Local Government Finance Act, 1982

HL Deb 13 January 1994 vol 551 cc243-51

4.13 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Arran)

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for the Environment. The Statement is as follows: "With permission, Madam Speaker, I wish to make a Statement in response to the question raised during Points of Order yesterday; namely, whether the Secretary of State has powers under the Local Government Finance Act 1982 to direct the auditor to publish the information he has obtained in the course of his audit. This issue arises out of the provisional findings of the District Auditor in relation to allegations of misconduct at Westminster City Council. Those findings were set out in a statement issued by him earlier today.

"Madam Speaker, the District Auditor is, by statute, independent. He is appointed by the Audit Commission to carry out an external audit of a local authority's accounts. But, once appointed, he is not subject to direction by the Government or, except in certain limited circumstances, by the commission. He acts wholly independently. This is a most important democratic safeguard. His duties are laid down in statute and amplified in the Code of Audit Practice which is approved from time to time by this House.

"One of his duties is to consider objections made by electors against an authority's accounts. In the present case he received objections in relation to decisions taken by Westminster City Council during 1987 on its designated sales programme. It is alleged that decisions taken by the council and expenditure incurred in pursuing those decisions were unlawful. It is alleged in particular that the purpose of the council's policy was to retain political control of marginal wards.

"Madam Speaker, these are very grave allegations. It is right that they should be treated with the utmost seriousness. But the District Auditor has made it clear that his view on these allegations is provisional and that all the interested parties have an opportunity to challenge that view. If the allegations are proved then I shall have no hesitation in condemning the behaviour. Meantime, the rights of those accused must be protected. Nonetheless, Madam Speaker, I repeat that if the allegations of unlawful expenditure and wilful misconduct were ultimately upheld, I will condemn that behaviour—in this or indeed in any other case.

"Madam Speaker, the honourable Member for Blackburn asked yesterday that I should direct the auditor to publish the information gathered in his inquiries. My honourable friend the Minister for Local Government and Planning promised that he would take this request away and take legal advice. He has since written to the honourable Member explaining that I have no powers to direct the auditor to do so. A copy of my honourable friend's letter is in the Library. I am happy to assure the House that when this case is complete I shall look again at the issues the honourable gentleman has raised to see whether there are any changes I would wish to recommend".

My Lords, that concludes the Statement.

4.18 p.m.

Lord Williams of Elvel

My Lords, the House is grateful to the noble Earl for repeating the Statement made in another place. To those thanks I add my congratulations to the noble Earl on his first appearance in this House as Minister for the Department for the Environment. However, perhaps I may add a note of sympathy to those congratulations in that the first task of the noble Earl in this House is to open up this extraordinary can of worms.

Since being on the Front Bench I have dealt with Statements in this House for a number of years. However, I have never had to deal with a Statement as extraordinary as this one. Is the noble Earl aware that any noble Lord who wishes to read what Mr. Magill, the District Auditor, said in regard to those in control of Westminster City Council at the time, needs only to go to the Library to read today's Evening Standard. He will find the following comments: I am minded to find as a fact that the electoral advantage of the majority party was the driving force behind the policy of increased designated sales … the council was engaged in gerrymandering … there is a loss or deficiency in the council's accounts caused by … wilful misconduct". That is not provisional; it is simply a statement by Mr. Magill, the District Auditor, in the report which is apparently available to the public at large but about which the Government have not chosen to inform your Lordships.

Will the noble Earl accept that a number of Ministers supported Westminster City Council in that "gerrymandering"? For instance, Mr. David Hunt, the Employment Secretary, described the council as a "stunning success" and, a source of cheer for every Conservative". That arose through Conservative Central Office in March 1990. Mr. Kenneth Baker, former Tory Chairman, said that the council had been led, with verve by Shirley Porter … With spirit and imagination [she] had cut back expenditure but improved services". Will the noble Earl further accept that we on our side, particularly in the cases which have been of most embarrassment to my party—Lambeth and Liverpool—have always been rigorous in rooting out fraud and malpractice in local authorities wherever they may occur? I hope that the noble Earl will tell us that if there has been any malpractice, if the Westminster Tories have been caught with their snouts in the trough, cooking the books, if they have used residents' and taxpayers' money for their own electoral advantage, then, however they may try to cover it up, the Government will be equally rigorous in pursuing them. If that is not the case—this is what the issue is about—I will tell the noble Earl, having given him my congratulations on his new post, that his life in the new post will be a source of constant and extreme discomfort.

Baroness Hamwee

My Lords, the Minister has a welcome to his new position from those on these Benches and also sympathy for having to deal with so difficult a subject on his first day in it. I believe that this is a very sad day for government. It is a sad day for all government because this kind of allegation, this kind of publicity, can only bring politicians—all politicians—into disrepute. It is a particularly sad day for local government. I, my noble friends and many other noble Lords wish to support local autonomy. We do not wish to give central government or anyone else any excuse for intervening and taking over what local authorities are doing even if there is a certain frisson when the authority concerned is the Government's own flagship authority.

There has been an inevitable immediate reaction on the part of those concerned at Westminster to deny the allegations made, probably on the basis that if there is no defence, one must be quite offensive about the situation. Indeed the current leader of Westminster Council is quoted in the Evening Standard tonight as saying that the policy was highly popular and successful and that Westminster would keep on offering council homes for sale to buyers other than its own tenants. That perhaps needs no comment. The reaction on the part of the objectors to what has happened—the complainants—is also quite sad and perhaps predictable. They are reported as carrying banners and chanting. The chant was "We've won, we've won". I do not know that anyone has won out of this sad episode.

Certainly those who have not won are those who were not provided with homes by Westminster Council when they should have been, those who were entitled in every moral sense to the use of those housing units which were kept void and boarded up, which were not made available to tenants and which were eventually sold. Vigorous efforts have been made by local authorities, and central government goes on reminding local government that it should not leave properties empty. There is a homelessness problem in this country. I should like to hear from the Minister what the Government will do to provide housing for those who have been displaced by their political friends down the road.

We are told that the district auditor's views are provisional. I may have missed something in the Statement but I am not sure what happens now. I hope that the Minister can give us some idea of the timetable. The Statement says: If the allegations are proved". That is the term used. I wonder what is meant by "proved". I assume it can only mean that the district auditor is not given cause by the reaction to his provisional report to change his mind. It cannot mean "proved" in the sense of a criminal prosecution or indeed civil proceedings for defamation. I am confused by that term.

The Evening Standard also states that the auditor added—I am not clear whether this is in his provisional short report or whether it was made in a statement— I have a duty to certify that the amount of that loss or deficiency is due"— from the individuals concerned. Can the Minister tell us whether that certificate has been issued, or is there some provisionality about that?

Can the Minister also tell us what he believes the appropriate procedure should be in such a case? Is it really satisfactory for us to have a provisional report at this stage when surely the district auditor has given those who are the target of the allegations an opportunity during the investigation to make their case?

These allegations are so serious and the matter has gone on so long. Not only is the cost concerned so great but the cost of the investigation is so great. Does the Minister not agree that Westminster residents now have the right to know all that the district auditor takes as his view? Is it right that we should wait longer? I believe that the complainants and those who are the targets of the allegations have an interest in sorting out this matter extremely quickly in everyone's interests by well before 5th May. Does the Minister not agree that the chances are anyway that this will come out? We have the report in the Evening Standard. I cannot believe that the report will not be published pretty fully somewhere fairly quickly. If the Secretary of State does not have the power to direct publication, can he not at least give a view as to whether that would be appropriate? In other words, would it not be more dignified for all concerned to publish now?

The Earl of Arran

My Lords, I thank the noble Lord, Lord Williams, and the noble Baroness, Lady Hamwee, for their remarks. I am grateful to the noble Lord, Lord Williams, for congratulating me on being posted to the Department of the Environment, where there is much to be done and where I shall be extremely happy. At the same time naturally I very much regret leaving Northern Ireland—and not because I have to take up this Statement. I can assure the noble Lord that I shall not be—indeed I shall never be—placed in a position of extreme and constant discomfort. That is not my style.

I should like particularly to say a few words about the points made by the noble Lord and the noble Baroness. As the noble Baroness said, these are grave and serious allegations. But in the same breath I would say that everyone in your Lordships' House would agree that those who are criticised must have the right of reply. As I have already made clear in the Statement, if the allegations are proven, then of course Her Majesty's Government will unreservedly condemn the behaviour. Furthermore, I think your Lordships would agree that perhaps the most important principle is that a person is innocent until he is proven guilty. In that vein the conduct of this case will continue, as has already been done over some years, to be taken in a totally independent and impartial manner.

The noble Baroness, Lady Hamwee, asked whether the auditor has invited representations before he reaches a final view. He has said that, if he then stands by his current provisional views, he will apply to the High Court for surcharge and, in the case of the councillors, disqualification. The noble Baroness asked about the timing. The timing is as is set out in the report. Those who are accused will have the chance to make statements either orally or in writing by the end of July. To go further into what has happened would simply not be appropriate. It would be supposition and speculation and I do not wish to go into that this afternoon.

Lord Hailsham of Saint Marylebone

My Lords, perhaps I may ask my noble friend a question about the actual status of this provisional Statement, as I understand it has been called. I am very gravely disquieted at what I read. I understand that grave charges ought never to be made unless the persons accused have the right to rebut them. I understand that the right of the accused in the present case to rebut the charges has yet to be made. We are told in this Statement that they will have an opportunity to do so. I would like to know what is the actual status of the present situation.

I know that I am very ignorant about these things, but I am deeply concerned about what has happened. What would one think of a judge who, halfway through a case, said that he was minded to find the accused guilty, but that the accused would have an opportunity to make his defence? What would one think of such a judge? How does this present situation come about and what is the situation with which we are faced? We are entitled to be told about it. I hope that I shall be forgiven for pressing my noble friend to try to explain where we stand in terms which I can understand in my ignorance of the present procedure.

The Earl of Arran

My Lords, I naturally bow to the great experience and knowledge of my noble and learned friend on matters like this. I accept that he has asked a most apposite question. But my understanding is that the auditor had legal advice on what he can say. He has not published any information and that is what is prohibited. The current Statement is a summary of the provisional view.

Lord Strabolgi

My Lords, I am a resident of Westminster. Can the noble Earl say whether the auditor's report contains anything concerning the alleged gerrymandering over the sale of the cemeteries? The noble Earl may be aware that Westminster City Council sold some cemeteries in the City of Westminster for 5p to an offshore Panamanian company. This caused great distress to those who had loved ones buried there. There was such a scandal that in the end the council was obliged to buy them back for several million pounds. The offshore-based company made a very large sum of money. But those of us who are ratepayers of Westminster had to pay for it. I wonder whether any question of corruption arose here and whether it is a matter which should have been investigated. Therefore, I ask the noble Earl whether the district auditor's report—his investigations were obstructed all along the line by Westminster City Council, but the truth comes out in the end—will contain anything about the cemeteries? That is another matter which requires the utmost investigation.

The Earl of Arran

My Lords, the first point I wish to make to the noble Lord is that the Government have not seen the report and are not allowed to. It is an entirely independent, impartial affair. As regards the cemeteries, I do not believe that that is germane to the arguments we are hearing this afternoon.

Lord Harris of Greenwich

My Lords, I apologise for having arrived late. Following the question asked by the noble and learned Lord, Lord Hailsham of Saint Marylebone, I ask the noble Earl this question: did the district auditor see the councillors and others against whom these serious findings have now been made? It is a simple "yes" or "no" answer and I shall be grateful to know what it is.

The Earl of Arran

My Lords, I am now able to say that I am in a position to answer the question. I can assure the noble Lord, Lord Harris, that the answer is yes.

Lord Gilmour of Craigmillar

My Lords, as an elector of Westminster, can my noble friend say whether the procedure which has been followed in this case has been the usual one or unusual? Is the district auditor behaving as normally happens, or is this something quite different?

The Earl of Arran

My Lords, the auditor has behaved in a totally usual and normal way.

Lord Kennet

My Lords, can the noble Earl confirm to the House that we are really in a situation where the district auditor has made his provisional charges and has discussed them with those against whom they are laid, and that the Government are not able to see the report he has made but that the Evening Standard is?

The Earl of Arran

My Lords, I am not aware of what is in the Evening Standard. Whatever is in that paper is entirely speculation.

The Earl of Onslow

My Lords, for the sake of argument let us assume that this is a really serious offence. I ask my noble friend on the Front Bench: should we not then say to ourselves that we are taking these "serious offences" miles more seriously than any other country would in Europe? Lamsdorff got away with murder; France is corrupt up to its eyeballs and the Italians and the Spaniards are the same. Noble Lords opposite may mock, but it is quite a compliment to them that they have not yet understood it. They are complaining about a standard of integrity which may be low by our standards and we must keep it as high as we possibly can. That is why it is reasonable that we should go into it. Perhaps when the noble Lords opposite listen to what I have to say they might not mock because they might even find themselves agreeing with it.

The Earl of Arran

My Lords, I am sure that noble Lords opposite have listened very carefully to what my noble friend has said. I have also listened very carefully. I entirely disagree because these are very grave and serious situations. They have to be examined carefully, independently and impartially.

Lord Bruce of Donington

My Lords, is the noble Earl aware that in listening to the Statement I gather that the auditor's report is treated as the auditor's allegations? Surely the position is that the auditor makes a report and that is that. What provisions are there in the Local Government Act, and in the Acts appointing the Audit Commission and the rest of them, for the issue of provisional reports? I simply do not understand this. It is either a report or it is not.

The Earl of Arran

My Lords, it is purely a report of his provisional views. I believe that the noble Lord will find the authenticity in the 1982 Act.

Lord Elton

My Lords, it appears from what my noble friend said that the allegations are very serious and also that at some stage they will be subject to proof. Does it not follow that this matter is sub judice and that we should not pursue it too closely?

The Earl of Arran

My Lords, while I understand what my noble friend said, technically they are not sub judice. The allegations are certainly not proven until and if that happens.

Lord Merlyn-Rees

My Lords, the Statement, the district auditor's report and the questioning have been about what has happened. If the Westminster City Council continues acting in this way in future whose responsibility is it to say, "Stop it"?

The Earl of Arran

My Lords, that is entirely a legal matter. In the present circumstances I believe that it would be extremely unwise—if that were happening at the moment—for it to continue to do so. It is entirely a legal affair.

Lord Sefton of Garston

My Lords, does the noble Earl agree that the procedure in this case is exactly the same as in other cases which received a tremendous amount of publicity? Having followed the case I have in mind, will the noble Earl agree that it is a great pity that the noble and learned Lord, Lord Hailsham, did not make the speech that he made earlier today?

The Earl of Arran

My Lords, I am not quite certain what the noble Lord means precisely by that. However, I can say that whatever my noble and learned friend says, it is nearly always totally correct.

Lord Sefton of Garston

My Lords, perhaps I may explain—

Noble Lords

Order!

Lord Hailsham of Saint Marylebone

My Lords, since my name has been mentioned, perhaps I may say that I made no speech whatever. I asked a question because I wanted to know what the position was.

Lord Sefton of Garston

My Lords, then it is a great pity that the noble and learned Lord—

Noble Lords

Order!

Lord Wakeham

My Lords, will the noble Lord allow the Minister to answer?

The Earl of Arran

My Lords, I am grateful to my noble and learned friend. I understand and completely agree with the point that he made.

Lord Sefton of Garston

My Lords, as the Minister was not aware over the detail of what I was asking him, perhaps I should tell him that I interpreted the question of the noble and learned Lord, Lord Hailsharn, as seeking to ascertain whether or not the district auditor had acted the same in relation to this matter as in relation to all other such matters. The noble and learned Lord implied that a mistake had been made and that the district auditor had not been acting normally. Does the Minister agree that such points, implying that things are not in order, would have been better made when the other cases to which I have referred were before the House?

The Earl of Arran

My Lords, the district auditor has carried out his duties precisely as qualified by the Act.

Lord Campbell of Croy

My Lords, may I ask my noble friend the Minister For help? Are there not two questions: the first involving the right-to-buy policy, which is a political decision and not, as such, open to any charge of illegality—people may disagree with it, but that is another matter—and the other question relating to misappropriation of funds? The help that I ask is this: I have read the Evening Standard and, as far as I can see, there does not appear to be evidence that any of us have yet seen relating to the very serious charge of misappropriation of funds. Looking at this objectively, surely it is fair to say that in that sense the report is provisional because it is fundamental that those charged with misappropriation of funds should be able to defend themselves before we even debate on the basis of presumed guilt.

The Earl of Arran

My Lords, I think that my noble friend would agree that in these circumstances it would be completely improper to pursue with any interest or in any possible way the content of the report.

Lord Howell

My Lords, does the Minister agree that while some of us understand that the people concerned must have the right to be heard and to defend themselves properly and that the technicalities of the law should be observed—we know that nobody has yet been charged, which makes this a very odd procedure—there is nevertheless one conclusion that we can draw at once? I refer to the vital importance of maintaining a robust political life in this country, including all political parties. In a sense, is it not the case that the packing of quangos with people from one party and the Government's constant attacks on local government, especially on councils with a political complexion of which they disapprove, have led to the public immorality that we are discussing today? Is it not time for the Government to draw the proper conclusions on that broader principle while waiting for the individual cases to be determined?

The Earl of Arran

My Lords, in this case, that which must remain robust is the law.