HL Deb 03 February 2000 vol 609 cc368-71

4.45 p.m.

Lord Whitty

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Whitty.)

On Question, Motion agreed to.

House in Committee accordingly.

[THE DEPUTY CHAIRMAN OF COMMITTEES (Baroness Lockwood) in the Chair.]

Clause 52 [Decisions of case tribunals]:

Lord Dixon Smith moved Amendment No. 357A: Page 32. line 36. at end insert— ("( ) Where a person is subject to a compensation order under section (Compensation orders) he shall be disqualified until full restitution is paid.").

The noble Lord said: I should confess to Members of the Committee that I am still very much an amateur in the business of amending Bills. I am not absolutely certain whether the placing of Amendment No. 357A is appropriate for the purposes of this legislation. The same applies to Amendment No. 362A, which is included in this grouping. Both amendments deal with what appears to be a lacuna in the Bill as a result of changes that the legislation is making to the current law. This is a subject that the Government included in their White Paper on local government reform, Modern Local Government: In Touch with the People.

Clause 62 abolishes the last aspects of the power of surcharge. The Nolan Committee on Standards in Public Life recommended that that should happen. It has to be said that the power of surcharge, which has existed for a very long time, has proved, at the very best, to be a blunderbuss of an instrument: it occasionally hit the target but often also hit other targets. It was rarely sufficiently preclise to bring about the absolute result required. I do not believe that anyone who has seen the power of surcharge at work over the years would work very hard to defend it. Although the concept may have had some validity in principle, it has not really worked very well at all in practice.

Paragraph 6.35 of the White Paper to which I referred stated: Restitution of financial loss should remain a possibility, but only where the councillor or council employee has gained personally at the expense of the taxpayer".

These two amendments are specifically directed at trying to pick up that particular point; and, indeed, to re-insert that provision—if you like, that sanction— into the legislation. I do not know what the Government's attitude will be to this problem, but it is the convinced view of myself and my colleagues that if through fraud or malfeasance a councillor, or a local council employee, benefits improperly and illegally at the expense of the local taxpayer, it should be possible to require him to restore completely the funds he has purloined.

These two amendments are specifically designed to address that point. The Minister may say that they have not achieved that. However, I hope that he will accept the philosophy that lies behind the amendments. If he is prepared to reconsider the matter, I should be happy with that assurance. If I have managed to score a "bull's-eye", I shall be immensely pleased. However, I suspect that my amendments may prove to be like the old power of surcharge and perhaps rather like a blunderbuss in their effect. The issue could perhaps be dealt with more efficiently and with more precise wording. I hope that I have explained the purpose of the two amendments. We have done what we can to make them correct. I beg to move.

Baroness Hamwee

What would be the position if we did not include a provision such as that contained in Amendment No. 362A? After all, there are common law provisions with regard to how employees should treat any "profit" that is gained through their employment, but not formally through their employment, as it were. The proposed new clause (Amendment No. 362A) refers to someone gaining, at the expense of the taxpayer". That seems to me to be so wide a provision that it is difficult to define. I am not sure what gains might be covered. I believe that there could be many of them as "gaining" is open to interpretation, as is the phrase, at the expense of the taxpayer". I return to the general principle of an employee making a secret profit. As I say, there is well established law on that matter. It would be helpful to know to what extent that would apply even if no provision such as that in Amendment No. 362A were included.

Lord Whitty

I hesitate to place it on record that I share the noble Lord's philosophy, but I do not think that we are far apart on this matter. We both agree that the old system constituted a blunderbuss. We both agree that there needs to be some system for seeking restitution in many of the cases we are discussing. We considered a new system of compensation orders in developing the ethical framework as set out in the Bill. Indeed, we stated in the local government White Paper that where restitution of financial loss to a local authority is necessary, such an order should be available as a means of restoring ill-gotten gains. I believe that the noble Lord referred to the same part of the White Paper.

However, having looked at the issue in more detail, we have concluded that the penalties available to a case tribunal following an investigation by an ethical standards officer should be limited to censure, suspension or disqualification, as set out in the Bill. We believe that there would be real problems in enabling a case tribunal to issue a compensation order. There are a number of good reasons for this. Vesting such powers in a case tribunal may amount to a criminal sanction for the purposes of the European Convention on Human Rights. As the Committee is aware, criminal procedures require a higher standard of proof and, quite rightly, extensive safeguards for the rights of defendants. However, that would change the nature of the tribunals. This is not something that a case tribunal can be equipped to deal with.

Moreover, as the noble Baroness, Lady Hamwee, said, local authorities already have recourse to the courts to recover losses to the public purse. That is certainly the case as regards the cases that the noble Lord mentioned of fraud and malfeasance. Introducing a new system of compensation orders would not address this problem of local authorities being able to recover losses. As I say, they can have recourse to the courts. At present the difficulty that local authorities usually encounter in recovering financial losses is not in getting judgment in their favour, but in collecting the money from the individual concerned; for example, where the individual has disappeared, does not have adequate income to pay, or has disposed of the money. That would not change if tribunals took the decision. As the Committee will be aware, the courts have rather more substantial mechanisms place to help plaintiffs or victims of crime to enforce judgments. Therefore, we believe that the courts offer the best means of addressing these problems.

For those reasons we do not see any advantages in trying to add a compensation order to the mechanisms that already exist. Indeed, we see some disadvantages in doing so. I hope, therefore, that the noble Lord, Lord Dixon-Smith, will recognise that our proposals and the current procedure of addressing these matters through the courts will achieve the outcome that he seeks.

Lord Dixon-Smith

I do not apologise to the Committee for bringing this matter before it this afternoon. Of course we were aware that it was possible to bring criminal proceedings in this area. However, I was not aware that it was inappropriate for a case tribunal to deliver a judgment with regard to a criminal offence. The explanation is helpful. I shall study carefully what the Minister has said. I believe that he has gone a long way towards answering our concerns. I hope that I shall not have to refer to the matter again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 agreed to.

Lord Whitty moved Amendment No. 358: After Clause 52, insert the following new clause—