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Mr McLoughlin: My hon. Friend is absolutely right. One thing that causes too much pollution is stacking aircraft. Through better traffic management and longer traffic management of aircraft, a lot has been done to improve the flows into airports so that there is orderly access and entry into Heathrow, but more work can be done on that. That is one of the interim recommendations of the commission.

Huw Irranca-Davies (Ogmore) (Lab): In his statement, the Secretary of State rightly described the increase in airport capacity in the south-east as the “engine for growth”. The same applies in south Wales. Will he directly engage with the Welsh Government on how Cardiff airport can develop its services so that it can play its part in both UK and regional growth?

Mr McLoughlin: That matter is now in the domain of the Welsh Assembly. I am due to meet its Transport Minister, who will no doubt want to discuss the issue, some time in the new year.

Mark Reckless (Rochester and Strood) (Con): Can the Mayor of London expect any Government money to promote his imaginative proposal, and if so, could we also have some in Medway? Given that the page numbers in the Secretary of State’s report are different from those I got from the commission, can he shed any light on the late change in the report to include a Grain option and tell us whether meetings with the Prime Minister and the Chancellor last week played any part in that?

Mr McLoughlin: It is true that my report did not come off a PDF document, but I am not sure whether the page numbers differ from those in the report received by my hon. Friend. How the Mayor of London spends the considerable amounts of money that he has at his disposal is a matter for him.

Jessica Lee (Erewash) (Con): Does my right hon. Friend agree that within these important considerations about aviation expansion fits the complementary issue of supporting nationwide infrastructure? With that in mind, will he assure the House that Ilkeston train station is on target for opening at the end of 2014? Such news will perhaps bring a bit of extra festive cheer to the good people of Erewash.

Mr McLoughlin: I assure my hon. Friend that everything I have said about Network Rail and its reclassification will have no impact on the courageous campaign that she has mounted to get a railway station open in Ilkeston by next December. When I was in Ilkeston recently, it was suggested to me that it should be called not Ilkeston station but Jessica’s junction.

James Morris (Halesowen and Rowley Regis) (Con): I welcome the recommendation in the Davies commission on the use of existing airport capacity, particularly the reiteration of the support for Birmingham gateway. Does the Secretary of State share my disappointment that the commission has not been bolder in looking at Birmingham airport as a long-term solution? If we are considering options in London and the south-east, would it not have made more sense to have a credible option outside the area, because it could have a transformative effect on the west midlands economy?

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Mr McLoughlin: I am pleased to see the Birmingham lobbying exercise spread across the whole of the west midlands. There is clearly a united front on the matter. I know that Sir Howard will look at the exchanges today, but there is nothing to stop Birmingham airport expanding; indeed, I encourage that. At the moment, the airport is not utilised to its full capabilities. Many more services can be provided from Birmingham now that the extension of the airport has been completed.

Stuart Andrew (Pudsey) (Con): The aviation White Paper in 2003 stated that expansion of Leeds Bradford airport would need surface access improvements, yet we have seen very few. In this report, chapter 5 makes specific reference to surface access to other airports and recommends that the Government work with local authorities to ensure that such improvements take place. Will the Secretary of State make sure that Leeds Bradford airport will be looked at, because my constituents have to suffer many people going past their homes on very overcrowded roads?

Mr McLoughlin: Following my hon. Friend’s representations, I am delighted to give him the assurances that he requires. I will also come to his constituency and look at the situation there.

Jackie Doyle-Price (Thurrock) (Con): The Mayor of London claims that Heathrow is a planning error. It is not; it is our hub airport. As my right hon. Friend is well aware, the Thames estuary is home to some significant ports infrastructure. Is it not to be hoped that the Davies commission rules out, once and for all, a Thames estuary airport, particularly as we already have an excellent airport at Southend?

Mr McLoughlin: As I have said to various colleagues, everyone will have an opinion if they have something in their own localities. I will await the outcome of the commission’s report, but I take what my hon. Friend has said seriously.

Mr David Nuttall (Bury North) (Con): Let us forget Birmingham and Leeds Bradford and get back to Manchester. Given that Heathrow is already operating at full capacity and it is likely to be years before any option being considered by the Davies commission is built, may I ask my right hon. Friend what steps he is taking to encourage greater use of these regional airports—or major international airports as he calls them? May I suggest that a useful and popular first step would be to reduce airport passenger duty for new long-haul flights from regional airports, which would not cost the Treasury anything because they do not exist at the moment?

Mr McLoughlin: I am always keen to hear about schemes that cost no money whatever. Colleagues often convince me of a scheme but, unfortunately, when I go to the Treasury the idea is usually dismissed in fairly short terms. None the less, I understand my hon. Friend’s point. The truth is that Manchester has expanded and is, without any doubt, now a major international airport. I am just sorry that no one has mentioned East Midlands airport, which is also owned by Manchester airport.

Neil Carmichael (Stroud) (Con): Forty years ago, a Labour Government cancelled the Maplin airport project, thus creating the situation we now have with under-capacity.

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Now that we have a second chance to get this right, does the Secretary of State agree that any report from Sir Howard’s commission should include a proper analysis of the advantages of a new airport east of London?

Mr McLoughlin: As I have said and as Sir Howard has been at pains to say in his statements today, if this was an easy decision it would have been taken some time ago. It is not an easy decision to take. It is right that we should consider all the facts and our environmental commitments, too, and that is the work that the commission has embarked on.

Robert Halfon (Harlow) (Con): Will my right hon. Friend commend the Manchester Airports Group for its new stewardship of Stansted airport? Although I note that the report suggests that an extra runway is environmentally unsustainable and economically unviable, it also considers the expansion of the existing runway. If that happens, will my right hon. Friend ensure that the Government invest in the infrastructure on the M11 and the railways and ensure that local people are employed to help with the extra expansion?

Mr McLoughlin: I certainly commend Manchester Airports Group for how they have taken over Stansted and I hope that they will continue the public engagement with people from around the area. At the moment, it is estimated that there is room for growth at Stansted without any extra runway capacity. My hon. Friend makes the point about how important airports are for jobs and for giving people opportunities.

Mr Philip Hollobone (Kettering) (Con): Given the crucial role that Network Rail plays in the provision of Britain’s transport infrastructure, not least at the moment through the necessary but highly disruptive work in Kettering in preparation for the welcome electrification of the midland main line, does my right hon. Friend think that it is as efficient as it might be in providing Britain’s railway infrastructure and does he regard its extraordinary and expensive corporate structure as fit for purpose?

Mr McLoughlin: As I announced in my statement, Network Rail has been reclassified and is charged with some important projects. My hon. Friend refers to the electrification of the line that serves both his constituency and mine, but I would also point out the big infrastructure jobs that Network Rail has undertaken, such as the closure for six weeks in the summer of Nottingham station and the complete resignalling in that area. That project came in under budget. The projects are very big and, obviously, certain consequences will flow from the changes. It is vital that there is no question but that the huge investment we have committed to Network Rail will be delivered over the next five years.

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Rehman Chishti (Gillingham and Rainham) (Con): The Secretary of State will be aware of the comments made by Sir Howard Davies, who said that the estuary airport would cost about £80 billion to £110 billion and would cause massive disruption. Do the Government have that amount of money to spend when there are other, better, environmentally friendly options? Those views are shared by my constituents in Gillingham and Rainham and the local authority, Medway council. They are bitterly opposed to that bizarre idea on those grounds and many others.

Mr McLoughlin: One thing that will have to be considered if such proposals are made is how they will be paid for. I am, however, aware that figures for transport infrastructure projects sometimes get greatly inflated. This one started off at about £75 billion, it has grown to £100 billion, my hon. Friend says that it is £110 billion and I have no doubt that by next week it will be around the £150 billion mark.

Mark Garnier (Wyre Forest) (Con): In his statement, my right hon. Friend said that he is seeking political consensus on both sides of the House. By now, he will no doubt have gathered that there is practically political unanimity behind Birmingham airport. Is not the important point that rebalancing the economy of the UK is about not just regions but sectors? Significant expansion at Birmingham would rebalance the economy not just out of the south-east but away from the service sector, supporting our industrial heartlands in the midlands.

Mr McLoughlin: My hon. Friend makes yet another representation from the Birmingham grouping—[Interruption.] The Birmingham mafia, as Members say. As he knows, there is nothing to stop Birmingham airport expanding significantly. There is spare capacity there at the moment and it has to attract carriers in to the airport. I am keen to see it do that and for that to become available to the whole of the west midlands.

Mr Marcus Jones (Nuneaton) (Con): The west midlands is one of the only regions to have a positive balance of trade. The Government want to build on that rebalancing by investing in HS2. To properly integrate our transport infrastructure, does my right hon. Friend not agree that the future development of Birmingham international airport should feature far more heavily in the final Davies report than it does in the interim one?

Mr McLoughlin: I do not know whether I have been kiboshed as far as Birmingham is concerned, but my hon. Friends on both sides of the House have made clear to me how important they consider the airport to be. There is nothing to stop the expansion of Birmingham airport. It has done a lot to increase capacity and I hope that more services can be attracted to Birmingham.

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Points of Order

1.45 pm

Michael Fabricant (Lichfield) (Con): On a point of order, Mr Speaker. I cannot think of anyone less like a chocolate teapot than my right hon. Friend the Secretary of State for Transport. May I invite you to prepare a booklet of various examples of intemperate language, such as “chocolate teapot”, that you think might be inappropriate in this House?

Mr Speaker: The truth of the matter is that it is all about the context in which remarks are made. The hon. Gentleman, who is a keen student of parliamentary history—although I do not think he has written a book on the subject, so in that sense he would not compete with the hon. Member for Rhondda (Chris Bryant)—will be aware that there was at one time a list of proscribed words, but the list was discontinued, partly, I think, on the grounds that it was so extensive as to become unmanageable. It was judged instead that it was for the Chair to make a judgment about the manner in which something is said and the context in which words are used. I hope that the insatiable curiosity of the hon. Member for Lichfield (Michael Fabricant) has now been satisfied, for today at any rate.

Chris Bryant (Rhondda) (Lab): Further to that point of order, Mr Speaker. I think that I am right to say that on one occasion the hon. Member for Lichfield (Michael Fabricant) accused me of being a teapot. He seems to think that what is right for a teapot is not right for a chocolate teapot.

Mr Speaker: I fear that this exchange will descend. Colleagues will be aware that the hon. Member for Lichfield previously served in the Whips Office with considerable dedication and loyalty under the leadership of the man who now serves as the Secretary of State for Transport. Whether that explains the differential treatment, I do not know, but I hope that we will leave the matter of teapots and other items there for today.

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Mental Health Outcomes (Measurement)

Motion for leave to bring in a Bill (Standing Order No. 23)

1.48 pm

Mr Robert Buckland (South Swindon) (Con): I beg to move,

That leave be given to bring in a Bill to require the Secretary of State to record certain statistics relating to people receiving treatments for mental health conditions; and for connected purposes.

The Bill is not about a headlong drive towards box-ticking and bureaucracy in our NHS, but about finding the most effective way of achieving true parity of esteem between physical and mental health. Parity of esteem, or equal priority for mental health and physical health, has been enshrined in statute by the Health and Social Care Act 2012—a very welcome measure.

A year ago, the Department of Health published the NHS mandate, in which it identified a number of areas in which it expects particular progress to be made. One of those priorities is to deliver

“a service that values mental and physical health equally.”

Amen to that. How will that be achieved? The Government state in the mandate that they expect NHS England to be able comprehensively to identify levels of access to, and waiting times for, mental health services in the community. Again, that is welcome, but let us take a moment to look at the current ways in which performance in mental health services is measured. The NHS outcomes framework is the mechanism, and it is working well to cover physical health outcomes. When it comes to mental outcomes, however, the picture remains incomplete.

What I am seeking is an improvement in the range and depth of information. I am after quality, not quantity. Why? It is because I want to see developing in our local communities mental health services that genuinely reflect local need. I welcome the publication this month by the Minister, who is in his place, of the mental health dashboard, which brings together existing information about mental health provision. I note that in that document there is an acceptance that the range and type of information available will have to develop, but there is a concern that consistency and stability in what the dashboard measures are maintained. My proposals today will, I believe, deepen the quality evidence while maintaining that stability.

I further welcome the creation of the mental health intelligence network by NHS England and Public Health England. It sounds a bit James Bond, but it is a practical means which will be launched next year to devise more effective ways in which quality information can be gathered. However, unless more work is done to fill in the gaps in relation to mental health outcomes, I fear that important opportunities will be missed.

What measurements do we have so far? We have mortality rates of adults under 75 with severe mental health conditions. That information is being collected and it is relevant to the first part of the NHS outcomes framework. Those statistics reveal that life expectancy is 15 to 20 years shorter than the average in England; they also reveal the extent of co-morbid physical conditions. Already, we can see how such information is crucial to making the right interventions and tackling those appalling statistics. There are also measurements related to improving

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access to psychological services, which have helped to drive the commissioning of more and more services at a local level. I warmly welcome that. However, like the proverbial Swiss cheese, gaps both in the range and quality of measurement remain. I believe that mortality data should be broken down further to clinical commissioning group level, which would help to identify particular local needs—not just mental health needs, but physical needs.

Part 3 of the NHS outcomes framework aims to measure how well NHS services help people to recover from illness or injury. A useful measurement of recovery is the number of people who have or have had mental health conditions who are able to gain employment. There are national measurements, but they are not reflected in local indicators. If we are to drive more locally based employment support services, that needs to change. The outcomes framework is very much focused on acute services, so measurement of their use by mental health patients, broken down locally, would be very useful in helping to determine the extent of our community services or where, to put it bluntly, firefighting is taking place, as opposed to interventions in the community.

Part 4 of the outcomes framework deals with how well health services provide a positive experience of care, so measures of psychiatric in-patient or secure services have to be made. In-patients at acute hospitals undergoing treatment for physical conditions are rightly asked for a lot of information, all designed to make services more attuned to aspects such as age and gender, for example. We owe this to mental health patients using acute services too. They are among the most vulnerable people in our society and a service that is

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better attuned to their individual needs will yield better results. At present there is no collection of information about the duration of untreated psychosis—in other words, the length of time it takes between someone presenting with a psychosis and their treatment. How will we comprehensively identify problems with delays in referral and treatment if this is not done?

In relation to people detained under the Mental Health Act, let us not forget that we still have far too many people, including children, being detained in police cells, rather than in an appropriate place of safety. The number of incidences is recorded, but not the outcome. That is another example of how a lack of quality information prevents this issue from being properly prioritised and prevents local analysis of need.

One in four of us will experience some form of mental health condition in the year ahead, and 10% of children in the United Kingdom have a mental health condition. Many children and adults will have co-morbid physical and mental health problems. The division between physical and mental health is an artificial one which must be removed. They need—we need—commissioned services that are truly responsive to our demands. Parity of esteem must become a reality. I commend my Bill as a means of achieving that.

Question put and agreed to.


That Mr Robert Buckland, supported by Caroline Nokes, Annette Brooke, Mike Freer, Yasmin Qureshi, Mrs Madeleine Moon, James Morris, Mike Thornton, Caroline Lucas, Grahame M. Morris, Oliver Colvile and John Hemming present the Bill.

Mr Robert Buckland accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 28 February 2014, and to be printed (Bill 147).

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Local Audit and Accountability Bill [Lords]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1

Integrated audit

‘(1) Before section 1 of this Act is brought into force, the Secretary of State shall, by regulations, put into effect arrangements for integrated audit which enables auditors to work across authorities and with the National Audit Office, where national and local funding is being used jointly.’.—(Andy Sawford.)

Brought up, and read the First time.

1.56 pm

Andy Sawford (Corby) (Lab/Co-op): I beg to move, That the clause be read a Second time.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this it will be convenient to discuss the following:

New clause 2—Transparency of audit

‘(1) A local auditor has a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year.

(2) Local auditors only have a right of access to audit documents from private companies, under subsection (1), that relate to the service provided to the local authority by that company.

(3) A local auditor must make available on request any audit documents, obtained under subsection (1), subject to the provisions of the Freedom of Information Act 2000.

(4) In this section “private company” shall be interpreted to mean any legal entity, including joint ventures, not-for-profit organisations, mutually-held organisations and charities.

(5) Five years after the coming into force of this section, the Secretary of State must commission and publish a review of the effectiveness of subsections (1) to (3) and of the costs to local auditors, private companies and local authorities arising from it.

(6) The meaning of “significant” and “terms of qualification” shall be set out by regulations.’.

New clause 4—Scrutiny

‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report on the effectiveness, efficiency and economy of the structures and procedures put in place by relevant local authorities, under section 21 of the Local Government Act 2000 (Overview and scrutiny committees), to review the decisions made, or other action taken, by the executives of such local authorities.’.

New clause 5—Fraud investigation

‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report on the adequacy of the resources, staffing, structures and procedures put in place by authorities to detect and investigate fraud within the authority effectively.’.

New clause 6—Compromise agreements

‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report into the extent and appropriateness of the use of compromise agreements, incorporating confidentiality clauses, as provided for by section 203 of the Employment Rights Act 1996, to effect the exit of members of staff from employment by local authorities.’.

Government amendment 1.

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Amendment 13, in clause 20, page 15, line 24, at end insert—

‘(7) A person providing commercial or consultancy services to an authority may not audit those services.

(8) The audit of any commercial or consultancy services provided by a person appointed as a local auditor must be subcontracted to a different local auditor.’.

Government amendments 2 and 3.

Amendment 12, in schedule 2, page 43, line 8, at end insert—

30 A Local Enterprise Partnership.’.

Government amendments 4 and 5.

Andy Sawford: I shall speak to new clauses 1 and 2.

This is a better Bill for the scrutiny that it has received as a result of the work of the draft Bill Committee, the Communities and Local Government Committee and the House of Lords, and in Committee in this House, where I was pleased to receive substantial reassurances from the Minister, clarifications and explanations on many points. Some welcome concessions have been made, both during the Committee stage and in some of the amendments before us today.

Three years ago in a press release the Government announced the abolition of the Audit Commission, without thinking it through. There has been considerable criticism of the fact that there was no real consultation with local government, and when the announcement was made prematurely, the audit world was not consulted on how the new arrangements might evolve. That has led to a range of problems in the Bill. It is very much a backward-looking piece of legislation that seeks to post-rationalise a premature announcement that took most people by surprise.

The Audit Commission was abolished without proper consideration of how to maintain some of its more valuable functions, such as enabling local authorities to make comparisons and to use benchmarking tools to see whether they are spending the public pound as well as possible, and acting as an independent auditor, to bring transparency and public confidence to public audit. The Government had not thought through crucial issues such as how to maintain independence of audit, which we will come to later, without amendments to increase transparency, particularly new clause 2.

The Government had overestimated and double-counted the savings that may accrue. They had failed properly to address concerns that the audit market for local government is too limited. However, there is a bright spot. The Government’s reluctant U-turn on joint procurement is very much to be welcomed. It follows submissions from my noble Friends in the House of Lords and from the Local Government Association, the National Association of Local Councils and many other bodies. We tabled amendments in Committee to allow local authorities to form a joint procurement body, and we were pleased when, towards the end of the Committee stage, the Government introduced, albeit through gritted teeth, a new clause to do just that. The Government have not been clear about who will lead the development of that joint procurement body, but I urge them to work closely with the Local Government Association, the principal representative body for local government.

New clause 1 seeks to enable auditors to follow the public pound through the system. It would require the

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Secretary of State to make arrangements for integrated audit so that auditors can work across local authorities, and other relevant authorities at a local level, and with the National Audit Office where national and local funding is being used jointly. The problem that the new clause aims to solve is that the audit arrangements set out in the Bill are too narrowly focused on the relevant authority as a self-contained unit.

The Government have therefore failed to provide for the changing world of public services. Shared services, community budgets, which both they and the Opposition strongly support and which local authorities across the country—notably, many Labour councils—are taking forward, and combined authorities are all part of a shift towards much stronger partnership working by local authorities. There is also a specific point about local enterprise partnerships that I will come to later.

The previous Labour Government introduced the Total Place initiative in their last years in office. By enabling authorities to join together for some parts of their audit, we hope that we can see the value for money of the Total Place approach and that that will be a spur to further joining up. By bringing the National Audit Office into that approach to integrated joint audit, we can follow the public pound up and down the system for local and national spend.

The new clause is about future-proofing the Bill. In Committee the Government resisted all attempts to reference integrated audit or community budgeting approaches. In that sense, I think that the Bill will lead to an atomised approach to auditing, rather than a connected view. It has completely failed to make provision for the new world of public service delivery being built before our eyes, and not just the changes in local authorities that I have identified, but wider changes such as the troubled families programme and welfare changes, particularly the introduction of universal credit. They are all looking at connecting spending across the country. It is astonishing that the world of audit envisaged by the Bill takes no account of that at all.

We now have city deals, which should be properly audited. Indeed, we explored in Committee how they and other bodies, particularly those focused on enterprise partnerships and working with business, might be audited when it is not possible to bring together different auditors. As community budgets develop, different auditors will examine the use of the local government pound while the National Audit Office examines the use of the Whitehall pound, although they are actually being spent together. If a service is shared and common, surely it makes sense that the audit should be, too.

Another example is health and social care—the subject of the legislation we debated only yesterday. We need to see the future of the health service as one in which we meet the challenges of a rising elderly population, with people living longer and more independently. Local authorities, through their social care role, and health bodies will work jointly. Indeed, there are significant moves in that direction through local health and wellbeing boards. It would make sense for audit to be able to follow that pattern of more joint services.

Parliament has a strong interest in seeing that public money is spent well, whether nationally or locally. That was the drive behind Lord Heseltine’s introduction of

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the Audit Commission all those years ago. Parliament previously drew some assurance from the Audit Commission’s national work on value for money, but that work is winding down and the value for money assurances offered in the Bill are very limited. Indeed, we sought clarification on those points in Committee, and we had some reassurances from the Minister, but they were not sufficient for us to believe that that work will be carried out in the way it ought to be.

That point becomes increasingly relevant as Government policy cuts across departmental silos as fresh patterns of local delivery develop and local authorities commission services from, and develop partnerships with, an ever wider range of providers. The ad hoc Bill Committee that scrutinised the draft Local Audit Bill was absolutely right to state that the Bill should provide an unambiguous basis for insight into spend across central and local government, but as it stands it does not. Would it not be sensible—I ask this again in the hope that the Minister will change his mind at the eleventh hour—in the management of audit contracts if two authorities working together substantially and significantly could appoint a lead audit for a particular set of services, rather than having two separate auditors crawling over the same books and duplicating how they look at the same services, perhaps even reaching different conclusions?

We would rather have auditors work together to reach a shared view on whether services represent value for money and whether public money is being spent effectively, so an audit presented to a relevant authority might contain sections that had been prepared jointly and appropriately with other auditors of local spend, perhaps those from other relevant authorities or the National Audit Office. That audit would then be much more valuable, and not only to the council, but to the public and Parliament, in showing whether money was being spent well. For example, in my area there is an arrangement for shared services between Northamptonshire and Cambridgeshire county councils. There are questions about whether that genuinely delivers value for money. I am concerned that an audit in which they are each treated entirely separately and reported on separately will not give us a real sense of whether the partnership is delivering the value for money that I and my constituents want to see.

I therefore appeal to the Minister to have a change of heart. He is a former council leader. He might well return to local government after the next election or at some future time, when I am sure he would be very grateful that the Government had created audit arrangements fit for the new world of local government, not the old one.

This might be the most appropriate time to refer to amendment 12, which seeks to add local enterprise partnerships to the list of relevant authorities set out in schedule 2. LEPs have a growing role in the local public sector and partnership landscape. They are charged with driving local economic growth. From next year their role will increase, as they will be tasked with developing investment strategies for European structural funds; looking after skills for employment; leading on community-led local development; taking on board economic and social inclusion; looking at environment and climate change issues in local communities; taking forward social innovation, ICT and digital inclusion; and tackling youth unemployment. Indeed, the Government

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seem to view LEPs as a panacea for how many areas of local public service reform, enterprise and regeneration will be taken forward.

However, since the establishment of LEPs three years ago, and particularly following the publication of Lord Heseltine’s report “No Stone Unturned”, while their remit has expanded dramatically and the roles and responsibilities of their boards have changed, there has not been a commensurate consideration by the Government of how to address the governance, capacity, audit and probity of LEPs.

From next year, LEPs will receive central Government money, including a share of the £6 billion from the European regional development fund, a share of the £24 million growth money from the Department for Business, Innovation and Skills, a share of the £2 billion from the 2015 Treasury allocation for which LEPs can bid, and a share of the £400 million top-slicing of the new homes bonus, which is very controversial with local authorities, which are concerned about the implications of that top-slicing. As LEPs take responsibility for funding streams from several Departments and agencies, it is clear that there will be no effective audit trail to account for how the money will be spent. The truth is that LEPs are not really accountable to anyone.

In Committee my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) asked the Minister to set out how he envisages LEPs being audited in future. Given that they are responsible for such significant amounts of public money, and given the pace of change in LEPs across the country, the Minister’s response was simply inadequate. He could make a simple amendment to schedule 2 that would allow us to treat LEPs as a relevant local authority so that not only can we look at the local spend, but we can consider how the national spend will be accounted for as it goes into those LEPs in a way that does not mean having to look at the separate audits of a whole range of different Departments and agencies. If the Minister is not minded to accept our amendment to schedule 2, that could be addressed by simply accepting new clause 1, which would allow integrated audit, because LEPs are precisely the kind of area where integrated audit is much needed. Whether he chooses to accept new clause 1 or the amendment to allow a change to schedule 2—we hope he will accept one of them—we hope that we see a significant change in the confidence that we and the public have in how LEPs work.

LEPs are a mixture of the public and private sectors, so they are a different kind of organisation. Many public sector bodies are involved in them. For example, there are two LEPs operating across the area I represent, with different types of authorities in a two-tier area, so they are quite complex. Just saying, as the Minister did in Committee, that auditing the money for which LEPs are responsible will be done by that disparate set of audits by component bodies is just not good enough. I strongly urge him to rethink that.

Annette Brooke (Mid Dorset and North Poole) (LD): I appreciate the general points that the hon. Gentleman is making, but does he agree that the democratic accountability of LEPs needs to be considered at some stage, because in many cases we have one-party representation on the political side?

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Andy Sawford: The hon. Lady makes an interesting and important point. I should perhaps declare an interest as an officer of the all-party group on local growth, local enterprise partnerships and enterprise zones. I think the Minister can also claim to have held that auspicious role in the past. The group has been concerned about how we can make sure that LEPs are as effective as possible, principally in regenerating areas and communities and ensuring local growth, but also as regards democracy. LEPs must be accountable to communities, particularly given that they have mixed boards taken from the public and private sectors. In my area—I am not sure about the hon. Lady’s—there are two different types of authorities, and district councils around the country, in particular, have been very concerned about whether they have a powerful enough voice in the governance of LEPs.

The hon. Lady mentioned political representation on LEPs and their political leanings. A modest change to this Bill would address some of the issues about how LEPs are growing and developing to suggest that they should be audited in an integrated and proper way. That could enable elected local councillors to ask questions of and examine the performance of their LEP so as to enhance the local accountability and democracy that she and I want to see around the country in relation to the growing role of LEPs.

New clause 2 is about transparency. The independence and transparency of audit is not sufficiently safeguarded by the Bill. We recognise that the Bill has been improved during its passage through Parliament, and that the Government have sought to put in place ways to ensure an element of independence—for example, of local auditors. We had substantial discussion about how we would ensure the independence of members of the audit panels that recommend the appointment of auditors. However, there are significant issues in relation to how local authorities are finding new ways of working, particularly with private sector companies and other suppliers. We want to bring greater transparency to the relationship between local authorities and the private contractors to whom, increasingly, large amounts of public services are being contracted out.

The new clause is partly inspired by the strong points made by my hon. Friend the Member for Hayes and Harlington (John McDonnell) on Second Reading, when he encouraged us to look at the work of Transparency International. I assure him that I read its report on corruption, as did my hon. Friend the Member for Derby North (Chris Williamson), and used it to raise some important questions in Committee. Indeed, the Minister met representatives of Transparency International, so interested had he become in the strength of its recommendations and the issues that it was throwing up. Transparency International says:

“Private companies, when operating services in the public interest, should be required to comply with the Freedom of Information Act with regard to those services. Specifically, audit reports from local authorities should be covered under the Freedom of Information Act or published directly as public documents.”

I agree.

Our new clause draws on amendments that have been tabled at every stage in the Lords and in Committee. I pay tribute to the work of Lord Wills in this regard. At each stage, the Government have warmed a little more to the arguments that have been made. The Liberal

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Democrats have been encouraging, too. Lord Tope and Lord Wallace of Saltaire spoke in the Lords in favour of greater transparency. Lord Tope said:

“My Lords, Liberal Democrats campaigned hard for freedom of information long before the Act was passed and have since been consistent and enthusiastic supporters of its provisions. It follows therefore that we start with considerable sympathy for the issue that the noble Lord, Lord Wills, is pursuing…I am grateful to him for pursuing the issue at all stages of the Bill.”

I hope that he noticed that we took these matters forward in Committee. Lord Wallace of Saltaire said:

“I encourage the noble Lord to pursue this issue further. I will repeat what I said on Report: both Parliament and the Government need to look at this issue in general.”—[Official Report, House of Lords, 24 July 2013; Vol. 747, c. 1319-24.]

They are both right.

The Government’s main counter is that transparency increases costs and is not necessary because councils can already be subject to the Freedom of Information Act 2000. However, that is not sufficient given the travel towards ever greater outsourcing of services. Local government controls about a quarter of all public spending and contracts out an increasing amount of services to private providers. It is responsible for making decisions about a number of matters where the interests of private companies are often in tension with the wishes of the electorate. For all those reasons, local government is inherently exposed to corruption risks. On the whole, it navigates and mitigates those risks admirably, and we should recognise that and keep in proportion the level of concern. However, the public will want to know that we in this place have done our very best to ensure that there is transparency in how local authorities mitigate the risks and manage contracts.

2.15 pm

Two recent reports by the National Audit Office are very worrying. They warn of a crisis of confidence and highlight the fact that much of the work of central Government is being contracted out to firms such as Serco, with a contract of £1.8 billion; Capita, with a contract of over £1 billion; and companies such as G4S and Atos. We all know from our constituencies some of the problems with Atos, which has contracts approaching £1 billion but is singularly failing to deliver for our constituents. The reports highlight the issues and problems that have emerged in the management of these contracts. In its memorandum, the NAO says:

“Transparency is needed to ensure that no one within the contractor can hide problems and that it is in the contractor’s commercial interest to focus on their client’s (the government’s) needs”—

or, indeed, the needs of local government. The Institute for Government says:

“The current pace and scale of outsourcing outstrips the ability of Whitehall officials to design and manage complex contracts effectively.”

We know the scale of the contracts that local authorities are negotiating around the country. Some are working successfully but in others there are problems, and the public want to know that there is a measure of real accountability and transparency. Hon. Members will recognise that this is a challenge for local authorities as well as for central Government.

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The new clause aims to bring some transparency to the billions of pounds of public money that are at stake with regard to tackling fraud, corruption, incompetence and inefficiency in terms of citizens’ rights to know about the services provided to them and taxpayers’ rights to know about the services that they pay for. We have all agreed at various stages of our debate that local government and the relevant authorities that are subject to the Bill in schedule 2 are generally bodies that conduct themselves—in their financial probity and their conduct and standards in public office, including that of elected members and boards and their officers—in a manner that we would all want to see. However, we also know about occasions—we have to be honest about them—when those organisations fall short, sometimes wilfully and sometimes because of maladministration or error. We discussed some examples of that and what we can learn from them in Committee.

The fact that local authorities are covered by the Freedom of Information Act does not always provide the necessary transparency for private sector bodies carrying out public sector work, nor does the right of electors to inspect the accounts and audit documents, important though that is; indeed, it is provided for in a welcome way in the Bill. The Government have argued that the transparency that is intended in these provisions would increase costs, but we would argue that transparency can save money. Some of the work of the Audit Commission has saved billions of pounds of public money. There is evidence from local authorities around the country of how transparency can at times shine a light on areas of public spending that leads to savings to the public purse. I think the Minister would support that general point; indeed, he and his colleagues have talked about armchair auditors.

We deliberately included the word “significant” in the new clause to make it clear that it is not intended to cover the provision of services by small businesses, nor the work of town and parish councils, as in those cases it might be unnecessarily onerous in terms of cost. That acknowledges the Government’s concern in that respect. It would allow a local auditor

“a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year...A local auditor must make available on request any audit documents, obtained under subsection (1), subject to the provisions of the Freedom of Information Act 2000.”

That would clearly make these documents available to the public. We seek to define “private company” in the context of how freedom of information may apply in relation to the process of audit, so that it would mean

“any legal entity, including joint ventures, not-for-profit organisations, mutually-held organisations and charities.”

Of course, many more of those bodies are now involved in providing public services.

To ensure that the Minister understands that we intend to be very reasonable and measured in making this proposal, we have included a sunset clause. I hope that the Government recognise that that means that if the new clause proves to be particularly onerous, or unnecessary, they could at a future time consider whether it is any longer needed.

Our final amendment in this group, amendment 13, centres on the independence of audit. It is straightforward and I do not intend to detain the House on it for long. It

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is an important principle that independent audit means that companies should not be auditing themselves. As I have said, councils are increasingly outsourcing contracts to the private sector. When a company, be it PricewaterhouseCoopers, Deloitte and Touche, KPMG, Ernst and Young or some other provider—perhaps a smaller firm or even a new entrant to the audit market, as the Government hope will happen—provides services other than audit to a council, it should not then audit those same services. That is a simple but very important principle, because there is clearly a conflict of interest when a firm is auditing itself.

In Committee we heard assurances that in such circumstances an audit firm would, by virtue of the expectations in the contract with the council and, to some extent, with regard to the codes of professional standards and probity that govern and guide how auditors operate, make sure that a different person or even a different team within the company would carry out the audit so as to bring a measure of independence when looking at areas of spend and operation for which that self-same company is responsible. We listened to those arguments, which were made by a number of hon. Members. We know that auditors already seek to uphold professional standards of conduct and that in the private sector they sometimes need to have different teams when they work with a major company as both an auditor and a supplier.

We would argue, however, that it is a matter for the shareholders of those private companies to resolve any conflicts of interest. Our focus in this Bill is on arrangements for local and other relevant authorities that are spending billions of pounds of taxpayers’ money and where it is our responsibility to make sure that conflicts or interest are resolved.

Our amendment does not seek to prevent a company from undertaking audit work when it has other interests in the relevant authority. We recognise that that would go too far and that there are significant issues with regard to what is, in effect, an oligopoly in this market. We do not wish to narrow further the number of firms that could bid to undertake the audit work. Our amendment does say, however, that the audit firm would have to subcontract to another firm any part of its work that relates to the auditing of services that it already provides. Given that the Government envisage some arrangements whereby more than one auditor may be appointed to carry out work, we do not see what the problem is with the amendment. It seems perfectly sensible and I hope they will consider it.

The Minister has assured us that in many local authorities it will be commonplace for a company to be able to subcontract parts of its audits to different audit firms or to be able to make arrangements in relation to combined authorities where different auditors work together. He has assured us that that is a feasible and, indeed, desirable part of the arrangements as currently envisaged, and we see the amendment as a logical extension of that.

I welcome the new clauses tabled by my hon. Friend the Member for Hayes and Harlington, who has a strong interest in maximising transparency, which is the focus of his new clause 3. On new clause 4, independent studies have been done on the effect of changes in local authority structure since the Local Government Act 2000. I gently say to my hon. Friend that I would rather leave

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it to local authorities, local residents and interested parties to review their arrangements than ask for central Government’s verdict on what is the most effective structure for local democracy in any given local authority area.

New clause 5 addresses how local authority capacity has been diminished. I would be very interested to hear the Minister’s response to that, because it is an important point that was raised in Committee. On new clause 6, compromise agreements are a matter of increasing public concern. We sought to raise the issue in Committee, where we tabled amendments that would have meant that compromise agreements could not effectively gag employees. I am sorry that the Government did not accept them.

On Government amendment 2, I thank the Minister for his letter explaining this minor technical amendment. Government amendment 3 makes sense to us on the cross-border point, notwithstanding the wider policy point about the treatment of internal drainage boards, which we will come to later. Government amendment 4 is a tidying-up amendment.

Finally, on Government amendment 5, I am very pleased that the Government have responded to the points we made in Committee about recognising the qualifications of auditors. The amendment does not go far enough to address the important issue of auditors needing to understand the scope of public audit, a point that was powerfully made by the Chartered Institute of Public Finance and Accountancy in its representations to us and, indeed, by the draft Bill Committee; nevertheless, I welcome the amendment.

John McDonnell (Hayes and Harlington) (Lab): I wish to speak to new clauses 4 to 6, which stand in my name, and, without wanting to stray from the procedural rules of the House, I may refer to new clause 3, which has not been selected, but I assure you, Mr Deputy Speaker, that it will be a fleeting reference.

As has been said, on Second Reading I referred to the Transparency International report on the potential for corruption in local government. I circulated the report to all Members in advance of this debate and I am grateful that the Minister took up my suggestion to meet Transparency International and that the report became a subject of debate in Committee.

I tabled these new clauses to draw attention to some of the issues raised by the Transparency International report and to seek at least an element of forward momentum with regard to addressing these issues in future. It is critical that we maintain the confidence of the general public in the administration of local government. I think that Transparency International has helped us greatly, although its report says that it is very difficult to identify evidence other than anecdotal evidence about the level of corruption that may exist in UK local government. I believe we all share the view that the vast majority of councillors and council officials do an excellent job to a very high standard of probity and efficiency. Nevertheless, we are plagued with anecdotal information about elements of local government and with doubts about corruption.

Given the lack of data on corruption in local government collected at national level or any other level, Transparency International looks at the systems implemented to make sure that corruption does not take place. Its report says:

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“Here, a disturbing picture emerges, and one on which experts and interviewees”

in the study

“were agreed. On the one hand, the conditions are present in which corruption is likely to thrive—low levels of transparency, poor external scrutiny, networks of cronyism, reluctance or lack of resource to investigate, outsourcing of public services, significant sums of money at play and perhaps a denial that corruption is an issue at all.”

My new clauses address those key elements. First, lack of transparency relates to new clause 3, which has not been selected, so I will not dwell on it. On Second Reading, I gave the example of my own local authority—this may happen elsewhere, so I would welcome the views of other Members—regularly putting items in part 2 of its agenda on the basis of spurious commercial confidentiality. When the find of prehistoric flints on one of my sites was reported in part 2 of the agenda, I joked in a previous debate that commercial confidentiality might have been important 3,000 years ago, but it is not now. It is, however, becoming a regular way of stifling debate and of preventing issues from being reported in the local media.

I believe—this is why I tabled new clause 3—that we need to address that. Central Government need to be clear about how often it is happening in local government and about the scale of its use and whether it is being used appropriately. They also need to address whether they have a role to play in providing further and better guidelines on how part 2 items should be addressed and on how items should be deemed to be commercially confidential or otherwise for the purposes of part 2 of the cabinet system.

That relates to the overall system. Under the previous Government’s local government reforms, which I opposed, we now have quite a centralised local council system whereby the leader is elected and then appoints the cabinet. They are all on a relatively high income these days. I do not begrudge anyone being paid the rate for the job, but the leader of the council in my area is on £65,000 a year and is appointing other members of the cabinet on salaries of between £45,000 and £55,000 a year. That gives the leader extremely wide-ranging powers of patronage and it is the leader who decides which items go into the confidential part of the cabinet agenda. They do so after being given some advice, about which I also have concerns, which I will come to.

That centralisation of decision making is dangerous and has the potential to result in not just poor decision making and lack of transparency, but corrupt decision making. That level of centralised control is part of the problem we now have. One of the issues thrown up by Transparency International’s report is that, structurally, we have opened ourselves up to decisions being made by a very limited number of councillors, with limited scrutiny by others. Whatever people thought of the old committee system—to be frank, it might well have been relatively slow at times—it was more open, democratic and transparent.

2.30 pm

That brings me to the second element of my new clauses, which is covered in new clause 4. I am anxious that scrutiny in local government should depend on the

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system of scrutiny committees established by the previous Government, but those committees work only if they are properly resourced and can scrutinise decisions with an element of detailed research and knowledge. In my area, I am fearful that lip service is simply paid to scrutiny. There is not sufficient investment in officers to support such committees, and patronage in relation to them exerts a role in preventing its members from having independence of mind.

I tabled new clause 4 to suggest that there should be a review by the Secretary of State and a report to this House on how scrutiny is working in local government. My hon. Friend the Member for Corby (Andy Sawford) suggests that that should be left to local government, but that is the problem. In areas such as mine, which is increasingly becoming a one-party state, there is no way to enable a proper independent examination of scrutiny practices or to know whether scrutiny structures are operational. If the Audit Commission is no longer to exist, there does not seem to be any other body, other than the Secretary of State, with the power to instigate an investigation into whether scrutiny is working. I am sure that it works extremely effectively in some areas, but in others it is poor to the point of virtual non-existence. [Interruption.] My hon. Friend the Member for Sheffield South East (Mr Betts) is obviously tagged—another form of scrutiny. [Laughter.]

The new clauses are about transparency and scrutiny, but my new clause 5 relates to Transparency International’s concern about the lack of resource to investigate corruption in individual councils. I am concerned because it is very difficult to find information anywhere about the scale of local authority investment to ensure full probity. For example, with the latest round of cuts in local government, I am anxious about cuts to areas involving the management of accounts and their internal audit in finance departments. Because cuts in staffing have been so large, there is vulnerability in local government in that staff are not available for councillors to be able to ensure proper investigation or to bring to book corrupt elements. The new clause therefore suggests that the Secretary of State should prepare and lay before the House a report on the adequacy of resources and staffing levels, but also on the structures and procedures that individual authorities have put in place to detect and investigate fraud. At the moment, there is fragility in local government in relation to the investigation and detection of fraud.

My new clause 6 is about compromise agreements. I have asked questions over the past year about the use of such agreements within local government, and the response has been that it is not monitored by the Department for Communities and Local Government and that, therefore, no information is available. We have to go back to anecdote, which is the problem in this debate. As Transparency International has highlighted in its report, the vast majority of council officials leaving in my area do so on the basis of compromise agreements. I do not understand why such agreements are used to ensure that there is a gagging clause to prevent an official from commenting on their local authority’s activities, efficiency and other matters.

I can understand to a certain extent the use of compromise agreements in the private sector, but their use in the public sector seems to undermine the structures and procedures we put in place for whistleblowing. To cite my own area again, officers seem to disappear time

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and again, particularly after criticising the local authority or individual councillors—their desk is suddenly vacated and they have gone—and we then discover that they have left under a compromise agreement. They do not gain their full benefits until that has been negotiated—often, I have to say, at the door of the tribunal—but a compromise agreement is signed, so they get their pay-off, but they are not allowed to comment on the issues that may well have been what resulted in their leaving the authority. I doubt that that is peculiar to my own local authority, but I think that it flies in the face of openness, transparency and accountability.

I am simply suggesting that the Secretary of State should investigate what is happening in relation to such matters. It would be helpful to know how frequently compromise agreements are used across local authorities. It would also be useful to know how often confidentiality clauses are incorporated into such agreements and, frankly, why there is any need for them. I can understand their use to a certain extent if there are strict matters of commercial confidentiality involving a contract between a local authority and an individual company, but their use seems to range much further and even to cover any element of criticism of a local authority and its actions.

My new clauses are an attempt to address the issues raised by Transparency International. I am not making party political points. As I have said, I am criticising structures and systems put in place by the previous Government, but also trends that have accelerated under this Government in recent years. They have increased not localism but centralism within individual local authorities, and they have produced cuts that have cut the very officers needed to maintain levels of probity and undermined the ability of councillors who are not in the ruling regime or on its back benches to undertake appropriate and effective scrutiny.

I do not expect the Government to accept my new clauses, but I flag them up as issues that we need to bear in mind. We must send a message to local government that this House has concerns about these matters and that we take Transparency International’s report seriously. I suggest that the Government need—the Minister should take this upon his shoulders—to have a close watching brief on these issues and to engage in a dialogue with local government associations to see whether they have concerns. Local government might be able to make proposals for future reforms to ensure that we address the concerns expressed in Transparency International’s report and the issues that I have raised today.

If the Government do not do so, perhaps such issues should be referred to the Communities and Local Government Committee for a further report or, failing that, we should do what we have done in other instances and bring together a group of Back Benchers who have had a particular interest in or experience of local government over the years to look at such matters independently and report back to the House. These issues will not go away, but will cause more concern in the public mind, particularly as local decisions are made on controversial cuts that people fail either to support or fully understand. That is why full openness and transparency are needed in local councils about decisions that they make.

I commend my new clauses to the House, but I will not press any of them to a Division. I hope that this debate will set an agenda—not only for the Minister to

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examine, but one that the House can look at at a future date—in relation to whether local government operates effectively and efficiently, but also transparently and openly. It will also demonstrate our concern about corruption, which local government should be willing to address where necessary.

Alex Cunningham (Stockton North) (Lab): I am pleased to have the opportunity to speak in support of new clause 2, which would add a considerable dose of fairness to the Bill. I will concentrate on the need to extend the use of the Freedom of Information Act.

As we all know, private companies that deliver public services are exempt from the requirements of the Freedom of Information Act. The Information Commissioner has no power to investigate private contractors. He cannot serve information notices to require a contractor to supply information for an investigation, nor can he take enforcement action if a contractor fails to comply with his contractual obligations. Put bluntly, that renders it nigh on impossible for us to get our hands on the details of much of what private companies get up to with public money.

New clause 2 seeks to correct that oversight, at least in relation to services that are provided to local authorities and health bodies. I hope that, in time, such provisions will be extended to all significant public sector contracts that are placed with organisations outside the public sector, whether they are charities, not-for-profit companies, mutuals or those that make vast profits for their shareholders at the expense of the taxpayer.

I have been hugely concerned for many years—not just under this Government, but under the previous Government and others before them—that there is a tremendous lack of transparency in the use of public money when it is handed to private companies and other organisations for the delivery of goods and services. Further billions of pounds of public money have been distributed from the public sector into the private sector in every year since the coalition Government came to power, so my anxieties have increased considerably.

There are good grounds for that anxiety, because many of the vital services on which we daily rely have been contracted out to private sector and other providers. The list seems endless, but until now we appear to have been largely content to see taxpayers’ money handed over to private companies for the delivery of services ranging from waste management and highway repair to schools, hospitals, the justice system, early years care and, as we were reminded yesterday, the care of elderly people.

No public service appears to be safe from the zeal for outsourcing that has been demonstrated by this Government, regardless of whether evidence exists to support such a model of provision. Should Ministers be allowed to further their ambitions to privatise even more services, without the providers being subject to proper scrutiny? I do not think so. If taxpayers’ money is involved, any citizen or Member of Parliament should be able to see the detail of where and how it is being spent. Applying the provisions of the Freedom of Information Act to such circumstances would enable that to happen.

We must make the best use of taxpayers’ money. I often hear Members from all parts of the House talk about the need to innovate in delivering services and to

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share best practice so that people across the country can reap the benefits. Without the transparency that would be provided by new clause 2, through the Freedom of Information Act, we are destined to see service providers keep their cards close to their chests, protecting their information at the expense of better services across the country. That transparency would also provide us with data on organisations that are prepared to run services at a loss for a period to drive competitors out of the market and then make a killing in the long term when there is no one for them to compete against.

Although I am the first to acknowledge that the requirements of the Freedom of Information Act can, at times, be cumbersome, I am in no doubt about the greater good that they serve. It is those requirements that allow those who are on the outside looking in—who, let us not forget, consist largely of the taxpayers who fund service provision—to delve into the details and scrutinise the outputs to ensure that they are getting value for money through providers that are fit for purpose. It is also those requirements that allow politicians, the media and other organisations to scrutinise what companies are up to.

I spoke recently on the Offender Rehabilitation Public Bill Committee about the need for the extension of the Freedom of Information Act to services that are provided to the Ministry of Justice, including the probation services that are on the verge of being privatised. I said that I was offering Government Members an opportunity for the future. Just as they had the right to scrutinise the public sector by pressing for information under the Act after Labour brought it in, they could have any number of fruitful days examining the contracts that are let by the future Labour Government if the provisions are extended to the private sector, as outlined in new clause 2.

Perhaps I will not convince the Conservatives, who will doubtless plead that commercial confidentiality must be retained in contracts, but the Lib Dems would surely love to have the chance to exploit this new transparency. They will know that, with £100 billion of taxpayers’ money being spent each year on the provision of public services by private and voluntary sector companies, it is essential that such expenditure is evaluated properly and that service providers are held fully to account for their actions. It is a core tenet of our democracy that taxpayers are able to access the information that is necessary to do that thoroughly and vigorously.

2.45 pm

Under this Government, the number of services that are run by the private sector is growing. There is a parallel growth in the size of the democratic deficit. Not only is more taxpayers’ money being entrusted to companies that have limited or no experience of such service provision, as will happen with the probation service, but there is an increase in the number of activities that are undertaken by Departments that are not subject to the Freedom of Information Act. As a result, the number of contracted services that are unaccountable and lacking full scrutiny is increasing. As things stand, private sector companies that are responsible for delivering public services are able to hide behind a cloak of commercial confidentiality.

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Billions of pounds of taxpayers’ money is being awarded to companies under contracts that are barely transparent. We cannot say that often enough. Billions of pounds of taxpayers’ money is being awarded to companies under contracts that are barely transparent. Those same companies are free to exploit the benefits of gaining detailed knowledge of successful public sector bodies through the submission of freedom of information requests. That information can be deployed to undercut, imitate or outbid the very same public sector bodies when contracts are tendered or renewed. That situation leaves private companies in the strongest possible position to exploit such knowledge. More importantly, it enables them to hide what they are doing with large sums of public money.

Departments are under considerable strain in monitoring their contracts because staff numbers have collapsed under the Government’s cuts. The public therefore deserve the right to do some monitoring of their own. There would be real accountability if the private firms and other organisations that spend those billions of pounds of taxpayers’ money were compelled to answer directly to the public by providing responses to questions about what they are doing.

James Morris (Halesowen and Rowley Regis) (Con): The hon. Gentleman seems to be talking about large private companies. Subsection (4) of new clause 2, to which he is speaking, includes in the definition of a private company

“joint ventures, not-for-profit organisations, mutually-held organisations and charities.”

Is he not concerned that the new clause would place large costs on smaller organisations that might not be able to handle the kind of requests he is talking about?

Alex Cunningham: No, I am not. As my hon. Friend the Member for Corby (Andy Sawford) said in opening the debate, this proposal relates to substantial contracts. It does not include the smallest organisations and we must ensure that they are protected. However, I would say that such organisations have a responsibility to be accountable for anything that they do when spending public money.

In the new world, public and private providers will ultimately be responsible for delivering equivalent services, but they will be governed by different rules. If a public partnership wins a contract to deliver refuse services, it will be subject to the freedom of information provisions, but its private sector rivals for future contracts would not be. Why should that be so? Private contractors that provide services should undoubtedly be held to the same standards of responsibility as state providers. I do not believe that anyone can argue to the contrary. It is therefore logical that the right to information about their regimes and establishments should also be equivalent.

So that there is no mistake, I remind Members that in announcing measures in 2011 to allow the publication of further spending and performance data on public services, the Prime Minister spoke of the “power of transparency”. Indeed, he went on to assert that, “Information is power.” He even suggested that

“we need more of it.”

I know that this is unusual, but I agree with the Prime Minister that we need more of it.

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To put it simply, many non-public sector providers shelter themselves from open scrutiny and operate behind a screen of secrecy that simply is not compatible with the principles of public service provision. Such stealth and secrecy cannot be allowed to continue. It is only right that as more and more public services that were once the sole preserve of local and national Government are contracted out beyond the public sector, steps are taken to ensure that the same access arrangements are required of private and voluntary sector providers. To do otherwise is unfairly to insulate the Government, the Department and favoured contractors from adequate scrutiny and accountability.

One of the major risk factors that flow from a position of secrecy is the potential for fraud and corruption. Other Members have addressed that point in more detail. In public service provision, that is a crime against each and every taxpayer, and the public should be granted protection against such transgressions by all providers of public services being made subject to the requirements of the Freedom of Information Act. We have already seen the failures of some companies that were happy to take the taxpayers’ billions, and some people may face legal action as a result. For such reasons, we cannot afford to overlook the importance of new clause 2. Its additional safeguards are particularly important given the Government’s recent poor track record on commissioning services.

I know that the Government will bang on about commercial sensitivity, but that is nonsense. This is about fairness, open government and, above all, trust. For those reasons, I fully support new clause 2.

Chris Williamson (Derby North) (Lab): I rise to support the shadow Minister, my hon. Friend the Member for Corby (Andy Sawford), on new clauses 1 and 2. To some extent, we rehearsed the arguments in Committee, when the matter was considered in some detail. The Minister and his colleagues were singularly unconvincing in their opposition to our proposals, but I hope that, having had time to reflect on those discussions and the contributions of my hon. Friends today, the Minister will accept our reasonable new clauses.

On new clause 1, considerable amounts of local and national funding are now used jointly. It therefore seems appropriate that they are subject to proper scrutiny and auditing arrangements. To argue against that is unacceptable. It is incumbent on the Government to ensure that funding is subject to proper scrutiny after deployment, particularly at a time when significant austerity and swingeing funding cuts have been imposed on public services, especially local government. They must ensure that we get the maximum benefit for the public pound in communities up and down the country. I hope the Minister will concede that the arguments that have been made are persuasive, and I hope that the Government will respond accordingly.

On new clause 2, it seems appropriate that proper measures are put in place to ensure that we do not end up with a cosy relationship between auditors and local authorities. There is a real danger of that, particularly as the Audit Commission is to be abolished. There could be significantly increased opportunities for corruption and the misuse of public funds. We could find situations such as the infamous “homes for votes” scandal involving Westminster council and Shirley Porter—or maybe we

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would not find out about them. Without new clause 2, they would be more difficult to uncover, so there might be more such examples around the country, which would be extremely regrettable.

In the case of that Conservative-controlled council in Westminster, we saw more than just the “homes for votes” scandal. We know from the records of officers who were employed there at the time that the council leader, Shirley Porter, bullied officers, and that anybody who had the temerity to question her direction of travel was slapped down in no uncertain terms. They were told, “You’re not one of us”, or “You are a negative officer and you need to decide which side you are on.” That was totally unacceptable behaviour by the leader of a council, and I fear that such behaviour is likely to increase if new clause 2 is not accepted.

As I said, it was not just the “homes for votes” scandal. Shirley Porter rose to notoriety when she sold three cemeteries in London for redevelopment for 5p each—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. As interesting as this may be, we are discussing audit. I know that the subject of Dame Shirley Porter may create some interest, but we have to try to stick to the new clauses and amendments. We are drifting a little wide of them. I am sure the hon. Gentleman is desperate to get back on track.

Chris Williamson: Indeed I am, Mr Deputy Speaker, and I am grateful for your guidance. I was just about to conclude my remarks about Shirley Porter by saying that she privatised at will, as well.

In Committee, we heard a lot from the Minister about his commitment to transparency. His Back-Bench colleagues reinforced that point. However, the Bill will make transparency considerably more difficult, because arrangements within local authorities will be considerably more opaque. Transparency International, which my hon. Friend the Member for Hayes and Harlington (John McDonnell) quoted, was scathing about the Bill, stating:

“The range of measures outlined in this Bill, combined with recent legislative reforms under the Localism Act 2011, remove key institutional defences against corruption, replacing them with arrangements that are likely to be inadequate to protect the public interest and the public purse.”

We hear a lot from the Government about their concerns for the public purse and the need to ensure that the taxpayer gets value for money, yet it seems that, unless they accept our new clauses, they are being cavalier with the public purse in this case.

I hope that the Minister will reflect on what has been said today. Unless the new auditing arrangements are subject to freedom of information provisions, their opacity will grow. I do not want to strain your patience too much, Mr Deputy Speaker, but circumstances such as the Shirley Porter case will not be uncovered. It is essential that new clause 2, tabled by my hon. Friends the Members for Corby and for Stockton North (Alex Cunningham), is accepted; otherwise private sector audit companies will not be subject to the scrutiny that was previously available under the Audit Commission arrangements. Even when there were external auditors, the information that they held was deemed to be held by the Audit Commission and was therefore subject to

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scrutiny by the general public. My hon. Friends and I say that it is important that proper scrutiny is still available under the new arrangements. As we heard from my hon. Friend the Member for Corby, local enterprise partnerships are now also spending considerable sums of money.

James Morris: Will the hon. Gentleman clarify the meaning of proposed subsection (1) of new clause 2? It states:

“A local auditor has a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year.”

Does that mean that a local auditor should have the right to access any and all documents within such companies irrespective of whether they are relevant to the relationship with the local authority? That would give the local auditor carte blanche to access any document at all in those organisations.

Chris Williamson: It means documents relating to the contracts under which companies are working for the local authority. Clearly, it would be overly burdensome and inappropriate for all their documentation to be subject to the Freedom of Information Act, but it is perfectly reasonable in respect of work they are doing on behalf of a local authority, as is made clear later in the new clause. The hon. Gentleman’s concerns are misplaced, and the new clause is entirely reasonable.

3 pm

Andy Sawford: My hon. Friend is right in his interpretation of the new clause. Clause 26 on the inspection of documents sets out the documents that would reasonably be made available for inspection in public bodies. We would extend that to private sector contractors.

Chris Williamson: I am grateful to my hon. Friend for that clarification. I hope that provides the reassurance Government Members were seeking.

In conclusion, we are moving to a new era in which the Audit Commission will be abolished and more private sector auditors will get involved in the market. It is important that those are subject to appropriate scrutiny, and we must therefore ensure that instruments are available to enable such scrutiny to take place. According to the Chief Secretary to the Treasury, up to £20 billion will be spent by local enterprise partnerships, and proper scrutiny and auditing arrangements must be in place to ensure that that money is expended properly. The public demand nothing less, and if the Government do not support this measure, it is incumbent on them to explain how that scrutiny will take place. If scandals are uncovered in the future because of a lackadaisical approach adopted by the Government, they will not be able to say they were not warned. I hope the Minister will sleep easy in his bed if he rejects these reasonable measures, because I believe that would put taxpayers’ money at risk of being misused. He needs to reassure the House and—more importantly—the wider public.

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The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis): I will respond first to the new clauses tabled by the hon. Member for Corby (Andy Sawford) before addressing those tabled by the hon. Member for Hayes and Harlington (John McDonnell). I will then consider the Government amendments in this group.

New clauses 1 and 2 and amendments 13 and 12 cover familiar ground which, as the hon. Member for Corby noted, we debated at some length in Committee. New clause 1 returns to the issue of integrated audit and seeks to enable auditors to work across local authorities with the National Audit Office. I support the principle of audits being undertaken efficiently and effectively, but I do not consider that the new clauses are the right approach, or that they are necessary to support bodies in working jointly or sharing services or budgets.

The public audit framework is designed to provide assurance about how each public body has used its resources. Individual public bodies are separately accountable, and because each is accountable for its decisions and expenditure, every one is required to produce a set of accounts and have an independent audit. I do not believe that the current accountability structure prevents local auditors from auditing relevant authorities cost effectively, or that it prevents authorities from working together to share services or budgets. The requirement to have a separate audit has not been highlighted as a problem in the four areas with which the Government have been working to explore service transformation and joint working via a community budget. Neither did the Public Accounts Committee raise external audit as a barrier in its report on integrated working by Government Departments and via community budgets.

Auditors are already required by the code of audit practice to have regard to partnership working that local government and health service bodies operate, to share information and co-operate with other auditors, and to minimise the burden of regulation on audited bodies. The Financial Reporting Council’s auditing standards also state that auditors should rely on the work of other auditors where appropriate, and guidance is available to support auditors making that judgment.

The National Audit Office supports Parliament to hold Government Departments to account. It does not have a role in auditing expenditure by local public bodies, and it does not wish to have one. The NAO already carries out a number of national value-for-money examinations under existing legislation, and the Bill broadens its powers to enable it to examine all or groups of relevant authorities. That will enable a more end-to-end view on the use of public money. It will not enable the NAO to undertake examinations of individual authorities, but it will be able to look at any thematic or systemic issues across a number of relevant authorities. For those reasons, we consider that the new clause is not needed.

There has been a lot of discussion about provisions in new clause 2, both in the other place and in Committee. As I said in Committee, we believe the new clause is not necessary to enable auditors to access all the information they need because the Bill already does that. Clause 22 mirrors the provision in the Audit Commission Act 1998, and enables auditors to access every document they need in order to undertake their statutory functions.

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That includes all documents held by local authority contractors which the auditor considers necessary to undertake an audit.

The Government also believe that it is not necessary to apply the Freedom of Information Act to documents an auditor has obtained from a contractor. Rather than extending that Act to documents an auditor has obtained from a contractor, the Government’s preferred approach is through the transparency agenda, existing rights of local people, and our planned revision to the freedom of information code of guidance. Local people can already access information about contracts. The Bill maintains local people’s current extensive rights to inspect detailed accounts, accounting records and audit information, and to ask the auditor questions and raise objections. Those rights enable local people to access more information than the proposed new clause would.

Chris Williamson: Does the Minister agree that perception is important, and that by not subjecting private sector auditors to the Freedom of Information Act, the wider general public could feel that they will not be able to access information that was previously available under the Audit Commission? Does the Minister believe he has an obligation to be seen to be doing the right thing, as well as giving those assurances at the Dispatch Box?

Brandon Lewis: What is important—I think this is what the hon. Gentleman was trying to say in a roundabout way—is to do the right thing, not what might look like the right thing but may not be. Local authorities are subject to the Freedom of Information Act, but I will continue my remarks so that he fully understands the point about how people can get to information.

It is absolutely right that the Government are driving forward the transparency agenda so that auditors have access to the information they want. That is why it is important that if people ask questions, the auditor may gather even more documentation to investigate the issues. That goes further than the Freedom of Information Act, which would require the auditor to provide information it holds but not lead it to seek additional material.

Last week, the Government published their response to the consultation on the transparency code. It set out their intention to make regulations requiring local authorities to publish specified pieces of information, including contract details exceeding £5,000. Local authorities also monitor the delivery of their contracts and are subject to the Freedom of Information Act 2000. The Government consider that a better approach would be for contracts to include provisions that require contractors to assist local authorities in meeting their Freedom of Information Act obligations—thereby satisfying the point raised by the hon. Gentleman. That decision was taken following the Justice Committee’s post-legislative scrutiny of the Freedom of Information Act, which recommended that greater transparency through contracts would provide a more practical approach than extending that Act to companies directly.

Mr Clive Betts (Sheffield South East) (Lab): I have heard what the Minister has said about transparency of contracts, but is he saying that if a local authority goes about formulating a contract in the right way, the public—it is they who are important—could be entitled

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to as much information about the spending of their money through a contracting process as they would be if the service was delivered by a local authority directly?

Brandon Lewis: It is not for me to prejudge a contract that a local authority might agree to, but it is true that people can access the Freedom of Information Act through the local authority, and the auditor can go further in its inquiries to ensure it has all the documents it needs.

Mr Betts: That has not answered my question—I was not asking what local authorities should do. If a local authority went about this correctly and formulated a contract correctly, could the public have as much information on the spending of their money through a contracting process as they could if the service were delivered directly by the local authority?

Brandon Lewis: In principle, yes, but it is not for me to prejudge how a local authority would contract. If it chose to contract in that way, of course that would be a matter for it. It would be entirely possible.

Chris Williamson: That response is instructive. I think the Minister is saying that in certain circumstances that information will not be available in the way it is currently available. It seems it will be down to the local authority. He said he met with Transparency International. I wonder if he would comment on its key recommendation:

“Amendment should be made to the Bill to ensure that the work conducted by auditors will be subject to the Freedom of Information Act, and that auditors will be allowed to access documents from significant private contractors that a local authority has used.”

Hon. Members: Will the hon. Gentleman give way?

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Interventions need to be shorter, but I certainly do not need instruction from Back Benchers.

Brandon Lewis: As I said, the Freedom of Information Act applies to local authorities, but we are not extending it to cover private companies. I am happy categorically to make the point, as I did in Committee, as the hon. Gentleman will see if he looks in Hansard, that we are not going to extend the provision to private companies; it is the local authority that will be accountable. He will have to take that as outlined.

We will issue a revised code of practice encouraging public authorities to include and enforce provisions in contracts to ensure that openness and accountability are maintained by encouraging the release of a wider range of information about contract delivery. This approach will be monitored by the Government and the Information Commissioner. If contractors or public authorities do not comply with this guidance, the Government will consider what other mechanisms might be necessary, including the possible extension of the Freedom of Information Act to service providers.

Mr Betts: On a point of clarification, will the guidance apply to subcontractors as well as contractors? In practice, many contracts are effectively delivered by the subcontractors as well as the main contractors.

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Brandon Lewis: I will not prejudge the guidance before we publish it, but I am sure that the hon. Gentleman, if he is not happy with what we do, will want to raise it with me at Question Time or through the Select Committee.

Following our debate on amendment 13 in Committee, I wrote to the hon. Member for Corby providing further details. I can assure the House that this amendment is not necessary, as sufficient safeguards are already, and will continue to be, in place to ensure the independence of the auditor. First, the Financial Reporting Council’s ethical standards require audit firms to establish policies and procedures to ensure that auditors act with integrity, objectivity and independence. There are specific limitations on audit firms providing non-audit services.

The ethical standards require the lead auditor to assess any threats to the auditor’s objectivity. Before accepting an engagement to provide non-audit services, it must consider whether doing so could threaten the firm’s actual or perceived objectivity or independence. The ethical standards do not prohibit audit firms from undertaking non-audit work, but they do require them to introduce safeguards that would eliminate these threats or reduce them to an acceptable level. This is where a reasonable and informed third party would probably not conclude that an auditor’s objectivity was or could be impaired. If the firm cannot introduce sufficient safeguards to reduce the threats to an acceptable level, it must not accept the non-audit engagement or it must withdraw from the audit.

Secondly, auditors must comply with international standards setting out the ethical requirements for financial statements audits and requiring lead auditors to report on compliance with independence requirements and audit firms to ensure that their quality control systems comply with professional standards and regulatory and ethical requirements. The international standards also require firms to put in place procedures for the acceptance and continuance of specific engagements, including whether compliance with ethical requirements can be achieved.

Thirdly, recognised supervisory bodies will have rules to ensure that local auditors conduct work properly and with integrity and that they do not accept appointments where a conflict of interest would prevent that. They must record threats to independence and the steps taken to safeguard independence and ensure that remuneration is not influenced by the local auditor providing other services. That is consistent with the established framework in the companies sector. In addition, we expect the independent auditor panels to advise the authority on the adoption and content of a policy on awarding non-audit work to the auditor. A note to the annual accounts is required if the audit firm undertakes non-audit work.

Those safeguards will protect the actual and perceived independence and integrity of the auditor. If objectivity is prejudiced, the firm must withdraw from either the audit or the non-audit work. We consider this approach preferable to the amendment tabled, which would not remove the potential conflict of interest. If the audit firm were required to subcontract to another firm, it would still be accountable for the audit opinion and any other work undertaken by the subcontractors.

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3.15 pm

Amendment 12 would add local enterprise partnerships to schedule 2 and make them subject to the local audit provisions. I will begin by repeating the assurance, which I gave in Committee, that any public funds channelled through LEPs will be subject to appropriate scrutiny. LEPs are voluntary strategic partnerships, not statutory public bodies. Each has a lead local authority that acts as the accountable body for public funding, and it is this local authority that provides the appropriate financial accountability, including through an annual external audit.

Making LEPs subject to public audit themselves would simply duplicate existing audit arrangements through which lead local authorities act as accountable bodies. The recent report from the all-party group on local growth, local enterprise partnerships and enterprise zones, of which, as the hon. Member for Corby said, I was the first chair, stated that

“many participants recognised the role of the accountable body arrangement in providing the necessary financial accountability for public money outside the LEP organisation, freeing the LEP up to focus on strategy and delivery”.

The amendment would simply add unnecessary burdens to LEPs, while doing little to improve accountability. With these explanations and assurances, I hope that the hon. Gentleman will feel able not to press new clauses 1 and 2 and amendments 12 and 13 to a vote.

On the amendments tabled by the hon. Member for Hayes and Harlington, new clause 4 would require the Secretary of State to provide each House of Parliament with a report on the effectiveness, efficiency and economy of structures and procedures that local authorities put in place for reviewing decisions or actions taken by their executive cabinets under section 21 of the Local Government Act 2000. Section 21 requires local authorities operating executive arrangements to appoint at least one overview and scrutiny committee. The role of such a committee is to review and scrutinise decisions and actions of the executive or the council and make reports or recommendations to the council or executive.

Such committees may also undertake reviews and make recommendations to the council on any matter affecting the local authority area or its inhabitants. Overview and scrutiny is thus important in holding the executive to account for its decisions and actions and plays a vital role in the development of policy, but councils are accountable to their local electorates. It is their responsibility to ensure that their scrutiny arrangements are effective, and they must account for this to their local people, ultimately—like us all—through the ballot box. The provisions in the Bill that enable regulations to make it clear that people can film meetings and blog or tweet about what their elected representatives are saying in meetings are all part of reinforcing local accountability and making it more effective.

The Government believe in localism—that power should be passed down to local people to hold their councils to account. Local authorities should not have to spend their time reporting to central Government, only for the latter to lay some report before Parliament. That is turning accountability completely on its head. The Bill’s provisions are all about strengthening local accountability, making it more effective and bringing it into the 21st century. These amendments would take us

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in a different direction and are wrong in principle as they would create a wholly unnecessary and inappropriate arrangement.

For example, new clause 5 would require the Secretary of State to prepare and lay before Parliament a report on the adequacy of the resources, staffing, structures and procedures put in place by authorities to detect and investigate fraud within the authority, before the Audit Commission is abolished. We agree that tackling fraud should be a priority, not only for central Government, but for local authorities and all public bodies. We are clear that local government needs to deal with the £2.1 billion a year of fraud that occurs largely through housing tenancy, payroll, procurement and council tax discounts fraud. “Fighting Fraud Locally: the Local Government Fraud Strategy” was published in 2011. Developed by local government for local government, it provides a blueprint to reduce the risk of fraud, realise cash savings and work together to prevent future fraud losses. To support local authorities in taking this work to the next level, we have just announced £16.6 million of new investment over the next two years. We have also committed to working urgently with local government to ensure that it has the right powers, incentives, data and capacity to tackle fraud effectively.

The Audit Commission’s work has clearly been an instrumental part of the counter-fraud landscape. Of primary importance is the national fraud initiative which, since it began in 1996, has helped to identify over £1 billion potentially lost to fraud, error and overpayment in the UK. During the earlier stages of the Bill, we announced that the initiative and associated data-matching powers would transfer to the Cabinet Office, and my officials are working with the Cabinet Office to ensure a smooth transition of that important function.

In addition, the Audit Commission has developed a set of counter-fraud tools, including “Protecting the Public Purse”, the annual fraud survey and the changing organisational cultures toolkit. We are working with the commission and others to determine the future of the tools that matter to local government, so please let me reassure hon. Members that we are progressing this issue with rigour and pace. I would be happy to keep hon. Members informed of progress in this area.

John McDonnell: I am grateful to the Minister for that information and for his offer of co-operation. Does he have figures for the number of staff employed to investigate fraud in local government in, say, 2007-08 compared with the number employed in that area during the past year?

Brandon Lewis: I cannot give the hon. Gentleman those figures off the top of my head, but I will come back to him on that if he will bear with me.

New clause 6 would require the Secretary of State to report to Parliament on the use by local authorities of compromise agreements that involve confidentiality clauses in relation to staff exiting their organisation. I know that the hon. Gentleman feels strongly about this issue and that he raised it on Second Reading. During that debate, he expressed concern that, if used inappropriately, confidentiality clauses could unreasonably restrict officers’ ability to provide full and frank advice to local members and to protect the public interest. Officers, including those exiting an organisation, must

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have proper opportunities to provide such advice and to raise concerns. The Secretary of State has made clear his view that so-called gagging clauses should not be used to undermine that principle, and I am happy to reiterate that view today.

The use of compromise agreements in the public sector was recently the subject of a report by the National Audit Office and was also scrutinised by the Public Accounts Committee. Further to this, the Government agreed that there should be greater transparency and accountability on the use of compromise agreements across the whole of the public sector, including local authorities. Importantly, the law is quite clear that compromise agreements—in which an agreement is reached to contract out of statutory employment rights—can be made only when the employee has had access to independent advice on the terms and effect of the proposed agreement.

Furthermore, confidentiality clauses cannot be used to prevent a protected disclosure under the Public Interest Disclosure Act 1998. The Government have recently undertaken a call for evidence to look at whistleblowing, and specifically at whether there is enough support for people who wish to report wrongdoing. The Government will respond to the call for evidence early in the new year. I hope that I have been able to reassure the House that the Government take this matter seriously and are taking action on it.

John McDonnell: I am grateful for that information, but may I suggest that that review of whistleblowing should pay specific attention to the use of compromise agreements, particularly within local government? I do not think that that has been explored or taken into account sufficiently so far.

Brandon Lewis: The hon. Gentleman makes a fair point, and he will appreciate that it is now noted and on record. I hope that I have been able to provide sufficient assurances to persuade him not to press his new clauses and amendments to a vote.

I shall not detain the House for long on Government amendments 1 to 5. Amendment 1 would require an authority to include the period of the auditor’s appointment in the public notice confirming the appointment of the auditor. Clause 8 requires authorities to publish such a notice within 28 days of making the appointment. The hon. Member for Corby will recall that he tabled a similar amendment in Committee and suggested that it would be helpful for the public to know the term of the auditor’s appointment. It was also suggested that knowing when the existing contract would end would be useful to potential bidders for any new appointment.

There was a similar discussion in the other place, where Lord McKenzie tabled an amendment to require that information on the term of appointment should be included in the published notice. At the time, the Government expressed sympathy with the intentions of the amendment, but questioned whether such a requirement needed to be set out in legislation, because it could simply be a matter of good practice and guidance. However, having considered the case further, and in the light of the points made by the hon. Member for Corby in Committee, the Government accept that it might be useful to put the matter beyond doubt through this amendment.

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Amendment 2 is a minor and technical amendment to ensure that references throughout the Bill cover subordinate legislation made under part 42 of the Companies Act 2006, as applied by schedule 5 to the Bill. It will make it clear that provisions on eligibility and regulation apply to the whole local audit regime.

Amendment 3 removes from schedule 2 internal drainage boards that are partly in England and partly in Wales. There are two such boards: Powysland and Lower Wye. Both are mainly in Wales but currently fall under the Audit Commission regime. The local audit provisions in the Bill will therefore not apply to those cross-border internal drainage boards after the Audit Commission is abolished. The Welsh Government intend to transfer the functions of the two cross-border IDBs, along with the functions of one IDB that is wholly in Wales, to a single body, Natural Resources Wales, and to bring them under the Welsh audit system. They intend to do this by the time the Audit Commission is abolished—by April 2015. Both bodies will continue to fall under the Audit Commission regime until then.

The Welsh Government supported a legislative consent motion to make audit arrangements for the two bodies under the Bill as a stopgap measure until the new governance arrangements are in place. However, the legislative consent motion was not passed by the National Assembly for Wales. As a result, in line with the devolution settlement, the amendment removes these two bodies from schedule 2. Welsh Ministers have agreed that we should retain the power in clause 2 as a backstop power to add cross-border bodies back into schedule 2 by regulations at a later date, should the transfer of functions take longer than expected. Regulations made under this power will be subject to consultation and the affirmative procedure, and would require consent from the National Assembly for Wales.

Amendment 4 is a minor amendment to clarify that paragraph 6(1) of schedule 4 does not apply in the case of health bodies. The paragraph currently provides that, when an authority uses an existing committee as its auditor panel, wider enactments that usually apply to committees of a local authority do not apply. A corresponding power in paragraph 5 then allows such enactments to be positively applied to the panel, to ensure that arrangements remain proportionate, given the panel’s limited role.

In the case of health bodies, however, their audit committees are covered by a specific existing framework, which is different from that applied to local authority committees. That framework reflects the different governance framework for health bodies such as clinical commissioning groups, and will need to continue to apply in full, even when the committee is acting as the panel. As drafted, paragraph 6 of schedule 4 could have the unintended consequence of disapplying that existing framework for audit committees within health bodies when they are acting as the auditor panel. The amendment therefore excludes health bodies from this provision.

Amendment 5 further modifies schedule 10 to the Companies Act 2006, as applied by schedule 5, in respect of auditors qualified in other European economic area countries. It has two main effects in respect of those individuals. First, it will enable the recognised supervisory bodies for local audit to recognise the

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qualifications of those auditors who hold the equivalent of a UK local audit qualification obtained elsewhere in the EEA. This is necessary to comply with the requirements of the recognition of professional qualifications directive, 2005/36/EC.

Secondly, the amendment specifies that recognised supervisory bodies can require an EEA statutory auditor to pass an aptitude test only if the auditor is seeking to become established as a local auditor in the UK on a permanent basis. The audit directive, which makes provision for an aptitude test, applies only to statutory audit. Unlike the audit directive, however, the recognition of professional qualifications directive does not permit the imposition of an aptitude test if an individual is seeking to provide services on a temporary and occasional basis. The amendment therefore seeks to align the regulatory frameworks for statutory and local auditors, as far as is permitted.

The amendment will also ensure that any indirect discrimination against EEA auditors is avoided and that the requirements for EEA local auditors and EEA statutory auditors are as consistent as possible. It will also ensure that a firm is qualified if it is eligible for appointment as a local or statutory auditor or is eligible for a corresponding appointment. I urge the House to support the Government’s amendments.

Andy Sawford: Thank you, Madam Deputy Speaker, for allowing me a moment to reply.

The amendments, particularly new clause 2, have had strong support from my hon. Friends and I am grateful to them for putting their views on record. I welcome the Minister’s statement that the Government will publish guidance to private sector contractors. He went further, saying that if that is not effective, the Government will consider extending freedom of information contracts to private suppliers. I consider that to be a significant move forward, certainly from where we were in Committee. It is a win for my hon. Friend the Member for Derby North (Chris Williamson) and others who have championed this. We very much look forward to seeing that guidance, but we also commit to taking the issue forward ourselves.

3.30 pm

In relation to integrated audit, I believe that the Minister—whether intentionally or not—has sought to misrepresent what our amendment would do in practice. We have not said that the National Audit Office should audit local government, for example. We have simply said that we should work together in audit. We have also not said that the absence of integrated audit is in itself a barrier to taking forward community budgets, but rather that it will be an enabler and a complementary approach as we take forward community budgets around the country.

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 8

Procedure for appointment

Amendment made: 1, page 6, line 43, at end insert—

‘(ba) specifies the period for which the local auditor has been appointed,’.—(Brandon Lewis.)

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Clause 39

Code of practice on local authority publicity

Andy Sawford: I beg to move amendment 14, page 26, line 11, leave out

‘one or more specified local authorities’

and insert ‘a local authority’.

Madam Deputy Speaker (Dawn Primarolo): With this it will be convenient to discuss the following:

Amendment 15, page 26, line 25, leave out subsection (4) and insert—

‘(4) A direction can only be made by the Secretary of State if—

(a) evidence of a breach of a code has been published by the Secretary of State to the local authority;

(b) a local authority, on receipt of a letter from the Secretary of State notifying them of evidence which purports to demonstrate a breach of the code has made a response to the Secretary of State within 28 days; and

(c) upon receiving any response the Secretary of State has published a report detailing his conclusions.’.

Amendment 16, page 27, leave out lines 1 to 29.

Andy Sawford: Clause 39, to which the three amendments relate, includes provisions on local authority publicity that the Opposition strongly believe, and have consistently argued, are unnecessary, undemocratic and wholly disproportionate. The amendment, and the clause itself, covers all council publicity from newspapers to posters and even social media. We are gravely concerned that the Secretary of State is, in effect, through clause 39 making himself the censor-in-chief of local government communications.

Much attention has been paid to the Government’s gagging law, which attempts to silence civil society. It is less widely known that, through clause 39, the Government are trying to silence elected local councils. These new powers make the Secretary of State censor-in-chief of local government at the same time as evidence is emerging that his Department is encouraging councils to print pro-Government propaganda through the circulation of the very loaded pro-Government suggestive press releases that we have seen appear around the country.

Clause 39 will give the Secretary of State the power to dictate when and how councils can publish communications to local citizens. Of even more concern to us is the fact that the Secretary of State is taking a power of censorship to direct what issues and information councils can talk about and even what language and phraseology they can use. Ministers have made it clear that their intention is to prevent councils from sharing information or commenting on the impact of Government policy if they disapprove of the message.

In Committee, the examples given by the Minister and his Back Benchers included not allowing elected leaders of a local authority to publish a comment on the effect of central Government funding changes—so furious are the Government that councils are letting their residents know the scale of the cuts they are facing. Under these new powers, the Secretary of State could force councils to use pro-government terminology such as the benign-sounding “spare room subsidy” rather than the “bedroom tax”, which betrays how unpopular and unfair the policy is to many of the

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poorest and most vulnerable people—including many disabled people—in our communities. Legal advice to the Local Government Association says that these censorship laws would prevent councils from publishing information on issues such as HS2 or health service reconfigurations.

The Government argue that the power is needed because local authorities are breaching the current voluntary code on local authority publicity. Yet they have managed to find only one example of a breach; Tower Hamlets’ publication “East End Life”, which seems to the Opposition clearly to flout the code. It is absolutely shocking that the Government have failed to take any action, using the powers they already have, in more than three years since they became aware of the level of concern, including that reported by Labour councillors in Tower Hamlets. We agree with the Secretary of State that that publication is a problem, but we ask again why the Government have taken no action—no action at all. In fact, the Minister attempted to explain to me in an answer to a parliamentary question that it is because the Secretary of State has not done anything that he now believes that he needs to give himself these dictatorial powers. It is so extraordinary that one might assume that if councils knew the full extent of these plans, they would resist them.

Through several freedom of information requests, I discovered that the Department has not communicated with local authorities about the plans since May 2010. No councils have answered letters or e-mails in respect of their local publications on this subject. This is all being done behind local authorities’ backs.

At the same time as the Secretary of State is censoring councils and preventing them from saying things he does not like, he is seeking to use them as a propaganda arm of the central state. I have discovered that, through these press releases, the Government are seeking to trumpet their policies when it suits them to use councils in that way at the same time as they seek to silence them when council communications are inconvenient. The Secretary of State preaches localism rhetoric, but the truth is—we know this, and local government knows it, too—that he does not really like local democracy. Starved of funds and subject to diktats even on issues like when to collect the bins, local authorities are now subject to censorship. It is clear that the Secretary of State’s warnings of cigar-chomping commies looking to take over government were remarkably prescient.

The hon. Member for Mid Dorset and North Poole (Annette Brooke), who I see in her place, described these censorship laws as

“a sledgehammer to crack a nut”.—[Official Report, 28 October 2013; Vol. 569, c. 704.]

Liberal Democrat-run Cambridge city council says that the clause is “disproportionate and unnecessary”. It says it is

“quite at odds with the principles of localism”.

I asked the Secretary of State in a parliamentary question of 16 December to publish or place in the Library all the responses his Department received to the consultation it ran on local media. The Minister replied:

“I have placed in the Library of the House, a copy of the Government’s response to the consultation on ‘Protecting the Independent Press…’ which outlines the divergent views of councils and representatives of independent newspapers.”—[Official Report, 16 December 2013; Vol. 572, c. 444W.]

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Because the Minister would not provide the information, I took the trouble of making a freedom of information request to local authorities themselves about their responses to the consultation on the publicity code. I then discovered that it was not only Cambridge city council that said it disagreed with the clause. Watford borough council, led by the widely respected elected local mayor, Dorothy Thornhill—she is not of my party, but she is someone I have worked with who has a good reputation around local government—says:

“These changes are a threat to local democracy. They could inhibit local elected members from representing their residents. Placing the ultimate decision-making powers in the hands of a Secretary of State is contrary to the localist agenda of the Government, and it is heavy-handed.”

It is not just Liberal Democrat councils either, because Conservative councils, too, are opposed. North Yorkshire county council says in its response:

“The proposed legislation is disproportionate”.

Tory-run North Somerset says:

“With regard to the proposed restrictions on the publication of council newspapers, we object strongly.”

Baroness Eaton said in the other place:

“This clause is unnecessary as there is no evidence that council publications are competing unfairly with local newspapers…the proposed measures in the Bill centralise powers to the Secretary of State and allow central government to interfere with matters that should rightly be decided at local level”.

Lord Tope, commenting on the lack of evidence to support the proposals on local authority publicity, said:

“All we have had from the Government is rather silly and misleading statements from the Secretary of State about ‘town hall Pravdas’”.—[Official Report, House of Lords, 22 May 2013; Vol. 745, c. 898-902.]

The Local Government Association, a cross-party but Conservative-led body, says:

“The powers are too wide ranging and do not allow councils any local discretion about how to engage with their residents. This is unnecessary and could allow the Secretary of State to interfere with the work of an elected council.”

The National Association of Local Councils, which has no political axe to grind, says these powers are “anti-localist”, fly in the face of localism and are

“a threat to local democratic accountability”.

Finally, let me cite the very considered words of the right hon. Member for Hazel Grove (Sir Andrew Stunell), the former Local Government Minister in the coalition Government. In Committee he said:

“Every Bill has high spots and not-so-high spots, and Clause 39 is one of those not-so-high spots.”––[Official Report, Local Audit and Accountability Public Bill Committee, 19 November 2013; c. 301.]

I have had the pleasure of working with the right hon. Gentleman in a previous role so I know that that is a typically understated remark from him. He then went on to challenge the Minister for assurances about the proportionality of any intervention, and the ability of councils to make representations with regard to how they are exercising discretion. However, far from giving reassurances, the Minister—and many of his hon. Friends, some of whom I see in the Chamber today—made us more rather than less concerned. Their political motivation was absolutely clear: they were frankly shameless about

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revealing that clause 39 was about silencing councils if they communicated with citizens about anything that the Government did not like.

The Secretary of State claims that the clause is needed to protect the press from unfair competition from advertising, but the recommended code of practice for local authority publicity contains no provisions relating to advertising. It is clear that the Secretary of State’s argument is a diversion from the real aim of censoring councils and their locally elected councillors. The National Union of Journalists disagrees with the Government’s contention that local authority publications are damaging to the press. Its general secretary has said that there is “no case at all” for the current Secretary of State

“and future Secretaries of State to be given extra statutory powers to decide when”

and how local authorities can communicate, adding:

“We do not believe that this element of guidance reflects the needs of many communities”.

The Minister will no doubt tell us that the Government ran a consultation in April 2013. That consultation was a classic example of things that cause the public at times to be very sceptical abut public sector consultations. It was, in fact, very much a “nonsultation”. Its outcome was so evidently predetermined, even by the loaded title “Protecting the independent press from unfair competition” and by the way in which it was launched. The Government, as if to confirm that impression—as if they had no regard to whether the public, or indeed local authorities, would consider that they had given any proper thought to the consultation—published their response within two days of the end of the consultation.

We have challenged the Government to give practical examples. As I have said, we acknowledged the issue about Tower Hamlets, on which they should have acted. Baroness Hannam said in the House of Lords that she had evidence involving other local authorities, yet she said—extraordinarily—that it would not be “helpful” to identity them. Asked to give examples, she said:

“I shall not say which local authorities…are breaching the code. I have them. I could do it, but I think it is…not helpful.”—[Official Report, House of Lords, 15 July 2013; Vol. 747, c. 604.]

In Committee, the Minister said:

“the fact is that there are examples out there.”––[Official Report, Local Audit and Accountability Public Bill Committee, 19 November 2013; c. 304.]

He then vaguely referred to four councils—Plymouth, Lambeth, High Peak and Nottingham, all of them Labour-run—which had had the temerity to inform the public of the unfair scale of the cuts imposed on them by central Government. Can Ministers not see that the kind of censorship that they are seeking to impose through clause 39 is not democratic, not British, and not worthy of the values that our Parliament should uphold? The motivation is petty, but the consequences will be very serious indeed.

Let me tell the House about the effect in my area. The Minister has suggested that a council publication in my constituency, the Nene Valley News, is competing unfairly with local papers. His ill-informed statements show why we should not trust the Government with these powers. The truth is that there is no newspaper for the Nene Valley News to compete with across much of east Northamptonshire—and now the only communications lifeline on which many people in the small towns and

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villages of my constituency can rely is being cut off. Those are people in areas with poor broadband access, and the demographic is such that, proportionally, there are fewer people in those areas than in some of the larger towns in the county who use social media widely, or even have access to the internet.

Mr Betts: Three years ago, the Select Committee conducted an inquiry into the whole issue of local authority publications, and found absolutely no evidence of any impact on commercial newspapers. Indeed, one of our findings was that many local authority publications were published on the presses of commercial papers, thus providing them with important additional income.

Andy Sawford: My hon. Friend, who chairs the Select Committee, is right. I think that there is often a complementarity between the newspapers, news sheets and magazines published by councils and other local papers. There is often a considerable spin-off in the form of the relationship between the communications that councils promote through their papers about local events and community organisations, and how vibrant local newspapers are able to become in terms of, for example, the advertising revenue that they can create in relation to such community events and activities.

The Minister has claimed that the advertising in the Nene Valley News is the problem. First, it is not included in the code; secondly, I would gladly facilitate a meeting between the Minister and the local small businesses and traders who use the low-cost space in the Nene Valley News, and who are now extremely worried about how they will get business. I quoted one individual at length in Committee, but for brevity I shall merely say now that he concluded his remarks to me on this matter by saying, “Aren’t the Tories supposed to be a party that likes business?” He is very sceptical about the motivation for, and is concerned about the effect of, this crass, uninformed and undemocratic clause.

3.45 pm

The clause will damage local democracy, because it will mean that local councils are not as able to inform and engage the public in their work. It will also damage community groups, scout organisations, local charitable organisations, small businesses and the food banks which, sadly, are needed in our communities, as they will not be able to publicise their activities through the local free sheet—through the local council. Many of my constituents have contacted me to tell me that they object to what the Government are doing. I hope that all hon. Members will want to support our sensible amendments, which are supported by the Local Government Association, and I urge the Minister to accept them. We have not sought to strike out clause 39 completely, although we question why it is necessary and argue that the Government should have taken action previously in relation to the code.