Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 3 months ago)
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Baroness Janke (LD)
My Lords, in speaking to Amendment 30, I declare my interest as a member of Bristol City Council. This amendment seeks to restore to Bristol people the same right that people of other cities have to change their system of government, subject to conditions required by the Local Government Act. A section added in 2011 relates to local authority referendums for elected mayors ordered by the Secretary of State. Noble Lords may recall that in 2012, the Government required that the 12 largest cities in England call referendums on whether their residents wished them to introduce a system of directly elected mayors. Bristol was the only city to vote narrowly in favour of such a system.
The section removes the right of Bristol citizens to change their system of government in perpetuity. This fact was not made at all clear when they voted in the referendum. As more and more people have found out that that is the case, they are quite outraged and feel that they are being discriminated against by virtue of having supported the Government’s arguments for a mayoral system. Whatever the view is about elected mayors—and there are many—many Bristol people are astounded that they have been denied the democratic rights that other cities enjoy as to whether or not they have a mayoral system. I can believe that this was not an intended consequence of the legislation. Nevertheless, it clearly is unjust and needs to be changed.
I say, “in my view”, but this view is also supported across the political parties in Bristol and by the mayor, as he said at a recent council meeting when a motion was unanimously passed supporting change—change not necessarily from a mayoral system but change to enable the citizens of Bristol to decide themselves what system of government they wish to have.
The Local Government Act lays down clear conditions as to how a local authority may change its governance arrangements, including the need for a referendum as fully described in Section 9N. The current situation is unnecessary, unjust and discriminatory in that Bristol people should be deprived of their democratic rights to determine their own system of governance, which is the case in every other English city.
I hope the amendment will receive support and that the Minister will consider how the current situation could be redressed and restore democratic rights to the people of Bristol. I hope the House will give its support in taking this matter forward. I beg to move.
Lord McKenzie of Luton (Lab)
My Lords, we have a good deal of sympathy with the amendment, which, as the noble Baroness said, has cross-party support in Bristol. I have been in touch with the leader of the Labour group there, who confirms her support for it.
As we have heard, Bristol was one of 12 cities that had a referendum foisted on it by this coalition Government, and it is worth reflecting on the extent of that mandate. The turnout was 24%, with 41,000 voting for and 36,000 against. So 77,000 people voted and the majority was about 5,000.
We know also that central Governments have an appetite for elected mayors that is not altogether reflected at local government level. The noble Baroness was right to point out how you change your system of governance and the constraints that you have. I have a helpful briefing from the House of Commons Library, which states:
“Under the 2000 Act, any local authority wishing to establish a mayoralty required a ‘yes’ vote in a local referendum. The 2007 Act changed this, permitting local authorities to adopt a mayor by resolution. However, an authority can still choose to hold a referendum on the issue. Alternatively, authorities can be obliged to hold a mayoral referendum if 5% or more of the local electorate sign a petition demanding one … The Government may also compel an authority”—
which is what happened in this case—
“to hold a referendum. The result of a mayoral referendum is binding on a local authority.
The Localism Act 2011 permitted a referendum to be held on abolishing an elected mayor, subject to time limits; and for a referendum to be held on establishing a leader and cabinet, or on using the committee system. Four authorities have held referendums on whether to retain their mayoral system. Electors in Doncaster … and Middlesbrough … voted to retain their elected mayor, whilst those in Hartlepool … voted to replace it with the committee system, and those in Stoke-on-Trent … voted to replace it with a leader and cabinet system.
Authorities which have changed their governance arrangements as a result of a referendum can only make a further change following a further referendum”.
That is not unreasonable. It goes on:
“Where a local authority has held a referendum on its governance arrangements, a further referendum may not be held for ten years (five years in Wales). Conversely, where a mayor has been created by resolution of the council, five years must elapse before the council may resolve to abolish the mayor. However, there is no time limit on holding a referendum (whether initiated by the council or by a petition) to reverse a decision made by a resolution”.
I come to the crucial point:
“Further, where a local authority has been required by the Government to hold a referendum and voted for an elected mayor, it may not hold a further referendum at any time. Bristol City Council is the only authority affected by this: as the law stands it cannot move away from its elected mayoralty”.
As the noble Baroness has said, it is held in that position in perpetuity. That just does not seem right, and perhaps the Minister will take the opportunity to explain why the Government think it is. However, if they do see it as an anomaly and an injustice, what do they propose to do about it?
Lord Wallace of Saltaire
My Lords, in preparing for the amendment I realised that I do not fully understand the evolution of the office of mayor in British local government. I am well aware that Titus Salt, who built Saltaire, was the mayor of Bradford for several years and as the leader of the council was very much an executive mayor. One did not have to be elected to be an executive mayor. We have since separated the ceremonial function of mayor and the power-wielding function of leader. It is only the elected mayor who gains executive control and leadership, and that is something which I trust others with greater local authority experience than I have will explain to me why and how this evolved.
The precedent for introducing mayoral governance following a referendum instigated by Parliament was first set when the London mayor was established. In this case Parliament instigated a referendum through enacting primary legislation. The electors then voted for London having a mayor, and by a further Act of Parliament the arrangements were introduced. There is no provision in those arrangements for the people of London to vote that they no longer want a mayor. Indeed, I am confident that no one would want to see the end of the London mayor, given the status of this great city, although occasionally there is a little confusion abroad when the Lord Mayor arrives just after the London mayor has been there—even if some might wish to see a different mayor to the current holder of that office. But the essential point for this afternoon is that there is no provision for there to be any change in the formation of the office of London mayor unless Parliament were to agree.
The same broad precedent was followed in the legislative arrangements that led to the establishment of mayoral governance in the city of Bristol. In that case Parliament, through approving by a resolution of both Houses an appropriate order under the Local Government Act 2000, an Act passed by a Labour Government, instigated a referendum. The people of Bristol then voted for a mayor, and that form of mayoral government was then established under the Act. As in the case of the London mayor, mayoral governance in Bristol can be changed only by a further Act of Parliament. The amendment before us today would change this. It would mean that the electors of Bristol could, if they chose, have a referendum by petitioning for one. If they voted to end the mayoral model, it would end. This is indeed the position in cases where a mayor has been introduced wholly by local choice. If it is wholly local choice to establish the mayor, it follows that wholly local choice should be able to end the mayoral governance.
However, the Government believe that it would be wrong to create circumstances where a mayor is established through a specific decision of Parliament and local choice together, but could be ended simply by local choice. I am not suggesting that Bristol should for ever have a form of mayoral governance if there is popular local disillusion, but the decision to change the governance of Bristol, having been instigated in part through a decision of Parliament, should also involve some parliamentary consideration of the specific Bristol issue and not simply be a matter of wholly local choice. It should be for the next Parliament to consider whether it wants to take parliamentary action in matters like this. Meanwhile, I urge the noble Baroness to withdraw her amendment.
Lord McKenzie of Luton
Does the Minister not accept that the parliamentary component of this could be the acceptance of the amendment? There could then be a referendum and the people of Bristol would have their input at that stage.
Lord Wallace of Saltaire
I accept that if there were very strong feeling in both Houses, that would be possible, but it is the Government’s view that this would be better achieved through an Act of Parliament that could consider how recent developments in local authority governance have worked, and that would perhaps reverse the thrust of the promotion of local elected mayors for the major authorities across England and Wales.
Economic Leadership for Cities
Lord McKenzie of Luton Excerpts(9 years, 5 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, we should congratulate the noble Lord, Lord Shipley, on securing this debate for us this morning, and the noble Lord, Lord Lyell, on his clear attachment to and love of Liverpool—although I am advised that he is an Everton supporter. I also look forward to the three maiden speeches we will hear today. The notion that local councils—particularly cities; and I am happy to accept the definition of the noble Lord, Lord Shipley, for that term—with strong local leadership can be a force for economic progress is, of course, not new. But moving forward on this agenda has been given impetus by what my noble friend Lord Adonis has set out in his report, Mending the Fractured Economy: the link between economic growth and the living standards of ordinary people has been broken, and this dictates a fundamental reform in order to secure more balanced growth. This converges with the recognition that the scale of spending cuts facing local authorities will most effectively be delivered by the chance to join up, reconfigure and innovate at local level.
As the noble Lord, Lord Heseltine, concluded in his report No Stone Unturned: In Pursuit of Growth, too many decisions are taken in London without a full understanding of their local impact. I certainly agree with that. But he asserted that local authorities have been relegated to service providers—increasingly, commissioners of services—and that local economic leadership has all but disappeared. This is too sweeping an assertion, doubtless many noble Lords here today will know of the engagement of their local council in regeneration activities and a partnership working with the local business community—driven in many instances by the support of RDAs. It belies the leadership role of the Core Cities Group over some 15 years, I believe, and in particular its work which culminated in amendments to the Localism Bill—as it then was—agreed by an all-party consensus, which allowed Ministers to transfer local public functions from central government to local and combined authorities.
As we know, a range of city deals followed, not homogeneous arrangements, underlining the diverse needs of cities—and there are more to come. Important as they are, however, it is difficult to maintain that such arrangements are transformational; step change is required if the true potential of our towns and cities is to be realised. We should remember that the Secretary of State still holds the whip hand in these deals, being required to determine whether any transfer of functions would promote economic development or wealth creation or increase local accountability.
What should change entail? It raises issues of funding, powers and coverage. Again, as my noble friend Lord Adonis has proposed, we should devolve funding of £30 billion over the next five years to combined authorities, local authorities and LEPs to cover key economic levers—housing, transport, skills and business support. Of course, how funding is devolved is important and we must not replicate the past with endless bidding processes and bureaucracy, nor allow the Treasury to strangle such initiatives.
This agenda brings with it the thirst for more taxes to be devolved to English cities. City Centred campaigns for council tax, stamp duty land tax, business rates, annual tax on enveloped buildings and capital gains property disposal tax to be devolved. It properly asserts that this would be Exchequer-neutral because central grants to cities would be cut.
We would go some way along this path by giving control over the full revenue from business rates, which we would in any event reform, to powerful new city and county regions which come together in combined authorities. It would be an incentive to do so, but we would not insist on their needing to have an elected mayor.
It is important that there is scope within the system to address the differing needs and resources of local authorities and scope for a safety net for local economic shocks. This will be especially important in the near term, given the current local authority funding arrangements, which have hit the poorest areas the most. Of course one way to devolve economic power and funding would be to relocate more civil service posts outside London.
So far as combined authorities are concerned, we can look to Greater Manchester as a beacon. It in particular has been leading the way, and we should congratulate it and indeed the Government on its new deal with the Treasury. The opportunity to promote a northern powerhouse is obviously to be welcomed. It will build on some of the existing strengths of these regions, including in science and technology, and it chimes with my noble friend Lord Adonis’s proposals for a long-term innovation strategy.
However, these opportunities are not just about big cities, however important, nor just about the north. We need to mend the link between growth and living standards across the UK, so we will propose that local authorities covering any part of the country—Norwich or Luton included—will be able to become combined authorities, again with devolution of powers and funding. We would devolve funding to all local areas that reform their LEPs and create formal governance structures across local authorities at regional level, so that every part of the country would have the chance to make its decisions over how to invest in skills, infrastructure and business.
Lord McKenzie of Luton
I am sorry, I shall wind up now. All the evidence shows that the economic benefits of devolving powers to local areas are too great to ignore. Devolving powers to cities is a start but not the end.
Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 5 months ago)
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Lord Collins of Highbury (Lab)
My Lords, I, too, want to support my noble friend in his amendments today. I particularly want to focus on one element of regulation in relation to gambling and the Gambling Commission. I would also like to focus my remarks on what my noble friend Lord Rosser said, in the sense of asking what the Government’s view is on the role of the Gambling Commission in terms of its acting contrary to Clause 83. Is there evidence, which the Minister might want to put before the Committee, that says that this clause is required? At the end of the day, the gambling market is a unique one, where the public expect fair rules. They want independence for the regulator, because they want to ensure the rules are applied by the people operating in that market.
In the recent debate on the Gambling (Licensing and Advertising) Bill, we heard several calls that this market needs even further regulation, because it has a huge social impact, not least in terms of problem gambling—addiction—and the harm that it causes to both individuals and families. When we debated the Bill, we were focused on the need for adequate research to fully understand the consequences of our actions. That was certainly the Government’s view, and it is certainly the view of the Opposition: think before you act, and understand the consequences. This comes back to my noble friend’s view about unintended consequences, of which there were two here.
The Gambling Commission expressed a view during pre-scrutiny of the Bill, which I want to repeat. It focused on this matter of unintended consequences. It is a regulator that does understand the economic consequences. It is not a regulator that wants to ban gambling; it wants to facilitate it. In fact, the more it acts to regulate, in a sense, the more the market can grow, because this is about public confidence and public trust. This is where I believe the draft guidance, in seeking to clarify, may actually create uncertainty, which again comes back to these unintended consequences.
The Gambling Commission itself spoke about the need to be wholly independent, impartial and objective, and the need to have public confidence. It says that it does not think that the wording will impair its objectivity at all—it believes that it is acting in a way that could meet the requirements of this clause. However, as it says, if it gets confused or conflated with the promotion of the commercial interests of specific economic sectors, and it appears to the public that it is part of the commission’s role to promote the industry as opposed to permitting the industry to promote itself and grow so far as is compatible with consumer protection, the likely outcome is a reduction in public confidence and a consequent reduction in the public acceptance of gambling as a mainstream leisure activity. This clause could have the complete opposite effect of what it was intended to do. It could harm an industry that is a legitimate part of our economic activity. There are unintended consequences.
The Gambling Commission raised another point, which is important with regard to what my noble friends have said on the guidance and the fact that you could be creating uncertainty. They say that the guidance to the growth duty will be important. That is absolutely right, and it helps to develop better policy for the industry to have a real input in determining the economic impact of any regulatory change. It is very important for the industry to be clear how that should be done and to have some assurance that its views are taken into account. However, the reform measure designed to reduce burdens on an industry and foster economic growth may have the unintended consequence of the regulator and parts of the industry expending time and money on unproductive and costly delaying tactics if the guidance does not encourage speedy and transparent decisions.
I can see what is coming as regards the new regulations we had under the Gambling Bill. I can see that people entering the market may say, “We want to challenge the commission on this because it denies our ability to enter this market and our ability to grow economically”. In a sense, instead of the commission regulating fairly and being able to build public confidence, this could undermine that, which is a bad unintended consequence that the Government need to address and answer today.
Lord McKenzie of Luton (Lab)
My Lords, it may come as no surprise that I, too, support my noble friend’s amendment and express reservations about disturbing the current arrangements for the Health and Safety Executive. The very essence of the HSE’s role has positive implications for growth. It is about encouraging leadership from the top of an organisation, having effective systems, good employee engagement—key attributes for an effective business. Of course, its role in promoting safe and healthy workplaces is typically linked with higher profitability, productivity and worker loyalty. That is what the data used to show, and I believe they still do. However, IOSH states that,
“good workplace health and safety already supports growth”.
It expresses concerns that the new explicit duty could “cause confusion” and undermine the focus and judgment of the HSE. Therefore, perhaps the Minister can be more specific about the benefits to growth of these provisions being applied to the Health and Safety Executive, and about what changes to the way the HSE goes about its business the Government expect if they should be applied.
The impact assessment accompanying these proposals specifically identifies as good practice the HSE’s existing role in working with a number of trade associations and local authorities to create sector or topic-specific guidance. The HSE has of course been subject to a number of reviews in recent years, most recently that of my noble friend Lord Young of Graffham, of Professor Lofstedt, and the triennial review led by Martin Temple. Those have, in a variety of different ways, found the HSE and the regulatory regime, fit for purpose.
The blueprint for the HSE as it currently exists was set out in Lord Robens’ 1972 report, Safety and Health at Work. His vision of a goal-setting, risk-based and proportionate health and safety framework has endured. That is reflected in the HSE’s current business plan, which includes in its goals,
“drawing a distinction between real health and safety and bureaucracy and ‘overinterpretation’; making it even easier for people to understand and do what is required; devoting a greater proportion of effort where risks are highest and where we can have greatest impact; and continuing to hold to account those who expose their employees and others to unnecessary risk”.
The HSE can justifiably currently claim that it keeps the burden on business productivity to a minimum. Indeed, it effectively enhances it. It is proportionate in its decision-making and understands the business environment.
Understanding the business environment does not necessarily equate to reducing regulatory activity. Downturns in the business environment may engender a more focused approach. For example, if the North Sea sector is struggling for growth, the temptation to cut back on maintenance of the infrastructure may be strong; that has happened in the past. That would signal an environment where more, not less enforcement is needed. Conversely, the HSE is alert to circumstances where a pickup in a sector signals the need for more regulatory activity—housebuilding and refurbishment being one—where worker demand can, at least initially, outstrip available skills, so there is the prospect of more enforcement activity because of growth in the sector. I presume that the Government are content with that. We should be mindful of the risks of the growth duty undermining compliance and enforcement.
IOSH makes reference to the HSE’s enforcement management model, which uses “economic advantage deliberately sought” as a contributing factor to prosecution. How does that approach sit with the growth duty? Reference is also made to case law, in which the judgments specifically acknowledge that adverse economic effect on the business had to be accepted as a consequence of improving safety.
What discussions have the Government had with the HSE about that duty? What assessment have the Government made about the prospect of greater challenges to the HSE’s enforcement proceedings with the new duty? Is it considered that any change is required to the HSE’s enforcement management model? The health and safety system is working well in the UK. There are risks that the provisions will cause unnecessary confusion. Why fix what is not broken, where no advantage is to be expected?
We had a response to our circular from the Homes and Communities Agency; I thank it for its reply. It states:
“The HCA, when acting as social housing regulator, is classed as one of the ‘non-economic’ regulators to whom this proposed duty will apply”.
I guess that that is accepted. It says:
“Regulation of social housing has existed for approximately 40 years and is currently delivered under powers contained in the Housing and Regeneration Act 2008, which came into force in April 2010 ... The Act requires that we discharge what are termed the ‘economic regulation objective’ and the ‘consumer regulation objective’. The main way in which we deliver these objectives is by setting ‘economic standards’ and ‘consumer standards’, and regulating against these”.
It goes on to say:
“We are precluded by legislation from proactive monitoring of the consumer standards so in effect are an organisation primarily focused on our economic regulation remit”.
It sets out what its economic objectives are; that is,
“to ensure that registered providers of social housing are financially viable, properly managed, and perform their functions efficiently and economically … to support the provision of social housing sufficient to meet reasonable demands (including by encouraging and promoting private investment in social housing) … to ensure that value for money is obtained from public investment in social housing … to ensure that an unreasonable burden is not imposed (directly or indirectly) on public funds … to guard against the misuse of public funds”.
It says:
“In many respects the sub-clauses of the economic objective are mutually reinforcing. For example, Registered Providers have an excellent track record in meeting their obligations to lenders, consistent with the Regulator’s objective to ensure providers are financially viable. This is also a key factor in their ability to borrow at competitive margins and therefore invest in the supply of new homes. However, on some issues and on some providers we also need to strike a balance between encouraging investment (typically in new development) and safeguarding the viability of providers and historic taxpayer funding”—
so there is a potential conflict. It continues:
“This is reflected in our standards, the way we obtain assurance that standards are being met, and in the action we take if providers do not comply with the standards”.
The HCA has the following questions, which I pose to the Minister, about the new duty coming into effect. It asks:
“How the duty will interact with existing duties. If the duty is ‘free standing’ then we will need to consider how it is balanced against the full range of our regulatory objectives and how we balance this in our decision making”.
It also asks:
“How widely regulators will need to consider economic growth. As set out above we already have a duty to support the supply of social housing, which is a growth related objective. We would need to understand if the duty is to be interpreted in a way that goes beyond our existing objective, and if so the impact on our regulatory remit and the potential impact on resources”.
It further asks:
“Whether the duty will be about minimising burdens or alternatively about being fully mindful of economic growth implications when making decisions? In our particular sector, and again referring to our obligation to support the provision of social housing, there is a strong argument that having in place strong regulation makes the sector attractive to on-going investment and therefore growth”,
and how that will sit with the overall growth duty obligation. It also raises the point:
“Whether the duty will apply to regulatory policy design or to all day-to-day decisions and all levels of decision making in between. It is the regulator's view that application of such a duty on the micro level of individual case decisions is not straightforward and that a similar outcome can be gained from a more strategic approach”,
and asks how,
“decision making might be challenged in relation to compliance with the duty”.
These are highly relevant questions and we hope that the Minister is able to deal with them fully, either today or in writing afterwards.
Lord Wallace of Saltaire
I shall take that back, too, and we will discuss it between Committee and Report. I hope that I have managed to answer a number of questions. I recognise the concerns that have been expressed. We have a well operating system of regulation in the United Kingdom. The question of balance between good regulation, better regulation, sufficient regulation and efficient regulation is something around which a great deal of hard politics revolves. All of us who read the Daily Mail as loyally as the noble Lord, Lord McKenzie, and I do know that its constant campaign against all health and safety regulations is one end of the spectrum, but the other end of the spectrum is the overregulation that we all also have to be concerned about. That is going to be a continuing basis of politics, and this clause aims to strike the right balance.
Lord McKenzie of Luton
Does the Minister accept that his Prime Minister is also at the Daily Mail end of the spectrum?
Lord Wallace of Saltaire
I could not possibly comment. I do not begin to think that the Prime Minister accepts the Daily Mail approach to health and safety. He knows as well as everyone else that there is always a difficult balance to be struck in this area. I am well aware that there are a number of things, from his own personal experience, that the Prime Minister feels very strongly about in terms of proper provision of public services and proper regulation.
Lord Wallace of Saltaire
My Lords, we are all very conscious that we are talking about a range of regulatory bodies which, as has already been said, have different relationships with Governments. Some are entirely independent, some are agencies of departments, and that is part of the universe with which we need to deal. I have already offered to discuss this between Committee and Report and I recognise, as I have already said, the concerns which have been expressed in this debate.
Lord McKenzie of Luton
The Minister has said that there is a possibility of further discussion between now and Report, but will he nevertheless undertake to arrange for written answers to be available to each of those questions in advance of that meeting? In order to make sure that nothing slips from people’s view, it would be very helpful if he would commit to getting us written answers where we have asked for them.
Lord Wallace of Saltaire
My Lords, I shall do my best to ensure that written answers are provided to the very large number of questions that have been posed in this debate about a substantial number of different agencies. On that basis, I hope that the noble Lord will be willing to withdraw his amendment.
Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 6 months ago)
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(a) by a notice fixed to the vehicle;(b) by a notice handed to the person appearing to be in charge of the vehicle at the time; or(c) where the enforcement officer is prevented from serving the notice by either of the methods in paragraph (a) or (b), by post,in respect of a parking contravention on a road in a civil enforcement area in England”
Lord McKenzie of Luton (Lab)
My Lords, in moving this amendment, I will also speak to our other amendments in this group—Amendments 61D, 61E, 61F and 61G. I will address the clause stand part debate in due course.
Most local authorities have adopted civil parking enforcement powers, which mean that they, rather than the police, can issue parking tickets for on-street parking contraventions and in local authority off-street car parks. This means that they have full responsibility for the design, implementation and enforcement of parking policies in their areas. The quid pro quo as the Government apparently see it is that local authorities should use these powers to seek best solutions to balance the sometimes competing needs of different road users, including cyclists, pedestrians, residents, shops and businesses.
Local authorities, as we know, are precluded from using their civil parking enforcement powers to raise revenue. The Government say that they are aware of concerns that some local authorities are being overzealous with parking enforcement, and they have focused on the use of CCTV as having insufficient regard to statutory guidance. It is suggested that enforcement by CCTV is particularly unfair because a motorist might be issued with a ticket as a consequence of a camera. The ticket arrives at their home some time after the event when they have no opportunity to examine the location when the alleged contravention took place. However, the Government’s consultation on local authority parking last year acknowledged the benefit of CCTV in enforcing moving traffic congestion where cars use bus lanes, do not exit box junctions and so forth.
The LGA disputes much of the Government’s analysis. It points out that successful appeals to the adjudicator are low, 80% of councils make no surplus on enforcement and parking surpluses that do arise are reinvested back into transport improvements. Parking controls help to ensure that businesses have access to loading bays, school entrances are kept clear and parking does not obstruct access to shops, businesses and residences.
Notwithstanding that, Clause 38 seeks to ban the use of CCTV for parking enforcement, although the Government have already acknowledged the need for some exemptions to this policy as a result of campaigning by the LGA. They have acknowledged the need to allow its use at bus stops, in bus lanes, outside schools and on red routes. CCTV is quite properly used to enforce parking restrictions where the use of enforcement officers is not practical. Outside schools is a particular case in point because motorists can move their vehicles when a traffic officer approaches. Enforcement in some instances requires constant observation over a period of time or for safety reasons.
As Clause 38 is currently drafted, and subject to the detail of any regulations, it would seem to make it impossible to enforce a penalty where the driver has fled the scene or where an enforcement officer is otherwise prevented from fixing the PCN to the vehicle or handing it to the person in charge of the vehicle; perhaps because of threats of violence. It cannot be the Government’s intention to allow such behaviour to be rewarded. At present of course, an enforcement officer can hand a PCN to a driver or send it by post when prevented from serving it directly. Amendment 61C would therefore allow a PCN to be issued by post where it cannot be issued in the manner currently provided for in Clause 38.
Amendments 61D and 61E would include in the Bill exemptions from the ban, some of which the Government have already conceded should be provided. This applies to contraventions for stopping at bus stops and bus lanes, school entrance markings and red routes on the grounds of safety and the needs of bus services. Amendments 61B, 61F and 61G have been added to our proposals for the same reasons. We propose that all arrangements for safety reasons should be covered as well as no-stopping and no-loading restrictions because these, too, impact on bus service delays.
Amendment 61F seeks to ensure that the provisions of Clause 38 cannot have effect until the proposed implementing regulations have been the subject of a regulatory impact assessment and an equalities impact assessment. As I understand it, no impact assessments have been conducted on these clauses, particularly in respect of the impact on those dependent on public transport or on vulnerable users. Can the Minister tell the Committee why this is? Will the Government now commit to producing such assessments before implementing these provisions?
The purpose of Amendment 61G is to enable those local authorities that wish to use CCTV and automatic number plate recognition in car parks in order to make it easier for users to park and pay later or to better manage space for users. It would make it easier, for example, to have pre-booking arrangements. The Protection of Freedoms Act 2012 provided for such technology in private car parks but not local authority ones. The use of such technology would depend on it being used for better space management or customer convenience. This approach follows the same basis as that on which the congestion charge operates and, so I am told, the new Dartford crossing toll. The Department of Health’s encouragement for NHS trusts to use pay-on-exit systems is in the same vein.
Since tabling these amendments and drafting most of these notes, we have seen a draft of the regulations enabled by this clause. We obviously need some time to look at these—although doubtless the Minister will offer some enlightenment—but on the face of things, it looks as though the prospect of enforcement by post is preserved for on-road contraventions, in limited circumstances when alternatives are prevented. These would appear to be more limited than in Amendment 61C. The regulations would also appear to cover some, if not all, of what is provided by Amendments 61D and 61E, but this is not in the Bill. The draft regulations do not address Amendment 61G.
Can the Minister help me in particular with a specific piece of drafting in those regulations? Regulation 9A(3)(c) looks at the circumstances where service of enforcement by post would be permitted. It refers to,
“where the civil enforcement officer has begun to prepare a penalty charge notice for service in accordance with paragraph (2)”.
What does,
“begun to prepare a penalty charge notice”,
mean in this context? Does the officer have to actually get his machine or pencil out of a bag for a written enforcement notice? Does he just have to appear and look at the number plate of the vehicle in contemplation of doing something or does he actually have to press the button on the notice? This might seem frivolous but it is important that these things are clarified otherwise the scope for argument, litigation and adjudication will be endless.
We welcome the Government’s response, so far as it goes, in listening to the concerns and the LGA’s campaign—however, it is not enough. I beg to move.
Lord Bradshaw (LD)
I believe that these provisions are ill thought through and extremely damaging to local government and local governance. At the same time as the Government are beginning to concede powers—to Greater Manchester, as we read this morning—these provisions are taking away a power which is essential for local government to keep its roads free. Those roads are becoming increasingly congested and increasingly badly maintained.
The law relating to bus operation is that the traffic commissioners who license buses provide that they do not run early or more than five minutes behind schedule. It is extremely difficult for bus operators to keep within the present limits with the present level of enforcement; it would be completely impossible if we got odd people having five minutes to pop in to get the paper and impeding the traffic. That has a large-scale effect. For example, in Oxford, which I know well, the congestion at one stage got so bad that in one of the park and rides they had to put extra buses in and extra drivers. Of course, they got no more revenue, because they were taking the same number of people, who just happened to be sitting in congested areas. I am not talking only about bus lanes; these appear to be covered in the proposed regulations. I am talking about the fact that a large number of buses do not use roads that have bus lanes; the vast majority—I think about 60%—travel along ordinary roads, which are protected in places at least by double yellow lines. I honestly believe that this is not a subject that the Government should be involved in.
There is very little evidence that surpluses are being frittered away or used by councils to subside luxuries. I accept that in Kensington and Chelsea and in Westminster a couple of councils make a profit, but we cannot argue from the particular to the general. A piece of evidence that I have from one local authority shows that actually a very small fraction of people contest their parking fines and a much smaller proportion of them are upheld by the parking adjudicator. Nobody likes getting tickets because they have been watched by CCTV but most people accept that they have done wrong and will have to pay the fine, which is mitigated to 50% if people pay promptly. It is quite impossible to think that the police have resources to do that sort of work; it has to be done by CCTV, and if local authorities can afford to employ parking wardens it is probably at the expense of spending money on something else. I cannot understand why, in this day and age, technology is not brought to bear on problems. This is not spying on people; it is picking up illegal parking that is obstructing the highway for the ordinary person.
The regulations talk about zig-zag lines outside schools. I know what they are like; they go for about 10 yards either side of the entrance. That is not the problem. If you go almost anywhere you will find a line of cars outside schools and, for that matter, outside hospitals, which is very long and creates huge safety problems. Many headmasters ask local authorities to bring the enforcement ban or some sort of TV equipment to control the problem, because many people who park in those places are just selfish or lazy—or perhaps both. I do not believe that we should pander to that sort of thing.
With this clause, we need to go back to the drawing board and take some advice from people who really know what they are talking about, not relying on something conjured up in Whitehall, probably by somebody who really does not understand the problem.
Lord Gardiner of Kimble
My noble friend is always extremely persuasive. Clearly, the record of these discussions will go back to the department.
In his amendments, the noble Lord seeks to place in the Bill the list of exempted areas where local authorities can continue to use CCTV to issue tickets in the post. The department does not think that it would be expedient to set the exemptions in primary legislation. It is conceivable that exemptions could be increased or reduced in the future, so it might be more desirable to include them in secondary legislation. Everyone will have their own view on what is the right balance for the use of CCTV, whether that is in parking, as your Lordships are debating today, or more widely. The Government have given careful consideration to the list of exemptions and, in particular, have reflected the views of those who responded to the consultation.
The noble Lord, Lord McKenzie, also seeks to introduce a requirement for impact assessments to be carried out for the provisions. As I am sure he will know, the Government have been clear in their determination to reduce the impact of rules and regulations on businesses and policymakers. Indeed, the Government’s Better Regulation Framework Manual, which was published in July 2013, states that impact assessments are required only for measures that regulate or deregulate business or concern the regulation of business. This clause applies only to local authorities that carry out parking enforcement, so we believe that no impact assessment is required.
Lord McKenzie of Luton
Will the Minister remind me what the criteria are for an equality impact assessment?
Lord Gardiner of Kimble
I think that I might need a little assistance on that, but I will return to it.
The noble Lord also suggested the insertion of a new clause that would prevent the measures in the Bill from affecting off-street parking. However, the measures in the Bill already apply only to on-street parking, so we consider that the noble Lord’s suggested new clause is not necessary.
I should also reply to my noble friend Lord Bradshaw on the issue of traffic flow. Local authorities will still be able to enforce parking. Indeed, the great majority of authorities do this without the use of CCTV. As I said, in those areas where traffic flow is vital, the Government have provided for CCTV to continue.
I promise to write to the noble Lord about equality impact assessments.
Lord McKenzie of Luton
My Lords, I thank all noble Lords who have spoken in this debate. I shall first pick up some points that the Minister made. I understand his definition of when someone begins to prepare a parking ticket. I suspect that CCTV evidence will need to be brought to bear on that decision on more than a few occasions.
Let me revert to the noble Lord, Lord Bradshaw, who said that the amendment was damaging to local government and took powers away from local authorities. With respect, that is not what the amendment was doing. What is taking the power away from local authorities is the clause in the Bill. The amendment was seeking to ameliorate the impact of that. In that sense, I guess that it is a middle position between the two extremes of the coalition—those who do not want the clause at all and those who, if it has to be there, want to make it work in a better way. The arguments for not having it there at all are not insignificant.
Lord Bradshaw
I am sorry to interrupt. There is a woeful lack of solid evidence to support what the Government are proposing. The Minister, in replying, referred to parking penalty charge notices and all the work given to the adjudicators. In one borough, which I shall not name, 45,771 tickets were issued in a year. Of those, 358 were referred to the parking adjudicator and 65 were upheld. So we are talking about 65—one and a half a week—against the local authority issuing nearly 1,000 a week. It is preposterous that this sort of evidence is used by the Government to make these proposals. I beg the Minister to go away and convene a meeting between the people who support the Bill and those who actually have to work it. Seriously, this will cause chaos to bus services and parking enforcement—and probably a general feeling, once again, that the Government are out of touch with people.
Lord McKenzie of Luton
My Lords, I do not at all dispute the adjudication figures. I probably used the same briefing as the noble Lord. We have a common understanding of the data and the Government have more to do in justifying what they are doing here.
The issue around schools is clearly very important. The point has been well made that it is nonsense to say that TV cameras will be able to be used along a very short stretch of road. Our amendment would widen or retain the opportunity to use CCTV in those circumstances. The noble Baroness, Lady Hanham, asked who was complaining about parking charges. I hesitate to say, but she might wish to take a taxi ride in Luton and it will not be long before she gets someone bending her ear about parking charges and enforcement. I suspect that that situation is not unique to where I live.
There is a localism argument in all this, although I know that depending on where people are on a proposition, they either grasp the localism mantra or they do not. We debated something just last week when those who are now on the localist wing were arguing for a very much centralist approach. We have all probably been on one side of that issue or another.
The Minister said that I was trying to introduce a new clause related to off-street parking enforcement; was that the point he was making? The point about Amendment 61G, which was suggested to us by the LGA, related to the opportunity for local authority car parks to have the benefit of the same use of technology as private car parks so that it can be used to improve management of those car parks—to enable people to park and pay afterwards, for example. Those are the sort of arrangements that make more efficient use of car parks—as I said, the Department of Health hospital trusts are encouraging that—which was the purpose of my clause. Perhaps the Minister might reflect on that.
My noble friend Lord Rooker, as ever, made a challenging point, in this case about the difference between somebody getting done for speeding on a motorway and somebody getting a parking ticket when they are stationary. These provisions apply only for stationary vehicles—for obvious reasons which the Minister I think dealt with. If people are motoring at 40, 50 or 60 miles an hour, you need some form of evidence to be able to justify a penalty, and CCTV is the obvious option. I do not think that the Government, to be fair to them, are seeking to change that in these regulations. But where I challenge the Government, and where I would certainly align myself with most of the Benches opposite, is that I do not think the Government have justified the very narrow use of CCTV that would result from this clause. At the very least it should be widened to cover all of those areas focused on safety, for example bus usage and the efficiency of the bus service. What they are doing is very restrictive and, I believe, unacceptable. One way or another, it needs to change.
Lord Tope
I do not think the noble Lord has quite withdrawn his amendment yet. Before he does so, I could perhaps help with Amendment 61G—which I certainly support—which refers to the use of an approved device in car parks. As I understand it, the Protection of Freedoms Act 2012 provided for the use of CCTV and automatic number plate recognition in private car parks but did not do so for local authority car parks. If that is the case—I believe that it is, and that is the reason for the amendment—I do not understand the logic for it. Why is it permissible in a privately owned or managed car park but not in a local authority one? I suspect, or would like to believe, that that was simply an omission when the 2012 Act was passed and that this is the opportunity to correct it.
Lord McKenzie of Luton
I am grateful to the noble Lord for his support on that particular amendment. I do not believe we can get an answer this afternoon as to why that distinction was made when the provisions were introduced but it is certainly important that we get it. We will obviously need a lot of follow-up on this area of debate, but in the mean time I beg leave to withdraw the amendment.
Lord Holmes of Richmond (Con)
My Lords, I support the amendment tabled by the noble Lord, Lord Low, and already spoken to. I feel nervous about standing between two noble friends. Luckily, I am not right between them, so I feel safe at the end of the Table. Also, it is a pleasure to be speaking to my noble friend the Minister. Two hours ago we were speaking on sport and now we are on parking. We should all bow down in awe at the extent of his knowledge and the range of expertise demonstrated in just one afternoon.
We all know very well that there are three subjects never to be discussed in polite conversation. I would certainly add a fourth, parking, to that. It raises temperatures—sometimes justifiably and sometimes the solution is actually in the hands of the person holding the steering wheel at that particular moment. Looking at the amendment, the situation is clearly set out and has worked not just perfectly but incredibly well in London since 1974. It has not impacted on the economic, social or cultural success of this great city. I would never say that what is good enough in London is good enough everywhere, but it is a very useful case in point to consider.
As a guide dog user, I obviously have a particular interest in this. In many cities and towns that I go to, trying to walk along the pavement is impossible. One steps out to avoid one car then realises that there is a second, third and fourth car and one is walking down the centre of the road while the cars are on the pavement. What a curious world one has entered there. It is almost as if pink flamingos are used as mallets for croquet and we are all diving down rabbit holes when we have reached a change of roles to that extent.
It is not just about visually impaired people, though—it is about the very nature and essence of inclusion. If you have a pushchair or pram, or you are walking with friends or family, if you have toddlers or if you are on a mobility scooter, if you are a pedestrian you should be able to access and enjoy the environment on the pavement. The clue is really in the name, “pavement”; it is not a carriageway. The Americans get it quite well—it is a sidewalk, not a side road or a side car park. That is where we should aim to guarantee everybody free, unimpeded access along the pavements, not just of London but across the entire nation. As we have already heard, there is a very clear local element here. Politics is nothing if it not only listens but acts locally. This amendment offers the right local solution to enable unimpeded access of the pavements up and down this nation.
I turn to the economics of it. Pavements are not designed for cars. Unsurprisingly, they crack and the tarmac sinks and they become not only unsightly but dangerous for pedestrians. Between 2006 and 2010, £1 billion was spent on pavement repairs as a result of parking. That figure does not even cover the costs that we can all only think about of people who have had to bring claims against local authorities for having been injured on pavements that have broken down as a result of people parking on them. Again with reference to the local agenda, that is why it is hardly surprising that 78% of local councillors believe that there should be prevention of pavement parking, as is the case in Greater London.
There is an economic argument and a social argument, as well as a legal argument. It would be good if my noble friend could strongly consider the wording set out in this amendment.
Lord McKenzie of Luton
My Lords, this is an important amendment, and we should thank the noble Lord, Lord Tope, for moving it on behalf of the noble Lord, Lord Low. As the noble Lord, Lord Tope, said, we all signed up to the Private Member’s Bill, which has stalled at the other end but is due for a Second Reading in January.
Under the existing legislation, it is illegal to drive on pavements and footpaths, but there is no specific prohibition against pavement parking. The ambiguity in the law means that most local authorities struggle to enforce restrictions, in contrast to London, which has operated a separate system since 1974. I understand that there are also exemptions in place in Exeter and Worcester. As the campaigning charity, Living Streets, said in written evidence to the Transport Select Committee:
“Inconsiderate parking can cause a major barrier to many vulnerable road users. It is clear that the current legislative situation relying on police enforcement isn’t working”.
Of course, there are some areas where parking on the pavement is unavoidable, and there are other legitimate reasons why it might sometimes be necessary—but all too often parking on the pavement obstructs access to pedestrians, forcing them to navigate busy and dangerous roads instead. Some 74% of adults report being forced to walk on the road because the pavement was being obstructed by cars and other vehicles. For some, pavement parking can effectively extinguish their right of way altogether. I refer to elderly people, people with buggies and those with disabilities. For them, cars that block the pavement can be a serious restriction on their freedom of movement.
I know that the measure proposed today has the support of the Guide Dogs UK, Age UK and several other organisations referred to by the noble Lord, Lord Tope. Banks of parked cars can also force cyclists to swerve into dangerous traffic flows, which can be especially dangerous on narrow roads. Pavements are not designed to bear the weight of cars, as the noble Lord, Lord Holmes, just said, let alone heavier goods vehicles; over time, they can become degraded, posing additional challenges for pedestrians and costs for local authorities.
The reality of the problem is not in contention, I suggest. In 2006, the Transport Select Committee said that the then Government,
“must grip the problem of pavement parking once and for all and ensure that it is outlawed throughout the country … rather than relying on the use of individual Traffic Regulation Orders on specific streets and local Acts to impose”,
a fine. Last year, the Transport Select Committee called for reform to end,
“a confusing patchwork approach across the country”,
and for a clarification of the rules for loading and unloading by haulage companies, and action to rectify the long-standing problems over poor signage. It is important that, even as the Government try to move towards allowing more diverse road signs from local authorities, common national standards can be agreed on this issue.
The status quo brings challenges for drivers as well as pedestrians and cyclists. The British Parking Association and the RAC Foundation all support the calls for change. Inappropriately parking vehicles can interfere with traffic flows for other road users, causing jams and congestion, and drivers are often unsure about restrictions—and which, if any, are in place. Given the growth in congestion on many of our roads, these problems are likely to be magnified in the years ahead.
The Government also seem to be in agreement, on the principle at least, that pavement parking is a problem that needs to be addressed. The amendment gives the Minister and the Government ample opportunity to do so. I urge them to take it.
Lord Gardiner of Kimble
My Lords, I first thank the noble Lord, Lord Tope, for speaking to the amendment; I am most grateful to the noble Lord, Lord Low, for tabling it.
The Government recognise entirely the importance of making the local environment convenient, safe and attractive to walk in, and of keeping footways in good order. I do not think anyone could have failed to be struck by all that my noble friend Lord Holmes of Richmond has said. However, as I think the noble Lord, Lord McKenzie, acknowledged, part of the dilemma is that there are indeed some streets where pavement parking may be inevitable, whether to maintain free passage of traffic, to allow loading and unloading or to allow the setting down of passengers in certain situations. I am afraid that I can think of instances when I have parked on a pavement for an elderly relative to get out safely, which I think was legitimate; it was not in London, either. There are therefore issues with a blanket ban, as the amendment is drafted, that are problematic.
Local authorities already have many powers to ban pavement parking; I have a list of them and they are quite considerable. However, I agree with my noble friend Lord Deben on this occasion. Local authorities are in the best position to decide on local parking restrictions and need to consider all road users when taking such decisions. A national ban of the type proposed would require local authorities to remove all existing restrictions, then to review their urban areas for where footway parking should nevertheless still be permitted, consult the community and erect new signage and markings, which would of course impose a burden on local government.
The amendment also proposes banning footway parking but allowing authorities to permit it where desired by a simple resolution. Circumvention of the traffic regulation order process would take away an important protection for the public. This process requires authorities to undertake consultation and advertise the proposals before councillors take final decisions. The Government’s guidance to local authorities makes clear that, during the appraisal of their parking policies, an authority should consider whether pavement parking is problematic in any part of its area. If it is, and is not covered by an existing traffic regulation order, the authority should consider amending the existing order or making a new one. Indeed, my noble friend Lady Kramer wrote to all English traffic authorities on 27 June this year to remind them of their existing, wide-ranging powers to prevent people from parking on the pavement where it is a problem.
Given the significant issues in managing a change of this scale, and the fact that authorities already have comprehensive powers to ban footway parking, I will ask the noble Lord to withdraw his amendment. However, before that, I want to emphasise that I am not asking the noble Lord to do that because the Government do not understand or accept the concerns that have been expressed. Indeed, the Government consulted the Disabled Persons Transport Advisory Committee on this. Although that body favours having no parking on the footway, it recognised that there would need to be exemptions from the national ban and that issues arise from this.
Although I am sure all noble Lords in the Committee will have every sympathy for what is intended, there are issues, which is why I ask my noble friend to withdraw his amendment.
Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“(5) Within one year of the passing of this Act, the Secretary of State shall lay before each House of Parliament a report setting out the effect of the Government’s policy of reducing the qualification period for right to buy on the number of affordable and council houses which have been replaced on a like-for-like basis.”
Lord McKenzie of Luton (Lab)
My Lords, this is a modest amendment that requires a report to each House of Parliament to set out the effects of the policy of reducing the qualifying period for eligibility for the right to buy from five to three years. In particular, it seeks information on the impact of this reduction on the numbers of affordable council houses that have replaced those sold. While this amendment focuses on replacement on a like-for-like basis, I acknowledge that the Government’s commitment relates to a one-for-one replacement.
As I made clear at Second Reading, we believe that people should have the right to own a home, and have come to support the right-to-buy programme as one mechanism to facilitate this. We are considering these issues when home ownership has declined to its lowest level in 30 years, and when we have a housing crisis in the UK because for decades we have failed to build sufficient homes to meet demand. The consequences of this are now being widely felt by millions of working people who are unable to afford the house that they want, and their children and grandchildren face the prospect of never being able to do so.
As Michael Lyons stressed in his latest report, building more homes is not just about home ownership. There is a need to provide homes for social and affordable rent so that those on the lowest incomes can have a decent home, too. His report specifically identified that local authorities should have a key role in commissioning and building social housing, and acknowledged the continuing commitment of housing associations to this end. Of course, the sale of a council house does not of itself add to or diminish the stock of housing in the UK, but how the proceeds of sale are applied and the extent to which that adds to the housing stock are of crucial importance. These things need to be considered in the near and longer term. Evidence provided to the Lyons commission suggested that about one-third of the properties sold under the right to buy are now privately rented, many at rent levels above applicable housing benefit levels.
In seeking this report, we are looking to hold the Government to account for the commitment made when their reinvigorated right-to-buy programme was introduced. The Solicitor-General in the other place,
“guaranteed, for the first time ever, that receipts from additional local authority sales—that is, sales above the level forecast prior to the change—would be used to help to fund new homes for affordable rent, on a one-for-one basis”.—[Official Report, Commons, Deregulation Bill Committee, 6/3/14; col. 276.]
This commitment applies to the reinvigorated programme generally, not just to changes in this clause, and requires some decoding. It is accepted that it is one-for-one, not like-for-like, and it would appear—perhaps the Minister can confirm this—that it is based on the Government’s analysis at national level that, should it have the relevant proceeds, and with the application of those receipts limited always to 30% of the cost of new provision, a one-for-one test could nationally be satisfied. Can the Minister throw any light on the distributional aspects of this approach and the extent to which the allowance works only because of a mismatch between locations where proceeds arise and where they can be reinvested? What assumptions have the Government made about the type of properties sold and those replaced? Because the right-to-buy proceeds could be applied to only 30% of the cost of replacement provision, local authorities will be expected to borrow the balance and fund from affordable rents. They have to sign agreements with the Government to this effect, so how many councils have entered into such agreements with the Government or the HCA? How many have not? Are the Government aware of any councils that would be precluded from undertaking such an agreement because of their borrowing cap? What is the Government’s definition of affordable rents for this purpose? Has any estimate been made of the additional housing benefit or universal credit cost that will arise from the requirement to charge such rents to benefit from the replacement arrangements?
One of the difficulties in all this is how to be clear about the baseline—the forecast level of sales prior to the reinvigorated programme. Is it correct that the baseline is set in terms of revenues garnered, not units sold, so that the Treasury always gets its money first? Will the Minister provide an analysis, year by year, of the baseline so that there can be some clarity as to the additionality that should provide the Government’s one-for-one commitment? It is understood that the Government’s guarantee does not extend to tenants accessing the preserved right to buy for those council homes that transferred into housing association ownership. The National Housing Federation briefing asserts that because housing associations entered into agreements about the split of proceeds of sale before the reinvigorated programme, they receive only a small proportion of the sale proceeds, with the lion’s share going to local authorities and not always used for housing. It says that 92% of housing associations that it surveyed declared that they would not be able to replace homes sold via the preserved right to buy. What plan do the Government have to facilitate replacement of homes sold by housing associations in that manner?
The National Housing Federation has given us figures for 2012-13, stating that 5,944 local authority homes were sold but that only 3,634 new homes had been started to replace them. For that and the subsequent year, how many homes have been sold and what are the related proceeds? How many of those have been treated as attributable to the reinvigorated process, and therefore how much is available for replacement homes?
Three other amendments focused on resources for social housing are grouped with this one, and I shall outline our position on them when they have been spoken to.
This is an important issue. Given the Government’s change in policy we need at least in these circumstances to review what is happening, hence the requirement for a report. I beg to move.
Lord Best (CB)
My Lords, I propose a cluster of three new clauses in the group, all concerned with the desperate problem of this country’s acute shortage of homes that are affordable to those on average incomes and below. Amendment 40 relates to right-to-buy discounts and seeks not to undermine these arrangements but to make them more productive. Amendment 41 seeks to apply more of the receipts from right-to-buy sales to the provision of new homes. Amendment 42 attempts to enable councils to borrow prudentially more funds to increase housing supply.
These proposed new clauses do not represent earth-shattering proposals that will solve the nation’s acute housing problems. Other more dramatic changes are needed to achieve really significant results, but this trio of amendments would enable councils to play a bigger role once again in meeting this country’s crying need for more and more affordable new homes.
I declare my interest as president of the Local Government Association. I am grateful to the LGA for preparing these amendments and, as always, for valuable briefings.
Clause 29 endeavours to make the right to buy more attractive by reducing the time from five to three years that a tenant has to live in a council property before being able to buy at a big discount. Discounts can be as much as 70% of value, so tenants can buy a home for 30% of what it is worth, subject to maximum discounts of an index-linked £100,000, now £102,700, in London and £75,000, now £77,000, elsewhere. These nationally set figures are very much back-of-the-envelope stuff. They do not recognise that the housing market outside London is not uniform. Levels of demand and house prices in Bradford and Burnley are not as the same as in Bedford or Brighton. Indeed, house prices are not even the same across London.
Amendment 40 would mean councils setting their own discount levels, based on local markets. It would place a maximum 60% on discounts. It would avoid giving away publicly owned assets on extravagant terms. It localises decision-making, in keeping with the Government’s general disposition towards the devolution of responsibility to local government.
Critics of the amendment could worry that some local authorities, which believe that the right to buy has already removed too many properties from their stock of affordable homes, will reduce discounts to the point where no one wants to buy. Some councils will certainly point out that a large proportion of RTB sales lead to the first buyer selling on to buy-to-let landlords. Sadly, this can mean the same previously rented home being re-let at twice the earlier rent, often increasing the housing benefit. Worse, the private tenants may be people requiring intensive housing management and support, which is not available from the private landlord. In extreme cases, I hear of families evicted by the council for anti-social behaviour returning to the estate, into former right-to-buy properties, costing the taxpayer twice as much, but without the restraints on behaviour that could be exerted for council tenants.
There are also the problems for the purchasers themselves. Those buying flats can discover a few years down the line that they must pay large sums towards major repairs and replacements of lifts, external cladding, roofs and so on, turning their asset into a liability.
Amendment 40 puts these arguments to one side and avoids the accusation that it could be used to undermine right-to-buy sales. It would require discounts to continue at levels that will still attract buyers. It would stop local authorities being forced to spend more than is necessary to encourage sales, and would prevent unwise tenants being tempted by the sheer scale of the discount from making an unwise purchase. It would substitute localised decision-making on an issue that requires local knowledge, for the distant regulation of RTB discounts by Whitehall.
Amendment 41 follows from that. It would seek to capture 100% of the sale proceeds—admittedly after they have been greatly depleted by the discount—to be recycled for local housing purposes. The importance of this measure is not hard to see. At present, the Treasury takes a 25% slice of proceeds from right-to-buy sales. Last year, from a total £877 million, the Treasury took £237 million. If that extra money had been recycled into the housing revenue account and used for new homes, it would have made a very helpful difference at the local level. Councils which have done the sums have estimated that they could have improved their housebuilding performance by some 30%.
Lord Wallace of Saltaire (LD)
My Lords, I think we all agree we need to build more houses and it is part of the puzzle over the last 20 years and more that successive Governments have been committed to doing this and have not been succeeding. Certainly, my own observation in Bradford is that one of the problems is a shortage of skilled labour for building. I am quite happy that the housing association that has its headquarters a good 10 minutes’ walk from my house in Saltaire now has a very good apprentice scheme to train plumbers, builders, electricians and others in sourcing its own maintenance and building. That is a model I hope others are planning to take forward. We are all conscious that we need to build more houses and aware—and this answers one or two of the questions raised by the noble Lords, Lord McKenzie and Lord Best—that we do not necessarily need to build the houses in the same areas where houses are being sold off as the population is shifting. We have different sorts of housing needs and requirements in different areas. Population has shifted towards the south-east and areas of heavy immigration require more housing than areas without much immigration, which now often have surplus housing stock. I have just been in Hull, for example, which does not suffer from a shortage of housing at present.
The noble Lord, Lord McKenzie, asked a number of questions. I do not have all the figures to answer him but I will make sure he gets the answers to all his questions as soon as possible, and of course well before Report. I am told by officials that many of the figures which he asks for are publicly available, so there should be no problem in that respect, but I do not have them immediately to hand. I noted his comments about houses that have been sold under right to buy and which are now privately rented. In some parts of England, there are some problems of that sort.
I think that the noble Lord, Lord Best, suggested that the discounts were enormous and immediate but the discount scheme, as he knows, is progressive and one gets the higher rates of discount only after renting a house for considerably longer than three, five or 10 years. The longer that someone has been a tenant the more discount they get, starting at 35% discount on a house and increasing by 1% each year to a maximum of 70% of the market value. It is not a short-term renters’ paradise, as I thought he was almost beginning to suggest.
The baseline for right to buy was set in April 2012, when the policy was reinvigorated, and it does not change year by year. I assure noble Lords that the Government are committed to keeping this reinvigorated right-to-buy scheme under review, including the impact of the change in the qualifying period from five to three years. The Committee may be interested to read the impact assessments for this clause that were published in January 2014, which is available on the parliamentary website, and in March 2012, at the time of reinvigorating the policy, which provide important context. When this Government reinvigorated the right to buy, they included an important measure guaranteeing for the first time ever that receipts from additional local authority sales—that is, sales above the level forecast prior to the change—would be used to help fund new homes for affordable rent on a one-for-one basis, not a like-for-like basis.
Lord McKenzie of Luton
While it is on my mind, is the test—the baseline—the originally anticipated numbers of sales of units, or is it anticipated sales proceeds?
Lord Wallace of Saltaire
I think that it is the units rather than the baseline being the proceeds of sales, but I will check with the officials and come back on that.
We publish quarterly and annually on right-to-buy one-for-one starts on-site and acquisitions, so the figures are available. I will make sure that they are circulated and put in the Library. Since the reinvigoration, there have been more than 12,600 additional local authority right-to-buy sales and, as the noble Lord, Lord McKenzie, said, councils have already reported almost 3,700 starts on-site and acquisitions of replacement homes for affordable rent. Councils have three years from the date of receiving the additional receipts in which to use them. This gives councils adequate time to leverage in additional funds and build up enough receipts to produce robust economies of scale.
The Government also publish annual statistics on preserved right-to-buy sales in England, which strike a balance between the needs to monitor the effectiveness of the policy and not to place unnecessary burdens on housing associations. As housing associations are independent organisations and stock transfer agreements are private commercial contracts, we do not mandate what those associations do with receipts that they receive from preserved right-to-buy sales. In practice, any surplus receipts retained, after costs and compensation for lost rental income, are likely to be used to support new build and other public benefits. Where receipts are shared with councils, it is our expectation that associations will work with them to develop replacement homes.
Lord Stoneham of Droxford
Before the noble Lord, Lord McKenzie, responds, may I apologise to the Committee? I meant to declare my interest as chair of Housing & Care 21 but failed to do so. I would like to put that on the record.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply and the noble Lords, Lord Best and Lord Stoneham, for their contributions to this debate. I look forward to receiving the figures in due course from the Minister. I was not quite sure whether in his response he was saying that the Government are currently meeting their one-for-one guarantee. It would be helpful to know if that is the Government’s position.
Lord McKenzie of Luton
In which case, when is it expected that the Government will meet that guarantee?
Lord Wallace of Saltaire
I have not chosen between soon or shortly, but we very much want to move on that. It takes time. As I said, local authorities have three years to replace, and we are already two years into this new scheme. We are, of course, frustrated by the length of time it takes to build new homes. That is part of a long-standing story under successive Governments which we continue to push forward with.
Lord McKenzie of Luton
I thank the Minister for that. I was also not sure whether he had accepted the thrust of my amendment, which was that the Government would produce a report. Could he respond to that?
Lord Wallace of Saltaire
My answer was that the Government already produces a large number of statistics which, in effect, form the basis of the report for which the noble Lord is asking.
Lord McKenzie of Luton
I take that as a yes. I thank the noble Lord, Lord Stoneham. I think we are on the same page in recognising the scale of the housing crisis which faces this country and the need for more social housing in particular, and for a one-for-one replacement policy.
We have debated the issues in the three amendments from the noble Lord, Lord Best, extensively from time to time in recent years. We share with him a strong desire to do more to produce more and better social housing, particularly housing for rent, though we are not able to follow him specifically on every aspect of his three amendments.
Where Amendment 40 is concerned with setting discounts locally, it discusses setting them at a level which will encourage right-to-buy take-up. That raises an interesting question of where the policy should be focused between facilitating and encouraging. Presumably, it would depend on the need for investment into the social housing sector, and there has to be a balance in these matters. I do not resile from my party’s position on managing the country’s overall level of debt. Our priority is not a wholesale lift of the cap.
Notwithstanding that, we should recognise the important role that local councils can and should be enabled to play in tackling the housing crisis—as the Lyons report put it, to return to their historic responsibility to build affordable housing. We note that there is some scope for a rise in output even on the current basis, but that would be modest compared to historic output. In the 1960s, I think that about 200,000 units a year were produced.
We recognise that councils have a long record of sound economic management and borrowing prudently—a point that the noble Lord made—but early removal of the overall cap will be difficult for any Government. The Lyons report recognised that. The report suggested that there is an opportunity to provide additional capacity without exceeding total borrowing if there is more active management from the Treasury of the overall borrowing headroom. Lyons suggests, for example, that councils should be able to apply for more borrowing headroom by demonstrating: a viable business plan and asset management strategy in the context of new contracts for housing delivery and a single pot of funding for housing investment; costed plans for investment in new housing that relate to their housing strategy and make full use of partnership opportunities; that new homes will be additional to those which would be delivered by others; and compliance with prudential rules with expectations about rent levels and reinvestment in their existing stock. The Treasury would be able to make a decision on a case-by-case basis against an understanding of the overall level of borrowing planned, to ensure that total borrowing did not exceed the current provision.
The report also points to the alternative models by which councils can invest in homes—by using land, by entering into joint ventures, by some of the imaginative work which the LGA has done on the municipal bonds agencies. There are other opportunities there, but we cannot go the whole way with the noble Lord in reducing the cap as he wants to.
I hope that debates such as this will continue to help us focus on the absolute need to address the housing crisis across the private sector, the local authority sector and housing associations. I look forward to receiving the Minister’s data in due course; I take it that they will come in the form of the requested report. In the mean time, I beg leave to withdraw the amendment.
Lord Lexden (Con)
My Lords, I would like to comment briefly on this amendment. I apologise to the noble Lord, Lord Best, for not being here at the start of his remarks.
There may be grounds to believe that this is an issue more of access than of supply. According to Leonard Cheshire, 10% of the British population have mobility issues and 2% use a wheelchair, but no British region has fewer than 19% of homes with disabled-friendly front doors, and London has 36%. There appear to be reasons to believe that the homes exist but that disabled people are not living in them.
I would like to touch briefly on research by the highly regarded organisation, Create Streets, which has shown that, in an urban environment, the results of lifetime homes standards requirements tend to be fewer houses and more flats, which is the opposite of what most people in this country want. If the issue is one of access rather than supply, might it not be better to require local councils to ensure an adequate supply of new homes and of new disabled-friendly homes and to take responsibility formally for ensuring that disabled people are housed in the right homes?
Lord McKenzie of Luton
My Lords, I put my name to this amendment but there is not much else left to say, so I shall be brief. Like the noble Lord, Lord Best, we welcome the work on standards and the inclusion of these matters in building regulations. We are grateful to Leonard Cheshire for its very helpful briefing. We welcome the fact that the lifetime homes standards and the wheelchair accessible standards have been recognised in building regulations, but like Leonard Cheshire and noble Lords who have spoken, there is a concern that those standards are optional, and that, moreover, a hurdle has to be gone through for a local planning authority to be able to require those as a planning condition. My noble friend made a telling point about the capacity of local planning authorities to address those issues.
I conclude on one point: this is not only a quality-of-life issue, although it is very important at that level; it has economic ramifications. Unsuitable accommodation means the likelihood of more trips and falls, more visits to the A&E and hospital, and more cost. I hope that the Minister can assure us that there is a way through this process to address the real concerns that have been raised today.
Lord Wallace of Saltaire
My Lords, I thank noble Lords who have taken part in the debate. As I came in, I was thinking that I have mixed views on housing standards. I first became aware of housing standards because of Parker Morris, when a number of houses in the Yorkshire dales were being condemned as back-to-earths which were not suitable or up to Parker Morris standards. Nowadays, those houses that remain would be regarded as extremely environmentally friendly and valuable; they were indeed beautiful homes. I once sat in on a violent argument between someone who lived in one of them and a particularly modernist Liberal councillor who believed that the Parker Morris standards were the absolute minimum and that any house that did not meet them should be immediately demolished.
On the other hand, having with my wife delivered to a large number of houses on the other side of the Aire from Saltaire just before the local elections this spring, with road names such as Cliff Rise and Steep Avenue—one house had 41 steps up to the front door—I recognise that accessibility is an issue with new housing. As I was listening to the debate, I reflected that if I wish to get out of bed in the middle of the night, in our house in Saltaire there are 15 steps down to the bathroom, whereas in my house in London there are five steps down to the bathroom, which, for someone approaching middle age, as I am, is much easier. The question of suitable and unsuitable accommodation is one which we all need to be concerned about.
First, this is not a dumbing down. As there is in much of the Bill and much government legislation at present, there is an inherent tension between local autonomy and central direction. I must say to the noble Lord, Lord Tope, that no Government can ever say that they understand in full the consequences of what they propose. We do our best to conduct impact assessments, but we are never entirely sure where we will be—especially after the High Court has had a go at our provisions in a few years’ time.
The optional requirements are intended to allow local authorities to set higher requirements for development than the building regulations minimum. They are a new concept in building regulations, and we are enabling local authorities, as a condition of granting planning permission, to require a developer to meet a higher building regulation requirement than the national minimum.
Lord Rooker
I can give advance warning—it would be nice if we could have the answer before we start the debate on the next amendment, because it is a fundamental issue. The time it takes for a local authority to change its local plan is enormous, and it is a huge cost as well. All I am asking is whether it is a requirement based on what he has just said in relation to this particular amendment. It ought to be straightforward to get an answer to that—yes or no—from his officials.
Lord McKenzie of Luton
My noble friend is absolutely right. I think the consultation document makes it very clear that it has to be part of the planning process for planning authorities to be able to impose it as an optional requirement.
Lord Wallace of Saltaire
My Lords, I reform that. If the local authority already has a standard, it can passport this on, keeping the standard without a need for a new policy. If it wants a new policy, it will have to have a plan policy. Does that begin to answer the question the noble Lord has raised?
Baroness Andrews
My Lords, far be it for me to improve or elaborate on anything that my noble friend has said. I just want to pick up a couple of points in the context of the code for sustainable homes.
That code has been in place since 2007. People are quite clear about the benefits. It has led to improved standards and to efficiencies. That is acknowledged by bodies such as the Environmental Audit Committee and the Local Government Association and many good public authorities. It is familiar, it is quite elaborate—that is true—but on the other hand, people know how to respond to that and how it benefits them. It has led to great energy efficiencies. Will the Minister tell me what the problem is that will be solved by removing the code?
The noble Lord, Lord Rooker, has quoted extensively from the BRE. It has probably provided us with similar briefings. The briefing points out that the new arrangements will mean that, in the future, energy performance set through the building regulations will be lower than many local authorities currently require, with the need for a special application to use optional regulations. This takes us back to the previous debate, and the shift in process and relationships, and in how things are decided, who gets to decide them and on what basis. He is right: of course there is a tension between national standards and localism. We are five years into this Government and it is about time some of those tensions were resolved. It is causing real issues at local level.
The BRE, which is expert in sustainability, has stated that:
“Over 75% of the sustainability requirements currently covered by the Code will no longer be covered by any UK standards or regulations”.
Is that factually correct? I would like to know if that is the case. What might that 75% include? How will that be compensated for in the new arrangements? In short, I would need to be convinced that whatever is coming forward will have the universal nature of the code for sustainable homes, that it will be as accessible and as easily applied, and that it will have the impact that the code can have in terms of efficiencies. What is going to happen to energy bills and to energy efficiencies within the home? I do not think that the House would want to proceed with this clause unless we could be certain that we knew the answers to those questions, and that we could say to people outside this House that the energy situation and their energy bills would get better as a result of these changes.
Lord McKenzie of Luton
My Lords, we have heard two very powerful presentations from my noble friends. It is not my nature to be helpful to the Minister, but I want to put one matter to him. The bit of briefing I received suggested that the particular provision in the Planning and Energy Act 2008 would stay in being until the zero-carbon homes policy was in place and that that would effectively replace it. That itself raises a couple of questions. The first is whether the zero-carbon homes policy would cover all the protections that my noble friends have said would be lost once we delete this provision. Secondly, how can we be assured that there will be an alignment—if that is the right way to go—and that the zero-carbon homes policy will come in at the same time as the ability to require higher standards disappears? There is a fundamental issue about whether the zero-carbon homes policy equates to what could be achieved under this provision. If it does not, the sort of losses that my noble friends Lord Rooker and Lady Andrews have identified become very real and pertinent.
Lord Wallace of Saltaire
My Lords, the noble Lord, Lord Rooker, often raises difficult issues for Governments, and I give all credit to him for the attention he pays to this. It is an entirely proper role for a Member of the House of Lords to look with deep suspicion at government proposals and to make sure that the Government can provide the rationale for them. Perhaps I can assure him that Oliver Letwin spoke on this on the Floor of the House and it was discussed in Committee, so it has not been entirely ignored by the House of Commons.
Lord McKenzie of Luton
Given that we are not expecting the zero-carbon home policy to be included until late 2016, there is a lot of water to flow under the bridge between now and then. Would he accept an amendment which put in the commitment not to repeal the provision in the 2008 Act until the zero-carbon home policy was in place?
Lord Wallace of Saltaire
I thank the noble Lord for that interesting suggestion. May I consider it and consult? Perhaps we can also discuss that off the Floor, between Committee and Report.
Lord McKenzie of Luton
My Lords, I shall speak also to Amendments 36B, 36C and 36D. This amendment would effectively give to individual London boroughs the right to override any relaxation of planning requirements for short-term lets which the Secretary of State might introduce. It would further make it clear that local authorities could deny any relaxation in respect of residential premises which were not the sole or main residence of the lessor.
The Government’s proposals to deregulate the position are proving to be, understandably, very contentious, as noble Lords will have seen from their postbag. We are supportive of those people who want to rent out their homes when, for instance, they go on holiday and want to make a bit of extra money. Although it may not be a mainstream activity where I live, we should not stand in the way of someone doing a house swap as part of their holiday plans. It is difficult to see why someone should be required to obtain planning permission in such circumstances. However, there is a distinction in our minds between infrequent letting in these circumstances and those who want to operate a short-let business. For those who do, and thereby materially change the use of a property, it is reasonable that they submit a planning application.
The arguments against a wholesale deregulation of the position for London have been well made. The specific problems caused by short-term letting have been fully set out in a range of briefings. London Councils says that deregulation of short-term lets will diminish the supply of permanent accommodation for those living and working in London, because if owners can charge significantly more for short-term lets, there will be general upward pressure on rents. The Camden case studies exemplify this. The survey of London boroughs has identified widespread concerns about the problems caused by extensive use of residential accommodation, which include increases in noise and anti-social behaviour, increasing fear of crime, the loss of community identity and reduced focus on fire risks.
The British Hospitality Association and others remind us why Section 25 of the Greater London Council (General Powers) Act 1973 is there in the first place: to ensure that housing is available and affordable for London residents. This, sadly, is an ambition which is increasingly difficult to fulfil. They claim that some other major cities—Paris, New York and Singapore—are looking to tighten their legislation in this regard at a time when the UK is moving in the opposite direction. Will the Minister tell us whether that is the case? The Bed & Breakfast Association expresses concerns that short-let businesses are largely unregulated, are enabled by technology to operate partly offshore and are careless of their responsibility regarding public safety.
Those who support some deregulation include Onefinestay, which says that it has pioneered a business which enables visitors to cities to stay in private homes while the owners are out of town. It argues that householders can top up their income, while tourist spending gets spread to local economies outside the usual hotel zones. It makes the point that such activity is not about scarce residential property being converted wholesale to other uses, it is about occasionally renting a home when you are not around, or even renting a room in your house while you remain in residence. In some ways, it might be argued that this is, de facto, the current position, because enforcement of the current planning requirements is limited. The London Councils’ briefing suggests that overall, it is less than 50%. Has anyone has been prosecuted for letting out their home for a couple of weeks while they have been away without getting planning permission?
The fact that London boroughs might effectively police the current position by where they draw the line on prosecutions does not make it altogether comfortable. What do we conclude from all this? It would be appropriate to deregulate in circumstances where the short-term let was in respect of a residential premises which was, and continued to be, the sole or main residence of the person letting the property. There would need to be careful definitions of sole or main residence—to preclude, for example, circumstances in which the owner was working abroad but expected to return to the property, but that should be well within the competence of parliamentary counsel. That would remove the nonsense of somebody having to get planning permission each year to let their home when they go on holiday, or, indeed, rent out a room for a few weeks and remain in residence.
It should also provide a degree of comfort from concerns that such arrangements will be uncaring of the neighbourhood and the local environment, because those letting the property will be returning to live in it. Further, it would remove the strain of boroughs having to look aside from such perfectly acceptable arrangements and determine not to prosecute. If the Secretary of State’s powers to deregulate are narrowed in this way, it might be said that no further safeguards are needed.
However, as the Bill provides an opportunity for the Secretary of State or the local planning authority to disapply the deregulatory change to particular types of residential premises or particular areas, we need to consider whether that is fair. Given that the Secretary of State in the first instance can set the circumstances in which the short-term let is facilitated, it would be reasonable and a localist approach to empower individual boroughs to disapply the deregulation. They know their areas better than the Secretary of State, and that is what our amendment provides. I beg to move.
Lord Ahmad of Wimbledon
As a previous Whip to the noble Baroness, I know that when she asks questions one needs to be quite detailed in one’s response. Let me again assure the noble Baroness that I will write to her specifically on that element. I am sure officials have also made note of her quite specific question. My noble friend Lady Hanham also raised the issue of curtailing the role, or asking why the Secretary of State would retain this role. As I have already said, we will work with local authorities in London on how regulations covering the role of the Secretary of State would work.
I am just looking through the number of specific fines from local authorities. Again, I have touched on some of them. I do not have the detailed breakdown of how many people have been pursued by which authority, but I have requested that from officials and will write to all noble Lords in that respect. I trust that I have covered most if not all of the questions. For anything pending I shall, of course, review the contributions made by all noble Lords, which I welcome, not least because of the experience across the board. I reiterate that the Government recognise that this is an area where there will be considerable interest and we wish to ensure that we get the change right. Therefore, I welcome the contributions that have been made in Committee today.
I reassure noble Lords that the Government will be working closely with all interested parties in London, including the local authorities and the hospitality industry. The Government want to ensure that the measures brought forward meet householders’ aspirations of temporarily letting out their homes or spare rooms, while retaining the key purpose of Section 25 which is keeping London homes for those who live permanently in London. We believe that these reforms benefit those Londoners who wish to supplement their income by making their homes or spare rooms available. It offers an alternative to hotels and guesthouses—as the noble Lord, Lord Mawson, mentioned—and further supports the wider tourist industry. It also helps those temporarily working in the capital or searching for a place to live by expanding the pool of competitively priced accommodation on offer. I beg to move that Clause 34 stands part of the Bill and I urge the noble Lord, Lord McKenzie, to withdraw his amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his very full reply and thank all noble Lords who have contributed to the debate on this amendment. I was slightly comforted by the Minister’s direction of travel. My understanding is it is likely that what is proposed is a narrower deregulation than might originally have been assumed from looking at the Bill. Whether it is narrow enough is something we need to look at with reference to genuine householders. I do not think that necessarily required a short-term let to be in respect of the householder’s property—that is it was their sole or main residence. That could impact on our position a little. I am not sure if we heard when at least the draft regulations are going to be available. The Minister prays in aid affirmative procedures. We have all done that and we know that is really only a marginal opportunity to influence the outcome of the regulations.
The Minister set his face against there being a right for London boroughs to take a different view and not follow the Secretary of State on the deregulation. That does not necessarily sit easy with those of us who are paid-up localists—normally including the noble Lord, Lord Tope. I think all noble Lords who spoke, including the noble Lord, Lord Tope, the noble Baronesses, Lady Donaghy and Lady Hanham, and, perhaps with respect to a lesser extent the noble Lord, Lord Mawson, share the analysis. It is just a question of where that takes us in terms of a solution.
The noble Baroness, Lady Hanham, made the point that central London in particular is a magnet for these operations and it does not necessarily apply to London as a whole. I do not think the survey that London Councils did—or maybe it was Camden—covered all the boroughs of London. I do not think there was 100% return, so it will be interesting to know what a wider spread might mean.
Clearly there is great concern about this provision. The Minister has helped to allay some of that concern this afternoon, but we need to have more detail before Report so we can determine which way we are going to proceed on this. Having said that, I beg leave to withdraw the amendment.
Lord Ahmad of Wimbledon
My Lords, this amendment would enable the Secretary of State to provide financial assistance to an organisation providing advice, information and training concerning residential licences. Importantly, this would allow such assistance to be made available where advice is provided in connection with the law concerning park homes.
The Mobile Homes Act 2013 introduced significant changes to the law on park homes and marks this Government’s commitment to provide proper protection to park home owners, while ensuring that those site operators who run a decent and honest business can prosper without the heavy burdens of red tape and bureaucracy.
As noble Lords are aware, the sector is small—about 85,000 homes on 2,000 sites in England. The law applying to it is unique and complicated. Many homeowners are older people and some are vulnerable. They are often hard to reach. It is also fair to say that many of them have suffered exploitation at the hands of unscrupulous operators. Homeowners often lack basic understanding of the law and their related rights. Not surprisingly, therefore, a source of concern in the past has been the lack of available, accurate and independent advice on the rights and responsibilities of the parties to a residential park home contract. This is why the Government commissioned the Leasehold Advisory Service, known as LEASE, in 2013, following the introduction of the Mobile Homes Act, to provide free initial advice on park home law.
LEASE has for many years provided advice to the residential leaseholder sector and it has been funded to do so by the Secretary of State by way of grant aid under powers in Section 94 of the Housing Act 1996. Those powers were not available to fund LEASE in respect of its park home functions because Section 94 is only available to fund advice in respect of residential tenancies. The tenure arrangement for park homes means they are residential licences. The amendment would enable the Secretary of State in future to pay grant aid to LEASE, or any other organisation, in connection with park home advice, in the same way as he can in respect of leasehold advice. Therefore I beg to move the amendment.
Lord McKenzie of Luton
My Lords, my noble friend Lady Andrews has put a compelling case, setting out our concerns with these proposals and building on the recommendations of the Delegated Powers Committee. It is a great pity that something of this nature and substance has been sprung on us at such short notice.
The Minister has gone through a whole range of potential responses and has touched on some quite tricky legal issues about the relationship of the consultation proposed and what that means for the hybridity process, and why, in a sense, we can ignore the matter.
When I saw the memorandum for the first time yesterday—it may have been this morning—what struck me was all the stuff explaining that the affirmative process was cumbersome, too difficult to organise and unpredictable in terms of time. That cannot be right. The affirmative process—these arrangements—is government management of business. I have never known that to be argued before as a reason for delay. As my noble friend said, we do not want to be part of anything which consciously disrupts the progress of the planning process on important regeneration, but we are entitled to insist on due process, a due process which has been in place for a very long time. The Delegated Powers and Regulatory Reform Committee identifies real concerns that this is about a specific issue concerning Ebbsfleet and that this is driving what would be a very substantial change in our processes.
I have already given notice that we will oppose this government amendment, so it is not worth my saying much more.
Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 6 months ago)
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Lord Wallace of Saltaire (LD)
My Lords, perhaps I should start by saying that the point which has just been raised by the noble Baroness, Lady McIntosh of Hudnall, will be dealt with later on today, so we will return to that question.
The purpose of Clause 1 is to remove the requirements of Section 3(2) of the Health and Safety at Work etc. Act 1974 from self-employed persons except those on a prescribed list of activities. The effect of Clause 1 will be to exempt self-employed persons from the requirements of Section 3(2), except those conducting undertakings prescribed by the Secretary of State in regulations.
As things stand, Section 3(2) imposes a duty on every self-employed person to protect themselves, and others, from risks to their health and safety, regardless of the type of activity they are undertaking. This means that duties are currently imposed on self-employed persons who undertake activities with little or no risk of harm to themselves and others. For example, a dressmaker, accountant or academic conducting commissioned research, as I used to do, working at home currently has duties under this section.
This proposal emanates from an independent review of health and safety legislation undertaken by Professor Ragnar Löfstedt in 2011. He recommended that self-employed persons be exempt from health and safety law where their work activities pose no potential risk of harm to others. One of the cases for doing so, he said, is so that Britain follows a similar approach to other EU countries—a comparison that may be welcome to some and possibly not welcome to others. The Government accepted this recommendation and a clause was included in the draft deregulation Bill.
In 2013, the Bill was subject to scrutiny by a pre-legislative scrutiny Joint Committee chaired by the noble Lord, Lord Rooker. Evidence presented by interested parties suggested that the clause, as originally drafted, could be confusing for self-employed persons to assess whether the law applied to them or not. The clause was therefore amended in the light of this evidence to make it clearer to the self-employed when the law will apply to them and when they will be exempt.
As a result of the change, only those self-employed persons conducting an undertaking prescribed by the Secretary of State in regulations will continue to have duties under Section 3(2). Undertakings will be prescribed if one of the following four criteria is met: first, there are high numbers of self-employed in a particular industry and high rates of injuries and/or fatalities—for example, in agriculture; secondly, there is a significant risk to members of the public—for example, in fairgrounds; thirdly, there is the potential for mass fatalities—for example, in the use of explosives or other dangerous equipment; fourthly, there is a European obligation to retain the general duty on self-employed persons—for example, in construction.
I hope that by now all noble Lords will have had an opportunity to consider a draft of the prescribing regulations, which has been produced in light of these four criteria. I am sure we can all agree that those self-employed undertaking work in the building industry should remain within the scope of health and safety law. Under the draft regulations, noble Lords will see that this will indeed continue to be the case. Builders, for example, will not be exempt under this proposal. Similarly, gas fitters and boiler engineers for obvious reasons will not be exempt. The risks posed when working with gas are recognised to be high and so the duties owed by a self-employed person who undertakes these activities will be maintained.
The draft set of regulations for the prescribed undertakings has been designed to strike a careful balance between the need to free self-employed persons from the perception that health and safety law places unnecessary burdens on them while still providing important protections in the law to those who require them. The Government have also tabled an amendment accepting the recommendation of the Delegated Powers and Regulatory Reform Committee to change the parliamentary procedure for these regulations from negative to affirmative. This will allow Parliament fully to scrutinise the regulations.
To ease transition to the new system and minimise familiarisation costs, the prescribed list relies on existing legal definitions, where possible. The clarity of the definitions in the list of prescribed undertakings in the draft regulations was the subject of an eight-week public consultation during the summer. The responses are being analysed by the HSE and will be published shortly. The draft list is available on the HSE website, and to assist the House, I will place a copy in the Library today. I hope that this will help in our discussions.
Further to aid the transition, the Health and Safety Executive is producing guidance targeted at self-employed persons and others to assist them in understanding the proposed changes to the law. It will also signpost them to existing guidance which explains in practical terms what self-employed persons need to do to comply with the relevant law. There is, for example, extensive guidance made publicly available by the HSE about managing health and safety in construction. This provides additional information about the definition of construction work, which is one of the activities intended to be prescribed. Detailed guidance exists for a majority of the other prescribed activities and, where it does not, the Health and Safety Executive will ensure that additional guidance is produced to support this legislative change. I beg to move Amendment 1 and propose that Clause 1 should stand part of the Bill.
Lord McKenzie of Luton (Lab)
My Lords, I rise to speak to our intention that Clause 1 should not stand part of the Bill. This is grouped with the government amendment and I can say that, should the clause survive, of course we accept that the affirmative procedure should be supported. However, I give notice that, notwithstanding the grouping, we reserve the right to vote separately on the clause stand part debate.
We have a first-class health and safety system in the UK which is respected around the world. At its centre is the Health and Safety at Work etc. Act, now in its 40th year. The system is built around the principle that those who create risks are best placed to manage them, and without being complacent, it is an approach which has hitherto saved countless people from being killed, injured or made ill by work. As we have heard, Section 3 of the Health and Safety at Work etc. Act currently places a duty on all employers and the self-employed to ensure, so far as is reasonably practical, the health and safety of others.
We should therefore be alarmed at what is now being proposed in Clause 1 of the Deregulation Bill, which seeks to exempt millions of the self-employed from health and safety legislation. This move springs from a recommendation made by Professor Ragnar Löfstedt, which was to exempt the self-employed who,
“pose no potential risk of harm to others”.
Such an exemption was proposed notwithstanding that it is generally accepted, including by Professor Löfstedt and the Health and Safety Executive, that the duty on the self-employed in these circumstances is limited, that little would be saved in terms of cost and time, and indeed in precautions undertaken, if such an exemption was introduced.
The professor also advanced the argument, as we have heard, that the exemption would help progress perceptions of a heavy-handed approach to health and safety for the self-employed, although scant evidence was provided to support the contention that this is a real problem. Indeed, the Engineering Employers’ Federation has refuted the view that self-employed people see health and safety as a burden and that they feel threatened by inspections and prosecutions. However, if there are these misapprehensions, surely the right thing to do is to challenge them, as the HSE is doing through its myth-busting panel rather than pare back the limited requirements which actually apply.
It was also proposed that this would bring us into line with Europe. However, international experience is varied, and more than half the countries of the EU include the self-employed in their health and safety legislation. Some that do not have stricter negligence laws which can be applied to those who put others at risk. Any suggestion that the UK’s health and safety system is creating an anti-competitive regime for the self-employed would not seem to be supported by what is happening. Self-employment actually grew by nearly 400,000 in the four years to 2012.
The HSE’s formulation to meet the Löfstedt recommendations was consulted on in 2012 and, despite receiving support from only a minority of consultees, was included in the draft Deregulation Bill which went before the Joint Committee. However, this attempt has proved problematic, with the Government eventually concluding from the pre-legislative scrutiny—rightly, in our view—that it would have been too confusing as to who was exempt and who was not. Given the minimal requirements on the self-employed who pose no risk of harm to others, it would have been logical at this point to hold on to the status quo; that is to say, although Professor Löfstedt arguably had a point, seeking to address it caused more problems than it solved.
Lord Wallace of Saltaire
My Lords, I suspect that most young, self-employed people get their information about these things off the computer or iPad. I hesitate to suggest that inspectors should visit them in their homes to check that they are doing things correctly. That suggests a level of state intervention in personal lives and activities that I hope the noble Lord would be strongly opposed to and perhaps the Labour Front Bench would not wish to propose. As I have stressed before, we are talking about the balance between acceptable risk and necessary regulation, and about the balance between the burden of regulation and the perception by people who wish to set up their own businesses or work on their own of the amount of regulation they face and the potential risks to themselves and others who may visit them.
Lord McKenzie of Luton
As we are in Committee, I will make a few comments. On the issue of perception not being irrelevant, surely the way to tackle perceptions or misperceptions is, for example, to do what the HSE does through its myth-busting arrangements and panels to make sure that there is proper information and education. To pander to misconceptions and weaken health and safety protections is completely the wrong way to go. I say to the noble Lord, Lord Curry, that we are not just talking about perceptions here. In this clause we are talking about actual diminutions in health and safety protections. This goes a long way beyond what Professor Löfstedt recommended. He said that we should change the rules for those self-employed who pose no risk of harm to others. In this clause we are way beyond that. The Minister said that whether the law is there or not people will still act sensibly. Some will and some will not. However, he has not effectively answered the point: why should woodworkers, furniture makers, metalworkers and maintenance fitters, for example, be outside health and safety provisions both as regards their own protections and their responsibility to others?
I fundamentally agree with the noble Lord, Lord Deben, who said that the risk of all that is that it will create greater complications than anything that it solves. The noble Lord, Lord Stoneham, said—or I took him to say—that we should not proceed with this until we know what the detailed regulations are, and it appears that we will not know those for some time. What has not been answered effectively is why, having originally accepted Professor Löfstedt’s recommendations, the Government now wish to go way beyond that. That is what they are doing with this clause: they are weakening health and safety protections which have stood the test of time for 40 years.
Lord Curry of Kirkharle
Perhaps I may respond to the points made by the noble Lord, Lord McKenzie. I was in contact with Professor Löfstedt in the past week. He has seen the wording of the Bill and appears to be very content with it. Perhaps I may respond to the comments of the noble Lord, Lord Deben. The Health and Safety Executive will carry the information that the noble Lord requested, so any self-employed business could very soon find out from the executive whether or not it is exempt.
Lord McKenzie of Luton
With great respect, I do not think that that is Professor Löfstedt’s position. He circulated his original advice; we know what that is and why it could not be implemented.
Lord Wallace of Saltaire
I hesitate to suggest that we should call Professor Löfstedt to the Bar to explain what he may or may not have said; he is in Sweden at present and we will have to wait until he comes back. The decision that the Government took to produce a list of activities rather than occupations that would be covered by health and safety regulations, leaving others outside, was in order to provide greater clarity. I stress that it is intended to cover activities conducted by self-employed persons rather than being occupation-based.
The self-employed person in any profession who conducts one or more of these activities will remain within the scope of the law. Where a self-employed person falls exempt under this proposal, it is considered that other enforcing authorities would be better placed to deal with transgressions. Many other laws and regulations apply to these activities. There are also other means of redress available in civil law to those who suffer harm as a result of a self-employed person’s activities, and in some circumstances in criminal law: for example, gross negligence.
I also remind noble Lords that we tabled Amendment 1 to ensure that the list, which is now available in draft and is, I hope, in the Library, will be subject to parliamentary scrutiny under the affirmative procedure —so we will be able to return at that point to make sure that we have the boundary that we are now arguing about right. As drafted, it was subject to the negative procedure, but now there will be a further opportunity in Parliament to debate the exact list of high-risk activities before it comes into effect.
Deregulation Bill
Lord McKenzie of Luton Excerpts(9 years, 10 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, I will speak on housing and, like my noble friends, against the folly of Clause 1 and its changes to the Health and Safety at Work Act. Clause 29 reduces the qualifying period for the right to buy from five to three years. We know that this is part of what the Government have labelled “reinvigorating the right to buy”. It has been accompanied by secondary legislation that increased the maximum percentage discount for houses sold to 70%, and increased the cash cap to £75,000—£100,000 in London—which in future is to be uprated by CPI.
We want to see people enabled to purchase a home, and we support the right to buy. However, housing is in crisis in this country, and especially affordable housing. Last year the Government built the lowest number of homes for social rent for more than 20 years and since records began. Section 106 agreements have been watered down, the capital budget for affordable housing has been cut by 60%, and the affordable rent model is anything but affordable. If recent reports are true, the Government are in panic over the prospect of yet a further fall in housebuilding as the general election looms. The Government’s favourite scapegoat to blame is the planning system, but can the Minister confirm that some 9,000 sites with full planning permission have not yet started building?
Therefore we will press the Government on their declared replacement policy. The formulation which they adopt is that they would use the receipts from additional—note, not all—right to buy sales to replace every additional home sold. We will wish to probe in Committee exactly what that means and how it would work in practice. It does not appear to cover sales under the preserved right to buy, which is to the detriment of the finances of housing associations.
We can see the merit of rationalising technical housing standards and their inclusion in the main building regulations, albeit with scope to deal with local circumstances. The Minister will be aware of the briefing from Leonard Cheshire which welcomes proposals to incorporate lifetime homes standards into building regulations, but expresses concern that they will potentially be optional. We will wish to be reassured that this is not the case.
We should be proud of our health and safety system in the UK. Over 40 years it has helped save countless lives and protected many from injury and ill health. Since this Government came to office there have been three reviews of its scope and operations — that of the noble Lord, Lord Young of Graffham, of Professor Lofstedt, and the triennial review. Each in its way has concluded that the system and the HSE is fit for purpose and doing an effective job.
We oppose Clause 1 not on ideological grounds, nor because our instinct is to resist any weakening of health and safety requirements, and nor because we believe that there is still a lingering antipathy to its cause in some higher reaches of government. We oppose it because whatever minor benefits the clause might bring are more than outweighed by the confusion and uncertainty it will engender.
The position at present is very clear. Under Section 3(2) of the 1974 Act every self-employed person is required to conduct their undertaking to ensure that,
“so far as is reasonably practicable … he and other persons … are not thereby exposed to risks to their health or safety”.
What could be fairer or more decent than that? Yet the Bill will restrict the requirement to those engaged in prescribed undertakings expressed by the Minister in another place to be “high-risk” activities. Notwithstanding that there is only a draft list of prescribed undertakings thus far—although an HSE consultation with a list commenced just today—Oliver Letwin proclaimed in another place that I think about two-thirds of people who are self-employed will no longer be covered by the Health and Safety at Work etc. Act. Why is that something to be proud of?
The Government, as my noble friend Lady Donaghy said, point to Professor Lofstedt as the reason for doing that, but that was not his recommendation. He recommended that an exemption should apply to those self-employed who have no employees and who pose no potential risk of harm to others. Even then, he acknowledged:
“The actual burden that the regulations currently place upon these self-employed may not be particularly significant”.
That point was reinforced by evidence from IOSH to the Public Bill Committee, where Richard Jones made clear:
“To our mind, the proposed exempted group … is not overly burdened by health and safety at the moment”.—[Official Report, Commons, Public Bill Committee, 25/2/14; col. 5.]
As the TUC points out, there is no need to make any change, because anyone who is self- employed but does not pose a risk to themselves or others cannot be prosecuted. They have no need to do a written risk assessment.
The HSE was clear that the best basis for any exemption should be to allow it only to those who would not be expected to put others at risk at any point in the normal course of their work and only if they did not work in certain prescribed industries. Paragraph 18 of the 2013 impact assessment states that,
“we explored the possibility of being wholly prescriptive and making a comprehensive list of the occupations, industries, or combinations thereof that would be covered by the exemption … However, discussion with sector experts within HSE made it clear that within occupations and industries there are many exceptions and atypical cases. Relying exclusively on such an approach would therefore risk unintended consequences”.
What is the huge burden that offending legislation imposes on the self-employed, and which holds back the advance of entrepreneurial zeal? The HSE’s original assessment was that the risk assessment would take—15 minutes a year. Annual savings for the new and existing self-employed would be about £500,000 a year—in aggregate, that is—but there would be upfront familiarisation costs of nearly £2 million. All of that, therefore, for the self-employed to save a quarter of an hour a year and on average less than 50p. The figures for today’s updated assessment tell the same story.
However, the proposition for exemption now in the Bill has greater health and safety risks. The HSE made it clear that some of the occupations proposed to be exempt have injury rates statistically higher than the average for all occupations. These, it said, include motor mechanics, furniture manufacturers, animal care occupations, metalworking, and maintenance fitters. That is a deeply flawed and dangerous position for the Government to take.
First, in framing the exemption using a prescribed list approach, we know that some who operate in risky businesses in a risky way will fall within the exemption. Secondly, even if the exemption could be phrased in a narrower way, the estimated savings are tiny. The prospect of exemption for some will provide another spur to the encouragement for individuals to declare a self-employed status—bogus or otherwise.
There is scope for huge confusion about whether someone will be exempt or not, particularly among the self-employed, who might typically get their information through informal channels and in circumstances when Ministers are talking up the scale and scope of exemptions. There could be confusion for those who take on an employee for part of a year, or whose activities are partly within a prescribed undertaking and partly outside. I hope that the Government will reflect and draw back from Clause 1.
Local Audit and Accountability Bill [HL]
Lord McKenzie of Luton Excerpts(10 years, 10 months ago)
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The Earl of Lytton
My Lords, this amendment is a further attempt to remedy an issue concerning parish polls. I declare my interest as president of the National Association of Local Councils, which has a particular interest in this. The background to this is already recorded in the Official Report of 26 June. On that occasion I was very gratified to receive not only the general support of the Committee but recognition from the noble Lord, Lord Wallace of Saltaire, that there is a problem that needs addressing.
Since then, accompanied by the chief executive of NALC, I have had an extremely useful meeting with the noble Baroness, Lady Hanham, and her departmental officials, and I am extremely grateful to her for that opportunity. I was encouraged by her very positive stance on this, as well as the great care with which her officials had obviously looked into the whole matter.
To summarise, parish polls are a very important way in which matters of interest can be aired and views sought, but they are governed by some fairly archaic legislation, which is more than 40 years old and contained in Schedule 12 to the Local Government Act 1972, and they are open to abuse. The issues are fourfold. First, incredibly minimal requirements are necessary to trigger a parish poll, which I have referred to in the past. Secondly, although it has to be on a parish matter, “parish matter” as a term of art is nowhere defined. Thirdly, once triggered, the costs incurred by the principal authority in conducting the poll are recoverable from the parish. While these may not be great in the overall score of things, in proportionate terms for a parish budget, they are pretty significant. Fourthly, there is no obligation to act on the poll, regardless of its outcome. Indeed, a number of polls have had very poor turnouts and inconclusive or even contradictory outcomes, as was outlined in the report by Action with Communities in Rural England.
This problem can only get worse. In Grand Committee, it was made clear that the Bill might not be the place for such an amendment. I understand that and the reasons for it. Yet it does affect parish finance and has a clear bearing on the way in which a parish is held to account. Equally clearly, there is a dimension of audit, although usually long after the event, as a check that the expense has been properly incurred.
The effect of the amendment would simply be to give the Secretary of State the power to amend by order the provisions of the 1972 Act. It does not of itself change anything in the Bill. The main change in this amendment compared with the previous version is in the five words at the end of proposed new subsection (1),
“with implications for parish finance”.
That was my way of trying to get round the issues to do with the scope of the Bill in terms of financial accountability and audit, which I explained in more detail in Grand Committee.
I am not hopeful that the amendment will prove acceptable. My purpose is to get on the record a firmer commitment to do something about this. The questions really are, if not here and now in the Bill, by this amendment, can something not be done at Third Reading, perhaps with—dare I say it?—a tweak to the Long Title of the Bill; I say that in the knowledge that we will shortly be dealing with a tweak to the Long Title. The best solution would be to accept something along the lines of this amendment in the context of the Bill, because it will be the quickest way of actually achieving something rather than expending powder and shot on trying to find some other parliamentary workaround to deal with what is, after all, not really the biggest of nuts to crack and which should not require a huge hammer to deal with.
Public money is at stake. If my amendment is not acceptable, and there is no tinkering with words that will make it so, perhaps the Minister could undertake to use reasonable endeavours to see if the Commons, with its wider powers over the scope of Bills, could be persuaded to do something. I believe, and have to accept, that the regulatory reform procedure is of no help here. The fall-back position, as I understand it from Grand Committee, would be for a Private Member’s Bill to be brought forward in a future Session, but at the cost of a further delay. If that is the only way forward, although it seems an awfully long-winded way of achieving something that really should be fairly uncontroversial, so be it. I would be happy to offer any assistance or activity on my part that could bring that forward. Perhaps the Minister could give an indication of whether, in that fall-back event, such a single-issue Bill would, in principle, receive government support and, more crucially, time to see it through. I beg to move.
Lord McKenzie of Luton
My Lords, we are sympathetic to the position adopted by the noble Earl, Lord Lytton, As my noble friend Lord Beecham said in Committee, the noble Earl has explained the archaic regime that exists at the moment for parish polls, the small numbers involved in calling a poll, the fact that the poll is not binding and the financial cost being recoverable for the parish. I would have thought an effort to address that would be well worth while. Indeed, the noble Earl’s amendment suggests that there should be an order-making power inserted into the Bill. Obviously, once the amendment itself has been accepted, it is presumably within the scope of the Bill; otherwise it would not be on the Marshalled List.
I do not see why it cannot be done. Maybe the wording needs to be changed. If the Government are reluctant to pick this issue up because they think that there are broader issues involved and it needs to be dealt with in some different way, perhaps we could hear that. However, if there is sympathy for the noble Earl’s proposition, and we are just looking for a parliamentary process to facilitate that, why not an order-making power?
Baroness Hanham
My Lords, we, too, are sympathetic to this amendment, and I am grateful to the noble Earl for having brought it to the attention of the House. We all recognise that parish polls are a way for local people to achieve something they want that is relevant and appropriate to the area over which they have authority. The noble Earl made it clear in Committee that sometimes that area extends to the European Union, which seems rather beyond the competence. We accept that there are concerns about the threshold for polls being called. I am very grateful to the noble Earl for coming to spend a bit of time with us, and we have had an opportunity to talk about it.
The way in which the noble Earl has constructed this amendment just about puts it within the scope of this Bill, but it is not wide enough for all that needs to be done. We believe that the scope can be made wider in the other place. We need to look at that carefully and will come back to it. I hope very much that we will be able to say that we will take that up and see it dealt with in the other place. If we cannot, then we are in the sort of territory that the noble Earl has talked about—a Private Member’s Bill or a hand-out Bill. I assure him that the Government are supportive of what he has said, and I give an undertaking to the House to take this away and look at how we can get it implemented in the best and quickest way. I hope that the noble Earl will be willing to withdraw his amendment.
Lord Wallace of Saltaire
My Lords, these amendments refine the provisions in the Bill that enable existing inspectorates to co-operate with an inspector, appointed by the Secretary of State, to inspect a best-value authority under Section 10 of the Local Government Act 1999, as amended by this Bill. Clause 33 and Schedule 10 to the Bill give a similar power to the Secretary of State’s existing power to ask for an inspection of a best-value authority. This is intended for use as a last resort in very serious cases, such as the ongoing intervention in Doncaster.
Paragraphs 2, 25, 36, 38, 54 and 72 of Schedule 12 amend existing legislation to enable existing inspectorates to co-operate with such a corporate governance inspection, as they sometimes do at present. The relevant bodies and inspectors are Ofsted, the Care Quality Commission, Her Majesty’s Chief Inspector of Constabulary, Her Majesty’s Chief Inspector of Prisons, Her Majesty’s Inspector of Probation, and Her Majesty’s Chief Inspector of the Crown Prosecution Service. The amendments to each of these paragraphs of Schedule 12, which take the same approach in each case, achieve this policy intention more cleanly. They remove the provision suggesting that a chief inspector may be appointed under new Section 10 as an inspector by the Secretary of State to inspect a local authority. This is because it is unlikely that it would be the chief inspector himself or herself who would undertake the inspection. Instead, it simply states that the chief inspector—or the commission, in the case of the Care Quality Commission —may do anything they think appropriate to “facilitate” such an inspection. This could include releasing staff to form part of an inspection team. All these amendments allow bodies to co-operate; they do not compel them to do so. We believe that these amendments simplify and clarify our approach without significantly affecting the impact of the Bill. I beg to move.
Lord McKenzie of Luton
My Lords, I am grateful to the noble Lord for that explanation. I was puzzled by what the substantive difference was between some of the clauses in the Bill and those that replaced them, but I believe the noble Lord’s explanation has helped me in that regard and I am happy to support his amendments.
Lord Beecham
My Lords, we have spent some time debating the requirements on local authorities to comply with the code of practice. I suppose this is our last opportunity to comment before Third Reading and the eventual passage of the Bill to the House of Commons. It is an opportunity to reiterate the problems that many of us envisage in the Government’s approach.
I suppose we ought to be grateful to the Government for clarifying the Title of the Bill, but the Title is almost irrelevant to the substance with which councils will have to contend. The further accretion to the Secretary of State of powers to direct individual councils is not a concession from the original proposition that a direction can be given to all councils. In replying to this short debate, will the Minister indicate exactly how the Secretary of State intends to go about giving his directions, whether to individual local authorities or to categories of local authorities? Would he envisage doing so after consultation and, if so, with whom: individual authorities or the Local Government Association?
Who else might the Secretary of State involve in the consultation process? For example, before making any direction, would he consult the local print media, which he purports to be most concerned about? How would he do that, particularly if he is issuing a general direction? Has the Secretary of State consulted at all, with anybody, about this proposal, thus far? It would be interesting to know whether he has had meetings with, for example, the Newspaper Society, if that is the correct name of the outfit in question, assuming that it has time to indulge in such consultations while the Leveson report remains undetermined.
There is a fundamental problem with the Government’s approach, which largely depends on what I have described —accurately, I think—as an obsession of the Secretary of State and has very little to do with the reality on the ground. I had the opportunity today of a brief conversation with representatives of the National Union of Journalists who were ensconced in Portcullis House. I do not know whether any other Members of your Lordships’ House were invited to meet them, but they stressed again their opposition, as members of a union that represents journalists both in local government and in the print media—
Lord McKenzie of Luton
I wonder whether my noble friend can help me before he leaves this subject. I refer to the change in the Title of the Bill, for the reasons that were outlined. By tweaking the Title further, as we have just discussed, might there be a way of facilitating the desire of the noble Earl, Lord Lytton, in respect of parish polls? Does my noble friend think that that could that be accommodated by changing the Title of the Bill?
Lord Beecham
I certainly do, but it would be more relevant to know whether the Minister will accept that point. In a moment or two, I shall give him the opportunity to make his position clear.
As I said, the National Union of Journalists, representing journalists across the piece, feels very strongly that the Government’s stance on this is entirely unjustified. Having said that, it would be remiss of me not to point out to the noble Lord, Lord Tope, that the NUJ has great reservations about the amendment that he moved. However, I will be interested to hear what the Minister says in reply before the debate ends.
Local Audit and Accountability Bill [HL]
Lord McKenzie of Luton Excerpts(10 years, 10 months ago)
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Lord McKenzie of Luton
My Lords, in moving the amendment, I will speak to the other amendments in this group as well. As noble Lords will doubtless recognise, Amendment 1 is a paving amendment and the substance is in Amendments 6 and 9. Amendment 9 is consequential on Amendment 6.
The proposition is straightforward, and we had understood there was consensus. Notwithstanding this, we have not seen a government amendment to give it effect. The amendments provide a route to securing a central procurement of auditors in the future. As we discussed on the first day in Committee, by the time the key provisions of this Bill come into force, it is expected that all the audit contracts with principal local bodies will be undertaken by private sector firms, under arrangements entered into with the Audit Commission. This will comprise some 800 principal authorities, including local authorities, NHS and police bodies, and so on.
The contracts—I think that there are 10 of them—run to March 2017, but can be extended for three years. When these contracts have run their course, the authorities will make their separate appointments, although there is flexibility for authorities to jointly procure, together with other bodies. It is generally accepted that the central procurement exercise undertaken by the Audit Commission has generated substantial savings for local bodies—some 40% reduction in fees—and had some, albeit limited, impact on broadening the diversification of provision in the audit market.
The Government’s own impact assessment has recognised that individual audit procurement is unlikely to match central procurement in generating reduced fee levels. Research shows that market concentration in audit services leads to higher audit fees, and while there is a credible argument that individual procurement will act against market concentration, major providers in the market are large, economically powerful entities with resources to invest in tackling the new opportunities.
One risk is that the larger authorities will fare well in this, because they will be more attractive clients to the big firms. In practice, smaller authorities will end up with less choice, being the junior partners in joint appointments and perhaps missing out on the services of the larger firms or being unable to afford them. The Government will doubtless remind us that authorities can group together. They can, but there is no clear framework to support this. Indeed, there is no explanation, for example, of what happens if there is joint provision when a conflict develops between one of the authorities and the firm involved.
The amendments, particularly Amendment 9, which is at the core of it, adopts the approach already included in the Bill for potential central procurement for smaller authorities. It enables regulations to specify a person to appoint auditors with relevant powers relating to fees, et cetera. It especially encompasses the prospect of authorities being able to opt either in or out of the arrangements, which we know is a key requirement of the Minister. The Minister has expressed an appetite for facilitating ongoing central procurement, provided that it is not mandatory, and a hope to be able to return on Report with some ideas. Perhaps we can now hear what they are. We know that the Minister and officials have been having discussions with the LGA, but we do not necessarily think that arrangements run by it are the only, or, indeed, the best approach. If we are to preserve central procurement, we need the legislative basis to do that. That is what the amendments provide. I beg to move.
Lord Palmer of Childs Hill
My Lords, in Committee, my noble friend said that the Government would commit to amend the legislation to create a framework to support a voluntary national procurement exercise. When she replies, I would appreciate it if she could put some meat on that earlier commitment.
Dealing with the point made by the noble Lord, Lord McKenzie, if one was always looking in terms of cost savings, which seemed to be the main thrust of his speech, we would have almost the demise of all local authorities. It would be a case of, “Let us have it all done nationally and then we would save some money”. We as a Government are committed to localisation. The idea that local authorities should be to a degree able to choose their auditor is part of that localisation. There was a feeling of despair in the noble Lord’s comment about how local authorities would be less hard negotiators than the Audit Commission. I doubt whether that will be the case. Many local authorities would be very hard negotiators on their own behalf in fixing the audit fees, the level of audit taking place and how it will dovetail with the internal audit systems of the local authority. A local authority that has a good local internal audit system can probably negotiate much harder with the external auditors, because of its knowledge of its internal audit system, than the Audit Commission has in the past.
I believe that the amendments are unnecessary, and I would welcome and wait for my noble friend’s comments on how the Government will keep the commitment that she made at an earlier stage of the Bill.
Lord McKenzie of Luton
My Lords, I thank the Minister for her reply and the noble Lord, Lord Palmer, for his contribution to this short debate. I say to the noble Lord that I do not advance the proposition that all local authorities will not be hard negotiators. My point was that there could be a differentiation between the smaller authorities and the larger authorities. I am sure that the larger authorities will be well capable of looking after themselves—they prove that on a daily basis.
Localism and audit appointments within a regulatory framework are more complex issues than localism generally in the context of provision of services. Cost savings is one feature, but it seems to me, particularly in the current climate, that it is a very important feature of what we should be helping local authorities to achieve.
The Minister has in a sense reiterated what she said before. I do not honestly believe that that takes us any further forward. We have accepted that there should be a permissive, not a mandatory, regime. If that is where the Government are, I am not sure what is in this that cannot be accepted because it provides a route to set up exactly that sort of regime.
The Minister said that there was an intention to bring forward an amendment in the Commons. With respect, however, in the next breath—as I understood it—she said that that was not certain. I do not know whether the noble Baroness might be able to clarify that point for me before I conclude—it is fairly critical.
Baroness Hanham
My Lords, I want to make it clear that it is the Government’s intention to see that the proposed arrangement is fulfilled, so that there might be wider procurement than there is at present. In order to do that, I am unable to say today that it will follow exactly these provisions because discussions need to take place. The Local Government Association in its briefing, as I am sure the noble Lord will have seen, is happy that that should be the situation. It is content to have those discussions and to see that an appropriate amendment is put forward in the Commons.
As a politician, one should never hedge. What I am told is that there will be an amendment. I should never have put any doubt in the noble Lord’s mind about that. I hope that will help to clarify the situation and prevent the noble Lord feeling that he has to press this amendment, when I suggest that it is completely unnecessary.
Lord McKenzie of Luton
My Lords, again, I thank the Minister for that. Indeed, I was tempted to press this amendment but I take her assurance that an amendment will be brought forward in the Commons that will enable central procurement, but not on a mandatory basis. If that is the proposition we can take from this discussion, that is as far as I can take this amendment today and accordingly I beg leave to withdraw.
“(6) Before the commencement of this section, the Secretary of State must be satisfied that effective successor arrangements are in place or achievable for—
(a) the management of existing audit contracts entered into with the Audit Commission;(b) the maintenance and updating of Value for Money profiles; and(c) certification functions currently undertaken by the Audit Commission.”
Lord McKenzie of Luton
My Lords, I will speak also to Amendment 3. The more we delve into this Bill, the clearer it becomes that the decision to close the Audit Commission was taken without a clue as to how some of its functions were to be carried out in the future or how some of the savings that it has driven could be maintained.
We have just discussed how a central procurement function might be preserved, and we will come on to discuss how the commission’s efforts to prevent and detect maladministration and error can be carried out in the future. Amendment 2 focuses on three specific areas, which are,
“the management of existing audit contracts … the maintenance and updating of Value for Money profiles; and … certification functions currently undertaken by the Audit Commission”.
It requires that robust processes are in place for these before the Audit Commission is closed. We have discussed these before and received assurance that the Government have these matters in their sights, but we are again sadly lacking in detail as to what is proposed.
As we discussed in Committee, the management of ongoing audit contracts is not a straightforward, passive matter. It requires the availability of certain powers that are currently available to the Audit Commission; for example, in relation to fee setting. Given the public interest in local public audit, any successor arrangements will need to ensure transparency in audit quality monitoring. The FRC is to monitor major audits and it is unclear what public reporting there will be on this. All other audits can be subject to cyclical monitoring by the supervisory bodies but there is no commitment yet to any public reporting on the results of this monitoring. Perhaps the Minister will tell us now what is proposed in this regard.
In Committee, the Minister told us that,
“we are giving consideration to the transfer of current Audit Commission tasks, including the value-for-money profiles”.—[Official Report, 17/6/13; cols. GC 25-26.]
Now is the chance for the Minister to be a little more specific. The value-for-money profiles are widely used; there were some 9,000 visitors to the commission’s website in the past financial year. They bring together data about the costs, performance and activity of local councils and fire authorities. The profiles show how organisations are spending resources, what services they perform and how these cost and performance levels compare between organisations and over time. The commission is enhancing the visibility of these profiles by presenting information about how spending and activity have changed over time, how councils’ performance differs, and factors affecting variation in activity and cost. Can we be very clear on this: are these profiles to be maintained and, if so, how?
It is accepted that certification processes may diminish as grant funding streams are reformed and phased out but there will certainly be the need to deal with housing benefit funding before this is absorbed fully into universal credit. Can the Minister give us some assurance on just this one matter, if not the generality of the replaced certification regime?
We have so little hard information on these areas and the Bill is about to leave your Lordships’ House. We should remember that it is actually three years since the decision to close the commission was announced. In these circumstances, requiring these matters to have been satisfactorily dealt with before the Audit Commission is closed seems the very least that we can do.
The same applies to being satisfied as to how the new audit regime is to be co-ordinated across government and how accounting officers will be entitled to obtain assurances on the effectiveness of financial management arrangements. There will be no organisation to publish the outputs from the audits of over £200 billion of public money. Accounting officers will need to continue to have access to analyse the outcomes of local work, and individual government departments will need arrangements to receive the outcome of audits. We are entitled to be assured that this is all in place before the commission disappears.
That is all that this amendment seeks to achieve, but it is very important. I beg to move.
Lord Palmer of Childs Hill
My Lords, the purpose of Amendments 2 and 6 is clearly to try to improve the transitional arrangements. It seems to be felt that we need a certain overprotection for transitional arrangements, but when private corporate bodies change their auditors and way of management, some transitional arrangement always has to take place. It works in a natural way, without the Secretary of State being involved in every item.
Amendment 2 inserts three paragraphs. The first deals with,
“the management of existing audit contracts entered into with the Audit Commission”.
One of the main purposes of the Bill is to make the audits of the various local authorities much more the responsibility of the local authority. Its appointment of the auditor and dealings with the auditor, and the auditor’s dealings with the authority, will become a more localised matter. However, because there are a limited number of audit firms, there will be a consistency in the types of audit operated.
The main point that the noble Lord spoke about was,
“the maintenance and updating of Value for Money profiles”.
Value for money in the external audits of local authorities has been a very important and costly factor in terms of the time that the Audit Commission and private firms of auditors have spent on those activities and how much they have charged for them. Two or three years ago, the value-for-money audits carried out by external auditors were more limited. There was no large-scale review of the use of reserves, assets and finance. Under the current arrangements, external auditors do not have to carry out a prescribed list of value-for-money exercises.
Currently, before the Bill, that situation is very much localised. There is a virtue in that localisation. Different firms of auditors will possibly take a different view on what is needed within that particular local authority, and that view will have an effect on the fees charged to that authority and on how much work needs to be done. As the years progress, it will be interesting to see how different local authorities have their value-for-money details published. We hope that all local authorities will publish these, and there may need to be some national gathering of that information for comparison purposes. However, that does not necessarily need to be in the Bill. Although I understand where the noble Lord is coming from on this, I think that it amounts to a little too much control which is not needed.
Baroness Hanham
My Lords, the current contracts are due to last until 2017, and there will then be an interim arrangement between 2015 and 2017, as I have described. After 2017, unless for some reason it is decided universally to extend the contracts again en bloc—which is completely outside what we are talking about today, and it is probably unlikely—it is for the local authorities to make their own decisions about the contracts: where they want them to be, and with whom. Following 2017, within that interim period between 2015 and 2017, local authorities will have to decide what they will do and how to manage it.
Lord McKenzie of Luton
Again, I am grateful to the Minister for her response and to the noble Lord, Lord Palmer, for his challenges. I will start with the noble Lord. I sought to focus on the contracts that are in existence, not the subsequent regime, in which local authorities may or may not appoint their own auditors. However, there is a bundle of contracts, to which my noble friend Lord Christopher referred, which are ongoing at the moment but which will need management. That management is more than just a passive affair, so it needs to be put in place.
I thought that the arrangement about extension was that it would ultimately be a decision for the DCLG about its 10 bundles of different contracts—you do not necessarily have to make the same decision in respect of each of them. I say to the noble Lord, Lord Palmer, that I did not say that there should be some standardised approach to value-for-money issues. I sought to ensure that there was security of the value-for-money profiles that the Audit Commission currently produces—data that are available to all authorities and others as well—so that authorities are able to make their own judgments and undertake their own exercises, whatever they may be. After the Minister’s response, this is the area I feel less confident about. We do not know from the reply whether they will be maintained, even broadly, in their current form, or whether they will be available as a valuable tool for local authorities and health bodies in the future.
It was not my intent to get the Secretary of State involved in all things. The purpose of the amendment is to require the Secretary of State to be assured that these matters are in place—not that the Secretary of State is operating them—by the time the Audit Commission closes. Once the Audit Commission goes, that will be a very clear break with the current situation. So far as the role of the FRC and supervisory bodies is concerned, I understand their role in that, but the key issue is on how transparent the result of their work will be. We do not yet have clarity on what will be the consequences of their auditing of audit work and what will happen to that. That was part of what I was inquiring about.
Perhaps the noble Baroness can first deal with that point about transparency of the FRC’s supervisory activities or the supervisory bodies: what is likely to be in the public domain as a consequence of their work? It would be helpful if we could have an answer on that. I should also like some clarity on the value-for-money profiles. Is it intended that the data will still be collected, maintained and available to relevant bodies—whether in precisely the same form as now, or not? Is it intended that these profiles be available in the future, once the Audit Commission has closed? This is an important issue, so could the Minister give some further clarity on it?
Baroness Hanham
My Lords, I may need to write to the noble Lord on the detail of this. However, our understanding is that clarity and transparency will remain as they are at present, so that the Financial Reporting Council will have much the same monitoring role. Anything that it does in relation to councils and local audit will have to be as transparent as is necessary. I would prefer to write to the noble Lord, particularly on this issue, and to make sure that the information is put into the Library of the House.
Lord McKenzie of Luton
I am grateful to the Minister for that but perhaps it is time we stretched our legs. I beg leave to test the opinion of the House.
“(7) Before promulgating a statutory instrument containing regulations or an order which would fall within section 40(7), the Secretary of State shall publish and consult with relevant persons on a draft thereof.”
Lord McKenzie of Luton
My Lords, this is a rerun of the amendment we moved in Committee concerning hybridity. It was prompted by the report of the Delegated Powers and Regulatory Reform Committee which drew attention to Clause 47 of the Bill relating to regulations under Clause 2. Clause 2 enables the Secretary of State, by affirmative resolution, to include someone as a relevant authority and to make provisions about how the Bill affects them. This is the case even though the regulations might be a hybrid instrument, although Clause 47 requires it to be treated as not being a hybrid instrument. The Delegated Powers and Regulatory Reform Committee made it clear that if the hybrid instrument procedure is not to afford protection in cases of hybridity, there should be another form of protection—hence our amendment concerning publication and consultation.
In Committee, the Minister told us that instances of hybridity will be rare. Indeed, I do not think that we have yet had an example of one. There was, however, acknowledgment that, where they arose, there would be an especially compelling reason for the Government to consult. In response to the Delegated Powers and Regulatory Reform Committee, the Minister reiterated the Government’s acceptance of the need to consult and promised an announcement on Report. We look forward to that announcement and, specifically, to hearing why the commitment should not be carried in the Bill. I beg to move.
Baroness Hanham
My Lords, as the noble Lord said, I was sympathetic about his amendment in Committee. It would ensure that if the Government were to bring forward what might amount to a hybrid instrument under the powers in Clause 2, the bodies affected would be consulted before regulations were laid. This, indeed, would need to be through regulations. We do not expect that the need to bring forward regulations would be anything less than rare.
As I said in Committee, we recognise that in these cases there would be especially compelling reasons for the Government to consult. In our previous discussion I referred the noble Lord to our forthcoming response to the DPRRC’s report. We have accepted the committee’s point and informed it that we would announce our commitment, which I am doing, and consult affected bodies at Report. We confirmed that this will not entail the need for any amendment to the Bill. I am happy to give that commitment today, and to consult relevant persons on a draft of any statutory instrument containing regulations or an order falling under Clause 40(7) of the Bill. Any such regulation would be subject to the affirmative process, so Parliament would have the opportunity to scrutinise it. In the light of that commitment, I hope that the noble Lord will feel that we have satisfied his requirements.
Lord McKenzie of Luton
I am grateful to the Minister for that commitment which is very clear. I would still prefer to see it in the Bill, but I will not press that point. The answer is clear and I beg leave to withdraw the amendment.
Lord McKenzie of Luton
This is a return, briefly I expect, to a drafting point. Under Clause 4 there is a requirement that,
“a relevant authority … must be audited … in accordance with this Act and … by an auditor appointed by that authority in accordance with this Act”.
The second requirement cannot be met before 2017 at the earliest when the appointments made by the Audit Commission come to an end. It could be three years later if any of these contracts are extended.
The concern is how the general requirements for audit provided for in the Bill can operate before local appointments are operative. I believe that we see eye to eye with the Government on the issue. The Minister’s letter of 25 June states:
“Officials believe that when the provisions are commenced, we will be able to commence different provisions for different purposes and as a result, we will be able to avoid any of the unintended consequences you highlight”.
I accept that there is flexibility on commencement of provisions but remain unclear as to how this would operate in the circumstances highlighted. Is it being contended, for example, that Clause 4(1)(a) could be commenced before Clause 4(1)(b)? It would be good to have some clarity on this issue before the Bill leaves your Lordships’ House. I beg to move.
Lord Palmer of Childs Hill
My Lords, I would also welcome the Minister clarifying some issues, particularly if there is, indeed, a problem of a practical nature. At present, most local authorities are audited by a professional firm. A fairly small proportion is audited by the commission. Those audited by professional firms will be audited under the continuing contracts until 2017. The local authority will then have the ability to appoint a new auditor. This is what happens in the commercial world. One has an auditor, the auditor audits for a period—generally for the year, in this case for slightly longer—and then there is a new appointment. This is quite the natural way of things. I am not sure—and I hope that the Minister and the noble Lord, Lord McKenzie, will clarify this—why we need to have this because, in a practical sense of the word, auditors are there for a period, they finish their term of office and then they, or another auditor, are appointed. That is the natural way of things whatever we decide or do not decide in your Lordships’ House.
Baroness Hanham
My Lords, first, I confirm that it is possible to introduce different parts of the Bill at different stages, and the order in the Bill can be switched around. I think the noble Lord asked whether Clause 4(2) could be introduced before Clause 4(1) and the answer is that it could—it is a case of whatever is convenient. The Bill introduces powers to commence different parts of the Bill at different times and to make savings on provisions relating to the Audit Commission Act 1998. Therefore, we would expect to commence this reference in line with the introduction of the local appointment, which I think we were discussing when the noble Lord, Lord Christopher, was here.
If the noble Lord wants to know our wider intention of how to manage the overall transition to the new audit framework, it may be helpful if I say a bit more about that. Our intent remains, as I said, to close the commission in spring 2015. The existing audit contracts will continue to run until 2017, but management of those will transfer to an interim body. We have discussed these over the three previous amendments. As the contracts will run until 2017, authorities will not need to make their own appointments until that stage, but they will have to have made those appointments so that there is a smooth transition between the contracts currently managed by the Audit Commission and whoever manages them subsequently, into the local authority’s own regime. We therefore expect that much of Part 3 of the Bill, which deals with local appointment, will not be commenced until closer to 2016, which then gives them a year to do that. It will be 2016 when procurement of auditors for 2017 is likely to begin.
The current intention is that the new eligibility and regulatory framework and provisions on the conduct of audit will come into effect immediately following the closure of the commission in 2015. It is our intention to make arrangements to enable us to do this under the powers in the Bill, subject to analysis of the transitional arrangements—again as we have discussed, there have to be transitional arrangements—that may arise.
Lord McKenzie of Luton
I missed the Minister’s first point. Would she mind repeating the beginning of that sentence?
Baroness Hanham
It is our intention to make arrangements to enable us to do this under the powers in the Bill. Our current intention is that the new eligibility and regulatory framework and provisions on the conduct of audit will come into effect immediately following the closure of the commission in 2015. The provisions will then relate to whatever interim arrangements for the body are in place. I hope that that is sufficient clarification for the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I thank the Minister for her reply and the noble Lord, Lord Palmer, for his contribution. I say to the noble Lord, Lord Palmer, that my point was not about auditors and succession of auditors but on quite a narrow drafting point. One of the requirements in Clause 4 is that the audit must be undertaken,
“in accordance with this Act … by an auditor appointed by that authority”.
Obviously, until 2017, the auditors will have been appointed by the Audit Commission, and the question is how the system works under those circumstances. I accept the broad point that matters can be introduced at different stages but I am still a little mystified as to how the new framework is to operate from 2015, so long as Clause 4(1)(b) is there—unless that is simply excluded from what is introduced in 2015. Perhaps I should read the record and we might have a further discussion on this in due course if necessary.
Lord Palmer of Childs Hill
Before the noble Lord, Lord McKenzie, sits down, I will just comment on the point about the appointment of the auditor by the Audit Commission. In practical terms, the Audit Commission currently suggests who the auditor should be—for example PricewaterhouseCoopers, or Grant Thornton, which has a large number of these audits. The local authority is the one that appoints the auditor, under its own constitution, although it accepts in practice the auditor that has been put forward by the Audit Commission—whether it is the Audit Commission itself or a professional firm. I would have to go back to the constitution but, as I understand it, the local authority has a constitutional duty to appoint an auditor, which it currently does on “the instructions” of the Audit Commission. However, the appointment cannot be foisted on a local authority, because it is a legal body in itself.
Lord McKenzie of Luton
My Lords, the noble Lord makes an interesting point but my understanding is that the contracts for the audits are with the Audit Commission not with the local authority. If the noble Lord is right, that in fact unlocks this particular conundrum: although it is not a contract organised by the Audit Commission, if it is nevertheless an appointment by the authority, then I think the problem goes away. With respect to the noble Lord, I do not think that is the position but we might just follow up on that. Having said all that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, obviously we are content with these amendments, and I thank the noble Baroness for taking forward this issue. We did retable our original amendment as Amendment 21, but that was simply to make sure that something was on the agenda. Clearly, I will not move it when we reach that stage.
“(10) Such regulations shall in particular provide that an individual shall be ineligible to act as a member of an audit panel if that individual has any disqualifying interest.”
Lord McKenzie of Luton
My Lords, the purpose of the amendment is to test the scope of the term “independence”, although it is written in terms of an audit committee rather than an audit panel. I regret not having been able to attend the meeting which the noble Baroness, Lady Hanham, kindly organised to consider these issues, but I am grateful for the note which was provided.
We have reflected on the proposition that all principal authorities must have an audit committee whose functions include those required of an audit panel, and we see some merit in the Government’s argument that this could be too restrictive. We consider that all principal authorities should have an audit committee to undertake the range of functions with which we are familiar. Given that the appointment of auditors is a new function, the audit committee would be a natural place to provide the appropriate scrutiny and oversight of the relationship with the external auditor.
However, given the importance to that scrutiny and oversight role of the independence requirements, we think these should be paramount. These independence requirements are not mirrored in audit committee arrangements, and the CIPFA guidance is more focused on the separation of engagements of executive and scrutiny members. That guidance does not require a minimum number of independent, non-councillor members. So if we insist on audit committees to carry out the auditor panel role, and on the independence requirements to be satisfied, it seems to be the case that many local authorities would have to substantially restructure their arrangements. We encourage them to do so, but to require them to do so where audit committees are currently functioning well is perhaps against the spirit of localism.
The suggestion that the auditor panel might be a small sub-committee of an existing audit committee almost gets the best of both worlds, and may at least provide a transitional solution. However, the primary purpose of the amendment was to address the definition of independence. For this purpose, the Bill requires members of the audit panel to be independent of the authority for which the auditor is to be appointed. In the Bill independence is defined in terms of individual positions; that is, membership and relationships—so parent or grandparent. It does not cover influential business relationships, for example. The amendment is intended to open up this possibility.
It seems from the briefing note received just last week that it is intended for these other matters to be covered through a combination of regulation and guidance. This is welcome, but we should at least ask when we might see a draft of this. When will it be ready for colleagues in the Commons to consider, if not for ourselves? The Bill has spelled out in some detail the membership and personal relationships components of a definition of independence, but we have little or no information on these other components. I would be grateful to hear further from the Minister. I beg to move.
Lord Palmer of Childs Hill
My Lords, the amendment of the noble Lords, Lord McKenzie and Lord Beecham, says that an individual will be ineligible if that individual has a disqualifying interest. Yet it seems, by all the purposes of any law there is, that if you have a disqualifying interest you are by nature ineligible. I listened to the noble Lord, Lord McKenzie, and I still struggle to see why one needs to clarify and why one needs the amendment, because if one has a disqualifying interest one would be ineligible. I raised this matter at early stages of the Bill. As for who should sit on these panels, yes, the members of the local authority who are qualified may sit on the panel, and there then seems to be a great emphasis on independent members.
At this stage I declare an interest, and I probably should have done so earlier in the course of this debate. I am currently a chairman of a local authority audit committee. I do not think that this disqualifies me, and perhaps it qualifies me particularly to comment on this. One of the interesting things which I hope the Minister will address in her answer is that it is currently quite the custom in many local authorities, including my own, for a member of that local authority who is of a different political party from the ruling party to be the chair of the audit committee. That very often provides a very independent chairman or chairwoman of that committee.
I am worried that if we change that and require an independent committee chair, will that chair be as independent as an opposition chair? By the nature and appointment of audit committees, when looking for people who will be independent, particularly in the case of chairs, there is in some cases a possibility that those appointing will look among people they know who may have political sympathy with the ruling administration. The current arrangements seem to give chairs greater independence. This is probably wider than the amendment of the noble Lord, Lord McKenzie, but it seems to me to follow on from what is a disqualifying interest. I think we are giving that too much concentration, rather than the actual and real independence of the person who chairs that committee.
Lord McKenzie of Luton
I thank the Minister for her reply. The noble Lord, Lord Palmer, criticised the drafting of the amendment. I should explain that its purpose was simply to put down a mechanism which could be used to address wider issues of independence. We had in mind, specifically, significant business relationships. The Bill defines independence in terms of personal relationships; it should cover as well, for example, significant business relationships, which was the purpose of the amendment.
I was comforted by the briefing note that was produced following the meeting. It states:
“Through this combination of regulations and statutory guidance the Government intends to address other important aspects of independence for an auditor panel. We intend to work with interested parties and the sector to develop the detail of these, but as an example they might cover … the necessary skills and experience of panel members … specifying that certain persons are not independent where they have … significant commercial relationships with the authority or audit firm … the process through which independent members should be appointed … considerations around political balance, where the panel includes elected members … the conduct of members and, for example, how declarations of interest are managed on an ongoing basis”.
Each of those points, or at least some of them, were touched on by us in Committee. I took comfort from that. In a sense, that was the issue or the focus that my—clearly inappropriately drafted—amendment was seeking to address.
I reiterate where we are on the issue of audit committees or auditor panels. I think that, because there is in some instances a potential conflict between wanting to fulfil the independence requirements and the broader role of the audit committee, the best solution where they cannot be aligned is the sub-committee approach. I am not quite sure who at the meeting raised that, but the briefing note again confirms that the auditor panel could simply be a sub-committee of the audit committee. As long as that auditor panel fulfils the independence requirement, honour and justice are satisfied. That seems to us to be a helpful way forward which still encourages local authorities all to have audit committees and to move to greater independence relating thereto.
Baroness Hanham
Although I do not think that I mentioned sub-committees, I think that I made it clear that where there are audit committees, the membership could be drawn from the independent members of that committee, with possibly a local councillor. The implication is that audit committees are meant to be there and could form the basis of the auditor panel.
Lord McKenzie of Luton
My Lords, I am grateful for that and beg leave to withdraw the amendment.
Lord Wallace of Saltaire
My Lords, this group of amendments deals with amending the scope of the auditors’ work. Amendment 12, which amends Clause 19, puts into the Bill a requirement for auditors of relevant authorities, other than health service bodies, to satisfy themselves that the statement of accounts presents a true and fair view. This requirement for health bodies is already in Clause 20.
The noble Lord, Lord McKenzie, moved a similar amendment in Grand Committee. In response, we provided assurance that it is indeed the Government’s intention to require larger relevant authorities to produce statements of accounts which are “true and fair” and for local auditors to give an opinion on whether this is achieved. We explained that this is not included in the Bill, but the same outcome will be achieved through a combination of the Bill and the regulations to be made under Clause 31, mirroring the same approach that is currently used.
We have reflected on this and other related discussions since Grand Committee, and consider that there are benefits to placing an explicit requirement in the Bill for auditors to give an opinion on whether the statement of accounts is “true and fair”, rather than retaining the current approach. The key benefit, of course, is alignment within the Bill between the audit requirements for health bodies in Clause 20, and those for local government bodies in Clause 19. Furthermore, presenting accounts that are “true and fair” is an established accounting and audit concept which is also used in legislation governing the audit of central government and companies.
The amendment will make clear that the accounts of the larger relevant authorities must meet the same high standards. However, because Clause 19 applies to all non-health bodies subject to audit under this Bill, this amendment will apply the “true and fair” standard to the audit of all relevant authorities. As we said in Grand Committee, the Government do not consider it appropriate that the “true and fair” standard should apply to smaller authorities. Smaller authorities are required to ensure that their accounts “present fairly” or “properly present”, which are briefer and more proportionate forms of accounting.
It will therefore be necessary to modify these requirements for smaller bodies, which the Government intend to do through the regulations under Clause 5. The modifications will retain the audit requirements on smaller bodies so that auditors of smaller bodies are required to continue to satisfy themselves that the accounts “present fairly” or “properly present”.
We are not planning to make the other amendment to Clause 3 that the noble Lord, Lord McKenzie, moved in Grand Committee, which would require relevant authorities to prepare statements of accounts which are true and fair. We believe that the amendment to Clause 19 achieves all that is needed. The duty on auditors in Clause 19 will effectively require the authority to prepare to true and fair standards. We will confirm that requirement in the regulations that will be made under Clause 31, by requiring the chief finance officer of larger relevant authorities to certify that the accounts show as true and fair. This is similar to the approach for health service bodies—which are required to keep proper accounts showing a true and fair view—and the Companies Act which says that the directors must not approve the accounts unless they are satisfied that they give a true and fair view.
Amendments 13 to 17 amend Clause 20, which sets out the general duties of auditors of health service bodies. These are needed to provide that the auditor of the accounts of special trustees is not required to give a regularity opinion. Clinical commissioning groups—which are covered by Clause 20—are funded by Parliament to commission healthcare services. As such, they are accountable to Parliament for how they utilise these resources. Clause 20 therefore requires the auditor to give an opinion on whether the CCG has used these resources as Parliament intended and in accordance with guidance covering financial transactions.
However, this clause currently requires auditors of the accounts of special trustees to provide a regularity opinion of these accounts. Special trustees are appointed by university or teaching hospitals under Section 212 of the National Health Service Act 2006 to hold property on their behalf. There are currently only three boards of special trustees in existence: for Great Ormond Street Hospital in London, the Royal Orthopaedic Hospital and Moorfields Eye Hospital. As these bodies do not receive funds voted by Parliament, there is no need for a regularity opinion by the auditor on their accounts. The general duties of the auditor of a special trustee are otherwise the same as for a CCG.
Finally, Amendment 65 is consequential to the amendments made to Clause 20 and technical in nature. It is required to enable Clause 20 to apply to audit of the accounts of NHS trusts and the trustees of NHS trusts in the same way as it applies to special trustees. I beg to move.
Lord McKenzie of Luton
My Lords, I thank the noble Lord, Lord Wallace, for introducing these amendments. We are happy with them. I will speak first to Amendment 12. We debated this issue of accounts being required to show a “true and fair” view in Committee, as the noble Lord said. We had drawn attention to the disparity of wording in the Bill between the general duties of auditors of relevant bodies which are health service bodies and those which are not. The requirements for local authority accounts to show a true and fair view was part of the process towards full GAAP compliance in the whole of government accounts.
In response to our amendment, the Minister, the noble Baroness, Lady Hanham, reassured us that it was a requirement for larger relevant authorities to present accounts that were true and fair and this was achieved through the interaction of primary and secondary legislation—the Audit Commission Act 1998 and the Accounts and Audit (England) Regulations 2011. The Minister said in Committee:
“We intend to mirror this requirement in the regulations to be made under Clause 31”.—[Official Report, 17/7/13; col. GC 30.]
However, the Minister went on to say:
“This approach is less complex than specifying ‘true and fair’ requirements in the Bill, because further amendments would be required to disapply these provisions … for smaller authorities, which, as the Bill makes clear, are not required to ensure that their statement of accounts are true and fair”.—[Official Report, 17/7/13; GC 31.]
As I said, we support the government amendment. I was going to inquire about how that latter point would be dealt with, but the noble Lord covered that in his presentation.
Before commenting on Amendments 13 to 17, I take the opportunity to thank the Minister and the Bill team for facilitating a meeting about the differing effects of the Bill on local authorities and health service bodies, and for the helpful follow-up tabulation. That tabulation presaged the amendment in noting that a regularity of opinion was necessary in respect of clinical commissioning groups, because they were funded by Parliament to commission healthcare services. This is not the case for NHS trusts which receive income from contracts.
The Bill already disapplies the regularity requirements for NHS trusts in Schedule 13 and, under this group of amendments, does so for special trustees. The amendment specifically restores the other requirements of Clause 20(1) in paragraphs (a) to (c) for special trustees. However, it is not immediately clear how those provisions are reinstated in respect of NHS trusts—that is, those which are not special trustees. I think that the clue to that is in Amendment 65, to which the noble Lord referred, but it would be helpful to have clarification on that point. Subject to that, we are happy with the amendments.
Lord McKenzie of Luton
My Lords, we are sympathetic to my noble friend’s amendments and supportive of the intention behind them, which is to improve transparency in the new arrangements for local government. As I said in Committee, these open up a very important area of discussion.
Freedom of information legislation has played an important part in opening up government to the public. With some local authorities now outsourcing large portions of their services to firms such as Capita, questions must be asked about how to hold such firms accountable, given the significant amounts of public money that they now manage; for example, some councils will be handing over control of critical council services such as planning, licensing and environmental health to private, for-profit companies. This will make it harder for local residents to get answers and action on issues affecting them. It will also make it harder for elected councillors to monitor and scrutinise these services on behalf of local people. It will make it almost impossible to change services if councillors and residents decide that they want things done differently. My noble friend and others have mentioned the G4S and Serco revelations of last week, which have rightly caused much outrage. We have called for freedom of information legislation to be extended to the delivery of public services by the private sector in order to give greater accountability and transparency.
Lord Wallace of Saltaire
My Lords, this amendment makes a small change to paragraph 1 of Schedule 7. It slightly changes the requirements on a local auditor when issuing a public interest report. The Bill currently places a duty on local auditors to inform the auditor panel before making a public interest report. The amendment changes that duty to a duty to inform the panel,
“as soon as is reasonably practical after”
making a public interest report. The noble Lord, Lord McKenzie, moved a very similar amendment in Grand Committee. At that time we agreed with the intent of the amendment that the auditor panel should not influence the auditor’s decision as to whether to issue a public interest report. After further reflection, we consider that such an amendment would be a helpful clarification and would reduce the risk that the auditor panel could be perceived to be influencing the auditor’s judgment. I beg to move.
Lord McKenzie of Luton
My Lords, we have Amendment 20 in this group. Obviously, we support the government amendment because it is in keeping with the amendment that we moved in Committee. In Committee we sought to strengthen independent around the process of an auditor issuing a public interest report, and without sight of the government amendment we have retabled our Amendment 20. The sequence has been: in the draft Bill, a requirement to consult with the audit panel; in the current Bill, a requirement to notify the panel before the public interest report is issued; in our amendment, a requirement to notify when it is issued; and now, in the government amendment, to notify as soon as is reasonably practical. This is a progression with which we could not possibly disagree, and we thank the Government for accommodating this point.
“(d) to assist in the prevention and detection of maladministration and error.”
Lord McKenzie of Luton
My Lords, this, too, is a re-run of the amendment moved in Committee, which we consider is unresolved business. Its intent is to add to the purposes for which data matching can be used the prevention and detection of maladministration and error. At present, data matching can be used for the prevention and detection of fraud. The relevant Minister can add certain specified purposes by regulation, but only after a consultation exercise. The prevention and detection of maladministration and error is not currently one of these additional purposes. Accepting the amendment would not immediately bring this purpose within the scope of data matching but would allow it to be included in future after due process.
The Audit Commission currently undertakes data-matching exercises for the purpose of the prevention and detection of maladministration and error but does so under its audit powers. I refer again to the national duplicate registration initiative relating to GP lists and the role played by data matching. When we asked about how this would proceed in future, we did not receive an answer. Perhaps we can have an answer today. How would that initiative go forward with the Audit Commission having been abolished?
The amendment is only about preserving opportunities for tackling maladministration and error, not extending them, a matter on which I would assume we had common cause. In Committee on 26 June, the noble Lord, Lord Wallace, said:
“I understand that the Audit Commission has already run exercises looking at error rather than fraud, using its other powers and that furthermore, following the abolition of the commission, such exercises might not be possible. I am, therefore, interested in better understanding the outcome of such exercises … and … the risks and benefits of including a power such as that proposed”.—[Official Report, 26/6/13; col. GC 223.]
Will the Minister share with us the conclusions of the further deliberations and discussions with the Audit Commission on this point? I remind him that the amendment enables only the introduction of a power. Further steps would have to be taken before it could become effective.
Lord Wallace of Saltaire
My Lords, I begin by informing the House that, following careful consideration of all options, the Cabinet Office will assume responsibility for the national fraud initiative, subject to the passage of this Bill. The transfer to the Cabinet Office will allow the national fraud initiative to continue and develop its effective and important work to complement wider government activities to tackle fraud.
Officials are continuing to discuss transitional issues over the coming months to ensure a smooth handover once the legislation is in place. Perhaps it would be appropriate to remind noble Lords that I am the Lords spokesman on the Cabinet Office. I was indeed being briefed by the Cabinet Office fraud and error team some weeks ago. We are considering whether or not to draft a data-sharing and data-matching Bill for the consideration of the House. We face some very large issues at national as well as at local level, which involve issues of data privacy and identity assurance, all of which we need to discuss within the wider framework of national and international consideration of this as well as consideration by local authorities. Noble Lords may remember that in Committee I expressed some surprise at just how far local authorities and the Audit Commission had gone in this direction when the national Government were being very hesitant about how far it would be appropriate to go in some of these areas.
On this Bill, it is the Government’s intention that the data-matching clauses should, before we move towards discussing the much larger issues in the changing digital revolution that we are concerned with at present, remain consistent with the provisions in the Audit Commission Act 1998 to ensure continuity and stability on its transfer to its new home. Amendment 22 would insert a fourth potential purpose for data-matching exercises: to assist in the prevention and detection of maladministration and error. The noble Lord, Lord McKenzie, made a very persuasive case for this amendment in Committee and provided some helpful examples of the types of exercises that the Audit Commission had already run, looking at error rather than fraud, using its other powers.
My noble friend Lord Palmer of Childs Hill rightly highlighted the issue of function creep in relation to data-matching exercises. In doing so, he brought to the House’s attention the need for very careful consideration of these matters, Perhaps I should say that as a liberal in every sense, I am battered on both sides on the question of the convenience that the digital revolution provides us with but also the enormous threats that it offers to individual privacy if we are not careful about how we manage data holding, data sharing, data matching and data mining. I am sure that all noble Lords are aware of the distinctions between all of those. This is a very difficult area, and while the detection of error as well as of fraud is inherently valuable, it would allow the new owner of the national fraud initiative to continue the Audit Commission’s work. Any amplification of ministerial powers in this area therefore requires careful consideration. I assure the noble Lord that my officials are working with a range of interested parties to gain an in-depth understanding of past and potential future uses of this power. This includes representatives from the Information Commissioner’s Office, and I will be meeting the Information Commissioner before the summer on this matter.
My officials are also seeking further advice from the Audit Commission about exercises it has carried out using its other powers and the risks and benefits that such an extension might entail. I look forward to meeting the noble Lord in due course to update him on progress in this area, recognising that we are tip-toeing around the edges of one of the major issues that any future Government will be facing in the next three to five years: how we cope with the explosion of digital information available on cloud computing. I hope with those assurances that the amendment can now be withdrawn.
Lord McKenzie of Luton
My Lords, I must express some disappointment with the Minister’s response. I am grateful for the information on the transfer of the NFI to the Cabinet Office and I am reassured that it will be in the safe hands of the noble Lord as the Minister in your Lordships’ House. I share the concern about the enormity of some of the data holding, data sharing and data mining privacy issues. I took it, perhaps from what the Minister said, that there was the prospect of some broader legislation not too far down the track. However, I hang on to my point that this amendment would not extend one little bit what happens at the moment. In fact, the amendment would not even take us as far as we are today with the Audit Commission because it would need those further processes before it came into being. Whatever else is going on and whatever the scale of these other issues—I share the noble Lord’s concerns over those—I fail to see why this provision cannot be taken forward. It seems to me that there is a diminution in the Government’s task of tackling maladministration and error without these powers being available. I do not think the noble Lord explained how they would be dealt with differently once the Audit Commission goes out of existence and how this range of opportunities would be replicated under the new arrangement. I do not know whether the noble Lord would like another go at trying to convince me on that, but it would be helpful if he could. What will happen to the Audit Commission’s current audit powers to deal with maladministration and error? What will replace those just to have an equivalent process when the Audit Commission goes?
Lord Wallace of Saltaire
The Cabinet Office is looking at the issue of fraud and error in government as a whole in a wider context and would like to examine the experience of the Audit Commission further and to feed that into our wider discussion about the future of data sharing, data mining, data matching and that whole area. We do not intend to leave a long-term hole but to treat this within the broader context of what is happening. Some of us have been concerned in rather a different context with the shift from household electoral registration to individual electoral registration, where, as it happens, some of the same issues arise.
Lord McKenzie of Luton
I am grateful for that further explanation. I take the point that this will not just be left lying fallow but that there will be some active consideration of it. I still hang on to my point that the active consideration could take place without implementation by having the amendment in the Bill. If not, we will need primary legislation of some sort in the future to bring it into being as part of the data-matching process, if that is what the conclusion is on further analysis. Having the amendment in the Bill does not mean that it has to be activated, because the Minister has to go through a consultation process to do that. As there is going to be this broader look, it seems to me that the Government have reached the wrong conclusion. They could have adapted the Bill to include this amendment even if they never implemented it. I think we have probably been around this enough, unless the Minister wants to say something further.
Lord Wallace of Saltaire
I note the noble Lord’s preference for belt and braces. I have some doubts about how many pieces of legislation we have passed that have not been commenced, so perhaps I am slightly in the other area on this. However, I promise to write to the noble Lord further about how the Government intend to take this forward.
Lord McKenzie of Luton
I am grateful for that. I recognise that the Minister sees this as extremely poor, as, indeed, do the Government. I beg leave to withdraw the amendment.
Local Audit and Accountability Bill [HL]
Lord McKenzie of Luton Excerpts(10 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“(d) to assist in the prevention and detection of maladministration and error.”
Lord McKenzie of Luton
My Lords, this amendment refers to Schedule 9, and in particular paragraph 8(2).
The power to conduct data-matching exercises is currently exercisable for the purpose of assisting in the prevention and detection of fraud. However, a relevant Minister, which is the Secretary of State or Minister for the Cabinet Office, can add a purpose for which such exercises can be used provided they fall within the specified purposes. These are currently the prevention and detection of crimes other than fraud, apprehension and prosecution of offenders and recovery of debt owing to public bodies. The amendment would add another purpose,
“the prevention and detection of maladministration and error”.
It should be stressed that neither the further purposes described nor the additional one arising from this amendment can be a proper purpose of data matching until introduced by regulation following wide consultation.
The data-matching powers currently exercised by the Audit Commission through the national fraud initiative have been a considerable success, having identified nearly £1 billion of fraud, errors and overpayments since 1996. It is important that the NFI is found an appropriate home in the new regime and we understand and accept that discussions are under way to make this happen. Probing this is not the purpose of the amendment although if the Minister has an update for us it would be good to hear.
The amendment has been prompted by the Audit Commission, which has expressed concern that some of the data-matching exercises that it undertakes at present under its audit powers would not be available to any new body as they would not fall within the additional purposes provided for in Clause 8(2). However, it has instanced a data-matching exercise to assist with identifying maladministration which it undertook concerning GP lists. This was done as part of the national duplicate registration initiative and sought to identify such matters as deceased persons registrations or duplicate registrations. The two most recent exercises led to more than a quarter of a million patient registrations being removed—saving some £16 million—and some 30,000 patient records ending up with current rather than previous GPs.
This work targets error rather than fraud so would not be covered by the Bill as it stands. There is quite properly a sensitivity about data matching and we support the safeguards which are included in Schedule 9 restricting the use of such exercises and protecting certain data. There is also the code of data-matching practice which has been drawn up by the Audit Commission, the maintenance of which will become the responsibility of a relevant Minister under the Bill. Clearly, data matching has, as a matter of fact, been undertaken under powers which will seemingly not be available in the future under the Bill. Where does this leave exercises such as the national duplicate registration initiative in the future? Will the initiative be conducted, at least in part, by data matching, by whom and under what powers? The NDRI is just one example. Perhaps I may ask the Minister whether there have been discussions with the Audit Commission about the demise of its audit powers in this regard and how matters will be handled in the future.
There is a further matter concerning the extent to which those fall within the mandatory provisions of data requirements. The Bill retains this requirement for those currently required to do so and now includes foundation trusts. The Bill also enables the adding-in of other public bodies subject to consultation and regulation. Has any consideration been given to adding in any further public bodies? What assessment has been undertaken of this possibility? One possibility raised with us has been adding in housing associations which currently participate only on a voluntary basis. Data matching has proved to be a powerful tool in helping bodies to detect potential tenancy fraud and we are advised that just one RSL which participated in 2010-11 recovered 12 properties from illegal occupation which were able to be reallocated to general tenants. There is a continuing imperative for local authorities and RSLs to manage their stock in the most effective way given the housing crisis which faces the country and punitive measures such as the bedroom tax.
We have a shared interest in targeting fraud but also—I hope—in the prevention and detection of maladministration and error. This is all the more important given the huge cuts in local authority budgets and of course the further dreadful announcements from the Chancellor just a few hours ago. Data matching has a role to play provided there are robust safeguards. At the very least the Government should justify any diminution in the opportunity to use these as a result of the demise of the Audit Commission. I beg to move.
Lord Palmer of Childs Hill
My Lords, what worries me with this is the possibility of spreading the data protection rules and investigations even further than they are now. They are pretty strong already in the Bill and detection of maladministration and error is done by many local authorities—I am not sure about health authorities—in their internal and external audits. One of the main raisons d’être for that is to look for maladministration and error. As my noble friend will know, such audits are independent of the other departments of the local authority or health service.
I therefore ask the Minister to say how this is or is not already covered at present. What worries me is the creep of adding more and more things all the time in order to look behind what is happening. I understand the motives for that but this is perhaps going a step too far.
Lord McKenzie of Luton
Will the noble Lord accept that the purpose of the amendment is not to spread anything further but to preserve what is there? The point that the Audit Commission has made is that it can use its audit powers to do this data matching to achieve the objective at the moment. Obviously, once the commission disappears, it will not have those powers. If those powers are to go somewhere else, that is fine. I accept entirely that internal audit would be one means of helping to address the issue but data matching across bodies has proved to be effective. This is not about seeking to extend what currently happens but preserving what the Audit Commission is able to do under its audit powers.
Lord Palmer of Childs Hill
Let me give an example. If one is looking into housing fraud, one does not, as a local authority, look only at the housing department and benefits claims. I know that local authorities such as mine look towards the UK Border Agency, with which they have a great relationship. When they look into possible fraud, administration error and all the other things that the noble Lord spoke about, the powers already exist. I am asking whether they need to be enshrined in the Bill.
Lord McKenzie of Luton
I am grateful to the Minister, and that we got two for the price of one with the Minister for the Cabinet Office as well, which is particularly apt. I am grateful, too, for the offer of a meeting, which I would be very happy to have. The noble Lord acknowledged the point that once the Audit Commission goes, some of the powers that it has used to do data matching will fall with it. Those will not automatically be picked up in the Bill or elsewhere, but that is the subject of ongoing discussion. I should just say in defence of the Audit Commission, if it needs it, that these data-matching exercises were not done in any sort of clandestine way. It published the results, particularly on this one initiative to show its benefits. I am grateful for the opportunity to discuss this point further.
I take the point entirely that there is already provision in the Bill for those who have to participate on a mandatory basis. I guess that part of my question was: is it intended in relation to housing associations to perhaps kick-start a consultation? Some do participate but I understand that it is quite a small percentage, and it looks as if some of the benefits could be quite significant for them to participate. That has nothing to do with extending the powers of data matching, but just extending the basis of those who are required to participate. Having said all that, I am grateful for what I take to be a positive response and beg leave to withdraw the amendment.
Lord Beecham
Yes, whole place. It is playing with words, and of course Labour words such as “total” are not acceptable. Within these areas there will of course be collaboration, and the proportion of funding will vary considerably. For example, in public health, less than 50% of government money will be coming in, so the Audit Commission would presumably be prohibited from taking a look at the effectiveness of that. It is not an audit job in that sense, but it is particularly desirable that it should address the issues of effectiveness and outcome, not purely in financial terms but across the piece as well, and that in itself should facilitate the work that the LGA and individual local authorities are doing, particularly in their scrutiny functions, to see how they are faring relative to others, and for that information to be communicated to the people who elect them. So I certainly could not support these amendments. I understand what the noble Lords are saying, but I think that a mission creep has overtaken their amendments as well. They were going too far in the interests of local democracy and the effectiveness of local government.
Lord McKenzie of Luton
My Lords, like my noble friend who was unable to support these amendments from the noble Earl, Lord Lytton, and the noble Lord, Lord Tope, I understand that—apart from the issue around this 50% funding—the Bill does what they are seeking to achieve. If you look particularly at paragraph 117 of the Explanatory Notes to the Bill, it says:
“These powers do not enable examinations of individual relevant authorities and are not designed to produce assessment of the performance of individual relevant authorities or comparative analyses in the form of published league tables”.
Unless that wording is defective—doubtless the Minister can help us on that—it achieves what the noble Lords want. As my noble friend says, whether it achieves what we want is another matter.
In relation to the other test in Amendment 18ZA—that is, an authority,
“who receives more than half their income from government funds”—
I can see that, for certain bodies, it is a test that is currently relatively straightforward to determine. However, if you seek to apply it to a local authority you can imagine the sort of criteria that you would have to unpick and examine. Presumably it is not part of government funds to take account of its income which comes from council tax. What happens when you come to the business rate? Is it part of its income? Do you look at the gross amount or the 50% under business retention that goes to central government and then comes back? Is that still government funding? Does it originate with the local authorities? All the issues around how tariffs, top-ups and safety nets work just from that regime itself could make that particular test in the context of local authorities extremely difficult to apply. It would be easy in some cases where either they would be clearly in or clearly out but I would be surprised if there were not a whole range where it would be extremely problematic.
The test at the moment, as I understand it, is that the Auditor-General can carry out examinations of bodies when more than half of their income comes from public funds and where they are appointed by or on behalf of the Crown. I am not quite sure how you translate that into the local authority context but it seems to me that the basic proposition which the noble Lords are seeking to achieve in terms of avoiding mission creep and certainly league tables is already in the Bill.
If that is right—and for that reason some of the comparative stuff to which my noble friend was referring is not available—it raises again the question we discussed earlier about the value-for-money profiles, the guardian of which is currently the Audit Commission. We discussed who was going to maintain those profiles, which I think would be part of the data that my noble friend and I would be looking for. We do not yet know where that is going to end up and how those profiles are going to be maintained, but I think that that is a slightly different issue from the one pursued by the noble Lord, Lord Tope.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, it is not very often that the noble Lord, Lord McKenzie, makes my case for me, and I am delighted to be in this unusual situation. Perhaps I should sit down without going any further. As always, however, the noble Lord provides a sting in the tail somewhere. On this occasion it was in his final question—to which I may not, even now, be able to give him an answer, but we will try.
Under the National Audit Act 1983 the Comptroller and Auditor-General can undertake examinations into the economy, efficiency and effectiveness or value for money with which a government department it audits has used its resources. He or she can also undertake these examinations in relation to bodies that receive more than half their income from public funds and which are appointed by or on behalf of the Crown.
Clause 34 broadens the Comptroller and Auditor-General’s powers to enable the National Audit Office to undertake examinations on groups of relevant authorities, enabling a more end-to-end view on the use of public money. The powers in Clause 34 have been designed deliberately to support the National Audit Office in undertaking its core roles. It enables examinations that support the National Audit Office either in holding the Government to account to Parliament or in providing analysis and advice that is useful to the sector. By definition, this does not mean that the NAO will be examining or reporting on individual authorities. It means that the comptroller can look at what is going on in a local authority but only in relevance to a wider group or area in relation to the money coming from Parliament.
The amendment would limit these powers to enable the Comptroller and Auditor-General to undertake examinations only on groups of relevant authorities that received more than half their funds from government. I think that that is where the noble Lord, Lord McKenzie, has stepped in and given a pretty clear explanation of why this is not going to work. The amendment is overly restrictive and would not support the National Audit Office in fulfilling its core roles. The Audit Commission currently has powers to undertake examinations in relation to all relevant authorities. Removing relevant authorities that receive less than half their resources from the Government would mean that the National Audit Office could not look across the whole spectrum and thus do its job. The amendment would also reduce the level of scrutiny of public spending that the NAO could carry out, including all the other elements mentioned by the noble Lord regarding the way that grants are paid and the money that goes into local authorities.
Amendment 18ZB would prevent the Comptroller and Auditor-General from undertaking examinations for the purpose of assessing the performance of individual authorities or the production of league tables. Clause 34(2) already provides for the first part of this. It states that a value-for-money examination must relate either to all authorities or to a particular description of relevant authority, and it is extremely unlikely that an individual authority would meet those criteria. An individual authority could be looked at but only in relation to a group and could not be identified as one authority. The Explanatory Notes set out that these powers are not designed for the National Audit Office to produce an assessment of the performance of individual authorities or comparative analyses in the form of published league tables. The Government do not wish to see a return to the comprehensive area assessment of local authorities. The NAO’s evidence to the pre-legislative scrutiny committee on the draft Bill confirmed that it is seeking neither to audit individual local authorities nor to interfere with the primary accountability of local authorities to the local electorate.
However, the clause does not prohibit comparisons of individual authorities during the course of the examination. This is because such group or overall analysis is necessary in order for the National Audit Office to make conclusions about the economy, efficiency and effectiveness with which authorities in a particular group are using resources, or to provide evaluation, commentary and advice to relevant authorities. We believe that the Clause 34 will give the National Audit Office a strengthened role in the assessment of value for money, which the Government said we wanted to achieve when we announced the intention to close the Audit Commission. I know that that intention has received a great deal of parliamentary support, including from the Communities and Local Government Select Committee, the committee which undertook scrutiny of the draft local audit Bill last autumn, and from many noble Lords during our discussions.
However, I understand—and I know that the National Audit Office does too—the concerns that have been expressed about the risks of scope drift or expansion of the programme beyond what is intended. I believe that there are safeguards in the Bill that mitigate against these risks. I emphasise that it is not the Government’s intention to replicate the Audit Commission’s programme of studies. The powers are narrower than the Audit Commission’s and there will be fewer studies. Although the examinations programme is ultimately a matter for the Comptroller and Auditor-General, Parliament undertakes a full and thorough scrutiny of the National Audit Office’s strategy and budget. The House of Commons Public Accounts Committee scrutinises the strategy and budget annually, including the balance of work between different roles, before approving the National Audit Office’s budget for the year ahead.
The Earl of Lytton
My Lords, first, I thank the noble Lord, Lord Tope, for his support and the noble Lords, Lord McKenzie and Lord Beecham, for their comments. All three have a much greater knowledge of local government matters than I can claim to possess but I would say to the noble Lord, Lord Beecham, in particular that it is important not to take amendments of this sort at this stage of the Bill too literally. The intention was to try to probe the parameters and get that on the record so that we know where we are.
Turning to the Minister’s comments, I hope I did not say that there would necessarily be mission creep, damage to democracy or any of the other things; only if it is uncontrolled and unconstrained could there be circumstances in which such things arise. But I am very comforted by what she said, particularly about the safeguards already in the Bill in connection with Amendment 18ZB.
It is my view that audit is a right and proper process. I am not suggesting for one minute that it should be removed, far from it; I do not think that anybody would advance that. However, it needs to be consistent with cost efficiency and done in a way that is not intrusive or that displaces other proper avenues of choice. I will leave it there for the time being but may return to it at a later stage.
Lord McKenzie of Luton
Before the noble Earl withdraws his amendment, can the Minister tell us any more about the value-for-money profiles, and in particular what the plans are to maintain those? Obviously that requires the compilation of data and comparative data.
Baroness Hanham
We are currently considering the future management of the Audit Commission’s value for money—the question asked. I cannot say anything more today but we will come back to this before Report, I hope, and I will certainly make sure that noble Lords are kept in touch with progress, which I think is what I said last time.
“Report to Parliament on the new audit regime
Within three years of the passing of this Act, the Secretary of State shall report to Parliament on the effectiveness of the new audit regime, covering in particular—(a) how the regime is being coordinated across government departments,(b) how the proposed arrangements are enabling accounting officers and Parliament to obtain assurance that the audit regime is performing effectively, (c) assurance that the independence of audit and quality of audit is being maintained,(d) the extent of diversity of provision in the audit market, and(e) the application of the regime for all relevant authorities including health bodies and smaller authorities.”
Lord McKenzie of Luton
My Lords, the amendment calls for a report to Parliament on the impact of the new audit regime and for this to be made within three years of the passing of the Act.
Let me acknowledge at the start the undertaking given by the Government on a post-implementation review but its objectives appear to be somewhat narrowly based and do not address some of the fundamental issues. The Bill provides for arrangements that are significantly different from the current regime whereby the Audit Commission effectively acts as regulator, commissioner and provider of audit. As the pre-legislative scrutiny committee report sets out, the new regime is more complex and certainly more fragmented. The regulation of local audit will transfer to the Financial Reporting Council, professional accounting bodies and the National Audit Office. Commissioning of local audit will transfer to local public bodies, and the provision of local audit will go to private sector firms. Research and value for money will be picked up by the NAO to a limited extent and by the sector’s own self-improvement. The National Fraud Initiative’s ultimate destination has yet to be determined, as we have discussed, and the co-ordination of grant certification remains a little vague.
Although some of the bases have been covered, potential gaps remain. Some of the bodies that are subject to the new regime are accountable to government departments other than CLG. How is this to be co-ordinated across government? Audited bodies themselves will have to liaise with government departments, the NAO and auditors because the commission will not be on hand to act as an intermediary. The role of accounting officers within departments is fundamental to the management and control of resources. They are currently able to draw on information on the outcome of audits, implementation of major initiatives and value for money outcomes analysed by the Audit Commission. How is this all to happen in the future? Unless the Minister can tell us otherwise, there appears to be no organisation that will be publishing the outputs of more than £200 billion of public expenditure.
Clearly, quality of audits is paramount. The role of the FRC as overall regulator and its specific role in providing quality assurance to just a few “major audits” has been the cause of some concern. We hear the government assurances on this but consider that Parliament is entitled to a more formal report on how this is working in practice. Can the Minister confirm that the reports of the recognised supervisory bodies monitoring auditor performance outside major audits will be in the public domain?
There is also the need for oversight on how this is working for all “relevant authorities”, including health bodies and smaller authorities. Many of the provisions in the Bill are not applicable to health service bodies because equivalent provision is made in other legislation. We have not thus far sought to compare or contrast these provisions with those applicable to other relevant authorities. Contemplating consolidation may give the Ministers a nightmare at the moment but the Bill does not give us a sense of how joined up this is all going to be in practice. A report to Parliament would cover this. I beg to move.
Lord Wallace of Saltaire
My Lords, the Government support the intention behind this amendment. Post-implementation review is acknowledged good practice. It will provide the assurances that Parliament and the general public will want that the new audit arrangements are achieving the outcomes that we expect, and it will identify how policies might be improved if they prove to be less effective than we anticipate. For these reasons, the Government have already committed to undertake such a review. This is set out in the impact assessment, at Section K.
However, I am not persuaded that the timeframe envisaged in the amendment is the right one. The commitment in the impact assessment is to a review within three to five years of Royal Assent. This is in line with the Government’s general commitment to post-legislative review. The reason for preferring a slightly longer period in the case of this legislation relates to the implementation of local auditor appointment.
Assuming that this Act is passed in early 2014, the amendment would require a report in early 2017. As noble Lords are aware, the earliest date at which local auditor appointment would begin is 2017. It would seem to make sense to include some assessment of the move to local appointment in the proposed review. This would enable a robust assessment of audit quality and auditor independence in the new regime, and of the impact of local appointment on the audit supply market.
Nevertheless, government departments, through the accounting officer, are accountable to Parliament annually for the money voted to them. Where this money is distributed to others, accounting officers need to be able to demonstrate that appropriate accountability arrangements are in place, usually through an accountability systems statement. The external audit of local bodies is one of the evidence sources that will help to demonstrate whether the system is working effectively. We will ensure that the necessary assurance can be provided to accounting officers and to Parliament.
The provisions for the audit regime of health bodies have been designed to provide at least the same level of assurance to the Department of Health accounting officer and Parliament on the use of resources by the health sector as current arrangements. All the health bodies covered by this Bill are included in the annual accounts of the Department of Health. The department reviews the outcome of the audits and annual governance statements of all health bodies and the NAO also uses these to inform its audit of the departmental accounts.
Finally, I would like to say a few words of reassurance about the scope of the proposed post-implementation review. The impact assessment explains that the review will look at how well the core objectives of the local audit reforms are being met. I remind noble Lords that these objectives are: to deliver greater localism, decentralisation and transparency; to maintain competitive audit fees; and to uphold high standards of auditing.
There does not appear to be anything in the list of specific requirements in the amendment which is obviously out of scope. The impact assessment makes a commitment that we will work up the detail of the review with representatives from local government and other interested parties. I hope that these reassurances will satisfy the noble Lord and he will be willing to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the noble Lord for his response. Of course, I will withdraw the amendment.
As I said in moving the amendment, I was aware of the proposal to have a post-implementation review. I accept the point about the timeframe. If it was done within three years, we would not have had any—or certainly many—local appointments of auditors so would not be able to judge the ramifications.
I do not know whether the noble Lord can help me on a further point, or write to me on it. In considering the Bill, I do not think that we have done enough work on how the regime for health bodies and other relevant bodies fits together. They are all defined as being relevant authorities. However, a whole raft of provisions appear to apply to relevant authorities other than health bodies. We may not have an overall view of how that fits together but one would hope that any review of how the measure will work in practice would pick up what the inconsistencies and consistencies of the regimes are and what lessons can be learnt from one stream which could benefit the other. That aspect appears to have received less attention than many other aspects of the Bill. However, I accept the undertaking that there will be a post-implementation review based on consultation with relevant bodies. I accept the point about a three to five-year timescale rather than within three years. That seems to me entirely reasonable. I do not know whether the noble Lord can say anything further on the health bodies point.
Lord Wallace of Saltaire
I take the point about health bodies. This clearly is an important part of the arrangement. We, of course, intend to include health service bodies in the post-implementation review. If there are other matters about the health bodies that the noble Lord would like to discuss between Committee and Report, I am very happy to do so. We recognise that this is an important part of the whole shift.
Lord McKenzie of Luton
I welcome that and would like to take up that opportunity. In the mean time, I beg leave to withdraw the amendment.
Lord Wallace of Saltaire
Amendment 23A would add new provisions within Schedule 12. The purpose of this amendment is to include local authority social housing providers within the Homes and Communities Agency’s existing powers to require a separate audit report into social housing accounts, once the Audit Commission has been abolished.
Currently, Section 210 of the Housing and Regeneration Act 2008 gives the Homes and Communities Agency a power to order an extraordinary audit as part of an inquiry under Section 206 of that Act in respect of a private registered provider of social housing where it has serious concerns that a housing provider has mismanaged its affairs. The agency can require the registered provider to allow its accounts and balance sheet to be audited by a qualified auditor appointed by the regulator.
Section 210A applies this regime to local authority housing providers by placing a duty on the Audit Commission, if asked by the regulator, to provide a report on the local authority’s accounts, so far as they relate to the authority’s provision of social housing. Amendment 23A ensures that local authority social housing accounts continue—upon closure of the Audit Commission—to be subject to examination as part of a Section 206 inquiry by enabling the Homes and Communities Agency to appoint an auditor which is on the register held by the recognised supervisory body to undertake an extraordinary audit. I therefore beg to move this amendment.
Lord Wallace of Saltaire
My Lords, as Cabinet Office spokesman in the Lords with some responsibility for charities, this is another amendment on which I shall speak. This is, indeed, about health service charities.
Amendment 24 makes changes to the Charities Act 2011 in respect of English NHS charities as a result of the abolition of the Audit Commission. Currently, the auditors of English NHS charities are appointed by the Audit Commission, so this amendment ensures that arrangements are in place for the audit of English NHS charities’ accounts after its abolition.
The trustees of English NHS charities will be able to appoint a person who is eligible to act as an auditor under the Companies Act 2006, this Bill or regulations under the Charities Act 2011. The amendment allows smaller English NHS charities, with income of between £25,000 and £500,000 in the year in question, to opt for an examination of their accounts as an alternative to audit, which is intended to minimise costs of producing accounts to the charities. This is consistent with the way smaller non-NHS charities are treated in the Charities Act 2011.
The criteria for who may undertake such examinations are set out in the amendment. An examiner of an English NHS charity’s accounts must be independent and the charity’s trustees must reasonably believe that the person has the requisite ability and experience to carry out a competent examination of the accounts. The examiner of an English NHS charity’s accounts must also be a member of a professional body as set out in Section 145(3) of the Charities Act 2011 if the gross income of the English NHS charity is between £250,000 and £500,000 a year, or be eligible under the Local Audit and Accountability Bill, once enacted.
The amendment enables the Charity Commission to give guidance to NHS charity trustees on the selection of an independent examiner and directions as to how an examination is to be carried out. The amendment also applies the same provisions to the group accounts of a parent NHS charity as have been set out for individual NHS charities. I beg to move.
Lord McKenzie of Luton
I have only one question for the noble Lord which concerns his reference to an independent examiner and a person who is independent. Can he remind us which definition of “independent” we are dealing with here?
Lord Wallace of Saltaire
I think we are referring back to the definition as in the Charities Act 2011. Since we have batted forward and back on the question of what exactly “independent” means in this respect, I may need to write to the noble Lord just to confirm the exact definition being used here.