Examination of Witnesses (Questions 159-203)
SIMON PARKER, JESSICA CROWE, AND BEN PAGE
14 MARCH 2011
Q159 Chair:
Good afternoon. If we could make a start. Welcome to our third
evidence session in the Inquiry into the Audit and Inspection
of Local Authorities. For the sake of our records, could you
introduce yourselves and say which organisation you represent?
Simon Parker: I
am Simon Parker, Director of the New Local Government Network.
Jessica Crowe:
I am Jessica Crowe, Director of the Centre for Public Scrutiny.
Ben Page: Ben Page,
Chief Executive of Ipsos MORI.
Q160 Chair:
Right. Thanks very much. Could we just begin? Obviously, the
Government has made a political decision to abolish the Audit
Commission, and it is not necessarily our job to go back and revisit
that as such. But would you say, looking at where we are at now,
that this has happened because the Audit Commission really was
no longer fulfilling a useful function, or do you think that the
Government has decided to abolish it because of concerns about
certain aspects of its work, and has put at risk some valuable
work that it was actually doing?
Simon Parker: Everyone
is looking at me. Okay, I can start on that. Firstly, I think
it is important to separate audit and inspection. I think, when
we got to the election, there was a broad consensus across local
government and elsewhere that perhaps inspection regimes had become
too heavy, too complicated, too much data, so I can see a case
for scaling back inspection, and I think the Government's approach
of trying to create local self-regulation is probably, on balance,
to be welcomed.
On audit, I think the case is less clear. I did
not get a great sense from the local-government community that
they had a big problem with the Audit Commission's role in audit.
The question is: can you make a more localised and decentralised
audit system work? You can, but you need to do a bit of work
and a bit of thinking to do that.
Jessica Crowe:
I think I would go along with that. I think there were three
reasons why total abolition of everything, as opposed to reforming
the bits that the Government and others, as Simon has said, were
unhappy with, was a mistake. I think it is particularly also
the way it was done. I think it is unclear what the evidence
was, and there were a number of wild reported reasons given, which
have been refuted: the Audit Commission staff attending days at
races and that sort of thing, which was clearly found to be untrue;
claims that it exceeded its remit. I do not think using those
sorts of errors to justify a reason is good when you are making
a decision about a framework of good governance.
I think there has been uncertainty because it was
not clear, before the announcement to abolish was given, what
was going to replace it, and I think that was a mistake, because
it has led to uncertainty and, I think, unintended consequences.
That is where I would endorse what Simon said: unhappiness with
the previous inspection and performance regime could absolutely
have been dealt with, but it is unclear that the audit system
was broken. That is a by-product of sweeping the whole thing
away.
Ben Page: I think
the Audit Commission did valuable work. I think the early version
of CPA was important in actually shining the light into certain
parts of local government where it had not been shone before.
There were criticisms about the reach and scope of the latter
part of the regime, CAA; whether those would mean that the Audit
Commission itself had to be abolished, I would probably wonder
whether that was strictly necessary.
I absolutely welcome the idea of more self-assessment
and proposals, for example, that the sector can police itself;
however, I am sceptical as to how that will work in practice and
I do think some form of independent inspection is also supported
by the public, which is in the evidence that I submitted. I have
also given you today a copy of one of the more recent studies
of what people being inspected by the Audit Commission said about
it, and that is a properly representative cross section of both
local authorities and other bodies. You can see more of them
are positive than negative about it.
Q161 James Morris:
As you were saying, Mr Page, we have lived through a period where
top-down performance management, arguably, over the last 20 years
was necessary in local government, but don't you think we have
reached a point where we are moving into a different age, which
demands innovation, and what that demands is local government
to take more responsibility for its own evaluation of its own
performance, and we do not need an external body looking over
the shoulder of local government, and local government is perfectly
capable of, on a peer basis, dealing with its own issues of performance?
Ben Page: I would
like to go along with that, because, in theory, of course, we
have local democracy in this country, as we always have done and,
in theory, the voters of Hackney or Lambeth could easily have
just voted out their badly performing leaders, etc, etc, and got
better ones in, and the sector itself had all the machinery it
needed, in theory, to police itself. Certainly, top-down, imposed
standards lead to minimum floors. All of this is obviously deemed
not to have worked, but I would say that I think the evidence
still is that, without some sort of comparison between authorities
on a like-for-like basis, whether that is the sector itself producing
it or somebody else—and I am not saying roll back the clock—I
do think that in itself is very helpful. If it is solely generated
by the individual authorities, you will get gaming.
Q162 James Morris:
Can I just cut across you there? I know, as somebody who looks
at public opinion very, very carefully, wasn't one of the problems
with the CPA and so on that it gave local authorities a particular
rating, but actually, if you asked members of the public in local
areas whether it had any meaning for them, whether it changed
their attitudes toward the local authority, there was a huge disjunction
between the two? Don't we need to accept that and then move on
to the next stage, which is properly getting local residents to
take control of the accountability?
Ben Page: I think
there are a number of issues there. One is that, if one wants
more local accountability, ultimately we need to get back to the
really toxic issue, which is about real localism and how much
of local spending is funded or raised locally or controlled locally,
which is obviously a separate issue. It is absolutely the case—and
you are right to make it—that the public never rated its
authorities as well as the CPA scores did, although, as I say
in my evidence, in the early iterations of CPA there was a stronger
correlation between what the public thought about their council
and what CPA was saying than later on, when, I believe, as the
grades got better and better, public opinion did not get better
and better at that point, although they were paying, of course,
much more council tax over this period to pay for these same levels
of service.
I think public opinion should be taken on board,
but of course the complexity is that local government delivers,
by some estimates, 700 different services in a unitary authority,
of which the average member of the public will only consume a
few. If they are going to be a vehicle for delivering all those
services that most people cannot form a judgment of and do not
know anything about, it is very difficult for them to make a valid
judgment. What the public say about these sorts of systems is
they do not expect to sit at night reading these things. Most
people do not want to get it into the detail, but in all the work
that we have done they like to believe that somebody, perhaps
on the parish council or the town council—people who are
interested—can find out about these things from public information
and can use it. Most people say, "Well, life is too short,"
but they do expect it to be used to hold officers to account.
Q163 James Morris:
Can I just ask Mr Parker a quick question? You said that you
thought there was some argument around the removal of the inspection
component of the Audit Commission. As somebody who runs a think-tank,
have you got evidence around the negative impact of the previous
inspection regime on local government? A lot of local-authority
leaders that I have spoken to talk eloquently about the burden
which CAA and CPA placed upon them. I wondered whether you had
any insight into that.
Simon Parker: You
have pointed to some of the things already. One is the burden,
which is well recorded; the other is the issue of satisfaction,
which did not track the results of things like CPA. I suppose
a third point would be about innovation. The previous inspections
were very good at punishing failure. By and large, if you got
a terrible CPA score, the ruling party lost office. There was
not a similar reward if you performed very well. It has been
said that the Coalition's approach—and I think it is particularly
true of local government—is one of creative destruction,
and it is about the balance between those two words. I think
the last Government and inspection regime was often so worried
about the destruction bit that it clamped down on the creativity
as well. The approach we are taking now is clearly on the other
foot.
Q164 James Morris:
Do you think it might have been possible that the regime of CPA/CAA
actually had a negative impact on local-authority performance
because of the fact that chief executives and officers were constantly
looking upwards to conforming to the CPA/CAA framework, rather
than actually delivering for their residents?
Simon Parker: The
evaluations I have seen would not support that, because the local
authorities generally improved internally and did improve their
services, although perhaps not always in the right place and perhaps
not always connecting with citizens. But as organisations I would
say probably the vast majority of councils are better run today
than they were 10 years ago, and inspection is part of that.
Ben Page: That
is what the sector themselves actually admit. They say although
they thought it was burdensome and it was too expensive, they
say that they would not have improved as much without it.
Q165 James Morris:
It is an improved performance in the context and the structure
that has been imposed, so it is answering its own question in
that respect.
Ben Page: I think
there is an element of that, but I think the question we have
to throw back to anybody who is inspected and regulated, and complains
about it is, "What would you have done differently without
that?" If I look at some of the biggest failures in local
government, both in district council and in some of the better
known urban authorities, where there were clear problems—I
am thinking of places like Watford—there were good examples
where the administration thought it was doing a pretty jolly job,
and it was only when they were named and shamed that things moved
ahead. I absolutely take the point about top-down imposition
of certain priorities sometimes from Central Government that perhaps
did not always correspond to exactly what local people would have
seen as a priority, although it is true to say that, if you allow
just the local electorate to determine exactly what was provided
locally, lots of things that were actually illegal would happen,
because the public's priorities are different from those of the
state as a whole or, indeed, the overall responsibilities of local
government.
Q166 David Heyes:
I want to ask you about the self-assessment and the internally
driven improvement, and the role that scrutiny might play in that.
I have to say my days in local government were under the old
committee system, but I still speak to many local councillors—backbench
councillors, as they are now called—who complain of being
disempowered and sidelined, often by over-powerful chief executives
and council leaders. I think what I want to ask is: is there
any evidence, perhaps from other areas, that scrutiny by local
councils will be a better driver of improvement than the external
inspection?
Jessica Crowe:
I think there are examples of effective scrutiny. I think, for
10 years, since the 2000 Act, which brought in the separation
of executive and scrutiny, we have been hearing, "Scrutiny
is not effective. It is very patchy. It is the lion that has
failed to roar"—all of those sorts of metaphors. I
think that there is plenty of evidence now that shows what conditions
should be in place in order to have effective local scrutiny by
those who have been democratically elected, and I think that is
absolutely the right place to start, with improvement and challenge
on behalf of local residents. It is about adequate resourcing;
it is enabling people to have independent research support and
a small discretionary budget to enable them to have their own
sources of information, so they are not reliant on the chief executive
or the administration; it is about effective leadership, and there
are lots of examples of very effective scrutiny chairs who have
delivered real change.
High-profile ones would be Councillor Len Clark,
Chair of the Children's Services Report in Birmingham, which got
national/regional coverage for a very, very challenging report
into very poor performance and has resulted in his recommendations
being taken on board by the ruling group. It is worth remembering
that he is a member of the ruling group, so it can be done within
a party system. Another example would be Councillor Robert Parker,
who is the opposition group leader in Lincolnshire County Council
and chairs their Value for Money Committee. He was recently commended
by the leader of the council for the challenge that he puts that
leader under.
I think that leads on to another success factor,
which is about having a culture in the organisation, which does
have to come from the top, that values and recognises what independent
critical-friend challenge can bring to improvement efforts. I
think it is very easy to blame scrutiny for not being very good,
but I think the answer does lie at the top in ensuring that the
whole organisation values it and resources it effectively to make
sure that it can contribute. I think, with those things in place,
those would go a long way towards enabling scrutiny to play the
kind of part that it will need to play. If there is not the external
national scrutiny, it needs to happen at a local level.
Q167 David Heyes:
I want to hear your colleagues' views on the same question, but
is it not the case that the examples you have given of really
good practice are very much the exception? I could top it with
hundreds, possibly, of examples where it has not worked.
Jessica Crowe:
It is quite difficult to determine what is effective because,
quite often, recommendations will be accepted by the executive,
who will then claim credit for it and say, "It was our idea
all along," so providing the evidence to say, "Actually,
it was scrutiny's idea that suggested it," is one thing.
If you want to look for metrics, there is information in our
annual survey, which we are just about to publish. I can certainly
make that available to the Committee shortly. Our survey shows
the percentage of recommendations that are accepted and those
that are then implemented—because that is also important—is
high and has been rising. It is unsung. It is lots of small
things. It could undoubtedly improve, but I would say that, yes,
the outstanding practices are outstanding because they are unusual,
but there is a lot of highly effective work that goes on on the
ground. It could be more effective, but that is down to the leadership
of local authorities to resource it and support it.
Ben Page: I am
supportive of it but I do think it is often under-resourced and
sometimes lapses into party politics. There are good examples.
Actually, some of the best examples have ex-committee clerks
from the House of Commons supporting them, where you start seeing
people asking some really interesting and intelligent questions.
There is a question. I think it is partly about the extent to
which the authority really wants to use it, and makes the process
its own and uses it effectively, as opposed to seeing it as something
that it is obliged to do and it is, therefore, used for just scoring
cheap points.
Simon Parker: I
suppose I do not have a great deal to add to what my colleagues
have said. I suppose what I would add is that, of course, we
need to look broader than scrutiny to see where the new pressures
on local government will come from. We may get into this in a
minute, but many of those will come directly from citizens themselves.
Q168 David Heyes:
We have had 10 years to get this right, and clearly it is not
right yet. If this is going to be the inspection process or part
of the inspection process in the future, it is absolutely vital
that it is got right. It has taken 10 years of failure. How
can we be confident that it will play a real role?
Jessica Crowe:
I would not accept that it is 10 years of failure; I would say
it is 10 years of slowly getting better. It is a slightly different
thing, but it is also true that it is not linear in either one
or another direction. Because it is dependent on a culture and
on leadership, when leaders change, as they do as a result of
elections, when individual chairs move on and change, then authorities
can go backwards or forwards, so it does absolutely vary.
I think there are a couple of key things that, if
your Committee was minded to impress upon the Government that
this is an important component of going forward, could make a
difference. One is to learn from the experience of health scrutiny,
which is quite widely acknowledged by academic research, as well
as work that we have done, as being amongst the most effective
examples of scrutiny. I think that is quite interesting because
it perhaps suggests the importance of independence, in that there
is less politics involved. We can all agree that we do not like
what the primary care trusts are doing—you do not get into
the "it is your side versus my side" kind of approach—but
also, arguably, health scrutiny has stronger powers than broader
scrutiny. It has the power of referral to the Secretary of State
and it has real powers to require attendance to provide commentary
on what NHS organisations say they are doing.
I think those are two things that we suggested in
our evidence should make up part of the new framework, which is
a power to refer if local scrutiny feels that its recommendations
are being ignored, that it is not having an impact because the
leadership chooses not to accept it. It should be able to formally
refer those concerns to, for example, the external auditor, to
inspectors, where they still exist, if it was in children's or
vulnerable adults' services, for example, to require an external
look or potentially also to the Local Government Group's sector-led
approach to say, "We do not think everything is right. We
need some support to improve things." That power of external
referral would be an important weapon in scrutiny's armoury to
give it some real teeth.
Q169 George Hollingbery:
You partially answered the question there, but I just wondered
if the experience of parliamentary select committees and their
effectiveness and potency is any great indication as to whether
scrutiny in local councils will do very well.
Jessica Crowe:
I think it is because, arguably, select committees are also a
recent invention—they are only slightly longer than local
authority scrutiny committees—and it is very noticeable
that the resources available to Select Committees have increased
over the years. I think that does offer an interesting model.
Most scrutiny committees in local government would give their
right teeth to be as well resourced by the excellent clerks that
you have and the quantity as well as quality—he did not
pay me to say that. We try and bring the two national and local
scrutiny functions together, and I have argued to select committees
before that there is benefit in more connection between national
and local scrutiny, and we have facilitated a sort of secondment
process.
Q170 George Hollingbery:
The fact is, without that right to call in, without the right
to refer it to third-party auditors, without this Committee being
able to say to the Secretary of State, "You come here; we
are going to tell you what to do"—of course you can
do that in health because these people are not elected and there
isn't the excuse, "Well, actually, I am liable to the ballot
box,"—it is not going to work, so your recommendation
has to be taken up for this to be effective. Is that right?
Jessica Crowe:
No, because I think where the culture accepts and the leadership
accepts the value of being challenged and being open to scrutiny,
then it can work on a goodwill basis, and a lot of it has worked.
Q171 George Hollingbery:
Yes, it can, but to be universally acceptable as a mechanism,
it is going to have some level of compulsion.
Ben Page: If you
are going to abolish central inspection and rely on this to do
it, then yes, you would want to beef it up.
Jessica Crowe:
Yes, at least to provide assurance, you would need to.
Q172 Heidi Alexander:
Just to explore something that has been touched on already, which
is the interplay between scrutiny and the politics of a council,
I just wonder: if scrutiny is going to become more important in
terms of holding local authorities accountable and making it transparent,
in your experience, how does the politics work best? From my
experience in my own local government career, the scrutiny side
of things often worked best when there was more political balance
on the council as opposed to one political group having a very
large majority. I just wonder, particularly from Jessica, what
your overall research shows in that respect.
Jessica Crowe:
We can certainly do some detailed analysis from that. We do have
an analysis in our survey of political control and stability,
which does seem to be important, I think, but it can work in all
sorts of different contexts. If you get an enlightened leader,
even with a huge majority, that is willing to tolerate some dissent
in their backbenchers, then you can get creative and challenging
scrutiny. I think there are a number of examples that I know
of where, if politicians know they could be on the other side
come the next election, they are perhaps more likely to design
a system that works whether you are in opposition or in the ruling
group, because they know that they could be in opposition themselves
next time.
There are examples of quite innovative approaches,
where the council has taken the view that policy review broadly
more supportive, perhaps, of the direction of the administration
should be something that can be left to the ruling group, but
they are very clear that the scrutiny aspect is left in the hands
of the opposition—is chaired and led by opposition members.
On the other hand, that may not work well, and this could be
down to the opposition as much as the ruling group. It does come
down, as I say, to this political culture; to keeping your governance
arrangements under review and assessing whether they are fit for
purpose and delivering what you want. As leaders, how honest
are we about our shortcomings and our willingness to be challenged?
That is, as you will know, not easy.
Q173 Bob Blackman:
Could I just lead on from that? Jessica, do you have any recommendations
or suggestions about the role of scrutiny in a local authority
and whether it should be chaired by the opposition or by the majority
group?
Jessica Crowe:
Our view has always been that at least some of the committees
in an authority should be chaired by the opposition. We do not
think it is healthy to have them all chaired by the majority group
although, as I say, there are examples where a majority member
has led some very good challenging scrutiny. We think at least
some; we think it should be left to the local discretion within
that. We would not say that they all had to go to the opposition,
for example.
Q174 Bob Blackman:
I will move on to the area that I really want to ask a few questions
about, which is the external approach to this. I think, Jessica,
in your evidence, you have suggested that your organisation could
act as an honest broker to which referrals could take place.
How would you envisage that working?
Jessica Crowe:
I suppose that was to partly address the point that has been touched
on, which is that scrutiny is liable to be politicised and, therefore,
referrals such as what we are recommending might have politics
played with them. It was to be able to say, "On a prima-facie-case
basis, this piece of scrutiny, this challenge, looks to be evidence-based,
it looks to be robust, it meets our principles of effective scrutiny
that we have developed over the years, and therefore it is a serious
case to answer and the appropriate agencies should investigate
it further." It is really to say there should be some way
in which scrutiny recommendations can be almost validated, not
for the detail—we would not be second-guessing what had
been done at a local level—but to say, "Yes, this is
a serious piece of work that has been considered." It is
almost like the Independent Reconfiguration Panel in the Department
of Health makes those independent recommendations to the Secretary
of State about the validity.
Q175 Bob Blackman:
How would that be funded?
Jessica Crowe:
You could have local authorities funding it through their RSG
top-slice; you could have people paying a subscription fee. There
could be a range of different things.
Q176 Bob Blackman:
Would this then be something that local authorities subscribe
to or would this be a mandatory requirement?
Jessica Crowe:
If it was part of the Local Government Group's self-regulation,
then I would argue—and I would argue to them—that
it would be a useful tool that would bolster their self-regulatory
approach. We are an independent charity. We are not funded directly
by any one single organisation. We have a range of sources of
funding. We could provide that independent balance using our
expertise in scrutiny. It could be done by any other organisation,
to be honest, that met those criteria. We are suggesting it because
it is something that we would know how to do, but I think it is
being able to provide independent advice to those that, ultimately,
would have to decide whether there was some external improvement,
support or intervention along a continuum.
Q177 Bob Blackman:
Simon, can I ask you: what is your view of residents being able
to refer things to some external body when they think there is
a serious concern?
Simon Parker: We
think it is quite a good idea. We have suggested that, with self-regulation,
that body should probably be the LGA, so we would be very supportive
of the idea that you could use a petition mechanism to trigger
some sort of external review if services were badly failing citizens.
Q178 Bob Blackman:
How would that work? Are you talking about a trigger level of
so many voters or a particular serious issue? How would that
function?
Simon Parker: It
is a good question. It could function in a whole range of ways.
I imagine it would probably be a certain percentage trigger level.
You would probably want to set that. 5% is very large. That
is what we have used for mayors in the past, so it would probably
need to be a bit lower than that. Obviously, triggering an external
review probably means that, in the first case, you bring in peer
reviewers or someone to take a look and see if there is a case
for going further, so it need not be overly bureaucratic.
Q179 Bob Blackman:
Obviously, one of the issues in any local authority is whistle-blowing
and, actually, if there is something going wrong, possibly referring
it to an external agency. If you have a trigger level for local
people, that does not allow people that think there is an issue
to actually get that onto the agenda quick enough.
Simon Parker: No,
it does not, although that feels like a slightly different thing
than citizens arguing about corporate failure. This is about
an individual whistle-blowing about a particular problem. I suppose
you would have mechanisms like the Local Government Ombudsman
that would be able to tackle that. One of the recommendations
that we might talk about later that we are thinking about is setting
up semi-independent audit committees for local authorities, and
those bodies might be a place where you could take a complaint
to anonymously.
Q180 Bob Blackman:
One of the concerns, for example, about the Standards Commissioner
was frivolous complaints, which then ended up with long delays,
nothing happening, and the Sword of Damocles hanging over either
councillors or whatever. How do you avoid that as a route when
this external mechanism might be triggered?
Simon Parker: It
is a good question. I must admit I have not thought a great deal
about it, so perhaps one of my colleagues would be better placed
to talk to it.
Q181 Bob Blackman:
Ben, do you have any view on this, because it is a public issue?
Ben Page: If you
do use the audit-committee approach, I guess there will be some
level of discretion about what they look at and what they do not,
and whether they ask for evidence rather than just making an assertion.
I think how much one demands of these processes in terms of due
process, etc, etc, you end recreating, at a local level, some
of the things that you have just abolished in the large national
organisation. There is going to have to be some balance struck.
Q182 Bob Blackman:
Sorry—one of the recommendations coming forward is semi-independent
audit committees, which then require staffing, support, extra
costs; at the same time, you have scrutiny cost, extra support,
extra assistance. This all sounds like a large-scale bureaucracy
growing back at a local level.
Ben Page: I am
not recommending this.
Jessica Crowe:
I would say, compared with the previous regime, scrutiny's support
in local authorities is very, very minimal. We are talking declining
discretionary budgets, not increasing ones, at the moment, and
declining support staff at the moment, not increasing. The trend
is against that. I would say we have always argued—very
gently, because we do not like to disagree with CIPFA—that
audit committees and scrutiny functions should not be quite as
divorced as the current guidance suggests, because we think there
is benefit not only in sharing resources in terms of saving money,
but also that they can well inform each others' work; that audit
purely on the due diligence and proper decision making should
also consider the outcomes and the impact of that expenditure,
so there is value in those things coming together, in our view.
Ben Page: The other
option, if there are going to be auditors in some shape or guise,
is to let them hear from people, but how much they will charge
depending on the volume of these things they receive, I do not
know.
Jessica Crowe:
Commercial auditors probably charge more than a scrutiny committee.
Q183 Bob Blackman:
The issue would be that auditors would audit the books and ask
whether the money has been spent in accordance with the proper
procedures, etc, not over the services.
Q184 Heidi Alexander:
Do you think it is important that there is a data set that exists
nationally of independently produced statistics, data that the
public can look at and compare their own council services with
those provided by other councils?
Ben Page: Personally
I am a data geek, so I think it is useful, I think it is helpful.
I do not think we should expect the whole public or millions
of people to want to look at it, but the existence of such things,
the ability to make valid comparisons between authorities, both
in terms of overall performance, and obviously in terms of what
I do, in terms of what people think about them, I think is helpful.
Certainly you need the performance data on a like-for-like basis
between authorities, and it should be useful for authorities themselves,
quite frankly, but it does need to be on a like-for-like basis.
Simon Parker: I
very much agree with that. Obviously the idea of self regulation
involves local authorities voluntarily putting some of that data
together, and we will see how well that works, but it is highly
desirable to have comparable performance data, and unit cost data
and spend data, because then local people, if no one else, can
see how their local authority stacks up. How do you know whether
your refuse collection service is efficient if you cannot see
it in comparison with others? I think that has to be a really
important part of a self regulation approach.
Q185 George Hollingbery:
Can I just ask very quickly, that data, was it useful before,
and is it useful, now? When I was a councillor in charge of performance
management—a laughable term as a district council—there
were lots of statistics, which we calculated in a certain way,
which were always different in other authorities because of constraints.
I just think about, for example, the fact that Winchester City
Council had 43 different conservation areas; that is not the same,
is it, in others? How do you make these data sets work?
Ben Page: If the
sector is going to regulate itself it needs to have a long, hard
look at its willingness to accept that things will not always
be great, and there is a real tension in having an "industry
body" like the LGA, which relies on membership subscriptions,
doing self regulation, because it needs the subscriptions, and
ideally you want it to be able to strike off people who are not
performing, and burn their insignia on the steps of LGA house,
and then, with a brass band playing, invite them back in again
when everything is better. Whether the sector is willing to do
that in a way that, in extremis, some of the previous regime would
do is debatable. It is that discipline for the like-for-like
data, and absolutely I take your point about the problems of comparing
different areas: nothing is ever going to be perfect, no two areas
are completely identical, some have more conservations areas than
others and so forth, but at least you can have a really good go
at it and be clear about what the differences are. It is a bit
like why Kensington & Chelsea and Westminster have some of
the highest levels of satisfaction with parks: their parks are
very good, but they also have the Royal Parks in the middle, so
you do have to bear these things in mind.
Q186 Heidi Alexander:
You touched upon the new proposals from the Local Government Group
for self regulation, in effect. Perhaps I will ask Simon and
Jessica, how confident are you at this stage that those proposals
will end up being adequate, and how do you think the LGA can avoid
the problems and the criticisms that were levelled at the set
of data that the Audit Commission put together?
Jessica Crowe:
I think anyone would share the sort of concerns that Ben has outlined.
The LGA is a membership body and unless you have mechanisms for
expelling people its levers to pull are going to be limited.
That is why I think the strength of the framework lies in the
focus on improvement, perhaps, rather than regulation, and that
might also avoid some of the problems that we had with indicators
that were collected under the previous regime where, because it
was all so high stakes and connected with your ratings, your performance,
and your league tables, it laid itself open to gaming. We had
that when I was a councillor: we were always being criticised
because our waste collection per head was a million miles higher
than everybody else, and we would try and understand why this
was. Of course, it turned out that other authorities were getting
away with not including any of their corporate overheads, so obviously
their costs were less, but we were constantly the ones being criticised
for being so out of line.
The stakes were there that encouraged gaming. If
it can be focused on improvement, and this data being a tool for
authorities to improve their own performance because that is what
residents need and expect, there is potential for it to be a better
system. It will require a lot of work and support from a range
of organisations to bolster the group as a whole, and that is
partly where our suggestion came from. This partly comes from
our research, Accountability Works!, which said if you
are going to have real accountability it needs legitimacy, it
needs credibility, and it needs utility to make it work, and you
cannot have all three. Arguably the LGA has legitimacy, because
it is the voice of democratic elected local government; I think
the credibility is where it needs to strengthen its arm to make
that system work.
Simon Parker: A
lot depends on the maturity of local government. Admittedly the
ones who tend to be our members are a self-selecting group and
tend to be among the better authorities. But I look at those
councils; going back to that point about inspections over the
last decade, we have improved local government's capacity quite
a lot, there are very few councils that are significantly underperforming,
but they are doing reasonably well.
I would hope this is a sector that has got the basics
in place, and that is preparing to be quite innovative and to
step up to the mark. If I am wrong about that then clearly the
system we are putting in place relies on councils being able to
drive improvement themselves from within. If they cannot do that
it probably will not work very well, and that is worrying in the
sense that, if you are a good localist, if we cannot make self
regulation work, there will be huge pressure on Central Government
to step back in. There is a risk here, and the risk is that local
government is not quite as mature and as good as we think it is,
but I do think it is good, and I do think it is mature, and I
hope and expect that they will step up.
Q187 Simon Danczuk:
I wanted to follow on from some of the things that have been said;
if scrutiny committees are a qualitative technique for getting
to the crux of what is going on in services, then the place survey,
as part of CAA, is probably a quantitative technique for finding
out what the public actually think in a sophisticated and robust
statistical way. That has been thrown out with CAA. Is that
a good thing or a bad thing? Before you answer that Ben, you
have practical experience, because last week we had councillors
from the LGA and different sections of it coming in and telling
us that, in terms of benchmarking, local authorities would do
it voluntarily because they would be shamed into it if they did
not provide the data to compare to other local authorities in
a similar family; they would be shamed into doing it and they
would not dare not provide the data to benchmark. Your company
does benchmark data, or survey data as it happens. Could you
share your experience of local authorities and how keen they are
to be named in terms of being benchmarked against other authorities,
or not?
Ben Page: We started
surveying local residents, for individual local authorities, in
1979, and until it was made compulsory, or until the introduction
of the best value regime, there was an increasing number of people
or authorities doing it, but by no means a majority. Without
somebody policing—and it can be the LGA, or it can be somebody
else—which questions are asked, and the way in which they
are asked, you will get very different answers. Even with some
iterations of some of the national surveys you have some county
leaders doing things like sending a newsletter to all the residents
a week before the questionnaire goes out saying "We love
you and here is our news". There was one county council
that got the highest score in England for communicating with its
residents because, having never bothered to send them anything
ever before, the week before the official survey it had decided
to write to every household with a nice covering letter. Strangely,
with one communications office they suddenly got the best score
in England because people were so delighted they had finally told
them something about what they were doing.
There are problems with the design of the place survey,
and I am intimately connected and happy to go through all of that;
it was trying to please Central Government. But if you do rely
just on the sector doing it, some of them will, but certainly
not all. I do not believe there will be local public pressure
to get them to do this: that will not happen. There may be in
a few places but you will not get that like-for-like comparison
across the piece unless the sector is willing to police itself.
I love the LGA; I have worked with the LGA since its inception.
But they need to be able to prove, if they are to do this, that
they can require their members to all do the same thing, in the
same way, at the same time, in order to allow likeforlike
comparisons between them, whether that is surveying the public—if
that is what they wish to do, and it is up to them, because otherwise
you get seasonal effects—or, indeed, in terms of collecting
data about performance.
Q188 Simon Danczuk:
My other question is around audits. How will auditor independence
be safeguarded if local authorities appoint their own auditors?
I know that, Simon, your organisation has been doing some research
around it, is that right?
Simon Parker: We
have, I think it comes out in the next week or two.
Q189 Simon Danczuk:
Any headline results are helpful at this stage.
Simon Parker: In
terms of the question you have just asked, I have talked about
the idea of semi-independent audit committees with councillors,
but also residents and others, involved. We think you should
have an audit committee which is actually appointing the auditor
of the local authority, rather than the local authority just choosing
whoever it wants. That is our proposal for safeguarding the independence
of the process. I can tell you about a couple of the other things
we have thought about if that is useful. The key thing that we
have looked at is: at first glance the move to devolve power over
audit looks like deregulation. It is really localisation of regulation,
and we think you then have to reinvent a new regulatory environment
on the ground. That is one of the reasons why we think the independent
panels to appoint auditors are very important. We also think
we need a rule that internal auditors and consultants cannot also
be external auditors. That is really to answer the Enron problem.
In terms of accountability and independence we are
gearing up to make those two recommendations. There is also a
point about the cost of audits: it is not obvious that getting
rid of that huge monopsony buying power of the Audit Commission
will result in cheaper audits, in fact quite the opposite, particularly
for smaller or remote authorities. We think the only way that
you will actually guarantee lower prices is to make sure that
it is a very competitive audit market. One way that you could
achieve that is to support the Audit Commission's mutualisation
into the fifth of the new Big Five: we think, on balance, that
would probably be quite an effective way to control cost.
We also think you need to simplify local government
accounts, because at the moment the complexity of those accounts
is a barrier to smaller players entering the market. Equally
we have to accept that we are not just trying to localise the
old audit regime. That is a really important point to make here:
the audit regime would have had to change anyway. In a world
of localism, the Big Society, councils are going to start risking
a bit more of their money out in voluntary and community groups,
they are going to start doing things like sharing services, so
we will need simpler, smarter sorts of audit as part of all of
this.
Jessica Crowe:
I would add to the point I made earlier about audit committees
not being completely separated from the scrutiny function. The
function of scrutinising is very much something that audit committees
do, and so in looking at the totality of how an authority is challenged
at local level, it should be considered together. The research
that we did a couple of years ago found that the audit functions
had found a benefit in being more closely connected to the other
scrutiny bodies in the council, not least raising the profile
of it with members and getting it taken seriously as a form of
governance that can be seen as a bit dry and not relevant to the
day-to-day.
There are benefits to having some connections, but
we would agree that it should be independently chaired, either
by the opposition or by an independent co-opted member from outwith
the council. Another mechanism that could be looked at is the
code of practice, which provides the independent professional
framework within which auditors work, which is something they
would point to as guaranteeing their independence: having their
own professional standards to work to. That should be looked
at, particularly in the light of all the other changes that we
have been talking about to the governance regime, perhaps to require
more attention to be paid to the kind of governance aspects of
what appears in the accounts.
There is an annual governance statement, and we have
been looking at them, and a number of them are highly variable
in who writes them, what purpose they perform. For some of them
it clearly is integrated in the way that the authority makes its
decisions and so you have some confidence that there is some consideration
given to risk and governance as part of the overall framework.
In others, it is a little bit perfunctory; it is a list of who
does what. There are other aspects of the regime that could be
strengthened to support governance overall, which will be important
if there is no longer this external framework that has been provided
by the Audit Commission.
Q190 George Hollingbery:
Simon you have just gone some way to answering my question about
the costs. It seems that you are of the opinion that costs may
well rise per audit?
Simon Parker: The
impact will be variable, because at the moment the Audit Commission
bundles together clusters of authorities and gives them out as
a package. It would vary; if you are a big authority that is
relatively easy to audit you may see your costs fall, if you are
small and more remote then you will be less attractive and you
might see your costs rise.
Q191 George Hollingbery:
The Audit Commission, in their submission, talked about the 1,200
parishes who get audit for free at the moment potentially ending
up in real trouble, ending up having to pay, and maybe paying
disproportionate amounts to get any kind of reply at all. Is
there place for a small companies account-type return, do you
think, in this whole scheme?
Simon Parker: We
would very much hope so, and that is one of the ways to introduce
a bit more competition into the market. That is one of the reasons
why one of the most important recommendations that we are currently
considering —of course, we have not finalised anything yet—is
that point about simplifying the accounts, so it is a bit easier
for people to come in and do them without having to spend a lot
of money to enter the market in the first place.
Q192 George Hollingbery:
I am suggesting that there is perhaps a role for a return that
is not audited, that can be viewed online, as there is for small
companies. Is that a realistic proposition in this area?
Simon Parker: Gosh,
that is a good question. It certainly sounds feasible for parishes,
but I would need to consider it further before giving you a full
answer.
Q193 George Hollingbery:
Another point that the Audit Commission made, which I thought
was fascinating, was they took on the liability from the auditors,
which is not something I considered before and I suspect is worth
a very great deal of money in terms of the price you negotiate
with the auditors. Is that something that your group has considered
at all?
Simon Parker: I
do not think it is particularly.
Q194 George Hollingbery:
It does occur to me, and perhaps the others would like to comment,
that there is a very considerable saving probably made, because
this is laid off on Government. Effectively it is very difficult
to sue Government for this, I suspect, hence why the Audit Commission
was allowed to do it. Do you think there is a possibility that
that will up prices, that there will be a considerable factor
in there?
Ben Page: I am
not an expert in audit costs, risks or litigation, etc.
Q195 George Hollingbery:
Perhaps I will go back to the Audit Commission on that one later.
CIPFA: I think you have already touched on the complexity of
the front end of accounts, which I find completely impenetrable.
As somebody with an MBA and specialisation in accounting in the
commercial sector, I find CIPFA's accounts completely impenetrable,
particularly trying to relate them to what is going on behind
in the council. Do you think there is a role there for some reform?
Second, I am very interested with the Localism Bill going through,
and with commissioning rearing its head, how do we audit all that
lot sitting behind?
Ben Page: On just
publishing financial data about authorities, CIPFA has done some
good work itself in the past, in the last two decades, in giving
prizes to authorities who use graphics and other things to try
and make clear where the money has gone, but it is not about changing
the format of the accounts, it is about producing literature,
websites, etc, that visualise it much better for people. You
are clearly along the right lines in terms of the need to make
this more transparent, but at the same time we need to be realistic
about the number of people who are going to look at it. For those
actively involved, or who are the activists—the minority
of the population—undoubtedly, there is a lot more that
can be done, because there is a lot that people miss.
Q196 George Hollingbery:
Commissioning, anybody?
Jessica Crowe:
It is something that is going to be increasingly important. It
is something that we have argued in relation to scrutiny, and
the same principles would apply that there should be more of a
level playing field. It should be something that should be considered
now with the possibilities not only of commissioning, but of joint-commissioning,
of pooled budgets across areas. This goes right back up into
the higher reaches of Whitehall, because it is about funding streams,
where they come from, who makes the decision, who votes the money
down, for what purposes. Pooling spending decisions and commissioning
decisions at local level creates some complexity, but it then
reaches back up into Whitehall as well. There is a job of work
to be done in looking at this; it would be quite nice if there
could be a common audit regime across the public sector.
Q197 George Hollingbery:
In short, this is a pretty complicated addition, which we had
not really seen before, certainly not to any great scale.
Simon Parker: Yes,
and what will happen when community groups take over services
using Right to Bid, how do we audit shared services? There are
no easy answers, but we clearly need to be able to come up with
some way to capture that money.
Q198 George Hollingbery:
One final question for Ben, you might not want to answer this
in a public forum, but, if you could give us a ballpark as a Committee
privately perhaps, we are interested in the cost of data gathering,
roughly how much does something like this cost?
Ben Page: To be
honest, I cannot remember. It depends how you collect the data.
This one was done by telephone, 500 interviews with senior people,
it will be £20,000 to £30,000, I do not know. In looking
at all of these things, the cost of data gathering in terms of
finding out what the consumers of the service think about it,
as a percentage of the cost, should be tiny. Of course those
things need to be looked at; it needs to be proportionate. The
main thing about gathering survey data is it needs to be in a
form such that people can actually use it, and it should not be
too often, because it takes time for organisations to act on it,
but it does also need to be reliable. To be honest, that does
cost some money.
Q199 Mark Pawsey:
In addition to the question of cost in a post Audit Commission
era, what about that of capacity? Every local authority has the
same year end; if you take away the Audit Commission does the
capacity exist within the Big Four, or other accountancy professions,
to get audit done on time?
Ben Page: I think
you would have to ask them, but I somehow think that capitalism
will deliver the goods.
Q200 Heidi Alexander:
Armchair auditors: what role do you think they have, if any, in
monitoring the financial performance of councils as well as service
delivery?
Ben Page: In theory,
vast. In practice, successive Governments, both Conservative
and Labour, have worked on the basis that if you publish the data,
be it on posters, in newspapers or online, residents will read
the data, and when they see malfeasance, or inefficiency they
will rise up, with pitchforks and flaming torches, and come to
the town halls and demand change. The evidence has been for Governments
of all complexions that whether you publish performance information
in the local newspaper, you put it online, most people do not.
That is not saying that you should not do it, but you need to
have realistic expectations about the number of people who are
going to find it fascinating and interesting. It has been one
of those fantasies of successive Governments that there will be
huge public appetite for this data and use of it. It may be that
things have finally changed and the internet has changed everything,
but I have not seen it yet.
Jessica Crowe:
I would agree with that. The key thing is, if somebody does have
a concern—and I agree with Ben that there are not going
to be that many of them who really delve into it in detail—they
need to have a way to do something with that, because publishing
and being transparent is good and is a necessary thing, but it
is not sufficient to deliver real accountability. If somebody
is worried about something that has been published, being an armchair
auditor, what do they do with that concern? We would say one
of the things they should be able to do is to take it to their
local councillor and get it looked into by scrutiny, because you
also need to be able to make judgments about not only what was
spent but the value of that money.
Ben Page: Much
more needs to be done to make sure that information is transparent
and understandable by "ordinary people", because one
of the issues is a good 10% of people in this country do not understand
percentages, and the way in which people have often in the past
got round this obligation to publish—which you can see in
some ways with some of the demands for complete transparency of
everything now—is to produce it, but in such a form that
people cannot effectively use it.
Simon Parker: Data
is not information. At the moment what we are chucking out is
loads of data. I am the sort of person who might be an armchair
auditor; I have spent quite a lot of time looking at open data
websites. I am astonished both by the sheer amount of data that
is available now and how little you can easily do with it. A
lot of it is practically worthless; I could not even work out
on one council's website how much the chief exec was paid. There
is a real question about how we make sure this is turned into
something people can do something with, and if I cannot do something
with it—you know.
On the other hand, when it comes to the armchair
auditors, there is a danger that we assume that if we do not have
this army of armchair auditors crawling over the accounts then
the approach is worthless, and I do not agree. I think you need
a few of them, because for me the point is not so much everyone
is crawling over the accounts, it is that when you take a decision
as a council you know someone might check it, and you have to
think "What would happen if someone saw this up on a screen,
and if they would not think it is good do I really want to do
it?" It is that shift in mentality that is the most important
part of the reform.
Jessica Crowe:
That is a really big challenge to the way lots of people have
thought about how decisions are made, and how Government is carried
out. I think of Leo McGarry, who was quoting Bismarck in The
West Wing, where he said, "Law and sausage are two things
you do not want to see being made". This is turning that
completely on its head and saying that people do want to know
how things are done and made, and there is a question mark as
to how many people want to know that, but having the right to
find out if they want to, and it being able to be understood,
and people having the knowledge that somebody might ask those
questions, are important. It is the mechanisms that exist to
say, I am unhappy about it, what can I do?
Q201 Mr Betts:
Finally, there are not that many Doncasters around, but is there
a danger under the new arrangements we will get more, and is there
a danger that, if they do happen, they will be less well dealt
with?
Jessica Crowe:
I do not know whether I should declare my interest as a Government
appointed commissioner in Doncaster at the moment. I have intimate
dealings with them. There must be a question as to: would those
very serious service failure cases be picked up, and the mechanisms
exist to do something about them? I think that is a fundamental
challenge and question. I do not think it is necessarily the
case that it is more likely there will be more of them, but there
has got to be a question about picking up on them, picking up
on them early and having the practical mechanisms of intervention.
Ben Page: I would
just post one question for political parties, because you could
argue that local government has been inspected, weighed and measured
more and more over the last two decades, and, in a sense, it has
probably—some people would debate it—become more competent,
but nobody has ever checked the sanity of the captain, the locally
elected politician. That is not to be done by any central inspectorate
or by Central Government, but it is up to political parties, and
some of the failures, you could argue, are about the inspection
regime, but they are often about what is going on inside local
political parties and how the parties police themselves. When
I think of one particular local authority, which is in Wales,
it is partly because there are no political parties doing anything
much there, it is just strange personalities.
Jessica Crowe:
It often is to do with personalities, that is the trouble, because
it is not something you can put your finger on and define: it
is personalities.
Simon Parker: We
clearly need a failure regime. We need a way to spot failure
early on, and a way to decisively tackle that, and we will see
if self-regulation has the teeth to do it. To reflect on the
Doncaster case, I am not sure it is the Doncasters we need to
worry about so much over the next two years. Yes, those organisations
happen where there is huge corporate failure, but I suspect they
are few and far between these days. There is a more worrying
question about how a lot of authorities will react to the spending
cuts, particularly some smaller authorities taking big cuts may
well find themselves facing something that looks like technical
insolvency. How do we cope with that? We need that question
answered pretty urgently I think, because it will almost certainly
happen somewhere.
Ben Page: We did
a piece of work for Zurich Municipal where we were interviewing
senior people from across the sector, both inside local government
and in the auditing community. It is widely thought that one
of the risks of the scale and the speed of the cuts that we have
is that some authorities will simply fall over and there will
be service failure. How is that dealt with if that happens?
It is a risk of this process of fiscal consolidation, as the Treasury
likes to call it.
Jessica Crowe:
The intelligence gathering that is available to the sector should
not just be left to the local government group; they have got
a leading role to play, but it is all the bodies with an interest
in having effective local public services coming together collectively
in some way, without the coordinating role of the Commission,
to say, "What do we know about organisations?", whether
it is political failure, whether it is financial failure, whether
it is service failure, and pooling that information.
Q202 Mr Betts:
Who would do that coordinating without the Commission?
Ben Page: Good
question.
Jessica Crowe:
If we are looking at the self regulation it would have to be the
local government group—they are the voice of local government—but
I do not think they can do it on their own. They need support
and that is appropriate. It is not saying that is necessarily
a weakness about the LGA, it is saying that there are lots of
organisations with an interest: the professional bodies, the other
inspectorates that do exist, and certainly the auditors.
Ben Page: Surely
the LGA, if it does do this, will need to create some sort of
arm's length institution inside the LGA to make this work.
Jessica Crowe:
Centre for Public Scrutiny? That was not a pitch.
Q203 Mr Betts:
Thank you very much indeed for the evidence you gave us.
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