MONDAY 22 MARCH 1999

MRS HELEN THOMAS, MR ALAN LANSDOWN MS EIRWEN LONG, MS SUE COOK, AND MR IAN GIBSON

  400. I appreciate that and I am not going to labour the point any further, but of course the private auditor who also came in was adopting a narrow statutory view of the job of an auditor. Would you accept that?
  (Ms Long) He was accepting the view that the Auditor had to act within the code of practice.

  401. I think the question is not whether the Auditor did his or her job within the rules, but whether the District Auditor was the right person to do the job. Do you think there may be better ways of auditing these accounts in the future?
  (Ms Long) The authority had its own internal auditor as well of course which would provide the kind of assurance, internal assurance that an authority would require, so the District Auditor would come in as an external auditor to look at all the accounts.

  Chairman: I accept what you are saying, that there are internal audits going on, but it seems in this case that there is too much reliance placed on the District Auditor by the Council itself which seems to be the case from the replies we had earlier, but anyway, that is for us to decide.

  402. Councillors from Rhuddlan have told us that they relied on the advice being received from officers. Do you think the case may demonstrate that internal safeguards within local government need to be strengthened?
  (Ms Long) Yes. I think, from my understanding, the reports that were given by officers to the councillors in Rhuddlan needed to be looked at in the context of the Council's own standing orders and the audit report suggests that maybe some of those were not in line with standing orders and I think that was an issue for the Council. For the future, I think that some of the lessons that come out of this are about the requirement on authorities to have standing orders which adequately protect the interests of councillors so that they do get adequate information and it is in a very appropriate form. There is also the looking forward as part of the Government's modernisation agenda. The White Paper talks about separating out the executive functions of an authority and the scrutiny role of the authority and the clear purpose of that would be that, if I quote from the White Paper, "It would be clear to both councillors and the public who has taken the decision and those councillors outside the executive will have a clear duty to question the policies and decisions of the executive and play their part in the formulation of the authority's policies", and I think this is quite important, "there will be sharpened monitoring of decisions resulting in improved decision-making, greater openness and accountability".

  403. But is that not predicated on the assumption that back-bench councillors will be privy to all information?
  (Ms Long) I think they will have a key role to play. Yes, I think you are right, that is the case.

  404. Because those words are fine, but it has to be built on full disclosure, otherwise it will not work.
  (Ms Long) Yes, I accept that.

  405. We very much hope that there will not be another local government reorganisation soon, but do you think any lessons have been learned about how that process was handled?
  (Mrs Thomas) I am afraid I was not part of the team managing local government reorganisation and I am not sure that any of us were, so what we say is based on advice rather than experience. I think that the Department in managing the process of reorganisation was very keen to make sure that the new authorities were able to assume their responsibilities in a way which led to the least possible disruption of services, and that was the main priority, to make sure that the local transition to the new authorities was handled very smoothly. There was guidance and there was a lot of consultation between the Department and both the former and new authorities over the process of reorganisation. I do not think that it was possible to foresee every eventuality. I think those guidelines and the handling arrangements were based on an assumption of openness and co-operation which in general terms, I think, was borne out by what happened in most respects across Wales.

  406. So the lack of communication that we seem to have heard about today you do not think has happened generally?
  (Mrs Thomas) No, I do not think it did.
  (Ms Long) And the Audit Commission as well issued a fair amount of guidance to both the old authorities and the new authorities on how to run down the old authorities and how to start up and work the new authorities, so I think that the combination of Welsh Office help and advice and the advice coming from the Audit Commission should have really encompassed all the issues that the new authorities had to consider.

  407. So why do you think there was this lack of communication in this particular situation?
  (Mrs Thomas) I do not think it is possible for us to answer that. All sorts of things might have been possible, but I think the only message we could offer is that it was not common in other parts of Wales and, generally speaking, the transition from old to new went not entirely without a problem, but this is the only example we have come across where there were claims of the kind of lack of communication that the Committee has heard about in this instance.

  408. Would you say it was something unheard of, in your experience, that files went missing?
  (Mrs Thomas) I have not heard of another case.
  (Ms Long) I deal with the residual local government reorganisation matters now and nothing of the kind has ever come to my attention.

  409. Denbighshire were telling us that they are suffering under an unexpected and heavy burden of inherited debt. What assistance has the Welsh Office offered thus far and do you think that the assistance you have offered so far is sufficient?
  (Mrs Thomas) The problems were first drawn to the Department's attention in, I think, August of 1996 when Denbighshire gave some warning that they thought there was going to be a problem, but the first real hard conversations took place in December 1996 after which there was a series of meetings and contacts between the Department and the authority to try to work out some sort of package of measures which would help the authority deal with the unfunded debt. That took some time to resolve, partly because the figures were uncertain and it took a while before, with the help of District Audit, we came to a figure that sounded as if it was the final figure for the problem, but the initial offer of a package was made, I think, in February 1997, so within a couple of months we had got a package of sorts and that was built up and extended to a final package in August 1997. I think that the Department was able to help Denbighshire in that way because of other things that were happening on the capital programme across the rest of Wales which meant that it was possible for us to come up with that sort of deal and I think Denbighshire were reasonably content that the settlement that we had reached with them was acceptable and helped with the problem.

  410. Do you accept, however, that the continuing uncertainty in terms of further monitoring and/or enquiries and so on, that that uncertainty is actually damaging to them?
  (Mrs Thomas) I am sure it is not very comfortable, but whether it is damaging, I am not quite sure what Denbighshire mean by "damaging".

  411. Well, the public perception, that perhaps there is a pretty negative view out there.
  (Mrs Thomas) As I say, I can absolutely understand that it is uncomfortable and it is a problem that has gone a long time without a clear explanation. I do not think it is for the Department to express a view on whether or not that is particular to them or not.

  412. Have any other new authorities inherited comparable problems to Denbighshire or taken as long to finalise their accounts?
  (Mrs Thomas) We are not aware of any other problems of this nature.

  413. The Secretary of State resisted calls for a public inquiry. Can you explain why this might be?
  (Mrs Thomas) The Secretary of State does not have any statutory powers that would allow him to intervene in this kind of issue and have a public inquiry under any statutory framework. If he were to hold an inquiry, it would be able to go into the issues in a way which this Committee has been able to, but any findings that arose from that, we would not be able to follow them up in any statutory sense with any formal action. I think the Secretary of State's view has been that actually it would be better to look forward to solving the problem and to move forward rather than to spend more time and possibly bring more attention to the problems that have arisen here by holding a public inquiry which would not effectively have any teeth at the end of the day. I think the fact that this Committee has looked at the issues probably means that the problem has had a very good public airing in the area in a way which a public inquiry probably would not have taken any further.

  414. Do you think the reform of local government that is going on at the moment which will create a more effective system of scrutiny at the local level could have avoided many of the problems that we are investigating now?
  (Mrs Thomas) I think that is certainly the Government's intention.
  (Ms Long) Yes, I think so. There is also the point as well that with the Assembly, section 74 of the Government of Wales Act will require the Audit Commission to appear before the Assembly and/or its committees and I think there will be an opportunity there for the Assembly to scrutinise the work of the District Auditor. You have got to remember that there is still a question of being able to disclose confidential information, but I think the key there is that it may be that the lessons that can be learned from a situation of this kind could be given an airing with the Assembly and that information be disseminated throughout the Welsh authorities.

  415. Your memorandum tells us that the Minister acknowledged last March that lessons had been learned during the investigations into the Rhuddlan debt. What are these lessons and are they being put to good effect?
  (Mrs Thomas) Well, I think there are probably two issues. One is about the monitoring of European grants which we have talked about and some of the changes which have been made to the monitoring of audit requirements there. I think the second area is the one that Ms Long has referred to which is the modernisation agenda and the need for greater separation between the executive and monitoring roles within local government and those are being taken forward through the White Paper on the Local Government Bill.

  Chairman: On that note, thank you for coming this afternoon. It has been a very long day. I hope we have been able to air some of the problems that have arisen over this issue. The Committee will deliberate and publish a report in due course. Thank you very much.