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28. February 2012

Good Governance

Which public sector standards do we want to afford? The changing ethics and transparency agenda in the UK

While economy, efficiency and effectiveness are very much at the top of most local councils' agendas, there is much less talk about another important 'e' in local government - the ethics agenda. Yet, internationally, the UK is still highly regarded because of its independent civil service, its direct focus on equalities and diversity issues and its performance management practices. The recent London study visit of a delegation of senior staff from the Inspection Board of the Turkish Home Office sheds some light on new developments in the UK.

First of all, some watchdogs have already gone or are going to disappear. As the Turkish delegates learnt during their visit to the Local Government Association, the government agency Standards for England ceased to operate from 31 January 2012. Established as a result of the Local Government Act 2000, the agency was responsible for promoting high ethical standards in local democracy. In particular, it oversaw the Code of Conduct, which covers elected and co-opted members of local councils, and other public agencies. However, the overwhelming majority of local councils have opted to keep their Standards Committees. So it seems that standards at local level still matter.

Moreover, the Audit Commission, a public corporation (independent of government) who appoints auditors to councils, NHS bodies, police authorities and other local public services in England, and oversees their work, will soon be closed as well. The Turkish delegates were very surprised to hear at the Audit Commission that all external audits will eventually be done by private audit companies and wondered about safeguards to corruption and public service ethos. The UK will be the first country in Europe to have fully privatised local government audit.

At the same time, much information about the performance of important local services, which was previously widely available to the public, has already disappeared.  It is no longer possible for residents to compare which councils have better refuse collection services or to be running things well in general.  Clearly, no other country in Europe has had such a wealth of public service performance information as in the UK - indeed, some critics have argued that there has been too much! It raises the question as to why the government has bounced from such a probably 'over-the-top' approach all the way to the other extreme, scrapping so much performance information completely? Again, the good news is that many local councils (as we heard from the London Borough of Westminster) continue to gather and use performance information systematically for their internal performance management systems.

In place of service output and outcome information, the coalition government has imposed the requirement on all local authorities that local citizens should now be able to find out exactly how their local council spends taxpayers' money, down to the last £500. But do residents care?  There is so far very little evidence of the effectiveness of 'armchair auditors'.

Many ICT officers have indicated that they now have to deal with more Freedom of Information requests which may be a positive indication that at least some citizens make use of the new data available. The London Borough of Barnet even intends to publish information on gifts and hospitality in the case of senior officers on its website in order to increase public trust.

So is there now more or less fraud and corruption in local government? Or is it possible that, in these tough times, public sector staff and citizens pay less attention to the rules and regulations, so there is an increase in fraud?

The 2010/11 Fraud Survey of the Audit Commission shows that local councils and related bodies detected £18 million of fraud in 1990. Today that figure has shot up to £185 million. Of course, this does not mean that there is necessarily more fraud - it may simply be that local councils have got better at detecting it. For example, in the old days, 90% of all detection was benefit fraud. Professionalisation in the field of tackling benefit fraud had the spin-off benefit that it helped to skill up those working on non-benefit fraud detection. As a result, today the split is 60 per cent benefit fraud and 40 per cent non-benefit fraud.

Not surprisingly, the biggest fraud not related to benefits is in procurement. The visit to the London Borough of Haringey was highly revealing of the very sophisticated systems which have now been put in place to deter and detect fraudulent practices in procurement. Haringey has developed such a thorough approach that it is now the lead procurement agency for the whole of London local government in the fields of construction and of energy. It was a matter of considerable satisfaction to the managers of this system, that the recent exposure by the Office of Fair Trading of over 100 building companies which had been operating price fixing in public sector construction contracts, did not find a single contract which had been let through this Haringey system.

Interestingly, the visit revealed a number of ways in which members of staff and the general public play a key role in revealing cases of fraud. Indeed, most fraud cases only get detected because of reporting by staff or the public. The Turkish delegates were concerned, however, that citizens might be deterred in playing this 'whistleblower' role where they had to address their complaints or suspicions to the very same local council that they suspected of committing fraud,  given that most people would not know any other body to address. They thought that an independent anti-fraud hot-line (such as operated by Child Line of NSPCC for those suspecting the existence of child abuse) might be a better solution.

The final visit to the National Fraud Authority in the Home Office made us all aware that effective anti-fraud strategies require partnership working across a wide range of private sector companies, the third sector and public agencies. Most importantly, it requires a public debate on what is right and wrong and which standards we want to stick to. Obviously, this will always be culture-bound but the Turkish delegates felt that the lessons learnt in the UK and policy changes would be very useful to inform this debate in Turkey.

Governance International would like to thank all hosts of the study visit for their excellent presentations and their contributions to the discussion, including:

  • ChildLine
  • Centre for Public Scrutiny
  • City of Westminster Council
  • Department of Health
  • London Borough of Haringey
  • London Borough of Barnet
  • Local Government Association
  • National Fraud Authority, Home Office
  • National Audit Commission

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