Local Audit and Accountability
Bill [Lords]

The Committee consisted of the following Members:

Chairs: † Sir Edward Leigh  , Mr Mike Weir 

† Bingham, Andrew (High Peak) (Con) 

Blackman-Woods, Roberta (City of Durham) (Lab) 

† Blomfield, Paul (Sheffield Central) (Lab) 

† Carmichael, Neil (Stroud) (Con) 

† Glen, John (Salisbury) (Con) 

† Glindon, Mrs Mary (North Tyneside) (Lab) 

† Griffiths, Andrew (Burton) (Con) 

Hames, Duncan (Chippenham) (LD) 

† Jones, Susan Elan (Clwyd South) (Lab) 

† Lewell-Buck, Mrs Emma (South Shields) (Lab) 

† Lewis, Brandon (Parliamentary Under-Secretary of State for Communities and Local Government)  

† Morris, James (Halesowen and Rowley Regis) (Con) 

† Pawsey, Mark (Rugby) (Con) 

† Perry, Claire (Devizes) (Con) 

† Sawford, Andy (Corby) (Lab/Co-op) 

Simpson, David (Upper Bann) (DUP) 

Stevenson, John (Carlisle) (Con) 

† Stunell, Sir Andrew (Hazel Grove) (LD) 

† Vickers, Martin (Cleethorpes) (Con) 

Whitehead, Dr Alan (Southampton, Test) (Lab) 

† Williamson, Chris (Derby North) (Lab) 

Georgina Holmes-Skelton, Fergus Reid, Committee Clerks

† attended the Committee

Public Bill Committee 

Tuesday 19 November 2013  

(Morning)  

[Sir Edward Leigh in the Chair] 

Local Audit and Accountability Bill [Lords]

Schedule 8 

Advisory notices 

8.55 am 

Andy Sawford (Corby) (Lab/Co-op):  I beg to move amendment 141, in schedule 8, page 67, line 22, leave out from ‘the’ to end of line and insert 

‘addressed to the Chairperson or Mayor of the authority and the officer concerned’. 

The Chair:  With this it will be convenient to discuss Government amendments 48 and 51. 

Andy Sawford:  It is a pleasure to see you back in the Chair, Sir Edward. I hope you saw that we made good progress in scrutinising the Bill last week. 

The amendment concerns advisory notices that can be issued by the local auditor in respect of a decision by the authority that 

“would involve the authority incurring unlawful expenditure”, 

where an authority 

“is about to take...a course of action which, if followed to its conclusion, would be unlawful and likely to cause a loss or deficiency”, 

or where there is 

“an item of account, the entry of which is unlawful.” 

We broadly support the schedule and agree that the local auditor should have the power to issue advisory notices. Clearly, it is about tidying up arrangements to take forward powers previously exercised within the Audit Commission framework. 

Our concern is about paragraph 1(2): 

“An advisory notice is a notice which— 

(a) is addressed to the authority or officer concerned.” 

Our reading of the provision is that the authority could receive a notice, but it is not clear to whom it would be sent and who would act as the representative of the authority. It could be the monitoring officer, the finance officer, the chief executive of the council, or the mayor or chairperson of the council, depending on the type of local authority; it could be sent to the authority without a named person on the notice, or it could simply be sent to an officer. Can the Minister clarify whether there will be any further guidance on whom a notice should be sent to? 

We also consider that the “or” in the provision is unhelpful and should be an “and”. In local authorities around the country, the overwhelming majority of their transactions are lawful, certainly in terms of their intent and motivation, but there are instances—some have been raised in Committee—where local authorities have taken unlawful action. Our concern relates to the advisory notice being addressed to an officer of the council. We could foresee a situation in which the officer was in

some way implicated by the advisory notice. It may, for example, be sent to the chief executive, the finance officer or the monitoring officer. Such individuals have at times been at fault—if we look at past public interest reports—when issues have come to light within the local authority. 

We have suggested a simple amendment, so that the notice could be sent to the chairperson or mayor—it could be the chairperson of the board in some types of authorities—and the officer. Our view is that a belt-and-braces approach would ensure that whether it is members or officers who are part of the problem—in some cases, neither may be aware of the issue, and there might be a genuine, understandable reason why things have gone wrong in the authority—they would be aware of the advisory notice and the auditor’s concerns and could take appropriate action. 

I hope that the Minister will reassure us that the current wording addresses my point—although it is difficult to see how we could be convinced by an “or” rather than an “and” in the sentence—or agree to take the provision away and look at it. That is not a political point, but a practical point about how local authorities work and about ensuring that the appropriate people receive the advisory notice so that appropriate action can be taken on behalf of the public. 

The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis):  Schedule 8 enables a local auditor to issue an advisory notice, if they consider that an authority or an officer has undertaken, or is about to undertake, unlawful action that has financial implications. An advisory notice must be sent to either the authority or an officer of that authority, whoever is thought to have taken or be planning to take the action. While an advisory notice has effect, schedule 8 makes it unlawful for the authority or officer to continue to take that action, unless the authority has given written notice to the auditor and the notice period has expired. 

Amendment 141 changes the individual to whom an advisory notice needs to be sent. I do not consider that to be the best approach and therefore do not consider the amendment necessary. It specifies that an auditor serves an advisory notice by sending it to the chairperson or mayor of an authority, rather than to the authority. If an advisory notice is being served on an officer, it must also be sent to the authority, as in paragraph 2(1)(b). 

I consider the amendment to define the individual to whom a notice would be sent too narrowly, because it does not enable service of advisory notices on authorities led by persons other than a mayor or chairman. The “authority” means “relevant authority” as defined in schedule 2 and applies regardless of the governance arrangements of the body. The Bill enables an auditor to issue an advisory notice to any of the bodies under schedule 2, except health sector bodies. 

In law, if a document, such as an advisory notice, is served on an authority, it will in most cases be served on that authority in accordance with section 231 of the Local Government Act 1972. For example: an advisory notice to a local authority would be posted to the address of the principal office of the authority; an advisory notice to a parish meeting would be served on its chairman; and an advisory notice on a police and

crime commissioner would be served on the commissioner. The existing definition is preferable, and I hope that that means that we can convince the hon. Gentleman to withdraw his amendment. 

I shall also speak to amendments 48 and 51. They are minor amendments, which apply the definition of “relevant authority concerned” when the auditor issues an advisory notice, to all of the provisions around advisory notices, rather than just paragraph 3 of the schedule. The “relevant authority concerned” means the relevant authority to which, or to any officer of which, an advisory notice is addressed. 

Andy Sawford:  I thank the Minister for his reply. I am not familiar with section 231 of the 1972 Act. I do not think that he has fully addressed our concerns. Given that we are talking about a range of relevant authorities, as set out in schedule 2 of the Bill, I take his point that specifying “Chairperson or Mayor” may not be appropriate to many of the relevant authorities. We may therefore move a simpler amendment on Report stating that the advisory notice should be sent to the authority and the officer concerned. In the meantime, I hope that the Minister will consider the matter further. 

We are not talking about the overwhelming majority of cases, in which the intention or motivation of officers of local authorities is sound, but the incredibly rare exception where the officer of the authority in receipt of the notice might be the officer of the authority who is part of the problem. The Minister suggests that that could be the case—that that officer would be sent the notice—and our view is that it is clearly sensible for the authority to have that notice drawn to its attention at the same time. We will raise the issue again on Report. In the meantime, I ask the Minister to consider a small amendment to change “or” to “and”. Nothing would be lost and there is something is to be gained by doing so. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdraw n.  

Amendments made: 48, in schedule 8, page 68, line 31, at end insert— 

‘(8) In this Schedule “the relevant authority concerned”, in relation to an advisory notice, means the relevant authority to which, or to any officer of which, the notice is addressed.’.

Amendment 49, in schedule 8, page 69, line 1, at end insert— 

‘(2A) The condition in paragraph (a) of sub-paragraph (2) is met in relation to a parish meeting only if the matters referred to in that paragraph are considered by the parish meeting itself (and not by its chairman on behalf of the parish meeting).’.

Amendment 50, in schedule 8, page 69, line 7, leave out sub-paragraph (4) and insert— 

‘(4) A local auditor may recover from a relevant authority—

(a) the reasonable costs of determining whether to issue an advisory notice to that authority or an officer of that authority, and

(b) the reasonable costs of issuing an advisory notice to that authority or an officer of that authority.

(4A) Sub-paragraph (4)(a) applies regardless of whether the notice is in fact issued.’.

Amendment 51, in schedule 8, page 69, line 10, leave out sub-paragraph (5).—(Brandon Lewis.)  

Schedule 8, as amended, agreed to.  

Clause 29 ordered to stand part of the Bill.  

Clause 30 

Power of auditor to apply for judicial review 

Amendment made: 52, in clause 30, page 20, line 9, at end insert— 

‘(5) Subsection (6) applies if a local auditor of the accounts of a relevant authority incurs costs in determining whether to make an application under this section in relation to the authority, but the application is not in fact made.

(6) The local auditor may recover the reasonable costs so incurred from the relevant authority.’.—(Brandon Lewis.)

Clause 30, as amended, ordered to stand part of the Bill.  

The Chair:  That is good progress. 

Clause 31 

Accounts and audit regulations 

Andy Sawford:  I beg to move amendment 142, in clause 31, page 20, line 22, leave out paragraph (f). 

Yes, it is good to make progress on a number of clauses where we can see the Government’s intent and believe that the clauses are sensible. Sadly, clause 31 is perhaps not, although we will hear from the Minister as to why he considers the clause necessary. 

The clause is, for us, another example of overreach by the Secretary of State. We hope that the Government, in light of some of their assurances on how audit operates, will consider it unnecessary and over-prescriptive. 

Clause 31 will allow the Secretary of State to make regulations about provision of the form and contents of accounting records; the form, contents, preparation and approval of statements of accounts and so on. Hon. Members will be able to see in subsection (1)(a) to (g) the range of areas in which the Secretary of State may make regulations. 

As the Minister has rightly pointed out, there is a great body of law, guidance, custom and practice regarding the conduct of audit in this country in both the private and public sectors through the good work of the Chartered Institute of Public Finance and Accountancy. There will, for example, be a code of audit in the Bill, which will be published in consultation with CIPFA by the Comptroller and Auditor General. We support that and consider that to be a helpful form of guidance. 

What we consider to be unhelpful is providing a power for the Secretary of State to meddle in the detail of, for example, how a local authority will present its accounts. Clearly, we would all expect it to do so appropriately, in a way that is transparent to the public and that its auditors consider appropriate. If it were not, the auditors would certainly not be shy in including in their letter to the local authority that they were concerned about the way in which the accounts were kept and prepared. Clearly, it would fall foul of the code that the CAG will set out, and the professional conduct that members of CIPFA, who are the leads in local authorities for the preparation of accounts, would have to be concerned about, given their own professional reputations and qualifications. We do not, therefore, consider the code necessary. There is, however, an

extraordinary bit of over-reach, even within a clause that is unnecessary overall. That is subsection (1)(f), which states: 

“The Secretary of State may by regulations applying to relevant authorities…make provision about…the financial management of relevant authorities”. 

To take that power through secondary legislation to meddle in the financial management of relevant authorities is wholly inappropriate and not in line with the rest of the clause. 

The Minister might tell us that it is helpful for there to be guidance on or uniformity in how local authorities and other relevant bodies prepare their accounts, but to say that the Secretary of State can, as he chooses, issue provisions about the financial management of relevant authorities seems wholly disproportionate and out of step with the rest of the clause. Will the Secretary of State use that power to direct how local authorities spend their money? Will he use that, for example, to extend his noted obsession with bins to direct how local authorities should reserve money for that particular interest of his? Will that power provide effectively an open door for him to meddle in what are rightly local authorities’ policy decisions on local expenditure and proper financial management? 

The Secretary of State has not been shy in telling local authorities how much they should pay people and, notably, he has told local authorities how much they should keep in reserves. Those are rightly matters for those local authorities: they are dependent on local circumstances and should be judgments left to them. Yet, here he has snuck in, to what otherwise appears to be a fairly innocent—if unnecessary—clause, a huge, sweeping power that will allow him to meddle and advance his role as the great centraliser. 

The Secretary of State pretends, through measures such as the Localism Act 2011—I and other hon. Members have supported some of these—to be committed to localism, yet by virtue of the Bill, and this measure in particular, he is taking extraordinary powers in terms of secondary legislation. If he wants to bring forward some kind of Bill, statement or White Paper on financial management in local authorities and what he thinks the priorities should be, he could publish that alongside the review of local government finance for next year. If he wanted to make substantive comment about local authority financial management, he could do so when he sets out the provisional allocation of grant in December, rather than seek this power that, if we do not check today, will allow him to do anything he likes in respect of the financial management of relevant authorities. That is quite extraordinary. 

We urge the Minister simply to remove the whole clause, because it is unnecessary. If he is minded to keep the clause, we urge him to remove subsection (1) altogether. If, however, he is minded to keep subsection (1), because for some reason he thinks it necessary, certainly we urge him to support our amendment that would delete paragraph (f), which surely he must agree is out of order. 

The Chair:  I call Chris Williamson. How nice to see you this morning. 

Chris Williamson (Derby North) (Lab):  Nice to see you too, Sir Edward. I have missed you over the weekend, so it is nice to reacquaint ourselves. 

I rise to support my hon. Friend, who talked about the over-reach in the clause. He is absolutely right. We hear much rhetoric from the Minister and the Secretary of State about the importance of localism, but, as my hon. Friend pointed out, this measure flies in the face of localism. I cannot believe that Government Members would disagree. The Secretary of State and the Minister are in danger of indulging in doublespeak—they talk about localism but they have included this clause in the Bill. 

9.15 am 

As my hon. Friend pointed out, we have heard a lot of talk from the Secretary of State in the past three years about the level of reserves held by local authorities, but those reserves were put in place to enable them to cope with the unprecedented cuts made to local authority funding by central Government. Local authorities have inevitably tried to build up their reserves to minimise budgetary and financial disruption and to manage the cuts that have been imposed on them. They draw on their reserves to manage the cuts in an orderly way, and to ensure that there is not a huge impact on members of the public who rely on local authority services. 

Andrew Griffiths (Burton) (Con):  I recognise the point that the hon. Gentleman is making about reserves enabling councils to plan, but does he not share the frustration of council tax payers who see local authorities—predominantly Labour authorities—cutting vital public services while racking up millions in reserves? 

Chris Williamson:  I am not sure whether the hon. Gentleman is living in a parallel universe. I would be interested to hear whether he can cite a specific example of that. He should look at the sorts of situations that local authorities, whether Labour or Conservative, face. This is not a party political issue. Local authorities right across the piece are alarmed about the scale of the cuts being imposed on them, and they have used their reserves to manage the cuts in an orderly way. Of course, it can appear curious that reserves are being built up while cuts are being made, but local authorities are between a rock and a hard place. They have got to use their reserves creatively to minimise the impact of the funding cuts. I hope that the hon. Gentleman will recognise that, because this issue affects not only Labour local authorities, but all local authorities. The situation is patchy, because local authorities in the most deprived parts of the country have been subjected to the biggest cuts, but all local government has had significant reductions. 

Local authorities face a difficult situation, and it is unreasonable for the Government to impose a clause such as this, which could meddle with authorities’ ability to manage a financial situation that they are in through no fault of their own, but as a result of Government decisions. If localism means anything, local authorities must be empowered to manage their finances on the ground in a way that reflects their needs and the pressures on them. If Whitehall and the big, heavy hand of the Secretary of State disrupt that ability, it will have a very negative outcome on council tax payers. 

Sir Andrew Stunell (Hazel Grove) (LD):  I wonder whether the hon. Gentleman would like to comment on the neighbouring local authority to mine, Manchester city council. Although it has £100 million of reserves, last year it received £1 million from the Government to handle the spare bedroom subsidy. It felt that it was so well off that it sent £500,000 back to the Government, but it continues to evict families without spending that money. 

Chris Williamson:  Again, we are getting a half-truth. 

The Chair:  Order. Clause 31 is about accounts and audit regulation. I know that the hon. Gentleman, who is very skilled, will keep referring to accounting records and financial management. 

Chris Williamson:  Absolutely, Sir Edward; I will most certainly do that. 

Andy Sawford:  Reflecting on your advice to my hon. Friend, Sir Edward, the interventions are instructive when it comes to showing us how the clause might be used. Government Members have sought to make completely inappropriate political points that are factually inaccurate, and that reveal their intention of using the clause to bring about their political view of the world, rather than allowing local authorities to decide on their financial priorities. 

Chris Williamson:  My hon. Friend eloquently makes a point that I was about to deal with. The intervention by the right hon. Member for Hazel Grove was instructive, because it indicated that the Government want to adopt a power to intervene in a way that would disrupt and damage a local authority’s ability to manage its finances. He talked about the spare room subsidy. As we know, the money available from the Government for that purpose is inadequate, and by accepting it, local authorities would be making life complicated and difficult, and would not be dealing with the situation. It would have been far better to abolish the bedroom tax, and there was an opportunity to do that when the issue was voted on last week. We know, however, which way he voted. 

Brandon Lewis:  I will try to help the hon. Gentleman to move away from political point scoring, as the hon. Member for Corby called it, by pointing out that he might want to double-check the clause. He referred to reserves and how councils manage their finances in relation to this clause, but reserves are governed by council tax setting, which is covered by part 2 of the Local Government Act 2003. Regulations made under clause 31 are not relevant to reserves. 

Chris Williamson:  In speaking of party political point scoring, I am only responding to interventions from Government Members. The fact is that the power is wide-ranging. I hear the Minister’s assurance, and I will be guided by my hon. Friend the Member for Corby as to our ongoing response, but I still have a good deal of concern about how the power might be used. 

Andy Sawford:  Does my hon. Friend agree that the Minister’s argument against the amendment on the grounds that provisions governing local government finance exist elsewhere does not really follow? Clause 31(1)(f) is not

necessary, and where the Government want to specify policies concerning local authorities’ financial management with regard to matters such as reserves, they should do so in the appropriate place. They should not adopt a sweeping additional power that would enable them to act contrary to existing provisions on local government finances and reserves. 

Chris Williamson:  My hon. Friend makes a telling and revealing point, which highlights that the Minister is arguing against himself. His previous intervention appears to indicate that the provision is unnecessary. Perhaps he will accept the amendment or remove the clause altogether. 

Andrew Griffiths:  It is important that we debate the question of financial management. The hon. Gentleman pointed me to the facts of the situation when I mentioned reserves; I will confirm the facts to him. Last year, Derbyshire county council increased its reserves from £234 million to £241 million, while it closed libraries and children’s centres. Does he not agree that it is important to focus on financial management? 

Chris Williamson:  I am not sure that that intervention is entirely fair or, indeed, relevant. Derbyshire county council is adjacent to the hon. Gentleman’s constituency, so I am sure that he is aware that it faces huge financial pressures. He can point to the council’s reserves, but I am talking about trying to manage the situation in as undisruptive a way as possible. He can point to Derbyshire, but many Conservative-led local authorities are in a similar situation. This is not a party political point; this is about the role of local government versus central Government, and unnecessary interference by central Government. The Government claim to be in favour of localism, but if they are, what is the point of the provision? The Minister’s intervention indicates that he acknowledges that the clause is unnecessary and irrelevant, because existing powers are available to him. What is the point of this additional clause, unless—as my hon. Friend the Member for Corby suggested, and as I fear—it is being used in an overbearing way to affect decisions at a local level in a way that would have a damaging and disruptive impact on that local authority? 

The clause would force local authorities to take a line that the Secretary of State feels is the flavour of the month. We have heard about bins and the Secretary of State’s determination to reintroduce a weekly bin collection. We have heard his continual criticism and complaints about remuneration levels in local authorities. He constantly interferes, yet claims to be a localist. Here is yet another example where his actions do not meet his rhetoric. 

James Morris (Halesowen and Rowley Regis) (Con):  I know the hon. Gentleman always views the motivations of the Secretary of State for Communities and Local Government with a degree of suspicion. Is he not reassured by subsection (3), which says that the Secretary of State “must consult” before making these regulations with 

“(a) the Comptroller and Auditor General, 

(b) such representatives of relevant authorities as the Secretary of State thinks appropriate”? 

That probably means the Local Government Association and other bodies in local government. He must also consult 

“the recognised supervisory bodies.” 

The hon. Gentleman’s rhetoric on the Secretary of State’s motivations and the powers imbued in the clause is undermined by subsection (3), which suggests that the Secretary of State must consult extensively within local government before making any regulations relevant to subsection (1). 

Chris Williamson:  It is not so much the Secretary of State’s motives, though I do question those, but his actions that concern me. Actions speak louder than words. It is of course welcome that he will consult. If his previous record is anything to go by, he can consult and then ignore those whom he consulted, if their view does not coincide with his view of the world. 

Paul Blomfield (Sheffield Central) (Lab):  Even in the context of the Bill, there is an example. Will my hon. Friend look at the Secretary of State’s consultation on the provisions we are to discuss shortly? In April 2013, the Secretary of State announced a consultation on protecting the independent press from unfair competition, but he announced plans to legislate within two days of the close of the consultation, clearly having paid no regard to it. 

The Chair:  Order. The Chair is in some difficulty. The clause relates to accounts and audit regulations. Paragraph (f) is about the financial management of relevant authorities. I do not know, as I have not yet heard the Minister, whether that relates to financial management of accounts and audit regulations. I am anxious not to have a long debate about the iniquities or otherwise of local government finance, and what the Secretary of State is or is not doing. We could get very wide of the point. I know, Mr Williamson, that you will want to stick strictly to the financial management of accounts and audit regulations, will you not? 

Chris Williamson:  I absolutely will, Sir Edward. I will draw my remarks on the clause to a conclusion. My fear is that the clause is intended to be used as a Trojan horse to influence, affect and, indeed, direct decisions of local authorities on the ground. It flies in the face of any concept of localism. 

My other concern is this: writ large throughout the Bill is an intention to reduce scrutiny. We heard from Transparency International about the lack of checks and balances, and that that will lead to more fraud and corruption in local authorities. My worry is that this is another opportunity for the Secretary of State to force more privatisation and externalisation on local authorities. As we know, a consequence will be less scrutiny of the private sector organisations providing public services through externalised contracts. 

As we have heard from organisations such as Transparency International, that will lead to more fraud and corruption. That is a real fear and concern. If all of us in this room are concerned about the public pound, securing value for money and ensuring tax council tax

payers are not ripped off, this is a clause too far. I hope that the Secretary of State will withdraw the entire paragraph. 

9.30 am 

Brandon Lewis:  After a wide-ranging discussion I will try to keep strictly to clause 31, which provides a power to make accounts and audit regulations. The regulations have a long history and form a vital part of the legislative framework for financial management and accountability in local government and other non-health bodies covered by the Bill. The amendment would remove the power to make regulations on the financial management of relevant authorities. This is a new provision, which did not appear in the equivalent power in the Audit Commission Act 1998. It complements and supports another new power in paragraph (g) to make regulations on internal control systems, whose removal has not been proposed, I notice. 

These are rapidly developing topics and the use of regulations allows the requirements to be kept up to date with the latest good practice. This is in line with the approach in the private sector, where the Financial Reporting Council publishes the UK corporate governance code, with which listed companies are expected to comply. It is an approach followed in central Government and the national health service, where these issues are also covered by codes. Reliance on primary legislation runs the risk of freezing practice in local government at the time the legislation is passed. 

It is worth commenting on the issue of “meddling”. The regulations made under the clause will give legal backing to the CIPFA code, as do the current accounts and audit regulations. The apparently new powers are essential to allow a natural evolution of the accounts and audit regulations in order to keep up with modern practice. These regulations have for decades contained important provisions on financial management and internal control, where they are linked with documents and processes connected with the accounts which were within the regulation-making power. However, now that the financial management and internal control provisions form such a significant part of current practice, which the regulations must cover, we have decided to include a specific power in the clause, so that it is absolutely clear what powers are being granted. 

Andy Sawford:  Will the Minister give way? 

Brandon Lewis:  Let me just finish this point. I will give way in a couple of minutes. It may help the Committee if I outline the requirements on financial management and internal control that have been included in the regulations. In the 1974 regulations, the provisions were quite rudimentary, simply requiring the chief finance officer to determine the systems of accounting control and ensure that they were observed. Those regulations also placed a duty on that officer to maintain a current internal audit—a vital part of effective financial management and internal control. Regulations made in 1983 and 1996 broadly maintained these requirements, but strengthened them in a number of ways: in particular the duty to maintain an effective internal audit was transferred from the chief finance officer to the authority itself. 

Major changes were made in the 2003 regulations, which placed a duty on the authority to ensure that its financial management was adequate and effective and that there was a sound system of internal control. Authorities were required to review the effectiveness of internal control at least once a year, and a statement on internal control had to accompany the statement of accounts. The internal audit duty was also strengthened. Important amending regulations were made in 2006, requiring the review of internal controls to be considered by the body or a committee. The current accounts and audit regulations, which date from 2011, broadly maintain these requirements with some modernising of the language. 

That development of the regulations over the years has been accompanied by the issue of professional guidance by the Chartered Institute of Public Finance and Accountancy, which complements and expands on the core duties set out in the regulations. These developments have mirrored developments in the private sector following the publication of the Cadbury report in 1992, and in the rest of the public sector. 

Andy Sawford:  As ever, it is helpful when we hear the Minister’s response and understand the intention behind the measures in the Bill. Some of what he says is reassuring. On the point about internal control, he noted that the Opposition have not highlighted that provision, but we see it as different to the specific point about financial management of relevant authorities. Will the Minister provide examples of why that power may be necessary and how may it be used? The one example he has given so far, specifying sound financial management, is clearly the whole purpose of the audit itself—indeed of the Bill. It is not something that needs to be specified in secondary legislation by the Secretary of State. 

Brandon Lewis:  That is why it is important that we get the right provisions in any given Bill, so that the Bill does not just outline what we are trying to do, but is able not only to change the wording of policy, but to change and develop the policy in practice. 

In central Government and the NHS, provision can be made by codes issued under the authority of the Treasury and the Department of Health, but for local government we must proceed by legal provision. Regulations are the appropriate medium to use, so that the requirements can keep pace with developments in best practice. That is what has happened over the past 20 years, and the addition of paragraphs (f) and (g) to the accounts and audit regulations will give explicit recognition to that important function of the regulations. 

As I said earlier, the amendment would remove only paragraph (f), on financial management, leaving paragraph (g), on internal control, in place. That would make little sense. Internal control exists within the overall financial management framework of a local authority. To be able to regulate one but not the other risks leaving the framework incomplete. Key aspects of financial management, such as internal audit; the role of committees in reviewing their annual governance statement; and the overall duty to maintain adequate and effective financial management will be covered by the regulations. Removing the power from the clause would call into question our ability to include such provisions in future regulations. 

Paul Blomfield:  I concur with my hon. Friend the Member for Corby that the way in which the Minister is describing the provision is reassuring. Despite his words, however, there remains considerable concern for us about the use of subsection (1)(f). If it is used in the way he describes in relation to paragraph (g), it sounds entirely reasonable, but the provision remain a stand-alone paragraph in a clause that is about accounts and audit regulations, which would give considerable power—the sort of power that has been suggested by some of his colleagues in this debate, for example, the power to direct local authorities on how they manage their reserves. That is only one example. The power is broad ranging. Is the Minister not concerned that he is creating an extraordinary precedent, not only for the current Secretary of State, but for any future Secretary of State? 

Brandon Lewis:  If the hon. Gentleman looks in Hansard at what my hon. Friends were saying about the use of reserves in response to the hon. Member for Derby North, he will see that they were responding to his comments on the stringencies of local government finance. I will not test your patience, Sir Edward, by getting into the strengths of local government finance and how well it has coped, with the latest BBC report highlighting how satisfied people are. 

I cannot overemphasise the importance of effective financial management in local government. In this country, we have been mercifully free of the sort of troubles we currently see in some American cities, for example. In part, that is due to the strong emphasis on sound finances that has always been in our local government system, but it is vital that the legislative framework provides for proper direction and support for the future. 

Paul Blomfield:  I was interested by the Minister’s reference to American cities. I am assuming that the implication is that some of the problems in American cities could have been dealt with by direction to the city in how they manage their money, not simply how they regulate their accounts, audit procedures or financial reporting. Is that the power the clause is seeking for the Secretary of State? 

Brandon Lewis:  I repeat exactly what I said a few seconds after the quote the hon. Gentleman has referred to. In part, it is due to the strong emphasis on sound finances, which has always been in our local government finance system. We need to ensure that we keep it that way and allow the system to be flexible enough to develop as things move forward and practice moves. 

The Public Accounts Committee has recently taken a close interest in financial viability and financial control systems in local government. The Department for Communities and Local Government’s accounting officer has set out his responsibilities for those systems in a statement that has been considered by the PAC. His power to act on those responsibilities depends on the ability of Ministers to set an adequate legislative framework for local government. That is essential, so that Parliament can receive the assurance it needs about the proper use of public funds. 

In light of my explanation, I hope that the hon. Gentleman will withdraw his amendment. 

Andy Sawford:  I thank the Minister for his response, but I do not feel it adequately addresses the points raised by my hon. Friends. 

The Minister makes the provision sound benign, describing the way in which it updates practice in the world of audit and financial management. He clearly sees paragraphs (f) and (g) as inseparable, but my hon. Friend the Member for Sheffield Central highlighted how they are separate points and allow the Secretary of State to do very different things, and, specifically in relation to paragraph (f), to meddle in financial management. That is relevant. 

The Minister tells us that the provision might be used in relation to the audit and accounts of local authorities. Indeed, Sir Edward, I heard you ruminating on that and whether the wording of the clause is such that paragraph (f) would confine the use of the power. 

James Morris:  Is not the hon. Gentleman alighting on the key point, which the Minister also raised, that the term “financial management” as it relates to the clause is quite narrowly defined? In accounting terms, when people talk about financial management in this type of context, they are specifically relating it to a framework by which the accounts and the framework of local authority accounting is to be taken into account, so financial management in the clause is narrowly defined. Is that not the key point that should reassure him? 

Andy Sawford:  The hon. Member for Halesowen and Rowley Regis makes a characteristically helpful intervention. He thinks the best of the Government’s motives, as we would expect, but we too want to think the best of the intentions behind the clause. I was looking to see whether the Minister was nodding in the direction of his hon. Friend to confirm the point he made. If the Minister had made that point clearly in his remarks, it would have been incredibly helpful, but he was not able to give us any clear examples of how the clause would be used. Part of the process of scrutinising the Bill is to help people in the future to interpret the meaning of the clause, and to ensure that the parameters in which the clause could be used are more clearly set out on the record. 

In fact, the Minister made much more general reference to the Government’s need for powers to meddle in financial management, causing us greater concern, as did interventions from some Government Members on the policy decisions of local authorities on how they manage their finances. If the intention behind the clause is to have some very limited powers over financial management, relevant to audit in a local authority and clearly linked to the points on internal control the Minister made well, that is something altogether different from a clause which, as it stands—certainly by any reading of the Minister’s inability to give examples or clarify how it could be used—could be used much more broadly to meddle with policy decisions that are rightly the preserve of local authorities accountable to their local electors. 

James Morris:  I cannot recall the Minister using the word “meddle” in relation to paragraph (f), but the point remains that in common practice, when any regulatory body talks about financial management—if we look at

the Companies Act 2006 and at other ways of approaching audit and control—financial management is used in a very specific, defined way, and that obviously applies to the clause. 

Andy Sawford:  I thank the hon. Gentleman for that intervention. No disrespect to the Minister, but I would be happy to see the hon. Gentleman responding for the Government on this point. He makes a much more helpful contribution to the debate and is more reassuring on how the power could be used. As the paragraph stands, it is inconsistent with the intentions set out around the rest of the clause. It is certainly inconsistent with the Government’s much vaunted commitment to localism, and I am a localist, so I want to help them to be consistent in their claiming to be the champions of localism. 

Frankly, it would be unconstitutional in the United States and in most western countries for the central Government to take this kind of power and to meddle in local financial affairs. If it were debated in the United States there would be public uproar about the overreach of the federal Government, yet the Government have slipped it through our parliamentary system without any real explanation, clarification or limitation of how it can be used. I note that the Minister failed to respond to my hon. Friend the Member for Sheffield Central, who sought clarification on how the power will be used. 

9.45 am 

My hon. Friend the Member for Derby North called the clause a Trojan horse. Again, I suspect that there is a difference of opinion about the Government’s motivation. The Government may not have designed it as a Trojan horse, and we should give them credit for that. The officials who drafted subsection (1) may have thought that it was helpful. However, we cannot deny that it can be used as a Trojan horse. 

We do not want to oppose something that could be important and helpful to matters such as internal control and the conduct of audit, on which the Opposition have sought to bring scrutiny to bear. It would be wrong of us to limit the ability of auditors to properly hold local authorities and other authorities to account. However, we are struggling because we have not been assured that that is the intended effect of paragraph (f). 

Brandon Lewis:  The hon. Gentleman has been generous in giving way today. I appreciate that he is not referring to the clause as a Trojan horse just to make political capital and to score political points, and he has stressed that he does not seek to do that. Clause 31 specifically and clearly refers to how accounting procedures are dealt with, so it seems self-explanatory that it refers to accounting procedures rather than anything else. As I said in my main remarks, the regulations that may be made under the clause will give legal backing to the CIPFA code, on which I know the hon. Gentleman puts great weight, and to the current accounts and audit regulations—but it is obviously a matter for the hon. Gentleman. 

Andy Sawford:  As I made clear, we want to understand why the Government think the clause is necessary. The Minister’s view is that it is necessary and that some

elements of it carry forward previous provisions relating to the world in which the Audit Commission was responsible for audit. However, my point, which the Minister again failed to address by conflating the debate on the whole clause, is that paragraph (f) leaps off the page. 

Brandon Lewis:  I will have one more go at trying to allay the hon. Gentleman’s fears. It is clear that the clause seeks to deal with the key aspects of financial management, such as internal audit and the basic content of annual accounts, as the current accounts and audit regulations already do. We do not intend to change the scope of the regulations, and I struggle to see how even the Opposition can argue that the clause will do that. 

Andy Sawford:  I thank the Minister. That was his most helpful reply so far, and it would be helpful if future Secretaries of State and others to refer back to it. He said that paragraph (f) relates to the basic content of annual accounts and matters of internal control. If that is the effect of the clause in the long run, we can understand the Government’s intentions. I ask the Minister to go away and think about whether that can be made clearer and more explicit on the face of the Bill, although it is now in Hansard. It is a shame that we have had to draw it out of the Minister, because we all want to make rapid progress on the clause. We will return to this on Report to ensure that there is the strongest possible clarification that the measure will not be used in an inappropriate way. In thanking my hon. Friends for making incredibly helpful, important and telling contributions to the debate, which have finally drawn some clarification, I beg leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Clause 31 ordered to stand part of the Bill.  

Clause 32 ordered to stand part of the Bill.  

Schedule 9 

Data Matching 

Brandon Lewis:  I beg to move amendment 53, in schedule 9, page 72, line 17, at end insert— 

‘(10A) In this paragraph “enactment” includes—

(a) an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales,

(b) an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament, and

(c) an enactment contained in, or in an instrument made under, Northern Ireland legislation.’.

The Chair:  With this it will be convenient to discuss the following: 

Government amendments 104 and 54. 

Amendment 143, in schedule 9, page 74, line 1, at end insert— 

‘(d) to assist in the prevention and detection of maladministration and error.’.

Brandon Lewis:  These amendments clarify and update the data-matching provisions in schedule 9 and add the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. Amendment 53 makes it clear that “enactment” in the context of schedule 9 includes primary or secondary

legislation made under Measures or Acts of the National Assembly for Wales, Acts of the Scottish Parliament and Northern Ireland legislation. 

Schedule 9, paragraph 4(8) makes it an offence for a person to disclose data, other than in specific circumstances. Paragraph 4(7) sets out where the onward disclosure of data may occur and in particular provides that disclosure is permitted under “an enactment”. The amendment clarifies that that term applies to enactments contained in, or instruments made under, devolved legislation. That also ensures consistency between schedules 9 and 11. Amendment 104 updates the definition of relevant NHS bodies in Northern Ireland for the purposes of data-matching exercises. The revised definition covers the full range of NHS bodies in Northern Ireland participating in data-matching exercises and is designed to be consistent with legislation in Northern Ireland, Scotland and Wales. 

Amendment 54 adds the prevention and detection of errors and inaccuracies as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. Lord McKenzie made a strong case for similar powers to be included in the Bill in the other place. At that time we considered that, although the Bill provides a timely opportunity for such an amendment to be made, especially given the national fraud initiative’s future home in the Cabinet Office, it was critical that we understood the implications of such a potential extension to ensure that the balance of risk and opportunity was properly assessed. Over the summer that is what we have done. 

We consider that the amendment will allow the national fraud initiative to continue to undertake the ad hoc data-matching exercises that it does at present through the Audit Commission's wider powers once the NFI moves to the Cabinet Office. That means that all possible uses of the NFI to carry out data-matching exercises will be set out in the Bill. That will allow the possible extension of the data-matching powers to include the prevention and detection of crime, other than fraud; to assist in the apprehension and prosecution of offenders; to assist in the recovery of debt due to public bodies; as well as the prevention and detection of inaccuracy and error, which is the subject of the amendment. 

I remind colleagues that, before adding any of these purposes, the Secretary of State must consult relevant authorities, their representatives and the bodies affected. In addition, those regulations will be subject to the affirmative resolution procedure. In our view, those safeguards will ensure that proper consideration is given to any extension to the initiative’s current powers. 

Andy Sawford:  May I ask, Sir Edward, on a point of order, whether it is your intention that I cover our amendment 143 in responding to the Government’s amendments? 

Brandon Lewis:  If it helps, I can cover that quickly as well before the hon. Gentleman speaks. I shall be brief. Amendment 143 would require the addition of a fourth potential purpose for which data-matching exercises can be undertaken by the national fraud initiative to 

“assist in the prevention and detection of maladministration and error”. 

As I have outlined, Government amendment 54—I hope this will give the hon. Gentleman some satisfaction—adds the prevention and detection of errors and inaccuracies

as further potential purposes for which a data-matching exercise can be carried out by the national fraud initiative. We consider that the amendment will allow the national fraud initiative to continue to undertake the ad hoc data-matching exercises that it does at present through the Audit Commission’s wider powers, once it has moved. 

Although we felt that a good case was made by the Audit Commission for the inclusion of error, in our view there was insufficient evidence on how the investigation of maladministration over and above error might be used. Furthermore, maladministration has a strong association with the work of the local government ombudsman. We were concerned that its use here might cause confusion as it could result in another body looking at maladministration in local authorities. However, unlike the ombudsman, it would be unable to act on the findings, thus potentially adding to his burden while raising the potential for conflicting roles and responsibilities. 

I hope that with that explanation the hon. Gentleman will not press his amendment. 

Andy Sawford:  I thank the Minister for his remarks, which greatly assist me—and render some of my carefully prepared notes redundant. 

The Chair:  I apologise for allowing the Minister to speak first. 

Andy Sawford:  I do not mean it in that respect, Sir Edward. The Government have listened, and that is to be welcomed. They have listened in respect of specifying where the national fraud initiative will go. Points were raised extensively in the House of Lords. The Government committed to setting out where it would go, and we now know that it will go to the Cabinet Office. 

The Government have also listened to the point about error, but there is clearly some difference between us on the strength of Government amendment 54, which is to be welcomed in itself, compared with our own proposed amendment, which is supported by a wide range of stakeholders, so I wish to speak to why we believe it is necessary. 

Our concern is that the data-matching exercises that the Audit Commission undertakes at present under its audit powers would not be available to any new body, as they would not fall within the additional purposes provided for. In tabling the amendments at this stage, the Minister has helpfully strengthened those elements of the Bill and gone some way to responding to our concern. We would all agree that prevention and detection of maladministration and error are particularly important. The context that my hon. Friend the Member for Derby North referred to—the financial challenges that the local authority faces—makes this as important as it has ever been. 

We recognise that local authorities are being pressed to make tough, quick decisions. My hon. Friend made the point about reserves and the ability of local authorities to plan ahead as they see their finances being cut disproportionately to the rest of the public sector. Some authorities, notably those serving the most deprived communities in the country, are facing the most swingeing cuts. The consequences of the decisions that are being

pressed upon them and the speed at which they are having to take decisions are huge in terms of the sound financial management that we would all hope to ensure is in place in local authorities, and ultimately there are consequences for the public that local authorities and other relevant authorities serve. 

We want the Bill to be amended so that data-matching powers can be included in relation to maladministration and error. I will set out why. We have talked about the Audit Commission’s shortcomings—all hon. Members have been keen to point those out, especially Government Members—but its work through the national fraud initiative has identified around £1 billion worth of fraud, error and overpayments. Particularly at a time when local authorities are struggling for resources, we want to ensure that such amounts of money—£1 billion of public money—are adequately detected. The point in Government amendment 54 about error is well made. 

10 am 

On maladministration, the ad hoc Committee on the draft Local Audit Bill recommended amendment 143, as did the Audit Commission, which cited a range of ways in which such powers had been used. The Bill helpfully adds foundation trusts, and a range of other bodies, to the list of mandatory participants; the Government responded, in a welcome way, to points made about that in the other place. The Bill would therefore provide many more opportunities to detect maladministration and error across a much broader range of organisations. 

Housing associations are an example of bodies that participate in data matching only if they choose to do so. That is despite clear evidence that data matching is a very powerful tool for helping bodies to detect potential tenancy fraud, and the increased focus on housing tenancy fraud over the past two years has led to significant savings for the public purse. We want housing associations, foundation trusts, local authorities—indeed, all bodies—and especially the public and the tenants whom those bodies serve to be protected from maladministration. 

The Minister suggests that the powers in amendment 143 would overlap with the role of the local government ombudsman. He made an interesting observation about how the amendment would interplay with the ombudsman’s role; that is certainly something for us to go away and think about. When he responds, I hope that he will recognise that we broadly welcome the approach that he has taken, and that we think that the proposals are the result of good scrutiny. Many of the amendments were tabled because of the level of concern expressed, both in and outside Parliament. 

There are a few questions to which I ask the Minister to respond. The ad hoc Committee heard suggestions that regardless of who owns the national fraud initiative—we now know that it will be the Cabinet Office—there should be a governance board representing key stakeholder interests to oversee the initiative’s development and operation. That seems a helpful and welcome suggestion. I ask the Minister to respond on that point. 

It is not clear to me, or to other bodies—this point was made by the ad hoc Committee—what mechanism will be available to the Cabinet Office to ensure that participants in the data matching in the national fraud

initiative follow up on data matches; perhaps the Minister can point me to the effect that any of the amendments in this group will have in that regard. To come back to the point about the baby and the bathwater—I recall your regret, Sir Edward, at the use of that language—the Audit Commission has a wide range of powers, some of which it has used to good effect; its appointed power to ensure that bodies subject to data matching follow up on data-matching exercises could be lost. If the Minister could assure us on what powers, if any, the Cabinet Office will have in that respect, it would be helpful. 

Maladministration is the sticking point, as the Minister says. We will test the issue on Report, and hope that the Minister listens to our concerns that his amendment does not go far enough. Dealing with “errors and inaccuracies” is a more benign way to use the national fraud initiative, although clearly that can save substantial amounts of public money. Maladministration is quite different. That relates to points made to us by Transparency International about the potential for corruption in local government. We know of examples of significant maladministration by local authorities around the country; they are always regrettable, and they come from administrations of all types, sizes and political colours. The infamous “homes for votes” scandal is perhaps an example that will always be on the mind of people who are considering how effective audit is. 

Clearly, through the data-matching exercise, maladministration may come to light. The effect of not giving any powers is that the Cabinet Office and authorities and auditors who are made aware of maladministration—it may have come to light through data matching—will have no powers to act upon it. The local government ombudsman might, by some other route, commence some kind of investigation, but, to our knowledge, there is no trigger from the data-matching exercise to the role of the Cabinet Office and any action by the local government ombudsman. 

Could the Minister assure us, perhaps by some form of guidance or a letter to the Cabinet Office that he copies to us, that there would be an expectation that the local government ombudsman would act when there is evidence of maladministration or suspected maladministration—we would all hope that subsequent investigation finds simply error or inaccuracy rather than maladministration? Will he assure us that, when maladministration comes to light through data matching, action will be taken, if not in the more direct way in the Bill that we propose, then in an indirect way through the local government ombudsman? In the absence of such a trigger, we will need to press the matter to a vote. 

Brandon Lewis:  I hope I can reassure the hon. Gentleman. Discussion on the arrangements for the governance of the national fraud initiative will continue with representation from interested parties. We are currently in discussion with the Cabinet Office and the Audit Commission to finalise those arrangements as part of the wider work on the transitional arrangements. 

It also worth confirming that all public bodies that are subject to audit are required to participate in a bi-annual data-matching exercise carried out by the NFI. As the NFI charges those bodies a fee for any data matches supplied, it is unlikely that they would fail to follow them up. The success of the NFI in providing

local government with such an effective tool to tackle fraud demonstrates the value of the exercises. Local government agrees. 

We have to be aware of how important a tool that has been in the fight against fraud in local bodies. It has identified more than £1 billion since it was started in 1996. We are keen to ensure that it is able to carry on fighting the good fight in that respect while continuing to develop its capabilities in a fast-moving and fast-changing forward landscape. That is why, on 15 July, Lord Wallace announced that those powers will transfer to the Cabinet Office once the legislation is in place. The wider scope of public audit also means that the external auditor would need to be reassured that the body had suitable counter-fraud measures in place to protect public funds. 

I should like to reassure the hon. Member for Corby that we have discussed the wording and scope of the amendment with the Audit Commission. It has confirmed that it is content that the measure enables the future owner of the NFI to run the types of data-matching exercises that it currently does. We believe that that gives the right cover. To be clear, the additional purposes we have outlined are on assisting in the prevention and detection of crime other than fraud, assisting in the apprehension and prosecution of offenders, and assisting in the recovery of debt owing to public bodies. 

Andy Sawford:  It is reassuring that the Audit Commission supports the Government’s approach in the schedule. As I have made clear, we welcome the way the Government have listened. We know that the Audit Commission supports many of the substantial concessions that the Government have made, but it does not support the Minister on the maladministration point. I have its most recent note to me, which I believe other members of the Committee will have received—it is a publicly available submission to the Committee. It clearly states that the purposes that should be added include: 

“to assist in the prevention and detection of maladministration and error”. 

The Audit Commission does not support the Government on that point. We cannot allow its welcome agreement with the Government and the Government’s welcome concessions to mask the fact that there is a clear disagreement on that point between the Government and everybody else, including the ad hoc Committee, the Audit Commission, the Opposition and their lordships. 

Brandon Lewis:  I will not repeat everything I said in my core remarks on the role of the local government ombudsman in dealing with maladministration, fraud and error—the hon. Gentleman has said he will go away and look at them—but, as I have said, a relevant Minister would be required to consult widely before regulating, modifying or limiting any current powers that are subject to the affirmative procedure. 

Amendment 53 agreed to.  

Amendments made: 104, page 72, line 28, in schedule 9, leave out paragraph (f) and insert— 

(f) a health and social care body mentioned in paragraphs (a) to (e) of section 1(5) of the Health and Social Care (Reform) Act (Northern Ireland) 2009.’.

 

Amendment 54, page 73, line 44, in schedule 9, after ‘offenders,’ insert— 

‘(ba) to assist in the prevention and detection of errors and inaccuracies,’.—(Brandon Lewis.)

Amendment proposed: 143, page 74, line 1, in schedule 9, at end insert— 

‘(d) to assist in the prevention and detection of maladministration and error.’.—(Andy Sawford.)

The Committee divided: Ayes 6, Noes 9. 

Division No. 4 ]  

AYES

NOES

Question accordingly negatived.  

Schedule 9, as amended, agreed to.  

Clause 33 ordered to stand part of the Bill.  

Schedule 10 

Best value inspections 

Brandon Lewis:  I beg to move amendment 55, page 75, line 4, in schedule 10, leave out ‘paragraphs (a) and (b)’ and insert ‘paragraph (a)’. 

The Chair:  With this it will be convenient to discuss Government amendments 56, 57, 105 and 58 to 61. 

Brandon Lewis:  Amendments 55 to 61 are intended to take account of amendments to the Local Government Act 1999 made by the recent Public Audit (Wales) Act 2013 that have already removed or amended provisions relating to the Auditor General for Wales. 

Amendment 105 makes a minor and technical amendment to section 25(2)(a) of the Local Government Act 1999, to ensure that inspectors and assistant inspectors of best value authorities can still be required to have regard to any guidance issued by the Secretary of State when carrying out investigations or inspections of best value authorities, once the Audit Commission is abolished. 

These are minor and technical amendments that remove redundant references or make clarifications to related provisions in existing legislation. I do not intend to delay the Committee further. 

Amendment 55 agreed to.  

Amendments made: 56, page 75, line 10, in schedule 10, leave out paragraph 5. 

Amendment 57, page 75, line 29, in schedule 10, leave out paragraph 7. 

Amendment 105, page 75, line 34, in schedule 10, leave out paragraph 10 and insert— 

10 In section 25(2) (coordination of inspections: persons to whom the section applies), for paragraph (a) substitute—

“(a) an inspector or assistant inspector appointed under section 10(1) or (2);”’.

Amendment 58, page 75, line 36, in schedule 10, leave out ‘and (3A)’. 

Amendment 59, page 75, line 36, in schedule 10, leave out ‘and Auditor General for Wales’. 

Amendment 60, page 75, line 38, in schedule 10, leave out ‘Auditor General for Wales’ and insert ‘Wales Audit Office’. 

Amendment 61, page 75, line 39, in schedule 10, leave out from ‘(3)(a)’ to end of line 40.—(Brandon Lewis.)  

Schedule 1 0 , as amended, agreed to.  

Clauses 34 and 35 ordered to stand part of the Bill.  

Schedule 11 

Disclosure of information 

10.15 am 

Andy Sawford:  I beg to move amendment 144, in schedule 11, page 76, line 36, at end insert— 

‘unless there is an overriding public interest in favour of its disclosure’. 

The Chair:  With this it will be convenient to discuss amendment 145, in schedule 11, page 77, line 22, at end insert— 

‘(l) to the Comptroller and Auditor General, for the purposes of the functions under or by virtue of section 18 and Schedule 6 of this Act, or

(m) to the Secretary of State, for the purposes of accounting to Parliament; and

(n) for the purposes of the Care Quality Commission under the Health & Social Care Act 2008.’.

Andy Sawford:  Elsewhere in the course of the debate— we hope there will be time to debate our new clause 2 —we have commented on some of the provisions in the preceding clauses. We have not sought to debate them at this point because we wish to ensure that our general and wide-ranging concerns about transparency are well made. We shall do so in relation to new clause 2. 

We know that many cases of wrongdoing, maladministration and fraud in local authorities are identified by whistleblowers bringing them to the attention of the appropriate person. Currently under the relevant legislation the Audit Commission and its appointed auditors are both described as prescribed persons. We consider that it is possible that whistleblowers might not approach a private auditor employed by a local body or council in the way that they would perhaps have approached the Audit Commission or its appointed auditors. Although we have sought to put in place safeguards for the independence of that relationship, the perception of the local authority employee in a new world where the authority itself will have appointed its own auditor may mean that that officer or whistleblower does not feel confident enough to approach a private sector auditor as they might have approached the auditor independently appointed by the Audit Commission. 

In addition, they could have approached the Audit Commission, but that provision is not allowed for in the Bill. That is why we have tabled our amendments 144 and 145. We agree with the recommendation of the ad

hoc Committee that the council’s audit committee should be named in the Bill as a prescribed person. I do not understand why the Government have resisted this. The effect of our amendments is to ensure that the Government think further about this. It is very important that new audit arrangements maintain independence, encourage probity, make appropriate provision for whistleblowers and ensure that it is still possible to compare the relative performance of different local authorities. After all, independent auditors blew the whistle on the homes for votes scandal that was referred to in the debate. 

A possible consequence of the way the Bill is worded is that a worker may believe that their only option to raise an issue of concern is with the media or general public. This is one route to shining a light on maladministration, error or fraud, but so often it is a blunt instrument to address issues in a local authority, compared with whistleblowing to an appropriate person. Although this may be to the private sector auditor, and we do not want to exclude that option for whistleblowers, we seek to enhance the options for them to ensure that it can take place. 

Departments are accountable to Parliament for the billions of pounds of taxpayers’ money paid to them by local bodies. Departmental accountability system statements refer to the assurance that Departments obtain from local external audit. Therefore, accounting officers need to continue to have access to the results of audits. 

Schedule 11 will make audit information confidential except in certain specified circumstances. That is our concern, reflected in amendment 144, about access to information. The amendment is a small, tidying-up amendment. It is a different point from whistleblowing, although the two are related. 

Under the schedule as it currently stands, there is a general bar on disclosure, and there are exceptions. Paragraph 2(1)(a) of the schedule states: 

“Information to which this Schedule applies may not be disclosed except…with the consent of the body or person to whom the information relates”. 

As I understand it, that is not a total block on the disclosure of information, because sub-paragraphs (1)(b) to (1)(k) will allow a disclosure even where a person does not give their consent; indeed, our amendment would add additional exceptions in relation to the Comptroller and Auditor General. 

Our view is that, in the interest of transparency, we should not seek to place significant limitations on when information can be disclosed. Currently, if information does not relate to the specific provisions of sub-paragraph (1)(b) to (1)(k), , we could find a situation—it may be an exceptional situation, which the Minister might reflect to us in responding to the amendment—in which an individual to whom the information relates says, “I don’t want that information to be in the public domain”, and it is not possible to identify where that information falls within sub-paragraph (1)(b) to (1)(k), which contain a range of specific provisions that override an objection under sub-paragraph (1)(a). 

We have sought Government officials’ clarification that one does not have to meet all the overriding provisions; simply one of them. However, where it is not possible to identify a specific overriding provision, it will be possible for an individual to say, “No, I don’t want the information to be made public”. 

The sensible way of covering all eventualities is to add to sub-paragraph (1)(a), which currently states 

“with the consent of the body or person to whom the information relates”, 

the phrase, 

“unless there is an overriding public interest”. 

That exact form of words is used elsewhere in the Bill, so there is precedent; the Government have used that form of words. We hope that they will look at the amendment and consider it to be a helpful way of ensuring that there are no loopholes. Clearly, where there is a public interest, there is no loophole. We hope that the Government will see our intention and understand that the amendment would be a perfectly reasonable and sensible one to make to the Bill and would stand in the interests of transparency. 

I have made the point about whistleblowers, which was debated extensively in the House of Lords. We cannot understand why the Government will not see the point that the Bill will not cover people who do not wish to approach the private auditor so it needs to be substantially strengthened. I know that some of my hon. Friends feel strongly about that. The point was also raised by Government Members in the House of Lords and made strongly by the cross-party ad hoc Committee. I hope that the Minister will feel able to accept our amendments. This is not a political point; it is made in the spirit of ensuring that there is the maximum transparency. When things go wrong—all the evidence suggests that that is rare—we will then have the maximum opportunity, because there are no loopholes regarding the disclosure of information and no barriers to whistleblowers, to ensure that appropriate action is taken. 

Chris Williamson:  I hope that the Minister will listen to my hon. Friend’s wise counsel on this issue, because this is a helpful amendment. As my hon. Friend said, it is a tidying-up amendment, which will offer considerable additional protection and strengthen the Bill. 

Throughout our consideration of the Bill, I have made various comments about the way in which powers to root out fraud and corruption are being diminished, and the schedule is another of the provisions that make it more difficult to shine a light on malpractice. The Government seem to want to go down the path of more externalisation and privatisation, and it would be helpful if the Minister, subject to his response, accepted the amendment. 

It is interesting to look at what the Under-Secretary of State for Communities and Local Government, Baroness Stowell, said about the detection of fraud and corruption. She was pleased that local authorities had detected £178 million in fraud last year. However, she went on to say that they needed to go further. It is difficult for them to go further, however, because the whole thrust of the Bill is in the opposite direction. I therefore hope the Minister will take the amendment on board and consider it. If he is not prepared to accept it, I hope that he will at least reflect on the Bill’s wording and perhaps introduce his own amendments further down the line to address the concerns that my hon. Friend outlined. 

It is not unreasonable to ensure that something should be disclosed if there is an overriding public interest in disclosure. If the public interest is overriding, it should

surely not be within the power of the body affected simply to say, “No, we don’t want this disclosed, thank you very much. It might be a bit embarrassing for us.” Well, the public interest—particularly if it is overriding, as in the amendment—should prevail in those circumstances. 

We hear a lot about transparency from Ministers and other Government Members, and if they genuinely believe in it, they will agree that the amendment is reasonable. I therefore hope that the Minister will take it on board or introduce his own form of words to deal with the issue. If we could achieve that, it would be of at least some reassurance to the general public, who will be alarmed by much of the content of the Bill. 

Andy Sawford:  My hon. Friend is right to draw the Government on this point. We understand that they have said they intend to make the Comptroller and Auditor General a prescribed person through an amendment to regulations, rather than through the Bill, but we would hope to hear that from the Minister and to have absolute confirmation that that will take place. 

Chris Williamson:  My hon. Friend is absolutely right. We wait with bated breath to hear the Minister’s response, and we hope he will give that reassurance or simply accept the amendment. 

10.30 am 

James Morris:  Is it possible for the hon. Gentleman to give an indication of how he defines the overriding public interest? 

Chris Williamson:  I do not seek to define it here today, but I think that there is probably an accepted definition. My hon. Friend might be able to assist in giving a clear indication of what we mean by an overriding public interest, but I think that there is an accepted definition, laid down by precedent, that could come to the fore. My hon. Friend might be able to help. 

Andy Sawford:  It is really worrying to hear a Government Member ask that question, because it calls into question the use of this language by the Government elsewhere in the Bill, and whether they know what their intention is. Perhaps the Minister can clarify this point. We used this wording because we thought that the Government might accept it. If the Government do not have clarity about what the overriding public interest is, then we might need to review whether we would support that provision elsewhere in the Bill. 

Chris Williamson:  That is a helpful and revealing intervention, and all the more reason why we hope that when the Minister responds he will be able to assist on that point. This would also help the hon. Member for Halesowen and Rowley Regis. It is not for me to stand here and define that; it is a matter for the Government and for looking at the precedents for the use of that term. 

Neil Carmichael (Stroud) (Con):  Does the hon. Gentleman agree with me that sub-paragraph (3) helps to broaden the scope of this paragraph as a whole? 

Chris Williamson:  To be honest, I am not sure that it does. We tabled the amendment simply to seek clarity. Given the hazy notion—subject to what the Minister says—of what is meant by overriding public interest, the amendment is even more important. We will listen to the Minister’s response in justifying—or not—this particular clause. 

If you said that a clause was going to be agreed under which potentially embarrassing information could be disclosed only with the consent of the body or the person to whom the information related, without the proviso that we suggest, then alarm bells would ring for ordinary lay members of the public. I am just an ordinary lay member of the public. I might be a Member of Parliament, but I am a bricklayer. My background is bricklaying, so I am not a lawyer or an expert on these things. I am trying to use the everyday, common parlance used by the ordinary people whom I seek to represent in this place. 

To me, as an ordinary humble bricklayer, the wording of the clause without the added proviso—notwithstanding the hazy definition of what we mean by overriding public interest—fills me with some trepidation. The onus is not on me to explain it; we are in opposition at the moment. We are merely pointing out what we consider to be weaknesses. I appreciate that the term is in the amendment, but in the end it is up to the Minister and to the hon. Gentlemen and hon. Ladies on the Government Benches to give us and the public the reassurance that what they are doing will not diminish accountability and transparency. 

As we heard from Transparency International, there is the potential for this to result in more fraud, corruption and misuse of public money. Particularly in a time of austerity, when people see unbelievable cuts in public spending and services being decimated, they have the right to know that money is being spent wisely and appropriately. Where public money is revealed to have been misspent, people should know about it. Why should potentially embarrassing information be revealed only with the consent of the body or the person to whom the information relates? [Interruption.] Perhaps the hon. Member for Burton, who wants to intervene, can explain that. 

Andrew Griffiths:  Is the hon. Gentleman seriously asking us to vote for an amendment when he cannot explain what the words mean? 

Chris Williamson:  I think there is an accepted view of what is understood by an overriding public interest. 

Andrew Griffiths:  Which is? 

Chris Williamson:  We only have to look at case law. Very often these words are subject to interpretation. An example of overriding public interest might be if money is expended wastefully, resulting in considerably more council tax payers’ money being used to fund a project than necessary, when more cost-effective ways were available. Another example is if a member of staff is

dismissed. Government Members have said that confidentiality clauses should be scrapped. If the amendment was accepted, it might be a way of ensuring that situations such as that could be brought to the public’s attention. 

The hon. Gentleman is making an unreasonable semantic point. He is trying to undermine an important and valid concern that we are expressing, which is unfair when all we seek to do is protect the public and ensure that information is not withheld unreasonably from the council tax payer and the general taxpayer. 

Andy Sawford:  I am very concerned that hon. Members voted for the provision on page 8, line 15 in clause 10 on the functions of an auditor panel, which includes the words 

“unless there is an overriding public interest in favour of its disclosure”, 

without knowing what that phrase meant at that point. We hoped that they knew what it meant. We interpreted it in a common-sense way, as my hon. Friend has set out. Clearly, if that is not a shared understanding and Government Members do not know what they mean by it, we might have to consider raising the use of that term in clause 10(11) on Report. Frankly, it would be rendered meaningless if they have no idea what they mean by it. 

Chris Williamson:  That is a revealing intervention. Hon. Members have been seeking to put me on the spot and undermine my support for the amendment by suggesting that I cannot give a definitive explanation of what is meant by an overriding public interest. I have tried to give a bricklayer’s common-sense view of what it might mean, but I have already made the point that I am not a lawyer. There may be lawyers and more learned individuals on the Government Benches. Indeed, some of my own colleagues may wish to give a legalese definition. But, as my hon. Friend points out, the hon. Member for Burton, who sought to embarrass me with his intervention, has already voted for those words. 

Andrew Griffiths:  I know what they mean, you don’t. 

Chris Williamson:  Fine. Then perhaps the hon. Gentleman can assist. 

The Chair:  Order. We do not need the sedentary remarks. The bricklayer can keep going. 

Chris Williamson:  I am very grateful, Sir Edward. I could not keep laying bricks because I have a poorly shoulder at the moment. Luckily, I am in the House of Commons seeking to stand up for the ordinary people who elected us to this place. 

Paul Blomfield:  On the mischievous and unhelpful interventions from the Government Benches, I have just been googling “overriding public interest”. It is curious that a number of Government websites use the phrase “overriding public interest” in a number of different contexts. I assume therefore that Government Members do know what it means. Their interventions are unhelpful and we can move on to another point. 

Chris Williamson:  I am grateful to my hon. Friend for that intervention. That would be sensible, and when the Minister responds I am sure he will give the definition. If he does not, I will intervene to invite him to do so. As a humble bricklayer, I have clearly not been able to satisfy hon. Members, so I wait with bated breath to hear the Minister’s definition. He of all people must know because it is in the Bill and has already been voted on. 

Following the mischievous interventions from coalition Members, some of the points that I was going to make have evaporated from my mind. I will sit down and if they come back to me when the Minister is responding I may have the opportunity to intervene to seek clarification. 

Brandon Lewis:  This is one of the first times I have heard the hon. Member for Derby North referred to as “humble”, but I take that under advisement. I will return to the key issues of amendments 144 and 145, tempting as other parts of the discussion have been. I will outline what schedule 11 deals with because hon. Members have tempted us a little way from the path. 

Schedule 11 deals with the information obtained by the auditors and other bodies listed in paragraph 1. It is not designed to cover disclosure of information obtained by individuals independently, such as whistleblowers. I have said that there is no need for the Bill to include provisions covering whistleblowing. We will amend the Public Interest Disclosure (Prescribed Persons) Order 1999 to list the Comptroller and Auditor General and local auditors as prescribed persons for whistleblowing purposes in the new audit framework. With regard to the important role of whistleblowing generally, we will debate that further when we come to new clause 3, which specifically covers that. 

The amendment seeks to amend the provisions relating to disclosure of information obtained by local auditors undertaking functions under the Bill, inspectors undertaking inspections under part 1 of the Local Government Act 1999, or other specified organisations such as the recognised supervisory bodies. I have some sympathy with the intent behind the amendment, but it is unnecessary because the provisions already enable disclosure of information. Without detaining the Committee too long, I will go into that in a little more detail to try to satisfy Labour Members. 

Schedule 11 enables the auditor and others to ask for information they need to undertake their functions effectively by protecting certain types of information and restricting its onward disclosure. Amendment 145 would add further organisations or persons to whom information may be disclosed. It would add the Comptroller and Auditor General for the functions under schedule 6, the Secretary of State for the purposes of accountability to Parliament, and the Care Quality Commission. I outlined part of my response to that a few moments ago. I can see why auditors might choose to share information with the National Audit Office to support the development of the code of audit practice or guidance, or with a Government Department to support the provision of assurance to the accounting officer that public money for which it is accountable has been used appropriately. We agree that auditors should be able to share information with, for example, the Care Quality Commission, but the amendment is not necessary to enable local auditors to share information with those parties. 

Paragraph 3 of the schedule already enables local auditors to disclose information unless doing so would prejudice the operation of their function. There is no restriction on whom this information can be disclosed to. 

Andy Sawford:  Characteristically, the Minister is giving a helpful response to enable us to understand better, and I am encouraged by how the scrutiny process can draw such things out. However, his points are not consistent. The Bill sets out a range of exemptions in the specific provisions, yet he says they are not needed because there is a catch-all. Which is it? I am reassured by the point about the catch-all, but am wondering why the Government feel the need to specify the exemptions. 

10.45 am 

Brandon Lewis:  I hope to be able to satisfy the hon. Gentleman. I am glad that my response was able to shed some light and help matters. If it helps, I will be quite happy to work things the other way around and give responses before the hon. Gentleman moves his amendments, but for now I will stick with the system used in Committee. 

Specifically regarding the Care Quality Commission, we do recognise the importance of it having access to the information necessary to ensure that health service providers provide people with safe, effective, compassionate and high-quality care. The CQC already has the power, under the Health and Social Care Act 2008, to require registered providers to provide any documents that the CQC considers it necessary to have for the purposes of its regulatory functions. That includes a health service provider providing a copy of its audit report, should that be required by the CQC. 

On amendment 144, paragraph 2 of the schedule sets out that information may not be disclosed and the exceptions to that. One is that the information may be disclosed “with the consent of the person or body to whom the information relates”. 

The amendment would allow disclosure without the party’s consent if there is an overriding public interest in favour of disclosure. I argue that that is unnecessary. 

Paragraph 2 of the schedule provides a number of reasons why anyone who holds information could disclose it, one of which is that the person or body has consented to that, but that is only one of the reasons that would make disclosure possible. If it is the auditor who holds the information, as I have said, paragraph 3 enables them to disclose that information to anyone, unless doing so undermines their undertaking the audit. 

Chris Williamson:  I just wonder whether the Minister could help us by defining what he means by an overriding public interest, to which he just referred. 

Brandon Lewis:  I thank the hon. Gentleman for raising that again. When we look at what an auditor decides is in the overriding public interest, that is a matter for that auditor to take forward. It is also for someone else who holds the information and is seeking to disclose it. They can do so with the auditor’s consent under paragraph 4 of the schedule. 

I think the hon. Gentleman missed the point of what we are looking at; it is about how the auditor can share information. The auditor must give consent unless the disclosure could prejudice their ability to undertake their functions effectively. That means that the schedule provides sufficient reasons for which local auditors and others can disclose information, which is its purpose. We will take another look at the schedule to ensure that that is the case, however, as I accept that it is extremely technical. With that assurance, I hope that the hon. Member for Corby will withdraw his amendment. 

Andy Sawford:  Having pointed out the processes of this place, I did not expect such a fatuous and disappointing response from the Minister on the value of the scrutiny we bring to bear. He will recognise that the ad hoc Committee provided excellent pre-legislative scrutiny, as did the Communities and Local Government Committee, which commented on the issues of public audit. During the Bill’s passage through the Lords, it was substantially improved. We seek to continue to do that through the scrutiny we bring to bear. I was commenting on how, at times, the Minister has been helpful in that regard, so it was intended as a generous offer. 

Brandon Lewis:  I was not trying to be fatuous; I was trying to make the very comment the hon. Gentleman made several times. I appreciate his comments and helpful remarks and I intend to continue to be as helpful as I can in recognising the issues raised. 

Andy Sawford:  I thank the Minister for that welcome clarification, because I was slightly surprised and disappointed, but let us move forward and consider whether his reassurances are sufficient to allay the concerns raised by my hon. Friends. An unexpected concern arose during the debate, particularly in response to the contribution of my hon. Friend the Member for Derby North, who made it clear, as I hoped I had, that what we seek to do through our amendment that calls for a public interest test is to ensure that the Bill has no loopholes. 

Government Members have challenged us on what we mean by public interest. That is difficult to define. For hon. Members who take a particular interest in this, the hon. Member for Burton considers that he has a definition. I suggest to him that he forwards that definition to the Public Administration Committee. It would have been a short cut for it in its incredibly extensive inquiry into how the public interest can be defined, which concluded: 

“Defining the ‘public interest’ is anything but easy…no single factor can be said to constitute the ‘public interest’, nor can the outcome of conducting a public interest test be predicted in advance; a case-by-case approach will be necessary”. 

The Committee went on to propose some rules of thumb. 

As my hon. Friend the Member for Derby North pointed out, he is a humble builder; I started my working life in a warehouse. Perhaps as we do not have the legal qualifications that some Government Members boast about, we would benefit from their instructive comments on how to define some of these complicated legal terms. We did not raise this issue in relation to clause 8, in which the Government themselves used the exact same language that we sought to borrow in our amendment.

We are satisfied that, although difficult to define, the public interest is a widely used concept in law. For example, legislation about the role of the Information Commissioner includes extensive provisions about the public interest, and there is extensive debate on the matter in Hansard. 

Chris Williamson:  Sir Edward, if you will forgive me for consulting my modest electronic device, in an attempt to increase my knowledge I have sought to use the internet to find a definition of an overriding public interest. I have found an interesting one that I think is relevant, and I would be interested in the views of my hon. Friend on it; indeed it would be helpful to know whether the Minister agrees with it. It defines actions in the overriding public interest as actions that are required by local or national Government that are 

“necessary for the promotion of public safety, health or general welfare”. 

Andy Sawford:  I thank my hon. Friend; that is indeed in line with what we envisaged the Government intended when they used the term themselves in the Bill. It is also in line with the interesting discourse on this matter by the Public Administration Committee. I would agree with that Committee—I suspect my hon. Friend would too—that it is difficult to predict exactly what will constitute the public interest, and that it needs to be judged on a case-by-case basis. If, however, Government Members feel the need to specify what is intended by a reference to the public interest, I suggest that they press the point with the Minister, who of course can include the definition in the relevant schedule to the Bill. 

Government Members may take some comfort in that. We can accept that this is a broad concept that is difficult to define but is incredibly important, which is why we tabled the amendment. I am grateful to my hon. Friend for his extensive remarks on the amendment. As he said, those remarks were made at the expense of some additional remarks I know he intended to make about the onus in respect of whistleblowers. 

The Minister’s response does not satisfy the points raised by the ad hoc Committee, the Audit Commission and others. In particular, I was hoping to get clarification about how the regulations on the role of the Comptroller and Auditor General will be amended to bring them into line with the Bill. I was also hoping for detail about some stronger relationship between the role of the local ombudsman and that of the Comptroller and Auditor General, or indeed the Cabinet Office on the data-matching initiative. I had hoped the Minister might consider some kind of trigger. He gave no indication of that in his remarks but I am ever hopeful. 

The Government have made some significant concessions on other areas of the Bill, so I will withdraw the amendment in the hope that the Minister and his officials will go away and reflect on the points we have made. I also say to him that although he may not accept our point about the Comptroller and Auditor General, our point about social care seems to me entirely in line with what he himself has sought to do in the Bill. 

Brandon Lewis:  I will simply restate my closing remarks, which may give some further comfort to the hon. Gentleman. I believe that the schedule provides sufficient reasons for which auditors can disclose information, but I accept that it is extremely technical, and so we will take another look at it to ensure that that is the case. 

Andy Sawford:  I am grateful to the Minister for that. I hope that he will look at all our points on schedule 11 and, for example, that he will see that proposed sub-sub-paragraph (n) is not controversial and is consistent with the rest of the paragraph, so that he will at least accept that one. We would be particularly grateful, in terms of the emphasis of further consideration by the Minister, for inclusion of proposed sub-sub-paragraph (l), on the Comptroller and Auditor General. The other points that we were making are technical—we were being helpful to the Government—but that matter is more a matter of policy, on how to ensure that whistleblowing can be conducted effectively. I appreciate the Minister’s response, however, and I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Schedule 11 agreed to. 

Clause 36 ordered to stand part of the Bill. 

Clause 37 

Duty of smaller authorities to publish information 

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

Andy Sawford:  Has there been consultation with the National Association of Local Councils and other bodies on the duty of smaller authorities to publish information? As ever in the course of the Bill—a point entirely understood by the Minister in debate on earlier clauses—we want to ensure that the measures in it are proportionate. I would therefore welcome a brief assurance from the Minister that the clause is proportionate and that there has been consultation with the sector. 

Brandon Lewis:  Yes, we have been in discussion with the association and we continue to meet regularly. Also, the measure is proportionate, so I hope that the hon. Gentleman is content with that, although I am happy to let him have some further information if that is helpful. 

Question put and agreed to. 

Clause 37 accordingly ordered to stand part of the Bill. 

Clause 38 

Code of practice on local authority publicity 

Andy Sawford:  I beg to move amendment 146, in clause 38, page 24, line 4, leave out ‘one or more specified local authorities’ and insert ‘a local authority’. 

The Chair:  With this it will be convenient to discuss the following: 

Amendment 147, in clause 38, page 24, line 15, leave out sub-paragraph (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 and sent 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 148, in clause 38, page 24, leave out from line 37 to line 21 on page 25. 

Andy Sawford:  We had hoped to have dealt with this clause this morning, in the interests of making progress on the Bill, but it will not surprise you, Sir Edward, or the Minister, that we intend to raise some very serious issues about it and to make it the subject of some debate. We have tabled three amendments. We hope that the Minister understands and supports the purpose behind them and that he sees that we are trying to be helpful, not only to the Government by ensuring that they do not make bad legislation, but to the public, who are not well served by the clause, and to local authorities around the country. I anticipate that there will not be a clause stand part debate, given the three amendments on different points, so I will speak broadly to the clause, as well as specifically to the amendments. 

The clause is not only unnecessary, but more than that; it is undemocratic. We support the publicity code, which indeed was in place under a Labour Government. It is a helpful safeguard and a piece of guidance for the public on how local authorities communicate with the public. It put in place general principles for how such publicity should be in the interests of the public; for communicating information to the general public; and for the local authority to engage locally in a way that enhances democracy, ensures that local people are aware of the services provided by the council, and engages people in local public debate such as consultations and so on. 

There is no evidence that the code is being widely breached. Indeed, Ministers have been pressed on that point. In the other place, Baroness Hanham said: 

“I shall not say which local authorities we already know are breaching the code. I have them. I could do it, but I think it is probably not helpful. I hope noble Lords will accept my assurance that at least a dozen are breaching…at the moment.”—[Official Report, House of Lords, 15 July 2013; Vol. 747, c. 604.] 

She goes on to say how she believes those local authorities are breaching the code. 

11 am 

It is extraordinary to have a significant piece of legislation that Members, including some from the governing parties, described on Second Reading in the Commons as a sledgehammer to crack a nut. It is extraordinary to have the Government proposing something as draconian, undemocratic and sweeping as clause 38 without feeling the need to provide any evidence of why it is necessary—indeed, they have denied us that evidence. The Government have said, “I have them. I could do it, but I think it is probably not helpful.” Not helpful to whom? Not helpful to the public in understanding the real purpose behind clause 38? Or, as I suspect, not helpful for the Government? 

The truth is that there is not really any evidence. The Government have very little evidence of how the code is being substantially breached. There are one or two examples. We have accepted that there is a particular local authority publication that could reasonably be said, on first reading, to breach the code. We have sought to understand how the Government have taken action in relation to that breach of the code. I have tabled parliamentary questions, to which I have yet to receive a reply. I have asked the Secretary of State for Communities and Local Government what communication he has had with the London borough of Tower Hamlets about its observance of the local authority publicity

code. I have asked the Secretary of State how many local authorities he and his Ministers have written to regarding their observance of the local authority publicity code. I asked those questions in October and have yet to receive a reply. 

Perhaps the Government have the examples. Perhaps they could do it—that is, reply to me—but think it is probably not helpful, in the spirit of Baroness Hanham. I greatly regret that they have not provided them to me. I wonder whether the noble Baroness Hanham has a little list. I wonder whether the Minister has a little list somewhere and would care to share it with us so that we can get some insight into the basis on which the Government think it is appropriate to take this incredibly sweeping power. 

Clause 38 was not included in the Bill when the draft Local Audit Bill Committee sat, thereby denying this part of the Bill the necessary scrutiny. Such matters are ultimately for the Public Bill Office to consider in consultation with the Government, but we would question why it is appropriate to introduce such a clause at a late stage to a Bill that is otherwise about local public audit. We suspect that it is because the Government have motives that are not wholesome and not democratic, and that in seeking to do this they are trying to push these powers through without proper scrutiny and without providing proper evidence. 

Through the clause, the Secretary of State is granting himself editorial authority over council publications. There is an extraordinary line that just leapt off the page when I was reading the Bill. It says: 

“The Secretary of State may give a direction to an authority whether or not the Secretary of State thinks that the authority is complying with the code to which it relates.” 

Whether or not. That is a sweeping power to act as publicity chief for local councils around the country, editor in chief of their publications, and censor in chief of what our elected local councils can do and say by way of communicating with their local public. 

Amendment 146 would change new subsection (1) so that the Secretary of State would be able to direct “a local authority”, rather than 

“one or more specified local authorities”. 

If the clause must remain part of the Bill—of course, we do not support it in total—and in order to make our amendments selectable by your good self, Sir Edward, we have sought to table amendments that begin to bring some proportion to the powers by limiting them to a local authority. 

Amendment 148 would delete this astonishing new subsection, which allows the Secretary of State to take powers whether or not he thinks a council is complying with the code. The Secretary of State wants the power to give a direction to a council, even where he does not think it is not complying with the code. On what basis is that a reasonable power for the Secretary of State to take? Would that pass any sensible test of local public opinion? Do any Government Members, who will no doubt vote through the clause and the extraordinary subsection within it without giving it any scrutiny, really think that their local public would think it appropriate for the Secretary of State to say, even if he has no evidence that there is a breach of the code—in fact, even if he knows that the council is not breaching the code—that he can act as their editor and censor-in-chief? It is absolutely mystifying. 

Under the Bill, the Secretary of State will not even have to answer to himself for his own thoughts or actions. That is extraordinary and is worrying in relation to all the other Henry VIII powers that the Secretary of State has taken in the Bill. That is why Opposition Members are so concerned. At times, Government Members have implored us to believe in the benign and good intentions of the Government in introducing these measures, which, they argue, are intended to be helpful, but this particular power for the Secretary of State is clearly not benign and is not based on good intentions. 

Amendment 148 would delete all of new section 4B of the Local Government Act 1986, which allows for proactive meddling by the Secretary of State. The new section goes beyond action on an individual local authority, whether or not the Secretary of State thinks they have taken action; it gives him the power to just sit there at night, dreaming up ways to tell councils that they can or cannot communicate with the public, including the language that they might use and the issues on which they might comment. New section 4B is Putinesque in its effect. Given the debate on Second Reading and the comments of Baroness Hanham, it also seems to be Putinesque in its intention, which is the most worrying thing of all. 

Either the Secretary of State wants everyone to stick to the code, in which case he could have chosen a different wording that required compliance with the code—the issue is that the code might not be challengeable by judicial review, given its wording, and therefore the Government want to bring force to it—or he wants to be selective. We want to know what purpose new section 4B serves. 

A consultation called “Protecting the independent press from unfair competition” was published in April 2013. We understand that some of the motivation behind the clause is about local authority newspapers competing unfairly with local papers. We all value our local papers, where we have them. That is a crucial point for my area, because the Corby Telegraph is an absolutely brilliant local paper, which does not see any threat from the local authority publication—I have spoken to it about that—and serves a vital local purpose in communicating with the public, but my public in the other four towns I represent are not served at all by a local paper, so hugely value their local authority publication. I look forward to acquainting the Minister a little with the role that the Nene Valley News plays in our local life. There is no strong evidence that local authority papers are competing with local newspapers. 

As my hon. Friend the Member for Sheffield Central said earlier, the Secretary of State made this ruling two days after the close of the Government’s consultation. I have taken the precaution of looking at that consultation and it is in no way definitive. I cannot see how the Secretary of State concluded within two days that it was. In fact, there is a complex relationship between local independent newspapers and local authority publications. In some areas, the local newspapers are complemented by the local authority publications. Clearly, local authorities are well supported by statutory notices, which is a separate issue that I will turn to later. 

Following the Government’s response to the consultation, Sir Merrick Cockell said 

“This announcement confirms what councils feared all along: the consultation on whether the Publicity Code should be made law was flawed both in its central premise and how it was carried out.” 

I hope that Government Members want to listen to Sir Merrick. He is a Conservative member of the LGA, but he is also its chair and therefore widely respected and speaks for the whole of local government. He continued: 

“Councils have very strong views on these issues which could have a profound impact on how they communicate with and represent their residents, yet they weren’t given the opportunity to fully consider the proposals and have their say.” 

He is absolutely right. The consultation was rushed through, which is consistent with the extraordinary remarks of Baroness Hanham and with the clause being introduced after pre-legislative scrutiny. The clause’s effect is wholly undemocratic, as is the basis on which the Government argue that they have for bringing the clause forward. 

The Local Government Association estimates that 79% of council publications reach 90% or more of their local population, whereas just 1% of local newspapers reach 90% or more of a council’s residents. It would be interesting to know which local newspapers make up that 1% and have such widespread coverage, but local newspapers are struggling in my area. I regret that and try my best to support them, but the readership of local newspapers is declining rapidly all around the country, not least because of competition from online media and the other ways that people choose to access information nowadays. Many sources of local news are now available, in particular through the internet, and many people get their local news through Facebook or Twitter. Local newspapers have tried to embrace that and to share their content through those mediums, but they face new and incredibly powerful competitors for what are called “eyeballs”. Those who look at local newspapers are, or so I am told, called eyeballs in the trade. Those eyeballs are sadly increasingly moving away from our much-valued local papers to other sources of news. That is, however, nothing to do with local council publications. 

I am aware of one example only of a council publication containing substantial advertising and substantial editorial content that we might otherwise expect to see in a local paper. Where local council publications are competing unfairly, I would have expected to see the Government take some action. It is a failure by the Government, given how important they tell us the matter is, not to act on the one case where there is an issue and to investigate it. The Labour members of that local authority, which was Tower Hamlets, are certainly concerned, because they raised it with my right hon. Friend the Member for Leeds Central (Hilary Benn). 

Organisations such as the National Union of Journalists have raised serious concerns about the Bill and I want to turn to outside interests, but I first wonder whether the Minister might be more thoughtful in response to his noble Friends. Lord Tope 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.] 

Baroness Eaton, who is a former leader of Bradford city council and with whom I have had the pleasure of working in a previous life, is a much-respected figure in local government. She is also a member of the Conservative party and is not afraid to speak truth to power and said: 

“It is therefore regrettable that many of 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 a local level.” 

She went on to say: 

“This clause is unnecessary as there is no evidence that council publications are competing unfairly with local newspapers and, by the Government’s own admission, very few councils are breaking the existing recommendations.”—[Official Report, House of Lords, 22 May 2013; Vol. 745, cs. 902 and 903.] 

It was in response to that that we heard about Baroness Hanham’s little list. Lord Palmer of Childs Hill, a Liberal Democrat Member who sits on the Government Benches, said: 

“Putting it on a statutory basis, as framed, is unnecessary and heavy-handed.”—[Official Report, House of Lords, 22 May 2013; Vol. 745, c. 908.] 

Lord Palmer was quoted by the hon. Member for Mid Dorset and North Poole (Annette Brooke) on Second Reading when she described the proposal as an extraordinary overreach by the Government and unnecessary. 

11.15 am 

Three years ago the Audit Commission conducted an investigation, and produced a report on local authority publications. That made it clear that local authority publications do not represent unfair competition. It found that the money spent by councils was not unreasonable, and that few council publications were published sufficiently frequently to be viable media for most local advertising. 

That is an important point about the character of those local publications. Obviously, we would all want action in cases where there is evidence of a breach of the code under the Local Government Act 1986. What action is taken in such cases? 

I hope that the Minister knows that the LGA has published a briefing. It is a very unusual step for that cross-party association to go as far as supporting an Opposition amendment, as it would normally fight shy of engaging in a way that might be perceived as political. 

It is a measure of the importance accorded to the matter by the Conservative-led LGA, which has a majority drawn from the Minister’s party, that it has said that should the Government be unwilling to remove the clause it would support the amendments that I and my hon. Friend the Member for City of Durham have tabled—amendments 146, 147 and 148. It has said: 

“The clause gives the Secretary of State the power to direct a local authority regardless of whether that authority is complying with the code to which these powers relate. The powers are too wide ranging and do not allow councils any local discretion about how to engage with their residents.” 

It also comments: 

“This is unnecessary and could allow a Secretary of State to interfere with the work of an elected council”. 

I hope that the Minister has had the opportunity to look at the briefing, which adds: 

“Amendments 146, 147 and 148 more closely define these powers.” 

I know from my conversations with LGA representatives that it will particularly welcome our emphasis on a process that would ensure that evidence would be

considered. We wanted a requirement—a simple test—so that whenever there is evidence it is investigated and the local authority has the opportunity to respond. 

Given the degree of subjectivity in the way the Secretary of State can apply the provision, there should be evidence that before making any determination he has asked the local authority to clarify why it conducts its publicity work as it does. That would give a measure of reassurance and would make the clause, if the Government want to press it, more democratic. 

The National Association of Local Councils also has a Conservative majority, although it rarely acts in a political way as a body. It is a consensual cross-party organisation, but I gently remind the Minister that while my friends are involved in it, so are his. The association states: 

“We do not support measures in Clause 38 to enshrine the publicity code in law”. 

It is concerned that 

“there is no evidence parish and town council publications are competing unfairly with local newspapers…the existing code provides for action to be taken against a parish or town council if there is evidence they have breached the code and to our knowledge there have been no breaches or any action taken”— 

which is consistent with our understanding of the Government’s track record to date, and their failure to answer my parliamentary questions, which were tabled in October. 

The association says—and its language is quite surprising—that 

“giving more powers to the Secretary of State is anti-localist, flies in the face of localism and is a threat to local democratic accountability”. 

I cannot remember a time when I have heard the good folk at NALC expressing themselves in a way that shows they feel so strongly. 

NALC also says: 

“we do not support the Secretary of State having further powers to determine the frequency or require compliance”. 

It adds—I am sorry but I cannot oblige the association on this point: 

“we do not support Parliamentary time being taken up putting the existing code into legislation”. 

We intend to use some parliamentary time today, but hope that NALC will support our purpose in doing so. It argues that there are many other ways in which the Government could support the work of local councils, rather than undermining it, as the clause does. 

I hope that the Committee will forgive me for being parochial, but I have a particular local interest in the effect of the Bill. The Nene Valley News—I know the Minister will be disappointed, but I cannot lay my hands on the copy I brought for him—is an important publication in my area. It is delivered fortnightly to more than 37,000 homes and businesses. Sir Edward, I have a copy if you are interested in reading of local matters in east Northamptonshire. 

The Chair:  It will become my bedtime reading. 

Andy Sawford:  It says, 

“We produce Nene Valley News as a public service to local residents. Our reporting aims to be fair and accurate, and we welcome articles from residents about community activities taking place around the district.” 

I have received many representations from residents in the smaller towns and villages across east Northamptonshire for whom Nene Valley News is a

communications lifeline. Some residents of those villages feel so strongly about this matter, it could be a defining issue at the next election. My Conservative opponent at that election will be looking for support in some of those beautiful, affluent villages and may find the door closing on him, due to disgust at the Government’s decision to remove this vital local communications tool. We should not underestimate how strongly people feel. 

The leader of East Northamptonshire district council, with whom I have spoken about this matter, is deeply concerned and opposed to the Government. If the Minister is unsure of the political balance or concerned that the council’s view may be influenced by members of my party, he should know that there are sadly only two Labour councillors on the whole of East Northamptonshire district council. It is bastion of shire Conservatism. The council’s policy and resources committee said, 

“The Committee notes the implications and expresses regret that it will be necessary to stop production of Nene Valley News, which was regarded as an effective way of engaging with the community.” 

That was a gentle way to minute a lively discussion. I have spoken to many councillors about that. 

I have also brought other publications, in case hon. Members are interested in knowing how these local publications appear around the country. They may be familiar with their own, but they can look at the samples I have here. They contain information on local facilities. They promote local voluntary and charitable organisations and their activities in a helpful way. They provide information on local planning issues, matters where the public are rightly interested in the work of the local authority. Of course, it is right that we should try to make the public as aware as possible. 

There is no overlap between these publications and the local newspapers because they simply do not cover the same area. The concern of local residents is that no other publications will look to cover the same areas, because it will not be viable for them to produce the content that would be sufficiently local and relevant to more dispersed smaller towns and villages, to employ reporters to gather the news, or sell and distribute any new local paper in the area. They are left with nothing. 

Local resident Michael Leeding said that Nene Valley News is an excellent way for the council to communicate with the community and that tradesmen in the area would suffer from its closure. He believed other forms of publishing the news would not hit such a wide audience. He said, 

“I believe there is no element of competition between the local press and the Nene Valley News. They are complementary to each other, not competitive. It informs us about what is going on in the area, the availability of local facilities, local planning details, local tradesmen, plus much, much more. I believe that as well as being a great source of information it must help local organisations and tradesmen develop.” 

Jacky Bright has recently moved back to the area and has found that Nene Valley News helped her to keep up with what is going on in the local area. She also sometimes takes The Northamptonshire Telegraph but finds very little overlap between the publications. She said, 

“Stopping Nene Valley News will leave our area the poorer. I am astonished that a Government that seems to want to have so many decisions made at local level—often when it is inappropriate”. 

I do not know what she means by that and I may not agree with her on the point. However, she continued, 

“should be passing legislation at a national level to deal with such a local issue.” 

That is the point. The public do not understand it. They have heard what we believe is the Government’s empty rhetoric about localism and see this as entirely inconsistent with it. 

Derrick Sims, whom I believe is a Conservative member of the authority, but I will double-check, said, 

“It does seem strange that a Government that espouses the merits of local government should remove its main means of communication with its people. I have used Nene Valley News to advertise support sessions at the local library as well as church fundraising activities. There is no other publication in the area that can replace Nene Valley News. I implore you to reconsider this decision as it will certainly have a negative effect on local communities.” 

The Chair:  Order. I am afraid I must bring the rhetoric to a temporary close. I apologise. 

11.25 am 

The Chair adjourned the Committee without Question put (Standing Order No. 88).  

Adjourned till this day at Two o’clock.