auditor for that financial year. The audit authority must consult the entity before making a replacement appointment and after making the replacement appointment must notify the relevant local authority.

103.     Clause 37 provides that, unless the entity otherwise requests, the audit authority must not make an appointment if the entity appears to be exempt from statutory audit. A company, an LLP or an I&PS is to be exempt if it appears to the audit authority that the entity is, or will be, exempt from audit under Part 16 of the Companies Act 2006 (including as applied to LLPs) or under the Friendly and Industrial and Provident Societies Act 1968.

Clauses 38 - Eligibility for appointment; and Clause 39 - Terms of appointment

104.     Clause 38 specifies who is eligible for appointment as an auditor under this Chapter. The audit authority may appoint as an auditor under this Chapter: a member of the staff of the audit authority; an individual; or a firm. However, those individuals or firms which are not eligible for appointment as a statutory auditor under the Companies Act 2006 or who do not satisfy the test of independence in that legislation may not be appointed.

105.     Clause 39 sets out the terms of appointment for an auditor appointed under this Chapter. An appointment made under this Chapter begins on the first day of the financial year or, in the case of a replacement auditor, on the date of the appointment. Unless terminated earlier, the appointment ends when the auditor has discharged their functions. An audit authority may terminate the appointment of an auditor if it appears that the entity has ceased to be a qualifying entity. However, the appointed person may not be dismissed for any divergence of opinion on accounting treatments or audit procedures.

Clause 40 - Right of entity to appoint auditor to conduct statutory audit; and Clause 41 - Functions of auditor not appointed to conduct statutory audit

106.     Clause 40 provides that where an audit authority appoints an auditor to an entity, the entity may also appoint that same auditor as its statutory auditor under Part 16 of the Companies Act 2006 (including that Part as applied to LLPs) or section 4 of the Friendly and Industrial and Provident Societies Act 1968. This appointment, if made, will be on the standard terms and conditions (including fees) as published by the audit authority. However, some entities may require certain modifications to be made to the standard terms and conditions and these modifications may be agreed between the entity and the auditor. The intention is that where the entity wishes to appoint the audit authority’s appointed auditor as its statutory auditor, that it is able to but not obliged to do so. This may be done for no additional fee beyond that agreed for the audit under this Chapter unless agreed with the auditor as part of the modification of the terms and conditions on appointment.

107.     Before publishing any terms and conditions, the audit authority must consult the Secretary of State (in the case of the Commission) and Welsh Ministers (in case of the AGW) and such associations of local authorities and bodies of accountants as they consider appropriate. If the audit authority terminates the appointment of an auditor made under this Chapter, it does not terminate the appointment by the entity of their statutory auditor.

108.     Clause 41 applies when the entity does not wish to exercise the power in clause 36(1) and instead chooses to appoint a different auditor as its statutory auditor, or where the entity exercises the power in clause 36(1) but then terminates the appointment. In such a circumstance, the audit authority’s appointed auditor has the same powers as in the Companies Act 2006 (including as applied to LLPs) or the Friendly and Industrial and Provident Societies Act 1968 to enable the auditor to make a report to the company, partnership or society on the annual accounts. The auditor must also send a copy of the report to the local authority with which the entity is connected and the relevant appointing audit authority.

Clause 42 - Public interest reports; Clause 43 - Codes of practice; Clause 44 - Access to information; Clause 45 - Consideration of report by entity; Clause 46 - Consideration of report by local authority

109.     Clauses 42 to 46 provide the powers for an auditor appointed under this Chapter to make a report in the public interest. This adopts, for this Part, one of the principles of public audit endorsed in Lord Sharman’s report, namely that public auditors should be able to make the results of their audits available to the public and to democratically elected representatives.

110.     By virtue of clause 42, an appointed auditor must make a report to the entity about any matter relating to the financial affairs or corporate governance of the entity which comes to their attention in discharging their functions under this Chapter and which they consider that it would be in the public interest to bring to the attention of the entity, the local authority with which it is connected, or the public. A copy of the report must be sent to the local authority with which the entity is connected and the relevant audit authority. The auditor may notify any person that a report has been made and supply a copy, or part of a copy to any person. Clause 43 provides that the Audit Commission must prescribe the way in which the auditor carries out their functions in a code of practice made under section 4 of the Audit Commission Act 1998, and the Auditor General for Wales must prescribe such conditions in a code of practice made under section 16 of the Public Audit (Wales) Act 2004. In carrying out their public interest reporting functions, an auditor is required to comply with the provisions in the relevant code of practice.

111.     Clause 44 requires the entity to provide the auditor with every facility and all information which the auditor may reasonably require for the purpose of preparing a public interest report where the auditor intends to do so. Any person who, without reasonable excuse, obstructs the auditor, or fails to comply, is guilty of an offence. An appointed auditor has a right of access to documents of the entity for the purposes of making a public interest report.

112.      Clauses 45 and 46 set out the process for the entity and the local authority to consider a public interest report. Clause 45 provides that where a public interest report is made, the report must be considered by the entity. In the case of a company this must be at a general meeting of the company, in the case of a LLP at a meeting of members of the partnership, and, in the case of an industrial and provident society in accordance with the rules of the society. The meeting must be held before the end of a period of one month, although the auditor may extend this period. At the meeting the entity must decide whether the report requires it to take any action and must notify the local authority of its decision. If the decision is to take no action then the reasons for this must be given in the notification. Clause 46 provides that where a public interest report is made, the local authority must consider the report and the entity’s decisions in relation to the report and decide whether the authority needs to take any action. The notice given of the meeting must include a copy of the report and of the entity’s notification setting out the decision it has taken in relation to the report. The meeting must be held before the end of a period of one month although the auditor may extend this period. At the meeting the authority must decide whether the report requires it to take any action. Provision is made to cover admission to meetings, inspection and public access to agendas and reports.