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Annual Balance Sheet, Etc

Volume 987: debated on Thursday 3 July 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

'(1) Every local authority who in any financial year undertake construction or maintenance work, whether under works contracts or by way of functional work or both, and every development body who in any financial year undertake construction or maintenance work by way of functional work, shall prepare the documents mentioned in subsection (2) below not later than 30th September in the financial year following that year.

(2) The documents are—

  • (a) a balance sheet;
  • (b) a revenue account;
  • (c) a statement of rate of return.
  • (3) The balance sheet must show a true and fair view of the state of affairs of the local authority or development body, at the end of the financial year to which it relates, in respect of each description of construction or maintenance work undertaken by them in that year.

    (4) The revenue account must show a true and fair view of the financial result of the local authority or development body having undertaken, in the financial year to which it relates, each description of construction or maintenance work to which it relates.

    (5) The statement of rate of return must give such information as is necessary to show

    whether, in respect of the financial year to which it relates, the local authority or development body have complied with section 12(1) below.'.—[ Mr. Fox.]

    Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    This new clause is needed to replace the present clause 9(1), which is defective, and which was rightly criticised in Committee as being insufficiently specific. The new clause makes it clear that authorities that run direct labour organisations will, like the private commercial firms with which they will be in competition, have to produce annual balance sheets and annual accounts which show

    "a true and fair view"
    of their trading situation and financial results.

    The notion of a true and fair view of their performance is a new one to most local authorities, but it is a familiar requirement in the Companies Acts in the private sector and it is familiar in the public sector to managers of nationalised industries and new town development corporations. Now that we are setting up direct labour organisations with separate trading accounts it seems only sensible that, so far as possible, those accounts should be kept on bases that make easy comparison with private contractors.

    This new requirement is, of course, restricted to the DLO accounts. It does not imply a wholesale change in the conventions under which the generality of local authority accounts are kept, and it does not imply any change in the role of the local government auditor. It simply means that DLOs—operating, we hope, in a businesslike and commercial way and in a competitive and commercial environment—will keep their accounts in a commercial fashion which enables their performance readily to be judged.

    The two Government amendments are related to the new clause. The first is a paving amendment to remove clause 9(1), which the clause replaces. The second is consequential, to include the clause in the list of the accounting clauses in this part of the Bill which are not to be allowed to prejudice the general provisions of the local government Acts under which the local authority accounts are regulated.

    We welcome the fact that the Government have tidied up the language. There was very reasonable criticism in Committee of the type of language used with regard to direct works organisations. It was unclear. The proposed language is clearer than the original wording, and for that we are very grateful. We have no intention, therefore, of opposing the clause.

    There is one thing that I should like the Minister to explain very briefly to the House. Subsection (4) of new clause 1 contains the words
    "each description of construction or maintenance work to which it relates."
    We are much opposed to the fact that certain clauses in the Bill cover such things as gritting, snow clearing and maintenance work. How detailed do the Government expect the annual balance sheet to be? A good deal of local government manpower could be involved in making an annual statement dealing with each individual item of snow clearance, or whatever it might be. Surely a blanket item could be put in relating, for example, to snow clearance for the whole year.

    I am sure that the Government will welcome the fact that I am seeking to ensure that local government manpower should not be employed needlessly in giving too detailed descriptions of the sort of work that has taken place.

    I have to express some misgivings about the new clause and the thinking behind it. I had a meeting last weekend with some of my county councillors from Avon county council, and with district councillors from Wansdyke district council and Woodspring district council.

    They raised the matter of the new clause and their misgivings about the Government's policy for the control of direct labour organisations generally. In essence, they were saying that they were loyal supporters of the Government, that they were doing their best to carry out Government policy, that they were cutting local authority expenditure, that they were economising on staff, that they were doing their utmost to keep down their rates, but that they had strong feelings that the Government's policy in the new clause—and in the Bill as a whole—involved loyal local authorities getting the stick, as it were, along with other local authorities which were deliberately trying to defy the Government and to wreck their policies.

    They feel that the new clause and other clauses in the Bill involve new controls and regulations being imposed on local authorities, and that the Government are using a blunt instrument rather than a sharper weapon against the few who are deliberately trying to undermine Government policy. I do not go all the way with this view, but these feelings are strongly held and they are sapping the morale of Conservative-controlled councils which are doing their untmost to be loyal to the policies of the Government. The Government should take these feelings extremely seriously.

    I accept that public expenditure has to be controlled and that local authority expenditure is a very large part of it. I also accept that the Government have gone some way in the new clause—and others that will be discussed later—to meet the misgivings expressed by the local authority associations. But it seems to me that the arguments put forward in particular by the Association of District Councils—of which I am one of the vice-presidents—have not been adequately dealt with so far by my hon. Friend.

    I hope that my hon. Friend will be able to deal with some of these points, and in particular with the point that is being made that the new tendering arrangements will mean substantial changes in the accountancy methods that local authorities will have to employ, and that this will mean additional staff having to be employed.

    I believe that these are arguments of substance that the Government have not so far entirely met. I hope that my hon. Friend will be able to reassure me and the House on these and similar matters.

    4.15 pm

    I must tell my hon. Friend the Member for Somerset, North (Mr. Dean) that we have had a continuing dialogue with all the local authority associations. We found it impossible to answer to their satisfaction certain questions about the Bill, but as the Bill progresses I hope that my hon. Friend will realise that in all we are seeking to do we are trying to be fair and reasonable.

    I shall restrict my remarks to the new clause. The other matters, such as tendering, will be covered in later amendments. If the hon. Gentleman's own local authority is as efficient as he has indicated, I can only suggest that what we are proposing here will not make any difference to it. I cannot believe that any hon. Member would oppose having sensible accounting procedures as the norm.

    I thank the right hon. Member for Widnes (Mr. Oakes) for his kind remarks about the changes that have been introduced in the new clause. We are at this moment talking to the Chartered Institute of Public Finance and Accountancy in order to achieve exactly what he wants—the simplest possible system of accounting. I give him that assurance.

    Question put and agreed to.

    Clause read a Second time, and added to the Bill.