Consideration of Bill, as amended in the Public Bill Committee
New Clause 1
‘(1) Before section 1 of this Act is brought into force, the Secretary of State shall, by regulations, put into effect arrangements for integrated audit which enables auditors to work across authorities and with the National Audit Office, where national and local funding is being used jointly.’.—(Andy Sawford.)
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 2—Transparency of audit—
‘(1) A local auditor has a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year.
(2) Local auditors only have a right of access to audit documents from private companies, under subsection (1), that relate to the service provided to the local authority by that company.
(3) A local auditor must make available on request any audit documents, obtained under subsection (1), subject to the provisions of the Freedom of Information Act 2000.
(4) In this section “private company” shall be interpreted to mean any legal entity, including joint ventures, not-for-profit organisations, mutually-held organisations and charities.
(5) Five years after the coming into force of this section, the Secretary of State must commission and publish a review of the effectiveness of subsections (1) to (3) and of the costs to local auditors, private companies and local authorities arising from it.
(6) The meaning of “significant” and “terms of qualification” shall be set out by regulations.’.
New clause 4—Scrutiny—
‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report on the effectiveness, efficiency and economy of the structures and procedures put in place by relevant local authorities, under section 21 of the Local Government Act 2000 (Overview and scrutiny committees), to review the decisions made, or other action taken, by the executives of such local authorities.’.
New clause 5—Fraud investigation—
‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report on the adequacy of the resources, staffing, structures and procedures put in place by authorities to detect and investigate fraud within the authority effectively.’.
New clause 6—Compromise agreements—
‘Before section 1 of this Act is brought into force, the Secretary of State shall prepare and lay before each House of Parliament a report into the extent and appropriateness of the use of compromise agreements, incorporating confidentiality clauses, as provided for by section 203 of the Employment Rights Act 1996, to effect the exit of members of staff from employment by local authorities.’.
Government amendment 1.
Amendment 13, in clause 20, page 15, line 24, at end insert—
‘(7) A person providing commercial or consultancy services to an authority may not audit those services.
(8) The audit of any commercial or consultancy services provided by a person appointed as a local auditor must be subcontracted to a different local auditor.’.
Government amendments 2 and 3.
Amendment 12, in schedule 2, page 43, line 8, at end insert—
30 A Local Enterprise Partnership.’.
Government amendments 4 and 5.
I shall speak to new clauses 1 and 2.
This is a better Bill for the scrutiny that it has received as a result of the work of the draft Bill Committee, the Communities and Local Government Committee and the House of Lords, and in Committee in this House, where I was pleased to receive substantial reassurances from the Minister, clarifications and explanations on many points. Some welcome concessions have been made, both during the Committee stage and in some of the amendments before us today.
Three years ago in a press release the Government announced the abolition of the Audit Commission, without thinking it through. There has been considerable criticism of the fact that there was no real consultation with local government, and when the announcement was made prematurely, the audit world was not consulted on how the new arrangements might evolve. That has led to a range of problems in the Bill. It is very much a backward-looking piece of legislation that seeks to post-rationalise a premature announcement that took most people by surprise.
The Audit Commission was abolished without proper consideration of how to maintain some of its more valuable functions, such as enabling local authorities to make comparisons and to use benchmarking tools to see whether they are spending the public pound as well as possible, and acting as an independent auditor, to bring transparency and public confidence to public audit. The Government had not thought through crucial issues such as how to maintain independence of audit, which we will come to later, without amendments to increase transparency, particularly new clause 2.
The Government had overestimated and double-counted the savings that may accrue. They had failed properly to address concerns that the audit market for local government is too limited. However, there is a bright spot. The Government’s reluctant U-turn on joint procurement is very much to be welcomed. It follows submissions from my noble Friends in the House of Lords and from the Local Government Association, the National Association of Local Councils and many other bodies. We tabled amendments in Committee to allow local authorities to form a joint procurement body, and we were pleased when, towards the end of the Committee stage, the Government introduced, albeit through gritted teeth, a new clause to do just that. The Government have not been clear about who will lead the development of that joint procurement body, but I urge them to work closely with the Local Government Association, the principal representative body for local government.
New clause 1 seeks to enable auditors to follow the public pound through the system. It would require the Secretary of State to make arrangements for integrated audit so that auditors can work across local authorities, and other relevant authorities at a local level, and with the National Audit Office where national and local funding is being used jointly. The problem that the new clause aims to solve is that the audit arrangements set out in the Bill are too narrowly focused on the relevant authority as a self-contained unit.
The Government have therefore failed to provide for the changing world of public services. Shared services, community budgets, which both they and the Opposition strongly support and which local authorities across the country—notably, many Labour councils—are taking forward, and combined authorities are all part of a shift towards much stronger partnership working by local authorities. There is also a specific point about local enterprise partnerships that I will come to later.
The previous Labour Government introduced the Total Place initiative in their last years in office. By enabling authorities to join together for some parts of their audit, we hope that we can see the value for money of the Total Place approach and that that will be a spur to further joining up. By bringing the National Audit Office into that approach to integrated joint audit, we can follow the public pound up and down the system for local and national spend.
The new clause is about future-proofing the Bill. In Committee the Government resisted all attempts to reference integrated audit or community budgeting approaches. In that sense, I think that the Bill will lead to an atomised approach to auditing, rather than a connected view. It has completely failed to make provision for the new world of public service delivery being built before our eyes, and not just the changes in local authorities that I have identified, but wider changes such as the troubled families programme and welfare changes, particularly the introduction of universal credit. They are all looking at connecting spending across the country. It is astonishing that the world of audit envisaged by the Bill takes no account of that at all.
We now have city deals, which should be properly audited. Indeed, we explored in Committee how they and other bodies, particularly those focused on enterprise partnerships and working with business, might be audited when it is not possible to bring together different auditors. As community budgets develop, different auditors will examine the use of the local government pound while the National Audit Office examines the use of the Whitehall pound, although they are actually being spent together. If a service is shared and common, surely it makes sense that the audit should be, too.
Another example is health and social care—the subject of the legislation we debated only yesterday. We need to see the future of the health service as one in which we meet the challenges of a rising elderly population, with people living longer and more independently. Local authorities, through their social care role, and health bodies will work jointly. Indeed, there are significant moves in that direction through local health and wellbeing boards. It would make sense for audit to be able to follow that pattern of more joint services.
Parliament has a strong interest in seeing that public money is spent well, whether nationally or locally. That was the drive behind Lord Heseltine’s introduction of the Audit Commission all those years ago. Parliament previously drew some assurance from the Audit Commission’s national work on value for money, but that work is winding down and the value for money assurances offered in the Bill are very limited. Indeed, we sought clarification on those points in Committee, and we had some reassurances from the Minister, but they were not sufficient for us to believe that that work will be carried out in the way it ought to be.
That point becomes increasingly relevant as Government policy cuts across departmental silos as fresh patterns of local delivery develop and local authorities commission services from, and develop partnerships with, an ever wider range of providers. The ad hoc Bill Committee that scrutinised the draft Local Audit Bill was absolutely right to state that the Bill should provide an unambiguous basis for insight into spend across central and local government, but as it stands it does not. Would it not be sensible—I ask this again in the hope that the Minister will change his mind at the eleventh hour—in the management of audit contracts if two authorities working together substantially and significantly could appoint a lead audit for a particular set of services, rather than having two separate auditors crawling over the same books and duplicating how they look at the same services, perhaps even reaching different conclusions?
We would rather have auditors work together to reach a shared view on whether services represent value for money and whether public money is being spent effectively, so an audit presented to a relevant authority might contain sections that had been prepared jointly and appropriately with other auditors of local spend, perhaps those from other relevant authorities or the National Audit Office. That audit would then be much more valuable, and not only to the council, but to the public and Parliament, in showing whether money was being spent well. For example, in my area there is an arrangement for shared services between Northamptonshire and Cambridgeshire county councils. There are questions about whether that genuinely delivers value for money. I am concerned that an audit in which they are each treated entirely separately and reported on separately will not give us a real sense of whether the partnership is delivering the value for money that I and my constituents want to see.
I therefore appeal to the Minister to have a change of heart. He is a former council leader. He might well return to local government after the next election or at some future time, when I am sure he would be very grateful that the Government had created audit arrangements fit for the new world of local government, not the old one.
This might be the most appropriate time to refer to amendment 12, which seeks to add local enterprise partnerships to the list of relevant authorities set out in schedule 2. LEPs have a growing role in the local public sector and partnership landscape. They are charged with driving local economic growth. From next year their role will increase, as they will be tasked with developing investment strategies for European structural funds; looking after skills for employment; leading on community-led local development; taking on board economic and social inclusion; looking at environment and climate change issues in local communities; taking forward social innovation, ICT and digital inclusion; and tackling youth unemployment. Indeed, the Government seem to view LEPs as a panacea for how many areas of local public service reform, enterprise and regeneration will be taken forward.
However, since the establishment of LEPs three years ago, and particularly following the publication of Lord Heseltine’s report “No Stone Unturned”, while their remit has expanded dramatically and the roles and responsibilities of their boards have changed, there has not been a commensurate consideration by the Government of how to address the governance, capacity, audit and probity of LEPs.
From next year, LEPs will receive central Government money, including a share of the £6 billion from the European regional development fund, a share of the £24 million growth money from the Department for Business, Innovation and Skills, a share of the £2 billion from the 2015 Treasury allocation for which LEPs can bid, and a share of the £400 million top-slicing of the new homes bonus, which is very controversial with local authorities, which are concerned about the implications of that top-slicing. As LEPs take responsibility for funding streams from several Departments and agencies, it is clear that there will be no effective audit trail to account for how the money will be spent. The truth is that LEPs are not really accountable to anyone.
In Committee my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) asked the Minister to set out how he envisages LEPs being audited in future. Given that they are responsible for such significant amounts of public money, and given the pace of change in LEPs across the country, the Minister’s response was simply inadequate. He could make a simple amendment to schedule 2 that would allow us to treat LEPs as a relevant local authority so that not only can we look at the local spend, but we can consider how the national spend will be accounted for as it goes into those LEPs in a way that does not mean having to look at the separate audits of a whole range of different Departments and agencies. If the Minister is not minded to accept our amendment to schedule 2, that could be addressed by simply accepting new clause 1, which would allow integrated audit, because LEPs are precisely the kind of area where integrated audit is much needed. Whether he chooses to accept new clause 1 or the amendment to allow a change to schedule 2—we hope he will accept one of them—we hope that we see a significant change in the confidence that we and the public have in how LEPs work.
LEPs are a mixture of the public and private sectors, so they are a different kind of organisation. Many public sector bodies are involved in them. For example, there are two LEPs operating across the area I represent, with different types of authorities in a two-tier area, so they are quite complex. Just saying, as the Minister did in Committee, that auditing the money for which LEPs are responsible will be done by that disparate set of audits by component bodies is just not good enough. I strongly urge him to rethink that.
I appreciate the general points that the hon. Gentleman is making, but does he agree that the democratic accountability of LEPs needs to be considered at some stage, because in many cases we have one-party representation on the political side?
The hon. Lady makes an interesting and important point. I should perhaps declare an interest as an officer of the all-party group on local growth, local enterprise partnerships and enterprise zones. I think the Minister can also claim to have held that auspicious role in the past. The group has been concerned about how we can make sure that LEPs are as effective as possible, principally in regenerating areas and communities and ensuring local growth, but also as regards democracy. LEPs must be accountable to communities, particularly given that they have mixed boards taken from the public and private sectors. In my area—I am not sure about the hon. Lady’s—there are two different types of authorities, and district councils around the country, in particular, have been very concerned about whether they have a powerful enough voice in the governance of LEPs.
The hon. Lady mentioned political representation on LEPs and their political leanings. A modest change to this Bill would address some of the issues about how LEPs are growing and developing to suggest that they should be audited in an integrated and proper way. That could enable elected local councillors to ask questions of and examine the performance of their LEP so as to enhance the local accountability and democracy that she and I want to see around the country in relation to the growing role of LEPs.
New clause 2 is about transparency. The independence and transparency of audit is not sufficiently safeguarded by the Bill. We recognise that the Bill has been improved during its passage through Parliament, and that the Government have sought to put in place ways to ensure an element of independence—for example, of local auditors. We had substantial discussion about how we would ensure the independence of members of the audit panels that recommend the appointment of auditors. However, there are significant issues in relation to how local authorities are finding new ways of working, particularly with private sector companies and other suppliers. We want to bring greater transparency to the relationship between local authorities and the private contractors to whom, increasingly, large amounts of public services are being contracted out.
The new clause is partly inspired by the strong points made by my hon. Friend the Member for Hayes and Harlington (John McDonnell) on Second Reading, when he encouraged us to look at the work of Transparency International. I assure him that I read its report on corruption, as did my hon. Friend the Member for Derby North (Chris Williamson), and used it to raise some important questions in Committee. Indeed, the Minister met representatives of Transparency International, so interested had he become in the strength of its recommendations and the issues that it was throwing up. Transparency International says:
“Private companies, when operating services in the public interest, should be required to comply with the Freedom of Information Act with regard to those services. Specifically, audit reports from local authorities should be covered under the Freedom of Information Act or published directly as public documents.”
Our new clause draws on amendments that have been tabled at every stage in the Lords and in Committee. I pay tribute to the work of Lord Wills in this regard. At each stage, the Government have warmed a little more to the arguments that have been made. The Liberal Democrats have been encouraging, too. Lord Tope and Lord Wallace of Saltaire spoke in the Lords in favour of greater transparency. Lord Tope said:
“My Lords, Liberal Democrats campaigned hard for freedom of information long before the Act was passed and have since been consistent and enthusiastic supporters of its provisions. It follows therefore that we start with considerable sympathy for the issue that the noble Lord, Lord Wills, is pursuing…I am grateful to him for pursuing the issue at all stages of the Bill.”
I hope that he noticed that we took these matters forward in Committee. Lord Wallace of Saltaire said:
“I encourage the noble Lord to pursue this issue further. I will repeat what I said on Report: both Parliament and the Government need to look at this issue in general.”—[Official Report, House of Lords, 24 July 2013; Vol. 747, c. 1319-24.]
They are both right.
The Government’s main counter is that transparency increases costs and is not necessary because councils can already be subject to the Freedom of Information Act 2000. However, that is not sufficient given the travel towards ever greater outsourcing of services. Local government controls about a quarter of all public spending and contracts out an increasing amount of services to private providers. It is responsible for making decisions about a number of matters where the interests of private companies are often in tension with the wishes of the electorate. For all those reasons, local government is inherently exposed to corruption risks. On the whole, it navigates and mitigates those risks admirably, and we should recognise that and keep in proportion the level of concern. However, the public will want to know that we in this place have done our very best to ensure that there is transparency in how local authorities mitigate the risks and manage contracts.
Two recent reports by the National Audit Office are very worrying. They warn of a crisis of confidence and highlight the fact that much of the work of central Government is being contracted out to firms such as Serco, with a contract of £1.8 billion; Capita, with a contract of over £1 billion; and companies such as G4S and Atos. We all know from our constituencies some of the problems with Atos, which has contracts approaching £1 billion but is singularly failing to deliver for our constituents. The reports highlight the issues and problems that have emerged in the management of these contracts. In its memorandum, the NAO says:
“Transparency is needed to ensure that no one within the contractor can hide problems and that it is in the contractor’s commercial interest to focus on their client’s (the government’s) needs”—
or, indeed, the needs of local government. The Institute for Government says:
“The current pace and scale of outsourcing outstrips the ability of Whitehall officials to design and manage complex contracts effectively.”
We know the scale of the contracts that local authorities are negotiating around the country. Some are working successfully but in others there are problems, and the public want to know that there is a measure of real accountability and transparency. Hon. Members will recognise that this is a challenge for local authorities as well as for central Government.
The new clause aims to bring some transparency to the billions of pounds of public money that are at stake with regard to tackling fraud, corruption, incompetence and inefficiency in terms of citizens’ rights to know about the services provided to them and taxpayers’ rights to know about the services that they pay for. We have all agreed at various stages of our debate that local government and the relevant authorities that are subject to the Bill in schedule 2 are generally bodies that conduct themselves—in their financial probity and their conduct and standards in public office, including that of elected members and boards and their officers—in a manner that we would all want to see. However, we also know about occasions—we have to be honest about them—when those organisations fall short, sometimes wilfully and sometimes because of maladministration or error. We discussed some examples of that and what we can learn from them in Committee.
The fact that local authorities are covered by the Freedom of Information Act does not always provide the necessary transparency for private sector bodies carrying out public sector work, nor does the right of electors to inspect the accounts and audit documents, important though that is; indeed, it is provided for in a welcome way in the Bill. The Government have argued that the transparency that is intended in these provisions would increase costs, but we would argue that transparency can save money. Some of the work of the Audit Commission has saved billions of pounds of public money. There is evidence from local authorities around the country of how transparency can at times shine a light on areas of public spending that leads to savings to the public purse. I think the Minister would support that general point; indeed, he and his colleagues have talked about armchair auditors.
We deliberately included the word “significant” in the new clause to make it clear that it is not intended to cover the provision of services by small businesses, nor the work of town and parish councils, as in those cases it might be unnecessarily onerous in terms of cost. That acknowledges the Government’s concern in that respect. It would allow a local auditor
“a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year...A local auditor must make available on request any audit documents, obtained under subsection (1), subject to the provisions of the Freedom of Information Act 2000.”
That would clearly make these documents available to the public. We seek to define “private company” in the context of how freedom of information may apply in relation to the process of audit, so that it would mean
“any legal entity, including joint ventures, not-for-profit organisations, mutually-held organisations and charities.”
Of course, many more of those bodies are now involved in providing public services.
To ensure that the Minister understands that we intend to be very reasonable and measured in making this proposal, we have included a sunset clause. I hope that the Government recognise that that means that if the new clause proves to be particularly onerous, or unnecessary, they could at a future time consider whether it is any longer needed.
Our final amendment in this group, amendment 13, centres on the independence of audit. It is straightforward and I do not intend to detain the House on it for long. It is an important principle that independent audit means that companies should not be auditing themselves. As I have said, councils are increasingly outsourcing contracts to the private sector. When a company, be it PricewaterhouseCoopers, Deloitte and Touche, KPMG, Ernst and Young or some other provider—perhaps a smaller firm or even a new entrant to the audit market, as the Government hope will happen—provides services other than audit to a council, it should not then audit those same services. That is a simple but very important principle, because there is clearly a conflict of interest when a firm is auditing itself.
In Committee we heard assurances that in such circumstances an audit firm would, by virtue of the expectations in the contract with the council and, to some extent, with regard to the codes of professional standards and probity that govern and guide how auditors operate, make sure that a different person or even a different team within the company would carry out the audit so as to bring a measure of independence when looking at areas of spend and operation for which that self-same company is responsible. We listened to those arguments, which were made by a number of hon. Members. We know that auditors already seek to uphold professional standards of conduct and that in the private sector they sometimes need to have different teams when they work with a major company as both an auditor and a supplier.
We would argue, however, that it is a matter for the shareholders of those private companies to resolve any conflicts of interest. Our focus in this Bill is on arrangements for local and other relevant authorities that are spending billions of pounds of taxpayers’ money and where it is our responsibility to make sure that conflicts or interest are resolved.
Our amendment does not seek to prevent a company from undertaking audit work when it has other interests in the relevant authority. We recognise that that would go too far and that there are significant issues with regard to what is, in effect, an oligopoly in this market. We do not wish to narrow further the number of firms that could bid to undertake the audit work. Our amendment does say, however, that the audit firm would have to subcontract to another firm any part of its work that relates to the auditing of services that it already provides. Given that the Government envisage some arrangements whereby more than one auditor may be appointed to carry out work, we do not see what the problem is with the amendment. It seems perfectly sensible and I hope they will consider it.
The Minister has assured us that in many local authorities it will be commonplace for a company to be able to subcontract parts of its audits to different audit firms or to be able to make arrangements in relation to combined authorities where different auditors work together. He has assured us that that is a feasible and, indeed, desirable part of the arrangements as currently envisaged, and we see the amendment as a logical extension of that.
I welcome the new clauses tabled by my hon. Friend the Member for Hayes and Harlington, who has a strong interest in maximising transparency, which is the focus of his new clause 3. On new clause 4, independent studies have been done on the effect of changes in local authority structure since the Local Government Act 2000. I gently say to my hon. Friend that I would rather leave it to local authorities, local residents and interested parties to review their arrangements than ask for central Government’s verdict on what is the most effective structure for local democracy in any given local authority area.
New clause 5 addresses how local authority capacity has been diminished. I would be very interested to hear the Minister’s response to that, because it is an important point that was raised in Committee. On new clause 6, compromise agreements are a matter of increasing public concern. We sought to raise the issue in Committee, where we tabled amendments that would have meant that compromise agreements could not effectively gag employees. I am sorry that the Government did not accept them.
On Government amendment 2, I thank the Minister for his letter explaining this minor technical amendment. Government amendment 3 makes sense to us on the cross-border point, notwithstanding the wider policy point about the treatment of internal drainage boards, which we will come to later. Government amendment 4 is a tidying-up amendment.
Finally, on Government amendment 5, I am very pleased that the Government have responded to the points we made in Committee about recognising the qualifications of auditors. The amendment does not go far enough to address the important issue of auditors needing to understand the scope of public audit, a point that was powerfully made by the Chartered Institute of Public Finance and Accountancy in its representations to us and, indeed, by the draft Bill Committee; nevertheless, I welcome the amendment.
I wish to speak to new clauses 4 to 6, which stand in my name, and, without wanting to stray from the procedural rules of the House, I may refer to new clause 3, which has not been selected, but I assure you, Mr Deputy Speaker, that it will be a fleeting reference.
As has been said, on Second Reading I referred to the Transparency International report on the potential for corruption in local government. I circulated the report to all Members in advance of this debate and I am grateful that the Minister took up my suggestion to meet Transparency International and that the report became a subject of debate in Committee.
I tabled these new clauses to draw attention to some of the issues raised by the Transparency International report and to seek at least an element of forward momentum with regard to addressing these issues in future. It is critical that we maintain the confidence of the general public in the administration of local government. I think that Transparency International has helped us greatly, although its report says that it is very difficult to identify evidence other than anecdotal evidence about the level of corruption that may exist in UK local government. I believe we all share the view that the vast majority of councillors and council officials do an excellent job to a very high standard of probity and efficiency. Nevertheless, we are plagued with anecdotal information about elements of local government and with doubts about corruption.
Given the lack of data on corruption in local government collected at national level or any other level, Transparency International looks at the systems implemented to make sure that corruption does not take place. Its report says:
“Here, a disturbing picture emerges, and one on which experts and interviewees”
in the study
“were agreed. On the one hand, the conditions are present in which corruption is likely to thrive—low levels of transparency, poor external scrutiny, networks of cronyism, reluctance or lack of resource to investigate, outsourcing of public services, significant sums of money at play and perhaps a denial that corruption is an issue at all.”
My new clauses address those key elements. First, lack of transparency relates to new clause 3, which has not been selected, so I will not dwell on it. On Second Reading, I gave the example of my own local authority—this may happen elsewhere, so I would welcome the views of other Members—regularly putting items in part 2 of its agenda on the basis of spurious commercial confidentiality. When the find of prehistoric flints on one of my sites was reported in part 2 of the agenda, I joked in a previous debate that commercial confidentiality might have been important 3,000 years ago, but it is not now. It is, however, becoming a regular way of stifling debate and of preventing issues from being reported in the local media.
I believe—this is why I tabled new clause 3—that we need to address that. Central Government need to be clear about how often it is happening in local government and about the scale of its use and whether it is being used appropriately. They also need to address whether they have a role to play in providing further and better guidelines on how part 2 items should be addressed and on how items should be deemed to be commercially confidential or otherwise for the purposes of part 2 of the cabinet system.
That relates to the overall system. Under the previous Government’s local government reforms, which I opposed, we now have quite a centralised local council system whereby the leader is elected and then appoints the cabinet. They are all on a relatively high income these days. I do not begrudge anyone being paid the rate for the job, but the leader of the council in my area is on £65,000 a year and is appointing other members of the cabinet on salaries of between £45,000 and £55,000 a year. That gives the leader extremely wide-ranging powers of patronage and it is the leader who decides which items go into the confidential part of the cabinet agenda. They do so after being given some advice, about which I also have concerns, which I will come to.
That centralisation of decision making is dangerous and has the potential to result in not just poor decision making and lack of transparency, but corrupt decision making. That level of centralised control is part of the problem we now have. One of the issues thrown up by Transparency International’s report is that, structurally, we have opened ourselves up to decisions being made by a very limited number of councillors, with limited scrutiny by others. Whatever people thought of the old committee system—to be frank, it might well have been relatively slow at times—it was more open, democratic and transparent.
That brings me to the second element of my new clauses, which is covered in new clause 4. I am anxious that scrutiny in local government should depend on the system of scrutiny committees established by the previous Government, but those committees work only if they are properly resourced and can scrutinise decisions with an element of detailed research and knowledge. In my area, I am fearful that lip service is simply paid to scrutiny. There is not sufficient investment in officers to support such committees, and patronage in relation to them exerts a role in preventing its members from having independence of mind.
I tabled new clause 4 to suggest that there should be a review by the Secretary of State and a report to this House on how scrutiny is working in local government. My hon. Friend the Member for Corby (Andy Sawford) suggests that that should be left to local government, but that is the problem. In areas such as mine, which is increasingly becoming a one-party state, there is no way to enable a proper independent examination of scrutiny practices or to know whether scrutiny structures are operational. If the Audit Commission is no longer to exist, there does not seem to be any other body, other than the Secretary of State, with the power to instigate an investigation into whether scrutiny is working. I am sure that it works extremely effectively in some areas, but in others it is poor to the point of virtual non-existence. [Interruption.] My hon. Friend the Member for Sheffield South East (Mr Betts) is obviously tagged—another form of scrutiny. [Laughter.]
The new clauses are about transparency and scrutiny, but my new clause 5 relates to Transparency International’s concern about the lack of resource to investigate corruption in individual councils. I am concerned because it is very difficult to find information anywhere about the scale of local authority investment to ensure full probity. For example, with the latest round of cuts in local government, I am anxious about cuts to areas involving the management of accounts and their internal audit in finance departments. Because cuts in staffing have been so large, there is vulnerability in local government in that staff are not available for councillors to be able to ensure proper investigation or to bring to book corrupt elements. The new clause therefore suggests that the Secretary of State should prepare and lay before the House a report on the adequacy of resources and staffing levels, but also on the structures and procedures that individual authorities have put in place to detect and investigate fraud. At the moment, there is fragility in local government in relation to the investigation and detection of fraud.
My new clause 6 is about compromise agreements. I have asked questions over the past year about the use of such agreements within local government, and the response has been that it is not monitored by the Department for Communities and Local Government and that, therefore, no information is available. We have to go back to anecdote, which is the problem in this debate. As Transparency International has highlighted in its report, the vast majority of council officials leaving in my area do so on the basis of compromise agreements. I do not understand why such agreements are used to ensure that there is a gagging clause to prevent an official from commenting on their local authority’s activities, efficiency and other matters.
I can understand to a certain extent the use of compromise agreements in the private sector, but their use in the public sector seems to undermine the structures and procedures we put in place for whistleblowing. To cite my own area again, officers seem to disappear time and again, particularly after criticising the local authority or individual councillors—their desk is suddenly vacated and they have gone—and we then discover that they have left under a compromise agreement. They do not gain their full benefits until that has been negotiated—often, I have to say, at the door of the tribunal—but a compromise agreement is signed, so they get their pay-off, but they are not allowed to comment on the issues that may well have been what resulted in their leaving the authority. I doubt that that is peculiar to my own local authority, but I think that it flies in the face of openness, transparency and accountability.
I am simply suggesting that the Secretary of State should investigate what is happening in relation to such matters. It would be helpful to know how frequently compromise agreements are used across local authorities. It would also be useful to know how often confidentiality clauses are incorporated into such agreements and, frankly, why there is any need for them. I can understand their use to a certain extent if there are strict matters of commercial confidentiality involving a contract between a local authority and an individual company, but their use seems to range much further and even to cover any element of criticism of a local authority and its actions.
My new clauses are an attempt to address the issues raised by Transparency International. I am not making party political points. As I have said, I am criticising structures and systems put in place by the previous Government, but also trends that have accelerated under this Government in recent years. They have increased not localism but centralism within individual local authorities, and they have produced cuts that have cut the very officers needed to maintain levels of probity and undermined the ability of councillors who are not in the ruling regime or on its back benches to undertake appropriate and effective scrutiny.
I do not expect the Government to accept my new clauses, but I flag them up as issues that we need to bear in mind. We must send a message to local government that this House has concerns about these matters and that we take Transparency International’s report seriously. I suggest that the Government need—the Minister should take this upon his shoulders—to have a close watching brief on these issues and to engage in a dialogue with local government associations to see whether they have concerns. Local government might be able to make proposals for future reforms to ensure that we address the concerns expressed in Transparency International’s report and the issues that I have raised today.
If the Government do not do so, perhaps such issues should be referred to the Communities and Local Government Committee for a further report or, failing that, we should do what we have done in other instances and bring together a group of Back Benchers who have had a particular interest in or experience of local government over the years to look at such matters independently and report back to the House. These issues will not go away, but will cause more concern in the public mind, particularly as local decisions are made on controversial cuts that people fail either to support or fully understand. That is why full openness and transparency are needed in local councils about decisions that they make.
I commend my new clauses to the House, but I will not press any of them to a Division. I hope that this debate will set an agenda—not only for the Minister to examine, but one that the House can look at at a future date—in relation to whether local government operates effectively and efficiently, but also transparently and openly. It will also demonstrate our concern about corruption, which local government should be willing to address where necessary.
I am pleased to have the opportunity to speak in support of new clause 2, which would add a considerable dose of fairness to the Bill. I will concentrate on the need to extend the use of the Freedom of Information Act.
As we all know, private companies that deliver public services are exempt from the requirements of the Freedom of Information Act. The Information Commissioner has no power to investigate private contractors. He cannot serve information notices to require a contractor to supply information for an investigation, nor can he take enforcement action if a contractor fails to comply with his contractual obligations. Put bluntly, that renders it nigh on impossible for us to get our hands on the details of much of what private companies get up to with public money.
New clause 2 seeks to correct that oversight, at least in relation to services that are provided to local authorities and health bodies. I hope that, in time, such provisions will be extended to all significant public sector contracts that are placed with organisations outside the public sector, whether they are charities, not-for-profit companies, mutuals or those that make vast profits for their shareholders at the expense of the taxpayer.
I have been hugely concerned for many years—not just under this Government, but under the previous Government and others before them—that there is a tremendous lack of transparency in the use of public money when it is handed to private companies and other organisations for the delivery of goods and services. Further billions of pounds of public money have been distributed from the public sector into the private sector in every year since the coalition Government came to power, so my anxieties have increased considerably.
There are good grounds for that anxiety, because many of the vital services on which we daily rely have been contracted out to private sector and other providers. The list seems endless, but until now we appear to have been largely content to see taxpayers’ money handed over to private companies for the delivery of services ranging from waste management and highway repair to schools, hospitals, the justice system, early years care and, as we were reminded yesterday, the care of elderly people.
No public service appears to be safe from the zeal for outsourcing that has been demonstrated by this Government, regardless of whether evidence exists to support such a model of provision. Should Ministers be allowed to further their ambitions to privatise even more services, without the providers being subject to proper scrutiny? I do not think so. If taxpayers’ money is involved, any citizen or Member of Parliament should be able to see the detail of where and how it is being spent. Applying the provisions of the Freedom of Information Act to such circumstances would enable that to happen.
We must make the best use of taxpayers’ money. I often hear Members from all parts of the House talk about the need to innovate in delivering services and to share best practice so that people across the country can reap the benefits. Without the transparency that would be provided by new clause 2, through the Freedom of Information Act, we are destined to see service providers keep their cards close to their chests, protecting their information at the expense of better services across the country. That transparency would also provide us with data on organisations that are prepared to run services at a loss for a period to drive competitors out of the market and then make a killing in the long term when there is no one for them to compete against.
Although I am the first to acknowledge that the requirements of the Freedom of Information Act can, at times, be cumbersome, I am in no doubt about the greater good that they serve. It is those requirements that allow those who are on the outside looking in—who, let us not forget, consist largely of the taxpayers who fund service provision—to delve into the details and scrutinise the outputs to ensure that they are getting value for money through providers that are fit for purpose. It is also those requirements that allow politicians, the media and other organisations to scrutinise what companies are up to.
I spoke recently on the Offender Rehabilitation Public Bill Committee about the need for the extension of the Freedom of Information Act to services that are provided to the Ministry of Justice, including the probation services that are on the verge of being privatised. I said that I was offering Government Members an opportunity for the future. Just as they had the right to scrutinise the public sector by pressing for information under the Act after Labour brought it in, they could have any number of fruitful days examining the contracts that are let by the future Labour Government if the provisions are extended to the private sector, as outlined in new clause 2.
Perhaps I will not convince the Conservatives, who will doubtless plead that commercial confidentiality must be retained in contracts, but the Lib Dems would surely love to have the chance to exploit this new transparency. They will know that, with £100 billion of taxpayers’ money being spent each year on the provision of public services by private and voluntary sector companies, it is essential that such expenditure is evaluated properly and that service providers are held fully to account for their actions. It is a core tenet of our democracy that taxpayers are able to access the information that is necessary to do that thoroughly and vigorously.
Under this Government, the number of services that are run by the private sector is growing. There is a parallel growth in the size of the democratic deficit. Not only is more taxpayers’ money being entrusted to companies that have limited or no experience of such service provision, as will happen with the probation service, but there is an increase in the number of activities that are undertaken by Departments that are not subject to the Freedom of Information Act. As a result, the number of contracted services that are unaccountable and lacking full scrutiny is increasing. As things stand, private sector companies that are responsible for delivering public services are able to hide behind a cloak of commercial confidentiality.
Billions of pounds of taxpayers’ money is being awarded to companies under contracts that are barely transparent. We cannot say that often enough. Billions of pounds of taxpayers’ money is being awarded to companies under contracts that are barely transparent. Those same companies are free to exploit the benefits of gaining detailed knowledge of successful public sector bodies through the submission of freedom of information requests. That information can be deployed to undercut, imitate or outbid the very same public sector bodies when contracts are tendered or renewed. That situation leaves private companies in the strongest possible position to exploit such knowledge. More importantly, it enables them to hide what they are doing with large sums of public money.
Departments are under considerable strain in monitoring their contracts because staff numbers have collapsed under the Government’s cuts. The public therefore deserve the right to do some monitoring of their own. There would be real accountability if the private firms and other organisations that spend those billions of pounds of taxpayers’ money were compelled to answer directly to the public by providing responses to questions about what they are doing.
The hon. Gentleman seems to be talking about large private companies. Subsection (4) of new clause 2, to which he is speaking, includes in the definition of a private company
“joint ventures, not-for-profit organisations, mutually-held organisations and charities.”
Is he not concerned that the new clause would place large costs on smaller organisations that might not be able to handle the kind of requests he is talking about?
No, I am not. As my hon. Friend the Member for Corby (Andy Sawford) said in opening the debate, this proposal relates to substantial contracts. It does not include the smallest organisations and we must ensure that they are protected. However, I would say that such organisations have a responsibility to be accountable for anything that they do when spending public money.
In the new world, public and private providers will ultimately be responsible for delivering equivalent services, but they will be governed by different rules. If a public partnership wins a contract to deliver refuse services, it will be subject to the freedom of information provisions, but its private sector rivals for future contracts would not be. Why should that be so? Private contractors that provide services should undoubtedly be held to the same standards of responsibility as state providers. I do not believe that anyone can argue to the contrary. It is therefore logical that the right to information about their regimes and establishments should also be equivalent.
So that there is no mistake, I remind Members that in announcing measures in 2011 to allow the publication of further spending and performance data on public services, the Prime Minister spoke of the “power of transparency”. Indeed, he went on to assert that, “Information is power.” He even suggested that
“we need more of it.”
I know that this is unusual, but I agree with the Prime Minister that we need more of it.
To put it simply, many non-public sector providers shelter themselves from open scrutiny and operate behind a screen of secrecy that simply is not compatible with the principles of public service provision. Such stealth and secrecy cannot be allowed to continue. It is only right that as more and more public services that were once the sole preserve of local and national Government are contracted out beyond the public sector, steps are taken to ensure that the same access arrangements are required of private and voluntary sector providers. To do otherwise is unfairly to insulate the Government, the Department and favoured contractors from adequate scrutiny and accountability.
One of the major risk factors that flow from a position of secrecy is the potential for fraud and corruption. Other Members have addressed that point in more detail. In public service provision, that is a crime against each and every taxpayer, and the public should be granted protection against such transgressions by all providers of public services being made subject to the requirements of the Freedom of Information Act. We have already seen the failures of some companies that were happy to take the taxpayers’ billions, and some people may face legal action as a result. For such reasons, we cannot afford to overlook the importance of new clause 2. Its additional safeguards are particularly important given the Government’s recent poor track record on commissioning services.
I know that the Government will bang on about commercial sensitivity, but that is nonsense. This is about fairness, open government and, above all, trust. For those reasons, I fully support new clause 2.
I rise to support the shadow Minister, my hon. Friend the Member for Corby (Andy Sawford), on new clauses 1 and 2. To some extent, we rehearsed the arguments in Committee, when the matter was considered in some detail. The Minister and his colleagues were singularly unconvincing in their opposition to our proposals, but I hope that, having had time to reflect on those discussions and the contributions of my hon. Friends today, the Minister will accept our reasonable new clauses.
On new clause 1, considerable amounts of local and national funding are now used jointly. It therefore seems appropriate that they are subject to proper scrutiny and auditing arrangements. To argue against that is unacceptable. It is incumbent on the Government to ensure that funding is subject to proper scrutiny after deployment, particularly at a time when significant austerity and swingeing funding cuts have been imposed on public services, especially local government. They must ensure that we get the maximum benefit for the public pound in communities up and down the country. I hope the Minister will concede that the arguments that have been made are persuasive, and I hope that the Government will respond accordingly.
On new clause 2, it seems appropriate that proper measures are put in place to ensure that we do not end up with a cosy relationship between auditors and local authorities. There is a real danger of that, particularly as the Audit Commission is to be abolished. There could be significantly increased opportunities for corruption and the misuse of public funds. We could find situations such as the infamous “homes for votes” scandal involving Westminster council and Shirley Porter—or maybe we would not find out about them. Without new clause 2, they would be more difficult to uncover, so there might be more such examples around the country, which would be extremely regrettable.
In the case of that Conservative-controlled council in Westminster, we saw more than just the “homes for votes” scandal. We know from the records of officers who were employed there at the time that the council leader, Shirley Porter, bullied officers, and that anybody who had the temerity to question her direction of travel was slapped down in no uncertain terms. They were told, “You’re not one of us”, or “You are a negative officer and you need to decide which side you are on.” That was totally unacceptable behaviour by the leader of a council, and I fear that such behaviour is likely to increase if new clause 2 is not accepted.
As I said, it was not just the “homes for votes” scandal. Shirley Porter rose to notoriety when she sold three cemeteries in London for redevelopment for 5p each—
Order. As interesting as this may be, we are discussing audit. I know that the subject of Dame Shirley Porter may create some interest, but we have to try to stick to the new clauses and amendments. We are drifting a little wide of them. I am sure the hon. Gentleman is desperate to get back on track.
Indeed I am, Mr Deputy Speaker, and I am grateful for your guidance. I was just about to conclude my remarks about Shirley Porter by saying that she privatised at will, as well.
In Committee, we heard a lot from the Minister about his commitment to transparency. His Back-Bench colleagues reinforced that point. However, the Bill will make transparency considerably more difficult, because arrangements within local authorities will be considerably more opaque. Transparency International, which my hon. Friend the Member for Hayes and Harlington (John McDonnell) quoted, was scathing about the Bill, stating:
“The range of measures outlined in this Bill, combined with recent legislative reforms under the Localism Act 2011, remove key institutional defences against corruption, replacing them with arrangements that are likely to be inadequate to protect the public interest and the public purse.”
We hear a lot from the Government about their concerns for the public purse and the need to ensure that the taxpayer gets value for money, yet it seems that, unless they accept our new clauses, they are being cavalier with the public purse in this case.
I hope that the Minister will reflect on what has been said today. Unless the new auditing arrangements are subject to freedom of information provisions, their opacity will grow. I do not want to strain your patience too much, Mr Deputy Speaker, but circumstances such as the Shirley Porter case will not be uncovered. It is essential that new clause 2, tabled by my hon. Friends the Members for Corby and for Stockton North (Alex Cunningham), is accepted; otherwise private sector audit companies will not be subject to the scrutiny that was previously available under the Audit Commission arrangements. Even when there were external auditors, the information that they held was deemed to be held by the Audit Commission and was therefore subject to scrutiny by the general public. My hon. Friends and I say that it is important that proper scrutiny is still available under the new arrangements. As we heard from my hon. Friend the Member for Corby, local enterprise partnerships are now also spending considerable sums of money.
Will the hon. Gentleman clarify the meaning of proposed subsection (1) of new clause 2? It states:
“A local auditor has a right of access at all reasonable times to audit documents from private companies to whom the local authority has contracted significant services during the last financial year.”
Does that mean that a local auditor should have the right to access any and all documents within such companies irrespective of whether they are relevant to the relationship with the local authority? That would give the local auditor carte blanche to access any document at all in those organisations.
It means documents relating to the contracts under which companies are working for the local authority. Clearly, it would be overly burdensome and inappropriate for all their documentation to be subject to the Freedom of Information Act, but it is perfectly reasonable in respect of work they are doing on behalf of a local authority, as is made clear later in the new clause. The hon. Gentleman’s concerns are misplaced, and the new clause is entirely reasonable.
I am grateful to my hon. Friend for that clarification. I hope that provides the reassurance Government Members were seeking.
In conclusion, we are moving to a new era in which the Audit Commission will be abolished and more private sector auditors will get involved in the market. It is important that those are subject to appropriate scrutiny, and we must therefore ensure that instruments are available to enable such scrutiny to take place. According to the Chief Secretary to the Treasury, up to £20 billion will be spent by local enterprise partnerships, and proper scrutiny and auditing arrangements must be in place to ensure that that money is expended properly. The public demand nothing less, and if the Government do not support this measure, it is incumbent on them to explain how that scrutiny will take place. If scandals are uncovered in the future because of a lackadaisical approach adopted by the Government, they will not be able to say they were not warned. I hope the Minister will sleep easy in his bed if he rejects these reasonable measures, because I believe that would put taxpayers’ money at risk of being misused. He needs to reassure the House and—more importantly—the wider public.
I will respond first to the new clauses tabled by the hon. Member for Corby (Andy Sawford) before addressing those tabled by the hon. Member for Hayes and Harlington (John McDonnell). I will then consider the Government amendments in this group.
New clauses 1 and 2 and amendments 13 and 12 cover familiar ground which, as the hon. Member for Corby noted, we debated at some length in Committee. New clause 1 returns to the issue of integrated audit and seeks to enable auditors to work across local authorities with the National Audit Office. I support the principle of audits being undertaken efficiently and effectively, but I do not consider that the new clauses are the right approach, or that they are necessary to support bodies in working jointly or sharing services or budgets.
The public audit framework is designed to provide assurance about how each public body has used its resources. Individual public bodies are separately accountable, and because each is accountable for its decisions and expenditure, every one is required to produce a set of accounts and have an independent audit. I do not believe that the current accountability structure prevents local auditors from auditing relevant authorities cost effectively, or that it prevents authorities from working together to share services or budgets. The requirement to have a separate audit has not been highlighted as a problem in the four areas with which the Government have been working to explore service transformation and joint working via a community budget. Neither did the Public Accounts Committee raise external audit as a barrier in its report on integrated working by Government Departments and via community budgets.
Auditors are already required by the code of audit practice to have regard to partnership working that local government and health service bodies operate, to share information and co-operate with other auditors, and to minimise the burden of regulation on audited bodies. The Financial Reporting Council’s auditing standards also state that auditors should rely on the work of other auditors where appropriate, and guidance is available to support auditors making that judgment.
The National Audit Office supports Parliament to hold Government Departments to account. It does not have a role in auditing expenditure by local public bodies, and it does not wish to have one. The NAO already carries out a number of national value-for-money examinations under existing legislation, and the Bill broadens its powers to enable it to examine all or groups of relevant authorities. That will enable a more end-to-end view on the use of public money. It will not enable the NAO to undertake examinations of individual authorities, but it will be able to look at any thematic or systemic issues across a number of relevant authorities. For those reasons, we consider that the new clause is not needed.
There has been a lot of discussion about provisions in new clause 2, both in the other place and in Committee. As I said in Committee, we believe the new clause is not necessary to enable auditors to access all the information they need because the Bill already does that. Clause 22 mirrors the provision in the Audit Commission Act 1998, and enables auditors to access every document they need in order to undertake their statutory functions. That includes all documents held by local authority contractors which the auditor considers necessary to undertake an audit.
The Government also believe that it is not necessary to apply the Freedom of Information Act to documents an auditor has obtained from a contractor. Rather than extending that Act to documents an auditor has obtained from a contractor, the Government’s preferred approach is through the transparency agenda, existing rights of local people, and our planned revision to the freedom of information code of guidance. Local people can already access information about contracts. The Bill maintains local people’s current extensive rights to inspect detailed accounts, accounting records and audit information, and to ask the auditor questions and raise objections. Those rights enable local people to access more information than the proposed new clause would.
Does the Minister agree that perception is important, and that by not subjecting private sector auditors to the Freedom of Information Act, the wider general public could feel that they will not be able to access information that was previously available under the Audit Commission? Does the Minister believe he has an obligation to be seen to be doing the right thing, as well as giving those assurances at the Dispatch Box?
What is important—I think this is what the hon. Gentleman was trying to say in a roundabout way—is to do the right thing, not what might look like the right thing but may not be. Local authorities are subject to the Freedom of Information Act, but I will continue my remarks so that he fully understands the point about how people can get to information.
It is absolutely right that the Government are driving forward the transparency agenda so that auditors have access to the information they want. That is why it is important that if people ask questions, the auditor may gather even more documentation to investigate the issues. That goes further than the Freedom of Information Act, which would require the auditor to provide information it holds but not lead it to seek additional material.
Last week, the Government published their response to the consultation on the transparency code. It set out their intention to make regulations requiring local authorities to publish specified pieces of information, including contract details exceeding £5,000. Local authorities also monitor the delivery of their contracts and are subject to the Freedom of Information Act 2000. The Government consider that a better approach would be for contracts to include provisions that require contractors to assist local authorities in meeting their Freedom of Information Act obligations—thereby satisfying the point raised by the hon. Gentleman. That decision was taken following the Justice Committee’s post-legislative scrutiny of the Freedom of Information Act, which recommended that greater transparency through contracts would provide a more practical approach than extending that Act to companies directly.
I have heard what the Minister has said about transparency of contracts, but is he saying that if a local authority goes about formulating a contract in the right way, the public—it is they who are important—could be entitled to as much information about the spending of their money through a contracting process as they would be if the service was delivered by a local authority directly?
It is not for me to prejudge a contract that a local authority might agree to, but it is true that people can access the Freedom of Information Act through the local authority, and the auditor can go further in its inquiries to ensure it has all the documents it needs.
That has not answered my question—I was not asking what local authorities should do. If a local authority went about this correctly and formulated a contract correctly, could the public have as much information on the spending of their money through a contracting process as they could if the service were delivered directly by the local authority?
That response is instructive. I think the Minister is saying that in certain circumstances that information will not be available in the way it is currently available. It seems it will be down to the local authority. He said he met with Transparency International. I wonder if he would comment on its key recommendation:
“Amendment should be made to the Bill to ensure that the work conducted by auditors will be subject to the Freedom of Information Act, and that auditors will be allowed to access documents from significant private contractors that a local authority has used.”
Will the hon. Gentleman give way?
As I said, the Freedom of Information Act applies to local authorities, but we are not extending it to cover private companies. I am happy categorically to make the point, as I did in Committee, as the hon. Gentleman will see if he looks in Hansard, that we are not going to extend the provision to private companies; it is the local authority that will be accountable. He will have to take that as outlined.
We will issue a revised code of practice encouraging public authorities to include and enforce provisions in contracts to ensure that openness and accountability are maintained by encouraging the release of a wider range of information about contract delivery. This approach will be monitored by the Government and the Information Commissioner. If contractors or public authorities do not comply with this guidance, the Government will consider what other mechanisms might be necessary, including the possible extension of the Freedom of Information Act to service providers.
I will not prejudge the guidance before we publish it, but I am sure that the hon. Gentleman, if he is not happy with what we do, will want to raise it with me at Question Time or through the Select Committee.
Following our debate on amendment 13 in Committee, I wrote to the hon. Member for Corby providing further details. I can assure the House that this amendment is not necessary, as sufficient safeguards are already, and will continue to be, in place to ensure the independence of the auditor. First, the Financial Reporting Council’s ethical standards require audit firms to establish policies and procedures to ensure that auditors act with integrity, objectivity and independence. There are specific limitations on audit firms providing non-audit services.
The ethical standards require the lead auditor to assess any threats to the auditor’s objectivity. Before accepting an engagement to provide non-audit services, it must consider whether doing so could threaten the firm’s actual or perceived objectivity or independence. The ethical standards do not prohibit audit firms from undertaking non-audit work, but they do require them to introduce safeguards that would eliminate these threats or reduce them to an acceptable level. This is where a reasonable and informed third party would probably not conclude that an auditor’s objectivity was or could be impaired. If the firm cannot introduce sufficient safeguards to reduce the threats to an acceptable level, it must not accept the non-audit engagement or it must withdraw from the audit.
Secondly, auditors must comply with international standards setting out the ethical requirements for financial statements audits and requiring lead auditors to report on compliance with independence requirements and audit firms to ensure that their quality control systems comply with professional standards and regulatory and ethical requirements. The international standards also require firms to put in place procedures for the acceptance and continuance of specific engagements, including whether compliance with ethical requirements can be achieved.
Thirdly, recognised supervisory bodies will have rules to ensure that local auditors conduct work properly and with integrity and that they do not accept appointments where a conflict of interest would prevent that. They must record threats to independence and the steps taken to safeguard independence and ensure that remuneration is not influenced by the local auditor providing other services. That is consistent with the established framework in the companies sector. In addition, we expect the independent auditor panels to advise the authority on the adoption and content of a policy on awarding non-audit work to the auditor. A note to the annual accounts is required if the audit firm undertakes non-audit work.
Those safeguards will protect the actual and perceived independence and integrity of the auditor. If objectivity is prejudiced, the firm must withdraw from either the audit or the non-audit work. We consider this approach preferable to the amendment tabled, which would not remove the potential conflict of interest. If the audit firm were required to subcontract to another firm, it would still be accountable for the audit opinion and any other work undertaken by the subcontractors.
Amendment 12 would add local enterprise partnerships to schedule 2 and make them subject to the local audit provisions. I will begin by repeating the assurance, which I gave in Committee, that any public funds channelled through LEPs will be subject to appropriate scrutiny. LEPs are voluntary strategic partnerships, not statutory public bodies. Each has a lead local authority that acts as the accountable body for public funding, and it is this local authority that provides the appropriate financial accountability, including through an annual external audit.
Making LEPs subject to public audit themselves would simply duplicate existing audit arrangements through which lead local authorities act as accountable bodies. The recent report from the all-party group on local growth, local enterprise partnerships and enterprise zones, of which, as the hon. Member for Corby said, I was the first chair, stated that
“many participants recognised the role of the accountable body arrangement in providing the necessary financial accountability for public money outside the LEP organisation, freeing the LEP up to focus on strategy and delivery”.
The amendment would simply add unnecessary burdens to LEPs, while doing little to improve accountability. With these explanations and assurances, I hope that the hon. Gentleman will feel able not to press new clauses 1 and 2 and amendments 12 and 13 to a vote.
On the amendments tabled by the hon. Member for Hayes and Harlington, new clause 4 would require the Secretary of State to provide each House of Parliament with a report on the effectiveness, efficiency and economy of structures and procedures that local authorities put in place for reviewing decisions or actions taken by their executive cabinets under section 21 of the Local Government Act 2000. Section 21 requires local authorities operating executive arrangements to appoint at least one overview and scrutiny committee. The role of such a committee is to review and scrutinise decisions and actions of the executive or the council and make reports or recommendations to the council or executive.
Such committees may also undertake reviews and make recommendations to the council on any matter affecting the local authority area or its inhabitants. Overview and scrutiny is thus important in holding the executive to account for its decisions and actions and plays a vital role in the development of policy, but councils are accountable to their local electorates. It is their responsibility to ensure that their scrutiny arrangements are effective, and they must account for this to their local people, ultimately—like us all—through the ballot box. The provisions in the Bill that enable regulations to make it clear that people can film meetings and blog or tweet about what their elected representatives are saying in meetings are all part of reinforcing local accountability and making it more effective.
The Government believe in localism—that power should be passed down to local people to hold their councils to account. Local authorities should not have to spend their time reporting to central Government, only for the latter to lay some report before Parliament. That is turning accountability completely on its head. The Bill’s provisions are all about strengthening local accountability, making it more effective and bringing it into the 21st century. These amendments would take us in a different direction and are wrong in principle as they would create a wholly unnecessary and inappropriate arrangement.
For example, new clause 5 would require the Secretary of State to prepare and lay before Parliament a report on the adequacy of the resources, staffing, structures and procedures put in place by authorities to detect and investigate fraud within the authority, before the Audit Commission is abolished. We agree that tackling fraud should be a priority, not only for central Government, but for local authorities and all public bodies. We are clear that local government needs to deal with the £2.1 billion a year of fraud that occurs largely through housing tenancy, payroll, procurement and council tax discounts fraud. “Fighting Fraud Locally: the Local Government Fraud Strategy” was published in 2011. Developed by local government for local government, it provides a blueprint to reduce the risk of fraud, realise cash savings and work together to prevent future fraud losses. To support local authorities in taking this work to the next level, we have just announced £16.6 million of new investment over the next two years. We have also committed to working urgently with local government to ensure that it has the right powers, incentives, data and capacity to tackle fraud effectively.
The Audit Commission’s work has clearly been an instrumental part of the counter-fraud landscape. Of primary importance is the national fraud initiative which, since it began in 1996, has helped to identify over £1 billion potentially lost to fraud, error and overpayment in the UK. During the earlier stages of the Bill, we announced that the initiative and associated data-matching powers would transfer to the Cabinet Office, and my officials are working with the Cabinet Office to ensure a smooth transition of that important function.
In addition, the Audit Commission has developed a set of counter-fraud tools, including “Protecting the Public Purse”, the annual fraud survey and the changing organisational cultures toolkit. We are working with the commission and others to determine the future of the tools that matter to local government, so please let me reassure hon. Members that we are progressing this issue with rigour and pace. I would be happy to keep hon. Members informed of progress in this area.
I am grateful to the Minister for that information and for his offer of co-operation. Does he have figures for the number of staff employed to investigate fraud in local government in, say, 2007-08 compared with the number employed in that area during the past year?
I cannot give the hon. Gentleman those figures off the top of my head, but I will come back to him on that if he will bear with me.
New clause 6 would require the Secretary of State to report to Parliament on the use by local authorities of compromise agreements that involve confidentiality clauses in relation to staff exiting their organisation. I know that the hon. Gentleman feels strongly about this issue and that he raised it on Second Reading. During that debate, he expressed concern that, if used inappropriately, confidentiality clauses could unreasonably restrict officers’ ability to provide full and frank advice to local members and to protect the public interest. Officers, including those exiting an organisation, must have proper opportunities to provide such advice and to raise concerns. The Secretary of State has made clear his view that so-called gagging clauses should not be used to undermine that principle, and I am happy to reiterate that view today.
The use of compromise agreements in the public sector was recently the subject of a report by the National Audit Office and was also scrutinised by the Public Accounts Committee. Further to this, the Government agreed that there should be greater transparency and accountability on the use of compromise agreements across the whole of the public sector, including local authorities. Importantly, the law is quite clear that compromise agreements—in which an agreement is reached to contract out of statutory employment rights—can be made only when the employee has had access to independent advice on the terms and effect of the proposed agreement.
Furthermore, confidentiality clauses cannot be used to prevent a protected disclosure under the Public Interest Disclosure Act 1998. The Government have recently undertaken a call for evidence to look at whistleblowing, and specifically at whether there is enough support for people who wish to report wrongdoing. The Government will respond to the call for evidence early in the new year. I hope that I have been able to reassure the House that the Government take this matter seriously and are taking action on it.
I am grateful for that information, but may I suggest that that review of whistleblowing should pay specific attention to the use of compromise agreements, particularly within local government? I do not think that that has been explored or taken into account sufficiently so far.
The hon. Gentleman makes a fair point, and he will appreciate that it is now noted and on record. I hope that I have been able to provide sufficient assurances to persuade him not to press his new clauses and amendments to a vote.
I shall not detain the House for long on Government amendments 1 to 5. Amendment 1 would require an authority to include the period of the auditor’s appointment in the public notice confirming the appointment of the auditor. Clause 8 requires authorities to publish such a notice within 28 days of making the appointment. The hon. Member for Corby will recall that he tabled a similar amendment in Committee and suggested that it would be helpful for the public to know the term of the auditor’s appointment. It was also suggested that knowing when the existing contract would end would be useful to potential bidders for any new appointment.
There was a similar discussion in the other place, where Lord McKenzie tabled an amendment to require that information on the term of appointment should be included in the published notice. At the time, the Government expressed sympathy with the intentions of the amendment, but questioned whether such a requirement needed to be set out in legislation, because it could simply be a matter of good practice and guidance. However, having considered the case further, and in the light of the points made by the hon. Member for Corby in Committee, the Government accept that it might be useful to put the matter beyond doubt through this amendment.
Amendment 2 is a minor and technical amendment to ensure that references throughout the Bill cover subordinate legislation made under part 42 of the Companies Act 2006, as applied by schedule 5 to the Bill. It will make it clear that provisions on eligibility and regulation apply to the whole local audit regime.
Amendment 3 removes from schedule 2 internal drainage boards that are partly in England and partly in Wales. There are two such boards: Powysland and Lower Wye. Both are mainly in Wales but currently fall under the Audit Commission regime. The local audit provisions in the Bill will therefore not apply to those cross-border internal drainage boards after the Audit Commission is abolished. The Welsh Government intend to transfer the functions of the two cross-border IDBs, along with the functions of one IDB that is wholly in Wales, to a single body, Natural Resources Wales, and to bring them under the Welsh audit system. They intend to do this by the time the Audit Commission is abolished—by April 2015. Both bodies will continue to fall under the Audit Commission regime until then.
The Welsh Government supported a legislative consent motion to make audit arrangements for the two bodies under the Bill as a stopgap measure until the new governance arrangements are in place. However, the legislative consent motion was not passed by the National Assembly for Wales. As a result, in line with the devolution settlement, the amendment removes these two bodies from schedule 2. Welsh Ministers have agreed that we should retain the power in clause 2 as a backstop power to add cross-border bodies back into schedule 2 by regulations at a later date, should the transfer of functions take longer than expected. Regulations made under this power will be subject to consultation and the affirmative procedure, and would require consent from the National Assembly for Wales.
Amendment 4 is a minor amendment to clarify that paragraph 6(1) of schedule 4 does not apply in the case of health bodies. The paragraph currently provides that, when an authority uses an existing committee as its auditor panel, wider enactments that usually apply to committees of a local authority do not apply. A corresponding power in paragraph 5 then allows such enactments to be positively applied to the panel, to ensure that arrangements remain proportionate, given the panel’s limited role.
In the case of health bodies, however, their audit committees are covered by a specific existing framework, which is different from that applied to local authority committees. That framework reflects the different governance framework for health bodies such as clinical commissioning groups, and will need to continue to apply in full, even when the committee is acting as the panel. As drafted, paragraph 6 of schedule 4 could have the unintended consequence of disapplying that existing framework for audit committees within health bodies when they are acting as the auditor panel. The amendment therefore excludes health bodies from this provision.
Amendment 5 further modifies schedule 10 to the Companies Act 2006, as applied by schedule 5, in respect of auditors qualified in other European economic area countries. It has two main effects in respect of those individuals. First, it will enable the recognised supervisory bodies for local audit to recognise the qualifications of those auditors who hold the equivalent of a UK local audit qualification obtained elsewhere in the EEA. This is necessary to comply with the requirements of the recognition of professional qualifications directive, 2005/36/EC.
Secondly, the amendment specifies that recognised supervisory bodies can require an EEA statutory auditor to pass an aptitude test only if the auditor is seeking to become established as a local auditor in the UK on a permanent basis. The audit directive, which makes provision for an aptitude test, applies only to statutory audit. Unlike the audit directive, however, the recognition of professional qualifications directive does not permit the imposition of an aptitude test if an individual is seeking to provide services on a temporary and occasional basis. The amendment therefore seeks to align the regulatory frameworks for statutory and local auditors, as far as is permitted.
The amendment will also ensure that any indirect discrimination against EEA auditors is avoided and that the requirements for EEA local auditors and EEA statutory auditors are as consistent as possible. It will also ensure that a firm is qualified if it is eligible for appointment as a local or statutory auditor or is eligible for a corresponding appointment. I urge the House to support the Government’s amendments.
Thank you, Madam Deputy Speaker, for allowing me a moment to reply.
The amendments, particularly new clause 2, have had strong support from my hon. Friends and I am grateful to them for putting their views on record. I welcome the Minister’s statement that the Government will publish guidance to private sector contractors. He went further, saying that if that is not effective, the Government will consider extending freedom of information contracts to private suppliers. I consider that to be a significant move forward, certainly from where we were in Committee. It is a win for my hon. Friend the Member for Derby North (Chris Williamson) and others who have championed this. We very much look forward to seeing that guidance, but we also commit to taking the issue forward ourselves.
In relation to integrated audit, I believe that the Minister—whether intentionally or not—has sought to misrepresent what our amendment would do in practice. We have not said that the National Audit Office should audit local government, for example. We have simply said that we should work together in audit. We have also not said that the absence of integrated audit is in itself a barrier to taking forward community budgets, but rather that it will be an enabler and a complementary approach as we take forward community budgets around the country.
I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Procedure for appointment
Amendment made: 1, page 6, line 43, at end insert—
‘(ba) specifies the period for which the local auditor has been appointed,’.—(Brandon Lewis.)
Code of practice on local authority publicity
With this it will be convenient to discuss the following:
Amendment 15, page 26, line 25, leave out subsection (4) and insert—
‘(4) A direction can only be made by the Secretary of State if—
(a) evidence of a breach of a code has been published by the Secretary of State to the local authority;
(b) a local authority, on receipt of a letter from the Secretary of State notifying them of evidence which purports to demonstrate a breach of the code has made a response to the Secretary of State within 28 days; and
(c) upon receiving any response the Secretary of State has published a report detailing his conclusions.’.
Amendment 16, page 27, leave out lines 1 to 29.
Clause 39, to which the three amendments relate, includes provisions on local authority publicity that the Opposition strongly believe, and have consistently argued, are unnecessary, undemocratic and wholly disproportionate. The amendment, and the clause itself, covers all council publicity from newspapers to posters and even social media. We are gravely concerned that the Secretary of State is, in effect, through clause 39 making himself the censor-in-chief of local government communications.
Much attention has been paid to the Government’s gagging law, which attempts to silence civil society. It is less widely known that, through clause 39, the Government are trying to silence elected local councils. These new powers make the Secretary of State censor-in-chief of local government at the same time as evidence is emerging that his Department is encouraging councils to print pro-Government propaganda through the circulation of the very loaded pro-Government suggestive press releases that we have seen appear around the country.
Clause 39 will give the Secretary of State the power to dictate when and how councils can publish communications to local citizens. Of even more concern to us is the fact that the Secretary of State is taking a power of censorship to direct what issues and information councils can talk about and even what language and phraseology they can use. Ministers have made it clear that their intention is to prevent councils from sharing information or commenting on the impact of Government policy if they disapprove of the message.
In Committee, the examples given by the Minister and his Back Benchers included not allowing elected leaders of a local authority to publish a comment on the effect of central Government funding changes—so furious are the Government that councils are letting their residents know the scale of the cuts they are facing. Under these new powers, the Secretary of State could force councils to use pro-government terminology such as the benign-sounding “spare room subsidy” rather than the “bedroom tax”, which betrays how unpopular and unfair the policy is to many of the poorest and most vulnerable people—including many disabled people—in our communities. Legal advice to the Local Government Association says that these censorship laws would prevent councils from publishing information on issues such as HS2 or health service reconfigurations.
The Government argue that the power is needed because local authorities are breaching the current voluntary code on local authority publicity. Yet they have managed to find only one example of a breach; Tower Hamlets’ publication “East End Life”, which seems to the Opposition clearly to flout the code. It is absolutely shocking that the Government have failed to take any action, using the powers they already have, in more than three years since they became aware of the level of concern, including that reported by Labour councillors in Tower Hamlets. We agree with the Secretary of State that that publication is a problem, but we ask again why the Government have taken no action—no action at all. In fact, the Minister attempted to explain to me in an answer to a parliamentary question that it is because the Secretary of State has not done anything that he now believes that he needs to give himself these dictatorial powers. It is so extraordinary that one might assume that if councils knew the full extent of these plans, they would resist them.
Through several freedom of information requests, I discovered that the Department has not communicated with local authorities about the plans since May 2010. No councils have answered letters or e-mails in respect of their local publications on this subject. This is all being done behind local authorities’ backs.
At the same time as the Secretary of State is censoring councils and preventing them from saying things he does not like, he is seeking to use them as a propaganda arm of the central state. I have discovered that, through these press releases, the Government are seeking to trumpet their policies when it suits them to use councils in that way at the same time as they seek to silence them when council communications are inconvenient. The Secretary of State preaches localism rhetoric, but the truth is—we know this, and local government knows it, too—that he does not really like local democracy. Starved of funds and subject to diktats even on issues like when to collect the bins, local authorities are now subject to censorship. It is clear that the Secretary of State’s warnings of cigar-chomping commies looking to take over government were remarkably prescient.
The hon. Member for Mid Dorset and North Poole (Annette Brooke), who I see in her place, described these censorship laws as
“a sledgehammer to crack a nut”.—[Official Report, 28 October 2013; Vol. 569, c. 704.]
Liberal Democrat-run Cambridge city council says that the clause is “disproportionate and unnecessary”. It says it is
“quite at odds with the principles of localism”.
I asked the Secretary of State in a parliamentary question of 16 December to publish or place in the Library all the responses his Department received to the consultation it ran on local media. The Minister replied:
“I have placed in the Library of the House, a copy of the Government’s response to the consultation on ‘Protecting the Independent Press…’ which outlines the divergent views of councils and representatives of independent newspapers.”—[Official Report, 16 December 2013; Vol. 572, c. 444W.]
Because the Minister would not provide the information, I took the trouble of making a freedom of information request to local authorities themselves about their responses to the consultation on the publicity code. I then discovered that it was not only Cambridge city council that said it disagreed with the clause. Watford borough council, led by the widely respected elected local mayor, Dorothy Thornhill—she is not of my party, but she is someone I have worked with who has a good reputation around local government—says:
“These changes are a threat to local democracy. They could inhibit local elected members from representing their residents. Placing the ultimate decision-making powers in the hands of a Secretary of State is contrary to the localist agenda of the Government, and it is heavy-handed.”
It is not just Liberal Democrat councils either, because Conservative councils, too, are opposed. North Yorkshire county council says in its response:
“The proposed legislation is disproportionate”.
Tory-run North Somerset says:
“With regard to the proposed restrictions on the publication of council newspapers, we object strongly.”
Baroness Eaton said in the other place:
“This clause is unnecessary as there is no evidence that council publications are competing unfairly with local newspapers…the proposed measures in the Bill centralise powers to the Secretary of State and allow central government to interfere with matters that should rightly be decided at local level”.
Lord Tope, commenting on the lack of evidence to support the proposals on local authority publicity, said:
“All we have had from the Government is rather silly and misleading statements from the Secretary of State about ‘town hall Pravdas’”.—[Official Report, House of Lords, 22 May 2013; Vol. 745, c. 898-902.]
The Local Government Association, a cross-party but Conservative-led body, says:
“The powers are too wide ranging and do not allow councils any local discretion about how to engage with their residents. This is unnecessary and could allow the Secretary of State to interfere with the work of an elected council.”
The National Association of Local Councils, which has no political axe to grind, says these powers are “anti-localist”, fly in the face of localism and are
“a threat to local democratic accountability”.
Finally, let me cite the very considered words of the right hon. Member for Hazel Grove (Sir Andrew Stunell), the former Local Government Minister in the coalition Government. In Committee he said:
“Every Bill has high spots and not-so-high spots, and Clause 39 is one of those not-so-high spots.”––[Official Report, Local Audit and Accountability Public Bill Committee, 19 November 2013; c. 301.]
I have had the pleasure of working with the right hon. Gentleman in a previous role so I know that that is a typically understated remark from him. He then went on to challenge the Minister for assurances about the proportionality of any intervention, and the ability of councils to make representations with regard to how they are exercising discretion. However, far from giving reassurances, the Minister—and many of his hon. Friends, some of whom I see in the Chamber today—made us more rather than less concerned. Their political motivation was absolutely clear: they were frankly shameless about revealing that clause 39 was about silencing councils if they communicated with citizens about anything that the Government did not like.
The Secretary of State claims that the clause is needed to protect the press from unfair competition from advertising, but the recommended code of practice for local authority publicity contains no provisions relating to advertising. It is clear that the Secretary of State’s argument is a diversion from the real aim of censoring councils and their locally elected councillors. The National Union of Journalists disagrees with the Government’s contention that local authority publications are damaging to the press. Its general secretary has said that there is “no case at all” for the current Secretary of State
“and future Secretaries of State to be given extra statutory powers to decide when”
and how local authorities can communicate, adding:
“We do not believe that this element of guidance reflects the needs of many communities”.
The Minister will no doubt tell us that the Government ran a consultation in April 2013. That consultation was a classic example of things that cause the public at times to be very sceptical abut public sector consultations. It was, in fact, very much a “nonsultation”. Its outcome was so evidently predetermined, even by the loaded title “Protecting the independent press from unfair competition” and by the way in which it was launched. The Government, as if to confirm that impression—as if they had no regard to whether the public, or indeed local authorities, would consider that they had given any proper thought to the consultation—published their response within two days of the end of the consultation.
We have challenged the Government to give practical examples. As I have said, we acknowledged the issue about Tower Hamlets, on which they should have acted. Baroness Hannam said in the House of Lords that she had evidence involving other local authorities, yet she said—extraordinarily—that it would not be “helpful” to identity them. Asked to give examples, she said:
“I shall not say which local authorities…are breaching the code. I have them. I could do it, but I think it is…not helpful.”—[Official Report, House of Lords, 15 July 2013; Vol. 747, c. 604.]
In Committee, the Minister said:
“the fact is that there are examples out there.”––[Official Report, Local Audit and Accountability Public Bill Committee, 19 November 2013; c. 304.]
He then vaguely referred to four councils—Plymouth, Lambeth, High Peak and Nottingham, all of them Labour-run—which had had the temerity to inform the public of the unfair scale of the cuts imposed on them by central Government. Can Ministers not see that the kind of censorship that they are seeking to impose through clause 39 is not democratic, not British, and not worthy of the values that our Parliament should uphold? The motivation is petty, but the consequences will be very serious indeed.
Let me tell the House about the effect in my area. The Minister has suggested that a council publication in my constituency, the Nene Valley News, is competing unfairly with local papers. His ill-informed statements show why we should not trust the Government with these powers. The truth is that there is no newspaper for the Nene Valley News to compete with across much of east Northamptonshire—and now the only communications lifeline on which many people in the small towns and villages of my constituency can rely is being cut off. Those are people in areas with poor broadband access, and the demographic is such that, proportionally, there are fewer people in those areas than in some of the larger towns in the county who use social media widely, or even have access to the internet.
Three years ago, the Select Committee conducted an inquiry into the whole issue of local authority publications, and found absolutely no evidence of any impact on commercial newspapers. Indeed, one of our findings was that many local authority publications were published on the presses of commercial papers, thus providing them with important additional income.
My hon. Friend, who chairs the Select Committee, is right. I think that there is often a complementarity between the newspapers, news sheets and magazines published by councils and other local papers. There is often a considerable spin-off in the form of the relationship between the communications that councils promote through their papers about local events and community organisations, and how vibrant local newspapers are able to become in terms of, for example, the advertising revenue that they can create in relation to such community events and activities.
The Minister has claimed that the advertising in the Nene Valley News is the problem. First, it is not included in the code; secondly, I would gladly facilitate a meeting between the Minister and the local small businesses and traders who use the low-cost space in the Nene Valley News, and who are now extremely worried about how they will get business. I quoted one individual at length in Committee, but for brevity I shall merely say now that he concluded his remarks to me on this matter by saying, “Aren’t the Tories supposed to be a party that likes business?” He is very sceptical about the motivation for, and is concerned about the effect of, this crass, uninformed and undemocratic clause.
The clause will damage local democracy, because it will mean that local councils are not as able to inform and engage the public in their work. It will also damage community groups, scout organisations, local charitable organisations, small businesses and the food banks which, sadly, are needed in our communities, as they will not be able to publicise their activities through the local free sheet—through the local council. Many of my constituents have contacted me to tell me that they object to what the Government are doing. I hope that all hon. Members will want to support our sensible amendments, which are supported by the Local Government Association, and I urge the Minister to accept them. We have not sought to strike out clause 39 completely, although we question why it is necessary and argue that the Government should have taken action previously in relation to the code.
Amendment 14 seeks to make things more proportionate. Either the Secretary of State wants all councils to abide by the code or he wants to be selective. I am told that he wants to be selective, which makes me even more concerned. Amendment 15 seeks to delete the astonishing new subsection that sees the Secretary of State attempt to take editorial powers over all local government publications. The words in the Bill leap off the page, because it says he will take this power
“whether or not the Secretary of State thinks that the authority is complying with the code”.
The amendment would require the Secretary of State to publish evidence of a breach of the code.
I am surprised that the hon. Gentleman did not pick this up during our three Committee sittings on this clause, as we made it clear that we support the voluntary code. We have been able to agree on one example where there is clearly a question as to whether the code is being flouted, and it is a great shame that the Government have not seen fit to take any action in three years to enforce the code.
I am going to make some progress, because the hon. Gentleman spoke extensively on these provisions in Committee and made us more, not less, concerned.
Amendment 15 seeks to delete the astonishing new subsection I mentioned, to extend the time that the authority has to respond to evidence of a breach of the code to 28 days from 14, and, crucially, to require the Secretary of State to publish a report detailing his conclusions, having considered the response from the authority. That seems to us to be a very reasonable amendment that enshrines an evidential basis for taking any action in relation to the code. Amendment 16 seeks to delete the whole of proposed new section 4B, as we feel it is overly proactive meddling from the Secretary of State. We will seek to press amendment 15 to a vote. I hope that hon. Members on both sides of the House will consider it reasonable that if the Government must press ahead with these powers, there is at least a requirement for the process to be evidence-led, for councils to have the right to make representations and for the Secretary of State to publish his findings before any action is taken.
I end by asking the Minister, one more time, to try to persuade us that this approach is necessary by saying how he thinks that the Opposition, the cross-party, Conservative-led Local Government Association, Liberal Democrat-run and Tory-run councils all around the country, the National Association of Local Councils, the National Union of Journalists and my constituents in east Northamptonshire, who are so upset about the end of the Nene Valley News, are all wrong and he is right. Even if he still thinks he is right, can he explain, as someone who purports to be a localist, why it is right to impose central Government’s will? This clause is worthy of a crackpot dictatorship.
This is barmy. It is absolutely crackers that we are spending parliamentary time on this matter. I receive Hillingdon People from my Conservative-controlled local authority. On virtually every page, there is a picture of a smiling Conservative councillor pointing at something, standing on something or expressing some view. Interspersed with the smiling photographs is genuine information about what is happening in the local community. People tell me that the newspaper is an ideal size for lining a hamster cage, so it serves some useful purpose in the local area.
Today, the Government have announced the commission report on the expansion of aviation, which includes the threat to my constituency from the third runway. I have been assured that there will be cross-party opposition on my council to the Government’s proposals. We will use Hillingdon People to explain the proposals that have been introduced. We have used it in the past to explain the proposals of all political parties. Undoubtedly, views will be expressed by councillors on a cross-party basis condemning the commission’s proposals and, almost certainly, the Government’s approach. Does that mean that we will then be hauled before the Secretary of State to be advised on the words that we can use about this matter and on the way in which Hillingdon People will be used?
The one good thing about local newspapers is that they reflect local opinion. There might be an overbalance of photographs of a certain party, but for all that they are a useful tool in mobilising local opinion around a local issue, and they are campaigning tools for a local authority in genuinely reflecting the views of the local populace who elected them.
My local council has certainly consulted local people and supported local meetings to ensure that people can express their views on the extension of Heathrow. It has then reflected those views in Hillingdon People, and launched campaigns on the basis of what local people have said. At my last public meeting on this matter, a campaign called “Back Heathrow” was spuriously launched by the aviation industry to support Heathrow airport expansion. It was completely funded by Heathrow airport and run by its public relations agency. People then said to me that Hillingdon People should be used to put out accurate information, rather than the spurious propaganda that the airport was putting out. I am anxious that my local authority, which will go on the stump on this issue, may be debarred from using Hillingdon People to explain what its views are and to campaign against the expansion of Heathrow airport.
I would be grateful to the Minister if we heard his views. By the looks of it, he will now be the editor-in-chief of Hillingdon People, so I would welcome his views now before we put a foot wrong. Is it in order, under this Bill, for Hillingdon council to use Hillingdon People to campaign against Heathrow expansion and to disseminate information that will be opposed to the commission’s views and what seems to be the emerging view about a third runway at Heathrow?
I rise to speak against this Orwellian clause and in favour of the amendment tabled by my hon. Friend the Member for Corby (Andy Sawford). He is absolutely right to say that the Government are seeking to put the Secretary of State in the position of censor-in-chief. We live in the United Kingdom. I thought that the Government believed in freedom of speech and the free press, but it turns out that that is not the case when it comes to publications produced by local authorities. It is clear that the Secretary of State is setting himself up as some sort of Orwellian big brother figure. If the clause goes through, the Department for Communities and Local Government should be renamed the ministry of truth. It is all right for the DCLG to issue draft press releases praising the Government. As my hon. Friend the Member for Corby said, as long as local government is praising the policies of central Government that is okay, but if it has the temerity to point out that in some way what the Government are doing might have a negative impact on the communities that they represent, then woe betide them; that is not acceptable. When the Secretary of State seeks to take that kind of power to himself, we have to ask what kind of country we want to live in. This is completely wrong. Just look at the document—it could be a Tory hand-out. It has even suggested the headline that the local authorities might like to put on their press releases. It reads, “Pickles praises troubled families programme”—so, big up the Secretary of State, but, whatever you do, do not say anything that could be interpreted as negative.
My hon. Friend the Member for Corby pointed out that there is absolutely no evidence suggesting widespread abuse of the voluntary code. Indeed, we would be hard-pressed to find any example, let alone widespread examples, so this provision is completely over the top. We have talked about using a sledgehammer to crack a nut, but it is more like using a pile-driver to crack a minuscule nut. There is no example of any abuse. It is clear, therefore, that the Secretary of State is seeking to set himself up as the censor-in-chief.
In Committee, I challenged Government Members to come up with some examples of the abuses that merit this heavy-handed legislative response. The first out of the traps was the hon. Member for High Peak (Andrew Bingham), who came up with the ludicrous assertion that legislation is merited to stop a photograph of the Labour leader of his local borough council appearing in the council newspaper with a Labour party pen. A pen with the Labour logo on it was an abuse that merited legislation—talk about crackers, as my hon. Friend the Member for Hayes and Harlington (John McDonnell) said. It is unbelievable. We are talking about legislation to stop local authorities publishing their council newspapers, giving information to the local community about matters affecting them, and it is suggested that the Secretary of State should be put in charge because a Labour leader appeared in a council newspaper holding a pen with a Labour logo on it.
The hon. Member for High Peak must have scrutinised that photograph with a magnifying glass to be able to see the logo, let alone to suggest that it would influence people. He dug himself an even bigger hole by comparing it with product placement, which is banned on the television. He said that we do not see packets of cornflakes on the table in “EastEnders”. Crackers really does not cover it.
The hon. Gentleman is making some cogent points. If that photograph had appeared on a Member of Parliament’s website paid for by IPSA, IPSA would have banned it. I am not sure whether that helps or hinders his argument, but someone else would want to ban that logo placement.
With the greatest of respect, I think the hon. Gentleman is talking through his hat. I am not sure that IPSA would ban it. Is he telling me in all seriousness that that would happen if a Labour politician appeared on their website and happened to be holding a pen with a Labour logo on it? People would not be able to see it; it is ridiculous. In the Committee sitting, I had a pen with “League Against Cruel Sports” emblazoned on it. I held it up and challenged the hon. Member for High Peak to read what it said on the pen, because the scale would have been about the same as in the photograph in the borough newspaper. He could not see it; of course he could not. The hon. Member for Daventry (Chris Heaton-Harris) mentions IPSA, but that compounds the ludicrousness of the Government’s case. When the hon. Member for High Peak made the point, he was unable to read the logo on my “League Against Cruel Sports” pen and, in the same way, without a magnifying glass he would not have been able to see that the Labour leader had the temerity to hold a pen with the Labour logo on it.
The next out of the traps was the Minister, who referred to a poster. A poster in Lambeth was a bit critical of the Government—we can’t be having posters. The poster was, I think, on a bus stop—so far, therefore, a pen and a bus stop merit legislation.
The final Government Member out of the traps, as I recall, was the hon. Member for Burton (Andrew Griffiths), who quoted Councillor Western, the Labour leader of Derbyshire county council. She had the temerity to point out that the cuts being imposed by central Government would have “a devastating impact” on our communities. Well, that is a statement of fact. It seems that Members on the Government Benches do not want statements of fact if they are in any way, shape or form marginally critical of what the Government are doing, even though they are accurate. This really is Orwellian and merits references to the ministry of truth. I sincerely hope that any Government Member who believes in fairness, free speech and the freedom of the press will support my hon. Friend’s amendment.
I conclude by reinforcing the point made by my hon. Friends the Members for Hayes and Harlington and for Sheffield South East (Mr Betts), to which my hon. Friend the Member for Corby may have alluded as well—the fact that local council newspapers are in no way a threat to the local newspaper industry. I know from personal experience at a local level that Derby city council uses a local newspaper to print and publish its council news-sheet, so far from damaging the local newspaper industry it is having a beneficial impact.
I am the secretary of the National Union of Journalists group in Parliament. There needs to be a discussion between Departments. We are working with the Department for Culture, Media and Sport and will hold a seminar in the new year to discuss how we ensure that all Government Departments can assist in the development and support of the local press. A Member on the Government Benches suggested publishing local material in the local media or on a wrap-around basis, which would support the print industry and the local press.
Indeed. There is a happy partnership between many local authorities and the newspaper in their local area. It is a significant overstatement of the truth to suggest that local authorities producing their newspaper are in any way responsible for the decline in the local newspaper industry. Many other factors, not least access to online information, are responsible for the decline. What the Government seek to do will not arrest that decline and might make matters worse. The truth is that, where there is a partnership with the local newspaper serving the local authority area, limiting the number of times the council can produce information through its newsletters will diminish the local newspaper’s income stream. Far from assisting local newspapers, the Government will add to their decline. I hope the Minister will reflect on that.
My hon. Friend the Member for Hayes and Harlington referred to his connection with the NUJ. Let me quote the National Union of Journalists’ response to what the Government propose. As my hon. Friend the Member for Corby said, in many areas where there is no local newspaper, local people rely on the council publication for useful information and would regret the Government decision to limit the council’s ability to produce that for them. The NUJ says:
“In areas where there are no, or limited local newspapers, then sharing planning details, service changes and details of consultations on a quarterly basis is insufficient”.
It is clear that there is no evidence to support what the Government want to do. The amendment—this is pretty unprecedented, in my experience—is supported by the Local Government Association, a Conservative-led body. It is very rare for the LGA to come out and support an Opposition amendment. It is also supported by the National Association of Local Councils, the National Union of Journalists and members of the general public. It is hard to find anybody who has a good word to say about this Orwellian clause, save for a handful of hard-line Conservatives on the Government Benches.
I implore the Minister, if he has any semblance of concern for the feelings of the public or the wishes of the Tory-led Local Government Association, and if indeed he genuinely believes in a free press and freedom of speech, to support amendment 14, because that would be in the interests of freedom of speech and of the general public, ensuring that they have the information they need about services and other activities in their local area provided by the council. I hope that he will reflect on that and support the amendment.
I rise to support amendments 14 to 16. Nothing is more likely to get the blood rising in the body of a journalist, even one who has not worked in mainstream journalism for half a lifetime, than the idea that someone wants to interfere in the message they are trying to deliver to their readers. That was my reaction when I first heard about the Secretary of State’s ambition to become editor-in-chief of all council publications, from city authority newspapers to parish council newsletters.
I spent many a happy year working as a journalist in the local and regional media and then in the communications industry for a blue-chip company. I never experienced any real interference, and certainly nothing like the level that the Secretary of State wants. Likewise, in my 20 years as a councillor, first for Cleveland county council and then for Stockton-on-Tees borough council, I never saw the abuse of power through publications of which the Secretary of State appears to be so terrified. It will therefore come as no surprise that, as a former journalist and councillor, I have particular concerns about clause 39, which gives the Secretary of State the power to direct local authorities to comply with a specific code of conduct relating to their publicity materials.
If the Bill passes in its current form, as other Members have said, the Secretary of State will be appointing himself editor-in-chief of Local Government Inc. and assigning himself carte blanche to intervene, irrespective of whether he believes a local authority is complying with the code of practice. So that we are clear about the extent and reach of the proposed powers, I will explain that clause 39 would apply to all local authority publicity material, including newspapers, such as the quarterly Stockton News in my constituency which is delivered to so many residents across the borough to keep them informed about services and what is going on in the local authority area. It would apply to posters advertising the many events, schemes and projects that local authorities promote for the benefit of their citizens. It would also apply to the social media updates that local authorities provide to ensure that residents have up-to-date information.
As an aside, I would be fascinated to know how the Secretary of State plans to monitor the thousands of communications emanating from councils across the country every day. Does he have plans for an army of Twitter monitors, Facebook spies and online assessors to ensure that there can be no challenge to his authority? Of course not, so perhaps the Minister can explain just how that brave new world will be policed.
The powers proposed in clause 39 are entirely disproportionate and represent a stubbornly heavy-handed response, as the Government have identified only one example of a local authority apparently abusing its position. Even in that instance, as other Members have said, the local authority involved has denied the accusation of contravening the Government’s current code of recommended practice. I agree that any political bias would be unacceptable in local authority publicity, and the code of conduct requires objectivity, even-handedness and appropriateness. That much is beyond contention. It was with that in mind that we encouraged the Government to take action in cases where possible breaches are identified in order to ensure neutrality and fairness. However, as my hon. Friend the Member for Corby (Andy Sawford) has said, the Government have not even written to the local authority in question about the publication. I must therefore question whether the Secretary of State truly believes that a breach has been committed.
It is also worth repeating that, as my hon. Friend the Member for Corby said, through a series of freedom of information requests it has been established that, since coming to power in May 2010, the Government have not contacted a single local authority to express concern about potential breaches of the code. Perhaps they can tell us how many they expect to contact in the future under the new proposals. Assuming that the Government are implementing the current code of practice in full, we must take it from that that few councils, if any, are breaking existing recommendations. All of that prompts the following question: why fix something that is not broken?
When we bear these factors in mind, the context of the Secretary of State’s attempted power-grab politics becomes abundantly clear. With the lobbying Bill currently seeking to limit the campaigning that third sector and voluntary organisations are able to undertake, it appears that the unpopularity of the Government’s policies has begun to sink in. Is the Secretary of State really heading up a damage-limitation mission to control how local authorities communicate the politically toxic effects of the Government’s policies to their local communities merely by explaining the changes and cuts that they need to make?
We know from copies of the template press releases that the Department has issued to local authorities’ press teams that they encourage bias as they frame Government policy in what could only be described as positive terms. Does this mean that the Secretary of State will have to punish one of his own Conservative-led councils for being politically biased for printing material from his own Department? This illustrates the absurdity of his proposals and reveals an outrageous double standard, if ever there was one.
Clause 39 not only grants to the Secretary of State the ability to determine when and how local authorities can publish communications to local residents but assigns to him the ability to dictate the issues and information that they can communicate as well—perhaps an ideal set of circumstances that would put him on a par with the Rupert Murdochs of this world. Why does he not just ban all the newspapers, ban all the publicity and ban all the posters? It would have the same effect. If that were not extreme enough, he is similarly assigned the ability to control the language and phraseology that local authorities will be permitted to use. Perhaps the Government will manage to rid the public of the bedroom tax after all, but changing the words will not change the devastating effects that his policies are having on some of our most needy people.
I am sure that the significance of this move, coming as it does so soon after the intense debates that have been had on the topic of press regulation and the need to remove the risk of political interference and maintain the sanctity of free speech, will not be wasted on Members on both sides of the House. I am minded to ask the Secretary of State whether, were he to assume these new powers, his reformulated role would be compliant with the spirit of the royal charter in providing the public with better protection from press abuses while upholding the freedom of expression that is so central to our democracy. Surely those provisions should apply to him as well. A new term has been coined for him this afternoon—the censor-in-chief—which is certainly what he will be with these powers.
In short, such wide-ranging powers will disfranchise local authorities, removing any semblance of their discretion over communications with residents. Let us not forget that local authorities have a responsibility to represent those residents and to provide services for them, and that transparency and accountability are fundamental cornerstones of that duty. Were an authority unable to protect the interests of its residents, it would unquestionably be failing in its duties.
Given the Government’s agenda for the national planning policy framework, the plans before us appear to undermine their express goal of empowerment for local residents and fly in the face of their professed localism agenda. Members need not just take my word for it. Baroness Eaton, the former Conservative leader of Bradford council, has described as “regrettable” the proposal in the Bill that will
“centralise powers to the Secretary of State and allow central government to interfere with matters that should rightly be decided at a local level.”—[Official Report, House of Lords, 22 May 2013; Vol. 745, c. 902.]
Ministers have already made clear their intention to prevent local authorities from sharing information or commenting on the impact of Government policy if they disapprove of the message. That would inevitably have the effect of gagging local authorities in contentious policy areas. To give an illustrative example, a piece in Stockton News entitled “Challenging Times”, published earlier this year to inform residents of upcoming service changes, would be unlikely to make it past the Secretary of State’s red pen unscathed, referring as it does to
“a time of unprecedented reductions in Government funding to the Borough as a result of the Government’s austerity measures.”
The Secretary of State might not like the fact that Stockton borough council’s funding will have fallen by 40% between 2010 and 2016, but that is precisely what it is—a fact. We are talking about facts—political, maybe, but not politicised. That is crucial to the argument for upholding the freedom of speech. I should also make the point that, as far as Stockton News is concerned, no politicians, with the exception of the civic mayor, ever write or comment in it. The publication does not even quote them or publish pictures of them.
Local authorities often work with residents, community groups and MPs to promote the best interests of residents in matters such as the siting of local health provisions and national infrastructure developments. If the Government’s proposals pass, the Secretary of State could use clause 39 to block such collaboration, ultimately to the detriment of residents.
Let us not forget that local authorities are already required by statute, in the shape of the Local Government Act 2000, to have regard to the contents of the publicity code, and should the Secretary of State have reason to believe that a local authority has failed to comply with a statutory obligation, he is able to intervene by seeking judicial review. The Secretary of State has failed to detail why he deems current provision to be inadequate or to explain why he has yet to apply any of the current powers. Instead he has argued that clause 39 is needed to protect the local press from unfair competition for advertising, but he has not told us how the situation is unfair.
Time and again, the Secretary of State overlooks some essential points, not least that the recommended code of practice has no provisions relating specifically to advertising, other than to specify lawfulness. This suggests to me that this particular argument is but a distraction from the underlying aim to censor local authorities and their elected councillors.
The nonsense of the suggestion is best borne out by the Communities and Local Government Committee report, which declared—others have already alluded to this—that there is no evidence that council publications are competing unfairly with local newspapers. Indeed, far from unfair competition, the obligation on local authorities to publish statutory notices actually results in local authorities paying the commercial newspaper industry some £26 million a year. Taking into account total spend, including general advertising, local authorities spend nearly £44 million a year with the commercial newspaper industry, which blows the Secretary of State’s argument out of the water.
As I have made clear, I can see no reason to move away from the current code of recommended practice to an unnecessarily heavy-handed, regulated system entrenched in legislation. We simply cannot hand full editorial control—because that is what this will mean—to one person for his own political motives. For that reason, I support amendments 14 to 16.
First, let me be clear that good communication between a local authority and the public is important. Let me also be clear that what clause 39 delivers is a manifesto pledge by both coalition parties. Local authority publicity can be expensive and it can be controversial, so it is important that local authorities get it right.
In Committee I outlined our intentions and explained exactly what the clause seeks to achieve. We should be conscious of the fact that localism is about empowering local people to be able to challenge and see, transparently, what their local authority is doing. This is about true localism and making sure that we are also able to do our bit to defend the independent local press.
The code of recommended practice on local authority publicity ensures that publicity is, among other things, cost-effective, objective, even-handed and appropriate, and Labour Members have agreed in principle with the voluntary code. It ensures that taxpayers’ money is not wasted on issuing inappropriate publicity or publicity that political parties themselves should be issuing, rather than a local council using taxpayers’ money to do it. The code has been in place since 2011. It was debated and approved by both Houses of Parliament.
The Minister is right to say that the code seeks to prevent money being used on things that are politicised, but does he not see that his argument is not consistent with a Department that is sending out puff pieces about its Secretary of State for local authorities to issue?
I suspect that deep down inside, the hon. Gentleman—we almost became hon. Friends in Committee—probably realises that there is a world of difference between a template press release sent to independent local journalists and a municipal taxpayer-funded newspaper that takes away the competition of a local independent press. None of the provisions in the Bill makes any changes to the publicity code.
Let me give a very clear example of how the process might work for a local authority publishing a weekly newspaper—such as Nene Valley News, which was mentioned by the hon. Gentleman—in direct competition to the local independent press that is so important in holding councils to account. Under the provisions, the Secretary of State, after advising the local authority that he intends to do so and giving it time to make any representations it wishes—such as that there is no other local paper—may, if he thinks fit, issue a direction requiring that the local authority comply with some or all of the code, but particularly, let us say, the part advising local authorities that council newsletters should be issued no more than quarterly. If the Secretary of State considers that a group of local authorities, or even all local authorities in England, should be required to follow the guidance in the code, he must of course make an order, which would need to be debated and agreed by both Houses of Parliament.
I suggest that the hon. Gentleman looks at Hansard for the reports of our proceedings in Committee, where we outlined the evidence—including from the Newspaper Society, which complained about exactly that issue—particularly, as was noted, in relation to Tower Hamlets.
Amendment 14 confuses the very clear and necessary provision that the Secretary of State may direct a local authority to comply with some or all of the publicity code. The amendment would achieve little in practice, as the Secretary of State may of course issue more than one individual direction. Amendment 15 would also be far from beneficial. It would add layers of complexity and bureaucracy to what should be a straightforward procedure to allow the Secretary of State rapidly to address incidences of the guidance in the code not being observed.
No, I shall make a little progress. The hon. Gentleman was keen to make progress during his speech.
Any local authority that already—rightly—complies with the guidance in the code would be wholly unaffected by a direction. Amendment 15 would remove sensible, proportionate measures and put in place a gold-plated bureaucratic process that requires the publication of not one, but two reports by the Secretary of State, all while taxpayers’ money might continue to be wasted.
Amendment 16 seeks to remove the provisions to ensure that a group of local authorities, or all local authorities in England, comply with the guidance in the code. We have sensibly decided to make provision for the Secretary of State to require compliance with the code not only by an individual local authority, but by a number of them or even, if necessary, by all local authorities in England.
The Secretary of State can issue an individual direction to an authority, but to require a group of local authorities or even all local authorities in England to comply with the code, the Secretary of State must make an order subject to the agreement of both Houses of Parliament. That was a recommendation of the Delegated Powers and Regulatory Reform Committee, and we were happy to amend the Bill to give effect to it. Amendment 16 would quite wrongly undo the power and the recommendation, leaving a ridiculous situation in which if the Secretary of State wanted to act to address widespread non-compliance by a group of councils, he might have to issue hundreds of individual directions. The amendment would also remove parliamentary scrutiny of the process.
We are obliged to make the provisions because although the vast majority of local authorities comply with the code, a very few do not; we accept that there are very few. It is to address that abuse of council resource and waste of taxpayers’ money that we have rightly decided to act. The provisions are important, proportionate and necessary.
The Minister is making some sweeping comments. I would be interested to know whether he can tell us of one local authority that the Secretary of State has found it necessary to take action against under the existing code, which is adequate for the purpose that he is outlining? I think we already know the answer.
I am sure that the hon. Gentleman will have done his homework and will realise that for the Government to take action under the voluntary code, there would have to be a long and expensive judicial review.
The provisions are the right way in which to move forward so that we can enforce the code effectively, efficiently and swiftly. It is slightly baffling that the Opposition claim that they have no problem with the voluntary code agreed by Parliament and support it, but do not want it to be enforced. That just does not make sense, has no credibility and does not add up. The provisions ensure that we can protect the good, local independent press, and that taxpayers’ money is used efficiently and effectively, and not wasted on town hall Pravdas. I encourage hon. Members to resist the amendments.
What a shocking response. We will not press amendments 14 and 16, but we will press amendment 15 to the vote.
Amendment 15 would place a very simple expectation on the Secretary of State: that he would act on the receipt of evidence, that he would share that evidence with the local authority and that he would ask it to comment. As the Minister says, these matters should be subject to local discretion as well as to national direction. The Secretary of State would simply have to say, in taking enforcement action against a local authority, that he had found a breach of the code. It would be incredibly simple, straightforward and right to make that amendment if the Secretary of State feels that it is necessary to take these extraordinary powers, even though we do not.
The Minister’s response, as at each stage of the passage of the Bill, has made us far more concerned, not less, about the intention behind this very worrying and deeply anti-democratic clause.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 15, page 26, line 25, leave out subsection (4) and insert—
‘(4) A direction can only be made by the Secretary of State if—
(a) evidence of a breach of a code has been published by the Secretary of State to the local authority;
(b) a local authority, on receipt of a letter from the Secretary of State notifying them of evidence which purports to demonstrate a breach of the code has made a response to the Secretary of State within 28 days; and
(c) upon receiving any response the Secretary of State has published a report detailing his conclusions.’.—(Andy Sawford.)
Question put, That the amendment be made.
With this it will be convenient to discuss the following:
Government amendments 7 and 8.
Amendment 18, page 31, line 2, at end insert—
‘(17) The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.’.
Government amendments 9 to 11.
Our amendments are precautionary measures to remove the risk of local authority budgeting being adversely impacted in the event of a delay to the Bill taking effect. Clause 41 currently provides that the council tax referendum calculations will take account of levies from 1 April 2014. The referendum principles, which we intend to publish in draft very shortly, will be put to this House for approval in February as normal. Those principles will take account of levies, but will be subject to the will of Parliament and the Bill, which will have come into force by then.
The amendments have a relatively simple effect. Together, amendments 6, 9, 10 and 11 provide that if the Bill is passed by 5 February—the likely date by which the referendum principles must be laid before Parliament—the provisions in clause 41 will take effect immediately and the changes to the referendum provisions will take effect for the 2014-15 financial year. Otherwise, the changes will take effect by order from 2015-16. There is no reason to believe that the provisions will not be in force before the referendum principles are approved, but we are tabling this group of amendments to give local authorities advance certainty over timings so that they can be confident that any delay in Parliament would not impact on their budget-setting timetable.
Amendment 7 is a minor amendment clarifying that the clause does not alter the existing discretion of the Secretary of State when determining categories of authority for 2014-15. Amendment 8 addresses the ability of the Secretary of State to determine categories of local authorities on the basis of whether their 2013-14 council tax increase would have been excessive had levies been taken into account. The clause puts this existing ability beyond question and does not extend it further. Similarly, the amendment does not extend that existing ability, but updates the references to increases in 2013-14 to include references to increases in 2014-15, should the provisions take effect from 2015-16. The current transitional provisions in subsections (14) to (16) ensure that council tax comparisons between 2013-14 and 2014-15 are made on a like-for-like basis. An amendment must be made to ensure that this protection for authorities still exists if levies are to be included from 2015-16. Subsections (18) to (20) in amendment 8 provide that protection.
In summary, these amendments are precautionary measures only and, apart from clarifications and restatements of existing legislation, have one purpose: to ensure that in the event of any unpredicted delay, local authorities will continue to be treated consistently and to benefit from the transitional protections already in the clause.
Our amendment 18 would give the Secretary of State some discretion to prevent any unintended consequences arising out of the levy changes from affecting city deals. The amendment states:
“The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.”
We are concerned that the provisions to include levying bodies could affect those city deals that have been agreed around the country.
The provisions would, for example, affect the deal in which the Leeds city region has been promised a large investment fund that is to be part-funded by the increased levy from the integrated transport authority. The deal was done in the expectation that the current rules would apply—that is, that the integrated transport authority levy would not be included in the calculation. Will the Minister clarify that, at the time the city deal was signed, there had been no discussion about changing the rules on levying authorities? The answer to that must surely be no. Had the Government known that they intended to make these retrospective changes, it would only have been right to inform the authorities that that city deal could be undermined by the changes on levying made at a later date. All local authorities are important, of course, but those that are leading our major cities and trying to work in partnership with the Government could understandably think that there had been a breach of faith in this regard.
It strikes me that the same argument could apply, in principle and in practice, to the internal drainage boards, which work in partnership with the Environment Agency. They are worried that being included in the referendum provision could lead to their being unable to do the essential drain clearing that helps with flood alleviation. My hon. Friend is making his point well. Does he agree that this could also apply to the internal drainage boards?
My hon. Friend is absolutely right. This group of amendments on levies would have significant implications for internal drainage boards. There was a specific amendment on them, but it has now been withdrawn. However, the other amendments will affect the boards just as they will affect other bodies that apply levies. I know that my hon. Friend considers this to be an important matter; he is an expert on matters affecting our rural communities and, in particular, on flooding. If a local authority felt the need to take urgent action—or, indeed, long-term action—on flood defences, I think we would all be concerned if that ability were to be undermined by the provisions in the Bill. I will return to that issue in more detail later.
Leeds city region has written a letter to the Deputy Prime Minister to raise concerns about the clause, and it gives us a new insight that we did not have in Committee. The city region is concerned that including levies within the ambit of a calculation to hold a referendum on annual increases in council tax could result in it having to hold
“up to 60 referendums, with the Combined Authority not being in a position to know whether its investment programme was affordable until all referendums had been passed.”
Is the Minister aware of that concern, and does he recognise those possible implications? A critical element of the Leeds city deal is the local contribution fund. The Leeds city region believes that the Bill, as it stands, will make the fund “impossible to deliver”, because it could trigger up to 60 referendums a year and the authority might have to conduct such referendums over a period of five years.
In Committee, the Minister said that the figures provided thus far did not make a compelling argument for treating city deals differently. Does he agree, however, that these new figures from Leeds city region should make us think again and support a clause that does not require the Secretary of State to make exemptions but, rather, merely permits him to do so?
The Minister might well be proved right; this might not become an issue. Leeds city region clearly believes that it will, however. If that were to happen, would it not be in everyone’s interests if the Secretary of State could make a judgment to exempt the levies? It would be in the Government’s interest, in terms of their good faith in negotiating the city deal. It would also be in the interests of the city regions around the country, particularly Leeds city region, which has expressed so much concern.
If a council tax referendum were lost and the levying body refused to reduce its levy, what would the Minister expect a local authority to do? Under the Bill as it stands, a levying body would not have to abide by the result of a referendum, should one be triggered and subsequently lost. In effect, therefore, the financial risk would be on the local authority regardless of whether the increase in council tax was a direct result of its financial decisions. That cannot be fair.
The provisions are retrospective. The Minister told us on Second Reading and in Committee—his noble friend Baroness Hanham told their lordships—that the provisions are not retrospective. They clearly are. The Local Government Association is absolutely clear in its analysis of the effect, as are Labour Members. Clause 41(15) allows the Secretary of State to apply changes retrospectively. He will be able to impose a different referendum limit on authorities where their council tax increase for 2014-15 would have been excessive under the new definition, but not under the current definition. This is not fair on those authorities that have taken decisions in good faith based on the legislation in place at the time. There is no difference in principle between Labour Members and the Government on the intention to protect citizens and residents of our local councils from excessive council tax increases. Indeed, councils such as Hackney have been freezing their council tax for many years and setting an example, as other Labour councils have done, but we would not want to see an unfair retrospective provision that undermines the plans that local authorities have put in place.
There is clearly a risk of perverse outcomes that will put growth-generating investment at risk. Levying bodies are, by statute or local agreement, able to recover some or all of their costs by charging local authorities a fee for infrastructure or services. Local government in England is subject to a variety of different levying arrangements covering significant and regionally important issues such as transport, drainage—the point my hon. Friend the Member for Ogmore (Huw Irranca-Davies) made—and a wide range of other local issues. There is enormous scope for perverse outcomes in our communities from these provisions.
There are a number of examples where the extension of council tax referendums will cause instability and uncertainty—not just the Leeds example, but many other areas around the country where plans have been made on a different basis from the legislation that is now being proposed. On integrated transport, the implications in west Yorkshire, for example, are that if the referendums were lost, it would put at risk £750 million of investment and 20,000 new jobs; these are very significant consequences.
Under the Bill’s provisions, an internal drainage board that needed to take emergency action to manage flood risk may be denied the capacity to do so by the outcome of a referendum. These boards may also be unable to support wider central Government objectives because the changes might limit their ability to levy funding to invest in flood defences. Participants in the work that Sir Michael Pitt did a few years ago in response to some of the most severe flooding we have seen in this country were left scratching their heads as to how, at a time of public sector financial constraint, we would meet the challenge of ensuring that there are effective flood defences. We know that some of the poorest and most vulnerable people are the most exposed to flood risk around the country. There are issues with insurance, for example. One of the sensible ways in which we were able to take this forward was through the drainage boards and the work they were able to do. That could now be undermined.
My hon. Friend illustrates the point very well. It is only a couple of years ago that we had extensive flooding in the south-west of England. One of the consequences of that was the need to do emergency work very rapidly on the drainage channels there. The levies paid through IDBs are very well supported by those communities that need them for flood alleviation.
My hon. Friend has considerable expertise in this and he is right. If a drainage board needed to take emergency action, clearly it would not be in the interests of communities—the very people who, during a cost of living crisis caused by the Government, we agree we want to protect from excessive council taxes—to leave them exposed to flood risk if we know that we can take emergency action to address that.
There are issues with pension authorities, particularly in some metropolitan counties and in London, which operates the legacy pension schemes of the Greater London Council. As with the rest of the local government pension scheme, there is little control over the costs of these, which are increasing with each successive valuation. Indeed, more levying bodies may be created in the future as a consequence of the pension governance reforms that the Department is considering.
In short, these proposals have not been thought through. We do not disagree with the fundamental intention behind them—to keep council tax down—but we do disagree about how they are being introduced, without further thought or consultation, and particularly about some of the issues that arise from retrospection as it affects drainage boards and city deals. We would urge the Government to go back to the drawing board. With the leave of the House, we will seek to press amendment 18 to a vote.
Before dealing with amendment 18, let me touch on the issue of internal drainage boards, which some hon. Members have raised. IDB levels are not being singled out. This Bill will ensure consistent and fair treatment between all local authorities.
I shall now turn directly to amendment 18, which relates to local authorities that have collectively entered into “city deals”—agreements with the Government on additional freedoms and financial certainties in order to promote local growth and skills—before the Bill’s commencement. This area was touched upon on Second Reading and debated in more depth in Committee, where the hon. Member for Corby (Andy Sawford)was content to take away and consider the clarifications and assurances I gave in response to a similar amendment.
Since this amendment has been tabled, I am happy to repeat some of the points discussed in Committee and to provide hon. Members more widely with any further expansion I can give. Although the amendment would have a wider effect, I understand that its intent is to address a single specific case—that of the Leeds city region deal— where there are plans to create a transport investment fund that would allow about £1 billion to be raised from grants, contributions from stakeholders and borrowing. Repayment of that borrowing will be met by the constituent authorities via modest increases in the transport levy over the next decade. This arrangement is novel. It will provide much-needed investment in the region and remains an arrangement that the Government are committed to and happy to support. However, the figures generated by Leeds and the other authorities taking part show that if those levy increases were passed straight on to local taxpayers in the form of higher bills, it would be affordable without the need for a referendum. It would amount to an increase of between 0.2% to 0.9% per year.
I understand the Minister’s point, which he made in Committee. It is a fair point, but does he accept that the consequence would be to restrict the ability of local authorities across that area, in a way that they never imagined, to raise council tax in a way that local authorities outside the city deal could? The amount that would trigger the referendum would mean that they were limited?
I will come on to that very point in a few seconds.
I have to say that there is no basis for suggesting that these levies would result in authorities being forced to hold referendums. Given the relatively small increases involved, I would urge those authorities to freeze their council tax instead and take advantage of the grants we are making available to support them in doing so, thus holding down council tax for hard-working people.
Let me gently suggest to Labour Members that this is an area where the facts do not support the claims being made. It is right for the Opposition to test and challenge the statements of the Government of the day, but where there is shown to be no basis for criticism, we should move on and focus our attention elsewhere. In this case, we are proceeding over ground already debated several times here and in the other place, and the figures involved are not disputed by the Opposition or the authorities themselves. However, in the same manner as for any other authority, if Leeds, Bradford or any other council wishes to make representations about how the proposed referendum principles will apply to their particular circumstances, the Secretary of State would take them into account when asking the House to approve the final principles in 2014.
I am listening carefully to the Minister and I am genuinely probing because this is a matter of concern. Can he give a categorical assurance that where emergency funding is needed for an area, as advised by an IDB, it would trigger the referendum and would not delay the essential work being done? Can he give that categorical assurance and, if so, how?
The hon. Gentleman makes a cogent point. My constituency of Great Yarmouth has been heavily affected by the east coast weather, with 9,000 evacuations and some homes lost in Hemsby, where the community is working phenomenally well together. What happens in the event of floods or other major disruptive events is that the Government look to support authorities facing major unexpected problems in the usual ways—through the building scheme, for example, or other appropriate bespoke approaches. Inclusion of levies in council tax legislation will have no effect on those procedures.
I want to make some progress, but I am happy to talk to the hon. Gentleman further about Bellwin.
The other claim made in Committee and on Second Reading was that the Government were reneging on their agreements with authorities and that they gave their approval for large council tax increases as part of the Leeds city deal. That is not correct. The Leeds city deal was not agreed on the basis that it meant large council tax increases for local people or on the basis of denying them their say if Leeds or other authorities wished further to increase council tax—for instance, to increase investment and go beyond what is set out in the deal itself. That could happen only so long as local taxpayers, who will have to bear the burden, are willing to accept it. It is a matter for them. With those reassurances, I hope that the hon. Member for Corby will not press his amendment to the vote. If he does, I encourage Members to resist it.
Amendment 6 agreed to.
Amendments made: 7, page 30, line 37, after ‘may’, insert ‘, in particular,’.
Amendment 8, page 31, line 2, at end insert—
‘(17) Subsections (18) to (20) apply (and subsections (14) to (16) do not apply) if this section comes into force on a day appointed by the Secretary of State by order under section 49(2A).
(18) Section 52ZC of the Local Government Finance Act 1992 applies with the following modifications to the determination of a set of principles for the financial year beginning with 1 April 2015.
(19) The Secretary of State may, in particular, determine categories of authority for that financial year—
(a) on the basis of whether an authority’s relevant basic amount of council tax for the financial year beginning with 1 April 2013 would have been excessive if that amount for that year and for the immediately preceding financial year had been determined under section 52ZX of the Local Government Finance Act 1992 as amended by this section,
(b) on the basis of whether an authority’s relevant basic amount of council tax for the financial year beginning with 1 April 2014 would have been excessive if that amount for that year and for the immediately preceding financial year had been determined under that section as so amended, or
(c) on the basis set out in paragraph (a) and on the basis set out in paragraph (b).
(20) In subsection (3)(b) of section 52ZC the reference to an authority’s relevant basic amount of council tax for the financial year immediately preceding the year under consideration is to the amount that would have been calculated by the authority for that year under section 52ZX of the Local Government Finance Act 1992 if the amendments made to it by this section had been in force for that year.’.—(Brandon Lewis.)
Amendment proposed: 18, page 31, line 2, at end insert—
‘(17) The Secretary of State may, by Order, exempt from the calculation of an authority’s basic amount of council tax any levies agreed as part of a City Deal signed prior to this Act receiving Royal Assent.’.—(Andy Sawford.)
Question put, That the amendment be made.
Interpretation of Act
Amendment made: 2, page 34, line 19, at end insert—
‘(2A) References in this Act to provision made under it include provision made under Part 42 of the Companies Act 2006 as it has effect by virtue of Schedule 5.’.—(Brandon Lewis.)
Amendments made: 9, page 36, line 3, leave out ‘and’ and insert ‘to’.
Amendment 10, page 36, line 5, at end insert—
‘(2A) If this Act is passed before 5 February 2014, section 41 comes into force on the day on which this Act is passed; otherwise that section comes into force on such day as the Secretary of State may by order appoint.’.
Amendment 11, page 36, line 8, leave out paragraph (a).—(Brandon Lewis.)
Amendment made: 3, page 42, line 36, leave out paragraphs (a) and (b) and insert
‘that is wholly in England’. —(Brandon Lewis.)
Further provisions about Auditor Panels
Amendment made: 4, page 47, line 5, after ‘authority’, insert
‘other than a health service body’.—(Brandon Lewis.)
Eligibility and Regulation of Local Auditors
Amendment made: 5, page 58, line 3, leave out sub-paragraph (3) and insert—
‘(3) For paragraph 6 (holding of appropriate qualification) substitute—
“Holding of appropriate qualification
6 (1) The body must have rules to the effect that an individual is not eligible for appointment as a local auditor unless the individual—
(a) holds an appropriate qualification,
(b) is an EEA auditor who has passed an aptitude test in accordance with sub-paragraph (3), unless an aptitude test is not required (see sub-paragraphs (4) and (5)), or
(c) has been authorised to act as a local auditor by the body pursuant to the European Communities (Recognition of Professional Qualifications) Regulations 2007 (SI 2007/2781), and complies with the requirements of those Regulations that apply to a person acting as a local auditor.
(2) The body must have rules to the effect that a firm is not eligible for appointment as a local auditor unless—
(a) each individual responsible for local audit work on behalf of the firm is eligible for appointment as a local auditor, and
(b) the firm is controlled by qualified persons (see paragraph 7 below).
(3) The aptitude test—
(a) must test the individual’s knowledge of subjects—
(i) that are covered by a recognised professional qualification,
(ii) that are not covered by the professional qualification already held by that individual, and
(iii) the knowledge of which is essential for the pursuit of the profession of local auditor;
(b) may test the individual’s knowledge of rules of professional conduct;
(c) must not test the individual’s knowledge of any other matters.
(4) No aptitude test is required if—
(a) the individual is to provide services consisting of local audit work on a temporary and occasional basis, or
(b) the subjects that are covered by a recognised professional qualification and the knowledge of which is essential for the pursuit of the profession of local auditor are covered by the professional qualification already held by the individual.
(5) Whether the provision of services is on a temporary and occasional basis is to be assessed on a case by case basis and in particular by reference to its duration, its frequency, its regularity and its continuity.
(6) A firm which has ceased to comply with the conditions mentioned in sub-paragraph (2) may be permitted to remain eligible for appointment as a local auditor for a period of not more than three months.”
(3A) In paragraph 7 (meaning of control by qualified persons)—
(a) in sub-paragraph (1) (introductory), for “paragraph 6(1)(b)” substitute “paragraph 6(2)(b)”, and
(b) in sub-paragraph (2)(b)(i), (requirement for firm to be eligible for appointment as statutory auditor), for “statutory auditor” substitute “local auditor, or as a statutory auditor in accordance with this Part of this Act as it has effect apart from its application by virtue of Schedule 5 to the Local Audit and Accountability Act 2013.”’.—(Brandon Lewis.)
I beg to move, That the Bill be now read the Third time.
Let me begin by thanking the members of the Public Bill Committee, who did such an excellent job in ensuring that the Bill was subjected to thorough scrutiny. We benefited from the wide range of experience that a number of colleagues from all parties had of working in and being part of local government and I thank them for committing their expertise to the Bill.
In particular, I should like to thank the hon. Member for Corby (Andy Sawford), who fulfilled his commitment to give the Bill robust but fair scrutiny. In the other place, Lord McKenzie commented that audit is sometimes considered “boring but important”. I would say that the often passionate critique put forward by the Opposition in the course of this Bill’s passage certainly proves the latter while arguably testing the former assertion. I am particularly grateful to the hon. Gentleman and his Opposition colleagues for their support in helping us to introduce new measures into the Bill in Committee.
The new provisions to modernise parish polls respond to amendments from the Earl of Lytton, who, in his role as president of the National Association of Local Councils, highlighted the urgent need to reform that outdated legislation. The measures to open up local council meetings will break down the doors of town halls and increase the transparency of local decision making. I am pleased that we have achieved consensus on that as it shows that in this digital age, as the way the public consumes information changes, it is no longer right that decisions should be made out of the sight of local taxpayers. We will, of course, work closely with interested parties to ensure that, as we agreed in Committee, we strike the right balance in the regulations between allowing members of the public to film council meetings and minimising disruption.
The Bill is the culmination of a great deal of work with a number of third parties, particularly the Audit Commission, which I would also like to thank for its support and healthy challenge throughout this process. During the Bill’s passage through the House, we have made, as has been noted, a number of amendments to strengthen it. In addition to the two new measures we have added, we have also made amendments to enable the sector to set up collective procurement arrangements, through which relevant authorities can choose to have an auditor appointed on their behalf. That has been welcomed by the Local Government Association and we will continue to work with it in developing the regulations that will set out the approach in more detail.
Also prompted by debates in the other place, we have amended the Bill to extend the purposes for which data-matching exercises may be used. That will enable the future owner of the national fraud initiative to continue to undertake data-matching exercises on the detection of errors and inaccuracies, as the Audit Commission can under its existing powers.
In addition, we have made a number of other technical and clarifying amendments to several of the local audit provisions, which will ensure the smooth and effective operation of the new audit regime after the Audit Commission’s demise. In addition to the amendment we have made today to support the transparency of the auditor appointment process, we have also clarified how the provisions apply to parish meetings, the qualifications and eligibility criteria for local auditors and how local auditors will recover costs for undertaking all their statutory functions.
We have had a lengthy debate about the local government publicity code. I think it is safe to say that we are all agreed on the content of the code, but that there is a difference of opinion about how that code should be enforced. I say again that it is right that action should be taken when authorities are failing to comply with the code. By ensuring compliance, the Bill will support local accountability by protecting the local free press from unfair competition and preventing taxpayers’ hard-earned money from being squandered on propaganda and competing with the local independent press.
The Bill further protects the taxpayers’ pound by ensuring that levies will be included within the council tax referendum principles. No longer will a local authority be able to raise council tax through back door levy increases, making taxpayers pay more for services that councils down the road do in-house and within the referendum principles. That levels the playing field for local authorities and the amendment we have made today will provide certainty for those authorities.
In conclusion, the Bill is another important step in delivering the Government’s localist agenda. It deals with some of the fundamental principles of good governance and good government, it promotes responsible and robust public accounting, it drives decision making down to the local level and it protects local taxpayers and defends local democracy. To return to my opening remarks, it is an important—and I would say interesting—Bill and I commend it to the House.
The Bill certainly has generated a great deal of debate—more, I suspect, than either the Minister or others who thought it was just about audit might have anticipated. That is in no small measure, as the Minister has just acknowledged, due to the skill and forensic arguments put forward by my hon. Friend the Member for Corby (Andy Sawford), who did sterling work in Committee, as he has done today, ably assisted by my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) and also my hon. Friend the Member for Derby North (Chris Williamson), from whom we heard today.
I join the Minister in expressing thanks to all Members who served on the Bill Committee, all those who gave evidence to the ad hoc Joint Committee, and my colleagues the noble Lords McKenzie and Beecham for the work they did in scrutinising the Bill in another place.
As we know, this is a Bill that arises from a very early decision that the Secretary of State took, which was to abolish the Audit Commission. When we heard from him on Second Reading, he was convinced that it was the right thing to do. We all recognise that the commission is going, but only time will tell whether it was right for the Secretary of State not to take the advice of the noble Lord Heseltine, who originally introduced the Audit Commission because he thought it was wrong for local government to appoint the people who audit it.
What is striking about the Bill, however, is that the quality of some of the content we have debated at length has not benefited from the length of time it has taken the Government to bring it forward, in part because of the complexity of what has been removed and therefore the need to construct arrangements to replace it. I acknowledge that the Government moved on the issue of joint procurement, and I am grateful to the Minister for listening to the arguments made by local government and by my hon. Friend the Member for Corby, but I am genuinely sorry that the Minister either has not wanted to get the arguments that we made or has not properly understood the consequences of the Bill failing to anticipate the new world in which local authorities have to work. That is particularly surprising, given that Ministers often lecture local government about the need to make changes.
On access to information, the amendments that we argued for were all about the public’s right to know. As we are aware, the Audit Commission is covered by the Freedom of Information Act; private auditors in general are not. As councils change the way in which they work, it is very important that the public have the right to understand what is happening and have access to information. Listening to the Minister this afternoon, the more he protested that our amendment was not necessary, the more puzzled I became. Then there was a moment of what I hope was conversion. I am delighted by what he had to say when pressed by my hon. Friends. We will hold him to what he said about ensuring that the public has exactly the same right as it currently has using the Freedom of Information Act to get access to information that auditors and private companies have about contracts that they are undertaking on behalf of local authorities.
I am very sorry that the Government have not made provision for auditing that will be fit for purpose for the years ahead. The Minister did not do justice to the argument that we advanced. We did not suggest that the Bill prevents local authorities from working together with each other or with central Government—for example, through the troubled families initiative. That is not our argument. Our argument is that when the Whitehall and the local pound are brought together to provide services at a local level, there will continue to be different audit arrangements.
I say to the Minister, and I hope he will reflect on it even when the Bill has become an Act, that that does not make sense. An audit, especially when the Bill gives us a chance to set it on a new footing, must take account of the changing way in which public money is spent, particularly as community budgets develop. It does not make sense if there is a community budget for different bodies, with the NAO trying to chase the Whitehall pound down the road and the local authority auditor looking at the local pound.
One clause that was dissected and then comprehensively savaged by my hon. Friend the Member for Corby, both in Committee and earlier today, is clause 39, which deals with the code of practice for local authority publicity. I was interested to hear that the Liberal Democrats apparently could not bring themselves to vote for it in Committee, because they were absent when it was discussed. I do not blame them, because they are right to be embarrassed by what is a most illiberal piece of legislation.
The hon. Member for Mid Dorset and North Poole (Annette Brooke) described that provision as a sledgehammer. If I may coin a new phrase, I think that it is a sledgehammer of a blunderbuss, and it has been constructed on the back of a lot of ministerial complaining about Pravda-like publications. I have not read quite so many local authority publications since Second Reading, but I have still found no figures on tractor production, which I continue to be disappointed about.
Basically, no evidence has been advanced on local authority publications. It is no good the Minister in the other place saying, “I could give you the names of 12 authorities, but I don’t think that would be helpful.” We have heard the Minister give one example, that of “East End Life”. The really damning revelation is that for all the complaints, concerns and denunciations of breaches of the code, he tries to suggest that what the Bill offers is true localism, and in three years the Government have not even contacted a single local authority, which is astounding. They could not be bothered to write a letter to a single authority, but they could be bothered to draft a shoddy clause that will give the Secretary of State the right to control every single local council publication, every website, leaflet and bit of content—the lot.
The Secretary of State, if he takes offence, will be able to tell councils, “You’re not allowed to refer to the bedroom tax as the bedroom tax. You have to call it something else.” If he feels like it, he will be able to stop councils commenting on spending cuts and the way they affect the local authority area. He could stop them commenting on airports, HS2 or NHS changes. He can even tell local parish councils that they cannot produce 12 double-sided A4 sheets a year. He will be able to do anything he wants. Censors the world over might think that is a jolly good clause, but the House was unconvinced.
Absolutely, but the problem with the clause is that they cannot publish any more than that. If they want to bring out a special edition on their Christmas celebrations, for example, having had their 12, that would not be allowed, because the Secretary of State is taking the power to prevent that.
The clause states that the Secretary of State can exercise all those powers regardless of whether he thinks that the local authority is complying with the code of conduct, which is extraordinary. I read with great care the arguments that the Minister tried to advance in Committee, but I am afraid that I found none that justified that. The truth is that Ministers ought to be really careful with the great big blue pencil they are about to get hold of.
On referendums and levying bodies, I must say that I was unconvinced by the Minister’s arguments in relation to the Leeds city region deal, described by his ministerial colleagues as a watershed moment, which was signed before the new policy was announced. The Minister has still not answered the question I asked the Secretary of State on Second Reading, and which was asked again today by my hon. Friend the Member for Corby, so I will put it slightly differently.
The city deal was signed towards the end of the year and the announcement of the new policy on referendums and levying bodies was announced at the beginning of the new year. Knowing how long it takes to decide on these things in government, I think that it is inconceivable that Ministers were not privately discussing changing the rules at the very moment when they were discussing the Leeds city region deal. If that is the case—I will give way to the Minister on this point—why did he not tell the people they were negotiating with? He does not want to intervene, so for the third time we have had no answer to the question, and some people will draw the conclusion that they do not want to answer it.
The Minister will have seen the letter mentioned by my hon. Friend the Member for Corby that the Leeds city region sent to the Deputy Prime Minister on 6 December asking the Government to solve the problem they created by changing the rules after the agreement was signed. The Minister knows very well how important the transport infrastructure fund is to the Leeds city region deal; indeed, it is the main thing that the city region got out of city deals, which, as he knows, I support. The letter is signed not only by the chair of the combined city region which is to become an authority—the leader of Leeds city council—but by the chair of the local LEP. They are not persuaded by the Minister’s arguments, because they say:
“As it stands, the Local Audit and Accountability Bill makes the Fund impossible to deliver.”
I listened carefully to what the Minister said, and I do not know whether there is a chink of light there, but he has a responsibility to sort this out.
Apart from doing justice to the Leeds city region, there is another argument for why the Minister has a responsibility to deal with this. If the Government go back on a done deal, which is what has happened in this case, they undermine confidence in the city deal process, undermine the certainty on which financial planning has to be based, and undermine the confidence of those who will negotiate with them in future, who will ask themselves, “Hey, look what happened to the Leeds city region—how do we know they aren’t going to change the rules for us after we’ve signed our names in ink on a piece of paper?” It needs to be sorted out.
As the Minister knows, we support the other changes that were made in this House on parish polls and councils allowing recording and videoing of council and committee meetings. In this day and age, with the very big changes in technology that enable every citizen to become a reporter, all of us in this House, whichever side we sit on, want more people to take an interest in what our local authorities are doing, by going to meetings and reporting them to spread the news and make sure that more people can see what is going on.
We will not oppose the Bill given that provision has to be made for a replacement for the Audit Commission, which is on its way out, but in some respects it is a lost opportunity. For all the words that the Secretary of State, in particular, is fond of saying about localism, once again this Bill proves that the longer he is in office the more he cannot resist using legislation to tell local councils what to do.
I thank my right hon. Friend the Member for Hazel Grove (Sir Andrew Stunell) and my hon. Friend the Member for Chippenham (Duncan Hames) for serving on the Committee. The thoroughness of the scrutiny by the hon. Member for Corby (Andy Sawford) has been very apparent. It would be remiss of me if I did not mention my noble Friend Lord Tope, as have many others, and thank him and Lord Shipley for their contributions in the other place. I also thank the Minister for his great courtesy throughout.
This Bill has pluses. It was right to abolish the Audit Commission. Having gone through the whole passage of the Bill, we have got to a pretty good place as regards auditing. I feel reassured by the Minister on the remaining issues. I am particularly pleased that he will continue to work on regulations with the Local Government Association. I applaud the modernisation of parish polls, which I am sure will be a great relief to parishes in my constituency. I welcome more openness in the recording and publication of council meetings, as that can only be a plus for local government.
We have discussed the publicity code at much length today. Clearly, there is agreement on the code itself across the House, but following its implementation and impact will possibly be an interesting experience. I can see the point of including levies in the referendum principles, thereby preventing unaccountable levying authorities from exerting pressure on council tax, but there is more talking to do about the potential unintended consequences. The Minister indicated that he would continue to listen to people’s concerns.
Finally, the Bill does not repeal the duty on local authorities to publish statutory notices in their local newspapers. I accept that the Government feel that this is not the right time to do that, but I urge them to keep looking at the issue. It is a burden on local government, given the tightness of its finances, and it is also the most ineffective way to communicate very important information to local residents.
I served on the Bill Committee and thoroughly enjoyed it. I thank everyone else who served on the Committee for making it such an enjoyable process. As has been recognised, we scrutinised the Bill extraordinarily well.
I want to talk briefly about internal drainage boards, which are important. In my constituency, the IDB is essential in maintaining flood defences and as part of the process of ensuring that houses are protected. The accountability of our IDBs is relevant to the Bill, so I want to underline their importance to local communities. I also note that councillors are, of course, on the boards and should be applying influence as appropriate. The precept issue should not disguise the fact that IDBs play an important part in land drainage, certainly in areas of my constituency.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.