LONDON GOVERNMENT BILL

HL Deb 15 May 1963 vol 249 cc1321-52

3.48 p.m.

House again in Committee.

EARL JELLICOE

I wonder whether I could say just a word or two about this particular Amendment? The noble Lord, Lord Faringdon, in arguing in favour of art annual system, drew a comparison between the number of people who go to the polls in a local election in Glasgow and the number of people who go to local elections in English counties. I would suggest that that is not really a valid comparison. It is comparatively easy to draw any conclusions you like from this type of statistic, and, in any case, I do not think the conclusion would necessarily be valid, drawn from entirely different types of constituencies, a highly populated area of Scotland and a possibly very thinly populated area of England.

Then, very briefly, may I adduce one or two further reasons why I suggest to my noble friend that this Amendment is not really watertight? In the first place, to provide for a review at an early date, and it would be quite an early date, would put an element of uncertainty into the affairs of this great city, which is what we wish to avoid. Second, he argued in favour of his Amendment that he feared the nation-wide impact of the adoption in this city of the triennial system. That seems to me an argument for a review on a country-wide basis and not on a Greater London basis. Finally, I would remind him that, should the need for a review ever become apparent, then within existing legislation it is perfectly within my right honourable friend's discretion to initiate such a review, with or without this Amendment. For those reasons I should again like to suggest to my noble friend that he might, at least at this stage, not wish to press this Amendment.

LORD CHELMER

I do not want to prolong the debate on this issue, but it is a matter of importance, a matter upon which there is in fact great controversy, and I think it would be helpful if the Committee were to divide and we could assess the feeling of your Lordships upon this matter, so as to reassure constituencies and others who are involved, not only in Greater London but, as I said earlier, in other parts of the country.

On Question, Amendment negatived.

VISCOUNT COLVILLE OF CULROSS moved, in paragraph 27(a), to leave out "of every London borough council". The noble Viscount said: This Amendment is the point that I foreshadowed in my speech on Second Reading, and I think it is perhaps as well that I did so, because I suspect that your Lordships would not spot this was a controversial provision in Schedule 4 if it were not explained. The crux of the matter is in paragraph 28 of Schedule 4, which provides that Section 239 of the Local Government Act, 1933, shall not apply to a London borough. Section 239 of the 1933 Act is the measure which allows a borough or a county borough council the choice between two different types of audit. They may either have district audit, the district auditors being civil servants with certain powers, or alternatively they may, if they so think fit, continue or choose professional audit by a member of one of the recognised bodies of chartered accountants. I think it is not clear at the moment whether, having made their choice, they may change subsequently. At any rate the choice is there, and up and down the country a very large number of boroughs and county boroughs have in fact chosen professional audit. Where they have done so, one would think that they had chosen it for a certain reason, because they appreciated certain things it gave them, or there may have been some things in the district audit which were not available to them in the way they wanted; I do not know. But it is a choice which has clearly been widely used and appreciated.

The situation in London is very mixed. At the present moment this Bill affects, I think I am right in saying, 86 county boroughs, boroughs, metropolitan boroughs and urban districts. Of those 86 authorities at the present moment there are, I think, 43 which either have or had the choice—they may have exercised it once and for all; I do not know—between professional and district audit. On the other hand, the metropolitan boroughs themselves never had this choice and of course cannot expect normally to be given it. Out of the 43 authorities outside the metropolitan boroughs area—that is to say, the four counties of Middlesex, Kent, Surrey and Essex—7 have in fact chosen, and those 7 are Croydon and West Ham, two county boroughs, Acton, Bromley, Hornsey, Richmond and Wimbledon. The proposal in the Bill is that from those seven shall be taken away their choice of professional audit, and from everybody else likewise the choice shall be taken away.

I do not know that it is particularly easy to see what is the answer to this. It is of very great importance, there is no doubt, because where you have a choice in the local government field which has been so widely exercised as this has been it must be very seriously considered before a major change of this nature is made. But the position is very difficult to provide with a completely logical answer. You cannot divide the new London boroughs into two varieties by the fact that previously they were either metropolitan boroughs or alternatively outside that area, giving the former no choice and giving the latter the choice they have always had or which most of them have always had. Equally if you take away the choice from everybody, as the Bill does, you are making a change in the law.

I am officially speaking to only the first of my series of Amendments, but I think perhaps your Lordships may conveniently take them all together. Under my Amendment I give the choice to all boroughs and this is likewise a change in the law. Nevertheless the question I think your Lordships should answer is this: should we, for London only, take away from the new boroughs in the outer area the choice most of them have always had and give the whole lot over to district audit, or should we extend the power to choose to a certain number of the inner boroughs who have never had it before? It seems to me that when you have a matter of this importance the only answer you can possibly come to is that you should extend—and it must be an extension, I admit—the choice to them all rather than take it away from some who have had it before.

I say that for this reason: I think that in another place and elsewhere Her Majesty's Government have supported their change in the law because they say it is the nearest thing to the status quo. It is not the status quo and nobody now will put that forward. But on the other hand, whereas the Amendment of Her Majesty's Government forces certain boroughs to change what they have had before, my Amendment does nothing of the kind, because there is no compulsion upon any of the boroughs in the London area under my proposal to choose professional audit if they do not wish. It may be—I do not know—all of them will choose district audit. I certainly would not complain. On the other hand, some may choose professional audit or some may stay with the professional audit they have already had. But at any rate my Amendment forces nothing on anybody, whereas Her Majesty's Government's proposition in the Bill does. This, I submit to your Lordships, is really the crux of the matter.

I do not think there is any question before your Lordships of the merits of the people who do these audits. I am sure that both on the district audit side and when it is in the hands of professional auditors it is done thoroughly, conscientiously and in every way properly, arid I do not think this Amendment would call forth any comparison, invidious or not, of that sort. On the other hand, this is not the first time this matter has arisen. It has arisen, I think, on six Private Bills which have been before the Houses of Parliament over the past series of years. On each of those occasions the Ministry of Housing has sought to impose the automatic district audit upon the authority concerned. On each occasion Parliament and on the last occasion, at any rate, your Lordships' House have refused to force tint compulsion and they have retained the choice for the authority concerned. On the last occasion they said they thought it was a great pity that, after the Ministry had been overruled five times on this, they should still return to the charge and put forward this compulsory district audit once again.

I think it may be said by my noble and learned friend the Lord Chancellor that those were Bills which concerned such things as water undertakings and similar matters and therefore no precedent is involved. But a water undertaking uses a lot of public money. It has in many cases a precept on the rates, and, although the sums may not be so large, at any rate it does not seem to me there is much difference in principle. Certainly there are, therefore, six precedents of recent Bills where your Lordships' House has been instrumental in retaining this choice.

There is only one thing that I should add, and I must do it out of fairness. There may be differences on the merit, not of the people who do the actual audit but of the system as such. I do not wish to go into these in detail, because they are technical matters, but my argument on that point is this. Professional audit is available to all county boroughs and boroughs in England and Wales, and it is in fact the only form of audit in Scotland, where there are slightly different methods. It is not available to county councils, rural or urban district councils or to metropolitan boroughs. But this is not purely a London matter. A change is being sought to be made in London, and London only, in this Bill. Of course, that is all we can do because it is all that is within the scope of the Bill, but I should prefer the choice to be left unaltered at this stage, because if there is anything which needs to be done about the respective methods of district or professional audit it cannot be confined solely to London and it is a nation-wide problem. Therefore, I think it is most unsuitable that this Bill should be used as a method to nibble away at this choice and to take advantage of the fact that here we have an opportunity to do something about it which cannot be applied elsewhere.

I think I should only add, as I am talking to the whole series of my Amendments, that they may look very complicated but I hope they will not cause grave concern to your Lordships, because they are only an attempt to bring up to date the provisions of Section 239 of the 1933 Act. Things have changed considerably since then and these Amendments are modelled on the provisions which have been accepted by Parliament in the six Bills which I have mentioned. If anything arises on these Amendments I shall be very happy to see them altered, but they are only consequential points. I submit that this is a matter of some importance and principle.

Amendment moved— Page 131, line 4, leave out the said words.—(Viscount Colville of Culross.)

4.5 p.m.

THE LORD CHANCELLOR (LORD DILHORNE)

I think it may be for the convenience of your Lordships if I reply now to the speech made by my noble friend and put the case, as we see it, in opposition to what he has intended, as we are discussing all his Amendments together. He bases his case primarily on the proposition that the Government are, by this Bill, taking the choice away from everybody, and in that sense making a major alteration in the law. He maintained that the choice should be left unaltered. I think that my noble friend is under a misconception about the true position, so far as the area of Greater London is concerned, when he says that there is now a choice and that the new boroughs should inherit that choice. I should like to reply at some little length to these Amendments because, although they have not been discussed in debate before, they have been the subject of considerable discussion in the Press.

First, I would seek, if I might, to get this matter into a proper perspective and to stress that this is a Bill for Greater London; and Greater London only. In view of the concluding remarks of my noble friend, I would emphasise that the House is not now considering, or being asked to express a view on, which of the two systems of audit is the better, either for the rest of the country or indeed for any other part of the country, whether North or South of the Border. It is with Greater London alone that we are concerned, and while it is right that we should look at the position in the rest of the country, that is only relevant in so far as it may reflect upon the question we have to determine—namely, what provision we should make for Greater London.

If the system proposed for Greater London in the Bill is retained, the fact that it is retained for Greater London in the special circumstances to which I shall refer later will not affect discussion which might (I do not know) take place in the years to come about the audit systems of borough councils generally. The Association of Municipal Corporations, a powerful body to whose views regard is properly had, and a body upon which the noble Lord, Lord Morrison of Lambeth based some observations quite recently—

LORD MORRISON OF LAMBETH

I did.

THE LORD CHANCELLOR

—has acquiesced in the provisions in this Bill as to this system on that understanding. I confirm that there is no intention of raising questions about the audit of accounts elsewhere in England and Wales.

Secondly, I do not want anything I say to be thought to imply—for it is certainly not my desire to imply—any reflection on the competence and efficiency of the members of the professional bodies mentioned in the Amendment in conducting an audit of accounts, whether it be of a company, a local authority or any other body. The question for consideration on these Amendments is simply: should district audit be the system in force in Greater London or should the new boroughs have a choice?

Before saying anything further on that question, I should like to say a few words on the historical development of the system of district audit. It exists solely for the purpose of auditing local government accounts. District auditors are specialists, recruited through the Civil Service Commission and highly trained for the work they have to do—so specialised that, on the merger of the institute of Chartered Accountants with the Society of Incorporated Accountants in 1957, district auditors were excluded from full membership because they were specialists training for working in a field divorced from private practice. The system dates from 1844, and with the successive creation during the 19th century of new species of local authorities district audit was, without exception, applied to their accounts. At the end of the century district audit applied to all the newly created authorities; to county councils, metropolitan borough councils, urban and rural district and parish councils. It is just worth while considering why that happened, and I suggest that the answer is that the system of district audit was thought more suitable for local authorities' accounts. However that may be, I ask your Lordships to note that the metropolitan boroughs had district audit from their creation and no powers to choose professional audit as an alternative.

Municipal corporations, however, were treated differently. On their reform in 1835 Parliament prescribed for them a system of elective audit; that is, audit by two persons elected by the local government electors and one appointed by the mayor. The district audit scheme was not applied generally to these corporations, although some parts of their accounts were, and still are, subject to district audit and until 1933 the elective system was the only system generally applied by Statute to the accounts of municipal corporations, including those given the status of county boroughs in 1888. But under local Acts some boroughs acquired powers to employ district audit, and others engaged firms of private accountants to supplement the elective audit.

The Municipal Corporations (Audit) Act, which was repealed and consolidated in the Local Government Act, 1933, provided that boroughs were to have the elective audit unless or until they had chosen another system, and they were given the choice between district audit and professional audit. If your Lordships will look at subsection (2) of Amendment 99A, which we are discussing with this Amendment, your Lordships will see that it provides that if the boroughs of Greater London are given a similar choice the system they choose must be followed for five years, and thereafter they may change from one system to the other from time to time.

Views may differ as to the interpretation of Section 239 of the Local Government Act, 1933—that is the section which gives boroughs the power of choosing. On one view, once a borough has chosen a system under that Act—has exercised its right to choose under that Act—it can change to the other system only if it obtains power to do so by an Act of Parliament. On that view, it cannot change under the provisions of the 1933 Act. The other view is that it can change from one system to the other as often as it chooses, and whenever it likes. The Ministry, I understand, have always taken the former view, and I think there is a great deal to be said for the view that once a borough has made its choice, its powers under Section 239 are spent. But the point I want to draw to your Lordships' attention is this. Whichever view about Section 239 is right, the Amendment differs from it, for it freezes the decision of the borough council for five years and then permits change from time to time; and, quite clearly, Section 239 does not do that. This is something quite new, and I could not advise your Lordships to accept that for Greater London alone. Indeed, it can be argued that, once a council has chosen, it should not be open to it to change its system by the mere passage of a new motion. It surely could not be right that a council should be able, for instance, to opt out of district audit following a surcharge on members for illegality or negligence, and opt in favour of a professional audit where, as the law now stands, there is no risk of surcharge.

Now I should like to remind your Lordships of the advantages which attach to the district audit system, contrasted with the professional audit system as it now exists. I will say something later about the Scottish system to which my noble friend Lord Colville of Culross referred, but I would point out that these Amendments do not import the Scottish system into professional audit for Greater London, and it would indeed be creating an anomaly to create a fourth system in England for Greater London alone—the elective audit system, the district audit system, the professional audit system now in use, and the professional audit system of Scotland brought into London for London alone. This Bill cannot be the vehicle for effecting changes in the professional audit system over the whole of the country.

It is not often that I quote from leaders in The Times, but I think that with regard to district audit The Times, in its leader of April 9, shortly summarises the position. Perhaps I may quote from what was said: The chief distinguishing marks of the district audit are, first, that it is a public procedure, the accounts must be deposited for public inspection, any elector has the right to attend the audit and to query any item in the accounts, and the auditor's report is a public document. I do not say that it might not be possible to provide for all that on a professional audit; but it is not provided to-day, and the Amendments do not propose it. And the right of the local government elector to query an item of the accounts, though it may not often be used, is not a dead letter—and the noble Lord, Lord Morrison of Lambeth, with his knowledge of the London County Council, may recollect that it was used by an elector in respect of the L.C.C. audit for 1959–60. The Times went on to say: The second distinguishing mark is that the district auditor acts in a quasi-judicial capacity with the power (subject to appeal) to disallow any item of account which is contrary to law and to surcharge the amount of any disallowed expenditure upon those responsible for it. Thus, under this system the auditor is wholly independent of the authority whose accounts he is examining, he is directed to have strict regard to the legality of all items and he is furnished with powers to make his examination effective. As I say, in my submission this is an excellent summary, and it shows that what has to be compared is the system; and in considering that, there is no question of comparing or reflecting upon the competence and efficiency of the individuals who do the audit, whether it be a district audit or a professional audit.

It surely is a valuable right that the electors should have an opportunity of querying any item in the accounts and, further, if dissatisfied, of appealing to the High Court or, in smaller matters, to the Minister. And if the district auditor does surcharge, there is again a right of appeal either to the High Court or to the Minister. These rights have been exercised in recent years both by electors and by persons surcharged. Not only has the district auditor power to disallow illegal items in the accounts, to surcharge persons responsible for illegal expenditure and for incurring losses by negligence; he also has power to require the production of information material to his audit, not only from the local authority and its officers but from third parties such as contractors. The professional audit is comparable with the audit of companies and the member of the firm of accountants employed on the professional audit has not got these powers. It is for this reason, I suspect, that during the nineteenth century the district audit was, as I have said, applied to all newly created authorities.

The question has been raised—it has to my knowledge bean suggested—that the professional auditors in England should be given the powers that professional auditors have in Scotland. I should like, if I may, to say a word or two about that. I do not wish to criticise or appear to criticise what happens North of the Border; it is a somewhat dangerous operation. I did it once, when I was on the Back Benches in another place, and I brought a storm upon my head. But it is not correct to say that professional accountants North of the Border operate what I might call the district audit system. Under the professional audit system in this country the borough council can choose whom it employs. In Scotland, the auditor is appointed by the Secretary of State from a panel. In Scotland the auditor cannot surcharge. Instead of doing so, he reports to the Secretary of State to decide whether or not to surcharge—and there is no appeal from the Secretary of State's decision, though the Secretary of State may state a case on a point of law for the consideration of the courts.

I doubt whether boroughs in London would welcome the appointment of a professional auditor by a Minister, and I am pretty sure that the absence of a right of appeal on the merits from a decision to disallow or to surcharge would be widely regarded as less satisfactory for members and officers of local authorities and for electors than the present district audit system. For these reasons I frankly am not attracted by the suggestion that the system of professional audit in England and Wales and in Greater London should be brought into line with the Scottish system.

My noble friend placed some weight on the argument that on six occasions accountancy bodies have successfully contended before Committee of both Houses of Parliament that the right to choose the system of audit should be allowed to various statutory boards, and my noble friend drew attention to the fact that a Committee of your Lordships House reported on the last occasion: When a point has been decided against a Minister five times, he should no longer persist in making recommendations to the contrary. Of those statutory bodies five were water boards and one a crematorium board—very different from all-purpose authorities spending large sums of public monies. These statutory bodies on which this point has been raised have limited functions of a commercial or quasi-commercial character. And while decisions of Select Committee on Private Bills are normally accepted by Parliament, that does not always happen.

One of the six cases on which my noble friend based his argument was that related to the Mid-Northampton-shire Water Board—a proposal in which I took considerable interest at the time—and there was a Report from a Joint Committee of both Houses in relation to that. That joint Committee of both Houses recommended that the Board should have the choice of the system of audit. The Labour Government disagreed with some of the Joint Committee's recommendations and introduced a confirming Bill of their own and in that Bill which was enacted, and which created the Mid-Northants Water Board, they removed the choice of audit which the Joint Committee had given against the advice of the Government of the day. So the Party opposite did not think it right then that a statutory water board with its limited powers and functions should have the choice which the Amendment now proposes for the new boroughs.

So far I have dealt with the question on broad lines. I want now to refer to the area of Greater London. There will be 32 large boroughs. There are now 42 county and non-county boroughs in the Greater London area. All but 7 have the district audit system and each of these boroughs is being amalgamated with areas which have district audit. In fact, in all other types of local authority in the area county councils, metropolitan borough councils and urban district councils have district audits—except, of course, in the City of London, which I leave on one side. In fact district audit applies to more than 95 per cent. of local government income and expenditure in the Greater London area.

My noble friend, in moving his Amendment, spoke repeatedly of this Bill's taking the choice away from everyone (I think those were his exact words), and it has been represented outside the House that the Bill seeks to remove an existing right to choose which system to adopt. Frankly, that is not the case. Metropolitan boroughs have never had the choice; they have always been subject to district audit. Other boroughs which have had the choice have undertaken to apply the district audit, and if the view is right that, once having exercised their option, their power under the Local Government Act, 1933 is spent, they cannot now change it. Of the 42 only seven have chosen professional audit.

In practice, all this Bill does is to apply the district audit to seven areas in relation to some part of which there has until now been a professional audit. It really is not quite accurate to say that this is taking away from the new boroughs the power they have always had—that was a sentence which I took down from my noble friend's speech. These new boroughs have never had these powers. The new boroughs, it is true, will be the inheritors of other authorities, but they have not had this power. All through the nineteenth century the system and practice throughout has always been that of creating a new type of authority to impose the district audit.

I would ask your Lordships to consider the position from this angle. The choice my right honourable friend had to make, when drafting this Bill, lay between a radical departure from what has hitherto been the practice in the Greater London area and seeking to maintain, so far as possible, the status quo. He has chosen the latter. The Amendment proposes the former. It does not touch the Greater London Council. That will still be subject to district audit. But the Amendment proposes that all the new boroughs, even those covering areas already subject to the district audit, should now be given a choice, and having exercised their choice, should be free to change it from time to time. That, as I have already said, is wrong in principle, and thought by many to be something entirely new.

My right honourable friend thinks it right that the new boroughs which cover areas always subject to a district audit should continue to have a district audit. There is no change there, and that applies to the greater part of the London area. The difficulty arises only in relation to the seven boroughs—out of the 42—who have had professional audit and who will now be merged with other areas which have always had the district audit. The decision lay between giving those seven new boroughs (in which the seven existing boroughs will be merged) a choice—and that would mean a choice in respect of a number of areas in relation to part of which there has always been a district audit. Further, it would mean drawing a distinction betwen those seven new boroughs and the remaining 25.

The decision lay between choosing to take that course and securing uniformity throughout the Greater London area by applying district audit not only to the Greater London area, but also to all the boroughs. My right honourable friend has put forward the latter course, which preserves the status quo as much as it is possible to do so. For the reasons I have given, I commend the proposals in the Bill to your Lordships. I regret that my honourable friend's decision to preserve, so far as possible, the status quo should have been represented as, or thought to amount to, an invasion of the rights of boroughs and of professional accountants. That is not the case, as I have endeavoured to show. If this Amendment is carried into the Bill, it will give professional accountants opportunities for employment which they never had before in these areas. I make no complaint of that; but that is the position and it should be stated clearly. It is really quite the converse of the position put forward by my noble friend.

Many people in the country take, as our predecessors did, the view that, for the reasons I have given, and having regard to the powers of district auditors, to the rights of the electors and to the provisions of appeal, district audit is best suited for local authorities; and they take that view for reasons which involve no reflection at all on professional accountants. But, whether that view is or is not right, what the Bill seeks to do, I repeat, is to maintain the status quo to the greatest possible extent. As I have said, 95 per cent. of local authority expenditure and income in the Greater London area is subject to district audit. It is surely more reasonable to make the other 5 per cent. subject to district audit than to make it possible for much of the remaining 95 per cent. to be subject to professional audit.

It may be too much to hope that, in the light of what I have said, my noble friend will withdraw his Amendment: but, if he does not, I can only invite Members of the Committee to join with me in rejecting it. I have intervened at this particular time because I thought it might be of convenience to the Committee that I should put the case, as we see it, for keeping the Bill in its present form, in the hope—it may not be realised, though I hope it will—that that might save the time of the Committee.

4.33 p.m.

LORD LATHAM

I rise to support the Amendment, and I must declare an interest. I am a member of the Association of Certified and Corporate Accountants, one of the bodies associated with the committee which has made representations to the Minister in regard to this question. The issue here is a perfectly simple one; and it is not a question of the merits as between district and professional audit. That is a matter which ought to be dealt with nationally as regards all local authorities, and not only as regards London.

The real issue here is perfectly simple, and I am pleased to be able to say that there is no Party difference on this question. I suppose that professional matters can all lead to political considerations, but the question is: are the boroughs of London to have the same right as the boroughs in the Provinces? That is the real issue, nothing more. Are these new London boroughs which are to be created under this Bill to enjoy the rights which other boroughs, county boroughs and non-county boroughs, enjoy at the present time? I think it should be made abundantly clear that we are not suggesting that these boroughs should adopt professional audit; we are suggesting merely that the option should be preserved for the London boroughs in the same way as it is preserved for the boroughs of the Provinces. The question is, whether the new boroughs are to have the option of choice or whether the Minister is to be able to dictate which form of audit the boroughs shall have.

That is an issue which seems to me to impinge upon the independence of the London boroughs in relation to and in comparison with, the provincial boroughs. The Royal Commission adjured everyone to appraise the value of and to maintain independence in local government. This is not independence: this is the intervention of the Minister to determine how the accounts of the new local authorities shall he audited. That is the real question which is before us on this Amendment, and I ask: why should this anti-London attitude of mind be preserved even into the realms of audit? What has London done that it should be treated less honourably (I put it that way) than the boroughs of the provinces? Why is it assumed that London must have the power of surcharge and the power of inspection, whereas the 72 county boroughs need not have those protective facilities, if I may put it in that way?

There are 72 county boroughs out of 83 who have the option to determine whether the audit shall be by district audit or by professional audit, and they include such large cities as Manchester, Liverpool and Birmingham. The noble and learned Lord, the Lord Chancellor, advanced no evidence at all that the absence of this power of surcharge, and of the power of inspection, had militated in any serious way against the proper conduct of municipal affairs in the cities of Manchester, Liverpool or Birmingham. As I say, out of 83 county boroughs, 72, large and small all of them all-purpose authorities, have opted for professional audit. The other 11 county boroughs have district audit. As regards the non-county boroughs, 137 have district audit but 179 have professional audit. Whatever may be the general consideration of this question as a national matter embracing all the local authorities, it is, in our submission, unfair to deny the new London boroughs the choice as to whether the audit shall be district audit or professional audit. That is the real issue.

The noble and learned Lord made some play with regard to the fact that 95 per cent. of local authority expenditure is audited by the district auditor. That arises, of course, by reason of the fact that all expenditure which attracts grant or subsidy from the Treasury is subject to district audit; and, really, in evaluating the expenditure which is audited by the district auditor one must deduct that in any comparison between that expenditure and that which is audited by professional auditors.

The noble and learned Lord endeavoured to brush away the statement made by the Select Committee, but it was, I submit, a formidable rebuke of the Minister of the day—a statement that it was difficult to justify continuing to make proposals which had been refused and rejected on five occasions. But I repeat that this proposal in the Bill is not maintaining the status quo. Nineteen authorities concerned are the successors, wholly or partly, of local authorities where the choice existed. Those are the figures which I have and they have not been contested. They have been included in communications addressed to the Minister and in the letters published in the Press. Nineteen of them, wholly or partly, are successors of authorities enjoying the right of choice.

THE LORD CHANCELLOR

Here I differ from the noble Lord. I know there is the view that some have the right of choice now. But what I was seeking to indicate is that there is a strong ground for thinking that once they have exercised that choice, the power under Section 239 is spent. If that view is right, it is inaccurate to say that they have any choice now.

LORD LATHAM

I do not think that what the noble and learned Lord has said alters the situation. Whatever may be the consequence of the fact that the power has been spent is another matter altogether. The facts are that 19 of these authorities are the successors of those where the choice existed. It is now proposed to take that choice away from the authorities which will succeed the present authorities; and that, it seems to me, is not preserving the status quo but removing a right which these local authorities had. That is the case.

THE LORD CHANCELLOR

I do not follow the noble Lord. If they had a right and exercised it, so that the right no longer exists, then this Bill does not take away any right.

LORD LATHAM

But it does take away some right. The fact that it could not be exercised again does not remove the fact that it has been exercised; it is being enjoyed and the local authorities are enjoying it; they are acting upon it. It cannot, therefore, be said not to exist, even though those powers may be spent. If the noble and learned Lord would desire to attach that condition to the grant of the choice in connection with the intended London boroughs, so much the better. I do not suppose those concerned would object to that. Put us on a parity. But how it can be contended, when nineteen authorities are going to lose their option, that the status quo is being preserved, passes all comprehension. But that is the case.

I want to remind the Committee that this option has been in existence for thirty years. It has worked satisfactorily. There have been no general complaints; there has been no demand for a review of the situation. There has been no request that there should be a committee appointed to decide which is the best method of auditing the accounts of local authorities. One could have understood that. It has been in existence since 1933; it was thought in 1933 to be necessary that this option should be granted. It was granted, notwithstanding all the history which the noble and learned Lord referred to in connection with the development of local government audits. This was in 1933, which, relatively, is not so long ago. It was decided there should be an option. We say that that option should be preserved as regards London. London should not be penalised by having less rights than the provincial boroughs, whether they be county or non-county boroughs. That is the issue. I sincerely hope that the Committee will take the view that the noble and learned Lord, the Lord Chancellor, has not made a convincing case as to why this right of option should not be preserved.

It is not a question of asking that there should be a decision now as to by whom or how the accounts should be audited. It is that the right to choose should be preserved and that London should be on a parity in this regard with the boroughs in the country, and not treated as a third-class category of local government. Therefore I warmly support the Amendment moved by the noble Viscount.

LORD REITH

If the noble Viscount were to take this to a Division, I would follow him. I agree with everything he said and nearly everything that the noble Lord, Lord Latham, said. But I could not help being impressed to an extent by some of the reasonable and cogent remarks made by the noble and learned Lord. I wonder whether the suggestion which I am about to make to the noble and learned Lord is a sensible one. I am not making it with the concurrence of the noble Viscount—he may disagree—and what I have said about supporting him still stands. Would the noble and learned Lord think it worth while to consider something between now and Report stage that he might bring to us on the Report stage? That might have the effect now of causing the noble Viscount not to press this Amendment to a Division, in the hope that the noble and learned Lord might produce something that would please us.

4.48 p.m.

LORD DOUGLAS OF BARLOCH

I am sorry to disagree with my noble friend Lord Latham upon this point, but I submit to the Committee that what the noble and learned Lord who sits on the Woolsack has said is a correct view of this matter. I am not going to repeat what he has said. I was, for about twenty years, chairman of the finance committee of a metropolitan borough and, for six years, chairman of the Finance Committee of the London County Council; and I had a good deal to do with district auditors during that experience. I have come to the conclusion that the system of district audit is a wise and sensible one; that it exists for the protection of ratepayers; and that it gives them an expert service which is highly desirable and highly to be commended.

In saying that, I am not casting any reflection upon accountants and auditors generally who deal with commercial or other accounts in their own way. But the district audit is a specialist service which has been built up over many years and the district auditors have an intimate knowledge of the law with regard to local government. They are better able to judge whether expenditure is lawful or unlawful. They have the very salutary power of being able to surcharge unlawful expenditure, if they think that it is right to do so. For these reasons, I think that the system of district audit is wise and useful. I have had to appear before district auditors from time to time when they have been discussing the accounts of an authority for which I have been responsible, and I have learned to respect their judgment, their ability and their reasonableness in dealing with these problems.

In addition, I should like to remind your Lordships that, in a way, the district audit has a resemblance to the highly respected institution in this country of the Comptroller and Auditor General, who audits the public accounts. The Comptroller and Auditor General is entirely independent of Parliament, just as the district auditor is entirely independent of the local authority, and he brings to bear upon his work long and expert acquaintance with the way in which public accounts are made up and with the powers of public expenditure which he has to scrutinise. For these reasons, I consider that the provision in the Bill is a wise one.

THE LORD CHANCELLOR

I wonder whether I could intervene to reply to my noble friend Lord Reith and to the suggestion he made. When this was brought to my attention, I went into it as carefully as I could—it was rather a new one for me—and I discussed with my right honourable friend the question of whether any solution could possibly be found which would be acceptable and workable. One of the reasons I devoted so much time in my speech, which I fear was rather long, to the Scottish system was because I had considered with him whether the Scottish system, which applied very well in Scotland, would be satisfactory if applied in the Greater London Area, and we explored every other possibility we could think of. I do not consider that the system would be satisfactory.

I do not think that I should be frank with the House if I asked my noble friend Lord Colville of Culross to withdraw this Amendment on the basis of holding out any hope that I could find a solution that would be satisfactory to him, to the noble Lord, Lord Latham, and to others who support this Amendment, because I do not think that one can be found. It is not for want of trying and for want of consideration. We have considered this matter, and the choice rests, I fear, between supporting this Amendment, which brings in a completely new feature, or preserving, so far as we can, the status quo.

I am grateful for the speech which the noble Lord, with his great experience, has just made. I hope I have made clear the true position, certainly so far as the metropolitan boroughs are concerned. There can be no question of taking away a right, because they have never had a right. So far as other boroughs are concerned, there is the argument that once they have exercised their power of choice under Section 239, that power is spent and so, in fact, nothing has been taken away from them. I appreciate the difficulty of this problem, but what the Bill proposes is to secure so far as possible the preservation of the status quo.

LORD ALDINGTON

I am very worried by the line the Government are taking over this point, and I should like shortly to say why. First, I think I should apologise for not being here at the beginning of the debate, although I heard the whole of my noble and learned friend's speech. He explained to your Lordships that the Bill was for London only and that the proposal does not prejudice the decision about district audit and professional audit over the country as a whole. But I am bound to say that the rest of his speech seemed to me to be an attack by a Government spokesman on the whole system of professional audit. I was dismayed to hear that, because I have always understood that professional audit, as the noble Lord, Lord Reith, reminded us, had proved itself to be extremely useful and right over a large number of boroughs (I think well over 200) for some time and that great cities like Manchester have had it for a period and found it to be just as they would want.

I was dismayed, too, to hear my noble and learned friend indicating to us that the professional audit was faulty, in that it lacked power to deal with abuses of the law. Surely the professional audit system has the priceless power of bringing things into open light, and, once that is done, the law can take its full course. I think your Lordships are well aware that the surcharge provisions of the district audit are one way of dealing with this matter. So far as I am aware, no proof has been brought, either in your Lordships' House or in another place, of any case in which a professional audit has failed the ratepayer. So I think that on this point I am against my noble and learned friend. I do not see why we should adopt the view that the professional audit has shortcomings.

Up to date, municipal corporations have had the option of choosing which type of audit they would like over the area of their accounts which is available for that option. What is proposed now is to narrow the area which is available for the employment by the boroughs of professional auditors. We can have all kinds of argument about whether the area is being narrowed by seven or by forty, but at any rate the area is narrowed, and at the same time the area of the compulsory district audit is enlarged. Frankly, I do not understand why a Government composed of my noble and learned friend and other right honourable friends of mine should be doing that.

Furthermore, it seems to me to be restricting the area in which local authorities have discretion. I think it is important that in this period we should not try to take away discretions from local authorities. For these two reasons, I am attracted by the suggestion of the noble Lord, Lord Reith, that the Government should think again about these provisions and between now and Report stage see what can be done to meet the legitimate fears of those who take the view. I do and some noble Lords opposite do. It is important at this time that in government, local and national, we should do everything we can to employ private professionals and private interests in partnership with the public, and it is because this Bill, over quite a small area, seems to offend that principle that I am so worried about it.

LORD MILNE

As a professional accountant, I must first declare an interest. The reason why I support this Amendment wholeheartedly is because there are two principles involved. The first and most obvious is that the Government have no apparent good reason for trying to take away from certain boroughs a right which has existed for thirty years, as the noble Lord said. The second is that in so doing—and I saw the correspondence—the Minister first made up his mind and then tried to justify his argument.

I had no intention to-day of getting involved in the merits or otherwise of the district audit as opposed to professional audit, but I am perfectly capable of taking up the challenge. I do not propose to look into the relative qualifications of the parties concerned. Those who support the principle of district audit support it for four main reasons: suitability, the fact that it is designed for the job; the independence of the auditor; the public inspection which is allowed, and the right of surcharge. In my opinion, all but possibly surcharge are just debating points. No auditor ever considers himself dependent on those who have actually put him in. I believe that public inspection to-day is practically obsolete, whereas surcharge may or may not be valuable. But the fact is that it is disputed by many people, and it is probably useful to the district auditor, because the task is undertaken so long after the accounts are finished, whereas in a professional audit the task is undertaken at the time and the right of surcharge is really not needed at all.

The fact that over 60 per cent. of boroughs outside the Greater London area have opted for professional audit shows that there really cannot be anything wrong with professional audit and the merits thereof. The noble and learned Lord the Lord Chancellor quoted from The Times, and I, too, should like to quote from The Times, of April 3: May I support Mr. Carpenter's plea"— that is the President of the Institute who represents the other Institutes before the Minister— for the London boroughs to be free to choose their own system of audit by suggesting that if uniformity is wanted the correct method of achieving it is by freeing other local government bodies from the grip of the district audit system. This is a relic of the suspicion which existed during the last century. I support the Amendment, and hope that it will be pressed.

5.3 p.m.

VISCOUNT COLVILLE OF CULROSS

I am grateful to those of your Lordships who have taken part in this debate. It has, I think, been most interesting and particularly useful since this is the first time that this matter has been raised on the Bill. It has also, to me, been extremely illuminating, and I am grateful to my noble and learned friend the Lord Chancellor for his very long and full speech on the subject, because I now see exactly where I stand. He said that many people consider that district audit is better. It is clear that the Government consider it is better—not, I hasten to say, from the point of view of the people, but as a system. They take every opportunity that is open to them to force it upon all local authorities and any other bodies that come within their grasp every time it occurs. If they are defeated, again it is very illuminating—although it was the other side of the House that did it—that special Parliamentary procedure (and it is a rare thing that it is used) is brought into play in order to overthrow the decision of one House of Parliament on this particular issue.

Although my noble and learned friend started off by saying that this was confined to London and that it would have no bearing upon what happened in the rest of the country, I then listened to a speech which continued with a swingeing attack upon the whole system of professional audit up and down England and Wales; and what he said about its effect in London, and its defects, applies equally to the whole of the 179 municipal boroughs arid the 73 county boroughs which use it in the rest of this country. There is no difference, and could be no difference, in his argument whatever. I am, therefore, astonished that he should say that this is not a matter of principle, but merely a matter of convenience for London alone. I hope he is not going to ask your Lordships to vote on it as being a purely localised issue, because it must be clear from what has gone on this afternoon that this is not so.

There are one or two other small points. I am sorry if my noble and learned friend does not like the machinery Amendments that I have put in. It is true that subsection (3)(a) in my Amendment No. 99A is new. I thought it had been accepted by both Houses of Parliament previously. If not, and if my noble and learned friend prefers to leave the law in a state of obscurity, I shall be happy that it should be so. I merely put it in in order to try to resolve the doubts that have so far prevailed on the particular issue of whether the choice is open again or not. Now it is clear that the Government and the Ministry are attacking the system of professional audit as a system on its merits. I think it will be much easier to know how to deal with it.

I think there is this point also. Noble Lords this afternoon have listened to all this and to many of your Lordships the points are new. I should certainly like very much to study what my noble and learned friend has said in his long and interesting speech to see whether there is anything in it that I can either fasten on to one way or the other, or perhaps develop on another stage of this Bill. I believe when it is read in full it will be seen to show exactly what I have said it is. Therefore, this is a matter of principle, which I said at the beginning we were dealing with, and not purely a matter of expediency for London alone. If that is so, and if this is one of the many opportunities that are going to be taken to nibble away at professional audit until it no longer exists, then I am certain that your Lordships should resist it, because the obvious answer is, as my noble and learned friend said—and I took down his words: I do not see that it would not be possible to provide for all the defects mentioned in The Times leader to be put right in professional audit".

THE LORD CHANCELLOR

My noble friend is taking part of my observations out of their context. I said that certain parts, the earlier parts, of The Times leader I quoted might conceivably be dealt with. I did not say that the second part of the quotation, so far as I quoted it, could be.

VISCOUNT COLVILLE OF CULROSS

In that case, it seems to me that my argument is strengthened further, because my noble and learned friend is simply saying that this system is not suitable at all for any local authority. However, I should like to study his speech, and I would certainly not at this stage divide on this matter, because I do not think the last word has been said. With your Lordships' permission, I ask leave to withdraw the Amendment this afternoon, but I will certainly return to this on another stage of the Bill.

Amendment, by leave, withdrawn.

5.10 p.m.

LORD LATHAM moved after paragraph 28 to insert: 29. In relation to Greater London, the following proviso shall be substituted for the proviso to subsection (1) of section 249:— 'Provided that—

1. (i) a byelaw made under this section by the council of a London borough shall not have effect in relation to a metropolitan road if, or in so far as, it is inconsistent with a byelaw made by the Greater London Council; and
2. (ii) subject to the provisions of paragraph (i) of this proviso, a byelaw made under this section by the Greater London Council shall not have effect in or in any part of a London borough if, or in so far as, it is inconsistent with a byelaw so made by the council of that borough.'"

The noble Lord said: This Amendment is designed to give power to make bylaws. Under the Bill as drafted, the Greater London Council would not enjoy the present power of the London County Council, the power conferred by Section 146 of the London Government Act, 1939, to make by-laws for good rule and governance, and the prevention and suppression of nuisances. It is thought desirable to apply the comparable powers of Part XII of the Local Government Act, 1933, to the Greater London Council. The proposed Amendment for that purpose would make it clear that, except in relation to metropolitan roads for which they will have the overriding authority, the Greater London Council's by-laws would have effect and run only so far as they were not inconsistent with those of a London borough council.

Under Section 146, the London County Council has made by-laws in regard to, inter alia, shooting galleries in any street or on land adjoining or near thereto flashlights or searchlights causing danger to traffic; public decency; window cleaning; painting; organs in connection with roundabouts in or near streets, and like by-laws. The Greater London Council might well wish to make similar by-laws, and also by-laws as to wilful jostling, advertising vehicles, bottles, broken glass, et cetera, such as are contained in the model by-laws issued by the Home Office. Amendments seeking this power were not discussed in Standing Committee in another place, owing to the operation of the guillotine procedure. It is thought that these powers ought to be possessed by the Greater London Council in order to preserve the comfort, convenience and amenity of the residents of the area, arid I accordingly so move.

Amendment moved— Page 131, line 8, at end insert the said paragraph.—(Lord Latham.)

EARL JELLICOE

I may be under a misapprehension here, and I should be glad if the noble Lord opposite would correct me if I am wrong. I had taken this Amendment to be a link to Amendment No. 86, which we discussed yesterday evening, and which would have conferred on the Greater London Government by-law-making powers which, of course, are at present possessed by the London County Council, but which we have not expressly written into this Bill.

LORD LATHAM

May I help? I think the real point is that the powers intended to be given to the Greater London Council would be effective only if they did not conflict with those for the London borough councils.

EARL JELLICOE

It is my understanding that, under the Bill as it is at present drafted, the Greater London Council would not have by-law-making powers. This was discussed yesterday evening on an Amendment standing in the name of the noble Lord, Lord Lindgren, who, although he did not say he was convinced by what I had to say, withdrew his Amendment. As we are at present, at least the Greater London Council would not have these by-law-making powers, and, therefore, there could be no inconsistency. That is my understanding of the position, but I may be wrong. If I am right, well and good. If I am wrong, then I should like to suggest, if the noble Lord would agree, that we consider this matter and come back to it at the Report stage.

LORD LATHAM

We will take time to see who is right and who is wrong. In those circumstances, I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD HASTINGS

This Amendment is consequential. I beg to move.

Amendment moved— Page 131, line 34, after ("its") insert ("charter or").—(Lord Hastings.)

On Question, Amendment agreed to.

LORD HASTINGS moved, after paragraph 38, to insert: 39. After section 287 there shall be inserted the following sections—

' Service of notices by local authority

287A.—(1) Any document to which this section applies, being a document required or authorised to be served on any person, shall be deemed to be duly served—

1. (a) where the person to be served is a company, if the document is addressed to the secretary of the company at its registered office or at its principal office or place of business, and is either—
   1. (i) sent by post, or
   2. (ii) delivered at the registered office, or at the principal office or place of business, of the company;
2. (b) where the person to be served is a partnership, if the document is addressed to the partnership at its principal place of business, identifying it by the name or style under which its business is carried on, and is either—
   1. (i) sent by post, or
   2. (ii) delivered at the said place of business;
1349
3. (c) where the person to be served is a public body, or a corporation, society or other body, if the document is addressed to the clerk, secretary, treasurer or other head officer of that body, corporation or society at its principal office, and is either—
   1. (i) sent by post, or
   2. (ii) delivered at that office;
4. (d) in any other case, if the document is addressed to the person to be served, and is either sent to him by post or delivered at his residence or place of business.

(2) Any document to which this section applies, being a document required or authorised to be served on the owner or occupier of any premises, may be addressed "the owner" or "the occupier," as the case may be, of those premises (naming them) without further name or description, and shall be deemed to be duly served—

1. (a) if the document so addressed is sent or delivered in accordance with paragraph (d) of the foregoing subsection; or
2. (b) if the document so addressed, or a copy thereof so addressed, is delivered to some person on the premises or, where there is no person on the premises to whom it can be delivered, is affixed to some conspicuous part of the premises.

(3) Where a document to which this section applies is served on a partnership in accordance with this section, the document shall be deemed to be served on each partner.

(4) For the purpose of enabling any document to be served on the owner of any premises, the local authority may by notice in writing require the occupier of the premises to state the name and address of the owner thereof, and if the occupier refuses or wilfully neglects to do so, or wilfully misstates the name and address of the owner, he shall, unless in the case of a refusal he shows cause to the satisfaction of the court far his refusal, be liable on summary conviction in respect of each offence to a fine not exceeding five pounds.

(5) This section applies to any notice, order or other document which is required or authorised by any enactment or any instrument made under an enactment to be served by or on behalf of a local authority, or by an officer of a local authority, not being a document to the service of which the provisions of some enactment other than this section or some instrument made under an enactment are applicable.

(6) For the purposes of this section, a notice, order or other document shall be deemed to be a notice, order or other document which is required or authorised to be served on a person if it is required or authorised to be notified, given or transmitted, or (in the case of a demand) if it is required or authorised to be made, to that person, and in this section the expressions "served" and "service" shall be construed accordingly.

Authentication of documents

287B.—(1) Any notice, order, or other document which a local authority are authorised or required by or under any enactment (including any enactment in this Act) to give, make or issue may be signed on behalf of the authority by the clerk of the authority or by any other officer of the authority authorised by the authority in writing to sign documents of the particular kind or the particular document, as the ease may be.

(2) Any document purporting to bear the signature of the clerk of the authority or of any officer stated therein to be duly authorised by the authority to sign such a document or the particular document, as the case may be, shall be deemed, until the contrary is proved, to have been duly given, made or issued by the authority of the local authority.

In this subsection the word "signature" includes a facsimile of a signature by whatever process reproduced.

(3) Where any enactment or instrument made under an enactment makes, in relation to any document or class of documents, provision with respect to the matters dealt with by one of the two foregoing subsections that subsection shall not apply in relation to that document or class of documents.'"

The noble Lord said: This new provision to apply to all local authorities in England and Wales derives from Section 183 of the London Government Act, 1939, which contains useful provisions as to the mode of serving notices on various types of person and body. Detailed provisions as to service of notices in regard to specific matters are laid down in the particular Acts dealing with those matters, and by the provisions of subsection (5) these specific provisions are unaffected. What has been lacking, however, is a detailed general power upon the serving of notices by the local authority, and some authorities have sought special powers on this subject in Local Acts. The proposed Amendment makes a detailed provision generally available. The local authorities' associations have been consulted and welcome the new provision. I beg to move.

Amendment moved— Page 132, line 14, at end insert the said new paragraph.—(Lord Hastings.)

LORD MORRISON OF LAMBETH

What I am mystified about is why the Government never thought about this when the Bill was being drafted. It does not seem to be very novel, and I gather that some other local authorities have similar provisions. Why was it that the Government did not think of this when they drafted the Bill, instead of leaving it till this point and using up time to bring it in and put the Amendment through? I am mystified as to why it did not dawn on the Department that this was necessary when the Bill was being drafted, instead of waiting until the Committee stage in this House, and not even in another place. I am not quite clear what the real reason for it is.

LORD HASTINGS

The noble Lord will no doubt know that an Amendment was put down in another place on the Committee stage, and there is also an Amendment in the name of a noble Lord opposite on the new Clause 72. In point of fact, when we come to that I think the noble Lord will find that this Amendment is doing what his Amendment sets out to do. There are one or two very small differences, but that is because two matters, Section 183 subsection (3) and subsection (5) of the London Government Act 1939, are left out, because they are already looked after under specific Acts in other ways and are not necessary. Otherwise, this is the same as the noble Lord's Amendment later on; substantially so. Why it was not done before. I am afraid I cannot tell the noble Lord.

LORD MORRISON OF LAMBETH

If it was done in another place, was it reached, was it excluded under the guillotine, or did the Government resist it? If it was excluded under the guillotine it shows what a clumsy instrument that was in the case of this Bill, which is a very big and controversial Bill and for which, of course, the Government had no mandate whatever. I do not know whether the noble Lord can tell us whether this was excluded under the guillotine and why it is that, with their scrutiny, my honourable friends in another place have got to rescue the Government for their incompetence in drafting Parliamentary legislation. Could he tell us?

LORD HASTINGS

I think it was taken away to be considered and put down at this stage.

EARL ALEXANDER OF HILLSBOROUGH

What I should like to know is whether the noble Lord, Lord Hastings, is really trying to tell us in rather strange language that the Government are willing to give us the concession for which we have asked.

LORD HASTINGS

I hope the noble Earl is under no misapprenhension. The concession is certainly what has been asked for by the local authority associations who have been consulted and who have welcomed the new provision. It is quite true, it was asked for originally by the Opposition in another place. I hope that I was not disguising that fact.

EARL ALEXANDER OF HILLSBOROUGH

At least we know it was a concession to us.

On Question, Amendment agreed to.

Schedule 4, as amended, agreed to.

EARL JELLICOE

I should like confirmation of this from the noble Earl the Leader of the Opposition, but I think it was agreed that we should either work our way to the end of Schedule 4 before starting our discussion of the Second Reading of the Bill of the noble Earl, Lord Mansfield, or begin that discussion at 5.30, whichever was the earlier. We have now worked our way through to the end of Schedule 4, and, therefore, if noble Lords opposite would agree, I should like to move that the House do now resume.

Moved, That the House do now resume.—(Earl Jellicoe.)

On Question, Motion agreed to, and House resumed accordingly.