Scrutiny of local government contracts undermined by ‘commercial sensitivity’

MPs on the Communities and Local Government Select Committee have urged local authorities and private sector contractors to recognise that they have an obligation to release information to scrutiny committees, in order to provide effective governance of services and delivery.

Local authorities are currently facing a number of challenges and an increased demand for services - which is being made all the more difficult by an ageing population and budget shortfalls. It is therefore important, as is the case with central government, that all expenditure is considered carefully and its impact measured.

This is critical to the delivery of digital services in local government, as authorities have historically had a tendency to outsource their functions. Oversight is needed to ensure that private firms are spending taxpayers money efficiently.

Overview and scrutiny committees were created by the Local Government Act 2000 and were designed to offset increased centralised power established by the new executive agreements. Some councils have multiple committees that broadly align with departmental functions, while others have fewer formal committees but make greater use of time limited task and finish groups.

However, a new report out today by the Communities and Local Government Select Committee found that scrutiny committees are being blocked by councillors, authorities and companies on the grounds of ‘commercial sensitivity’. The report argues that this is unacceptable and that local government has an obligation to hand over information to ensure effective governance. The report states:

We welcome the Minister’s willingness to consider our recommendations carefully. We believe that there are many instances across the country where scrutiny committees are operating effectively and acting as a voice for their communities, however there remains room for improvement for too many and we believe that updated guidance from the Department is long overdue.

It shouldn’t be so difficult

Giving evidence to the Select Committee, Jacqui McKinlay, chief executive at the Centre for Public Scrutiny (CfPS), detailed how some scrutiny committees are being forced to submit Freedom of Information requests to their respective authorities in order to get the details they need - which the report claims is unacceptable. On whether committees could get access to information, McKinlay said:

The very determined ones can. I met one last week that had put an FOI request in to its own organisation in order to get the information. You should not have to do that, but there are ways there. There needs to be persuasion and influence in order to say, “This is an issue around flooding”, or whatever it might be, “that is really important”.

McKinlay added that every councillor that she meets with will talk about the “barrier of commercial confidentiality”. She said that they will say that they “cannot give that information” and that there is a local of transparency.

However, as the report highlights, local authorities are required by statute to publish all information relating to decisions taken and service delivery. There are certain situations where withholding information is valid, for example when it relates to the financial or business affairs of a particular person - and as a result, many councils argue that specific details of a contract or a procurement framework can be withheld on the grounds of commercial sensitivity.

But, as Professor Colin Copus, director of local governance research at De Montfort University, told the Committee:

“Confidentiality is always another cloak behind which people who do not want to provide information can hide.”

The report has urged that more needs to be done to avoid such barriers. The Committee said:

There is a need for a much tighter definition of what is acceptable as an exemption for commercial confidentiality. Whilst we acknowledge that it is not always in the public interest for local authorities to publish all information and make it available to the public, we cannot see a justification for withholding such information from councillors.

Councillors have regular access to exempt or confidential information, often distinguished on agendas by use of different colour paper. There is no question about it. There should not be any problem with sharing information with elected members.

Councils should be reminded that there should always be an assumption of transparency wherever possible, and that councillors scrutinising services need access to all financial and performance information held by the authority.

Equally, the Committee heard a lot of evidence that scrutinising external providers of council services - private companies - can be difficult. The report states that scrutiny committees are ideally placed, and have a democratic mandate, to review any public services in their area.

However, once again, there are too many instances where committees are not able to access the information held by providers, or the council itself, because of ‘commercial sensitivity’.
McKinlay said that  that there can be an “unbelievable barrier” with commercial organisations as they “do not recognise they are contracting with a democratic organisation that has democratic governance processes.”

The report urges change in this area too. It states:

Scrutiny committees must be able to monitor and scrutinise the services provided to residents. This includes services provided by public bodies and those provided by commercial organisations. Committees should be able to access information and require attendance at meetings from service providers and we call on the Department for Communities and Local Government to take steps to ensure this happens. We support the CfPS proposal that committees must be able to ‘follow the council pound’ and have the power to oversee all taxpayer-funded services.

My take

Whilst some view scrutiny committees as bureaucratic, it’s clear from many of the central government IT disasters that these committees are able to hold people, government and companies to account, and are able to provide valuable resources for learning from past mistakes. The excuse of ‘commercial sensitivity’ is a well worn one and it is usually used as an attempt to protect people from their mistakes. However, culture needs to change where mistakes are allowed and learned from, and are rectified as contracts progress - not at the end when the money's spent and the people involved have walked away from the mess they’ve created.