DCLG has at last published the last pieces of the Standards jigsaw - the regulations which define Disclosable Pecuniary Interests along with the Commencement Order that sets out the transitional arrangements for the change over to the new Standards regime under the Localism Act 2011.

The new regime comes into force in under three weeks so local authorities need to set up the new arrangements as soon as possible, and members, Monitoring Officers and all officers who deal with members in their jobs will have to be trained on the new provisions.

Timing

These regulations are extremely belated. The Localism Act 2011 received Royal Assent on 15 November 2011 and at the time Grant Shapps stated that the new regime was to be in place by 1 April 2012. That deadline passed; DCLG then announced that the new regime was to be in place by 1 July 2012.

By taking seven months to publish the regulations, DCLG now requires every authority to arrange an extraordinary meeting at short notice to adopt its Code of Conduct and Arrangements for dealing with conduct complaints. Allowing five clear days to get the agenda and reports out before the meeting gives no opportunity for sensible discussion over what should go into such Code and Arrangements, and no time for member training before those members are subject to criminal sanctions under the new regime.

Disclosable Pecuniary Interests

The definitions of Personal and Prejudicial Interests under the Model Code are replaced by a new definition of Disclosable Pecuniary Interests (DPIs) under the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012 (SI 2012/1464), which apply to all local authorities in England and to police authorities in Wales.

Where a member has a Disclosable Pecuniary Interest, it is a criminal offence to fail to register that interest, to fail to disclose it at a meeting unless it is already registered, or to participate on a relevant item of business, unless the member has a dispensation from the authority, or to take any action on the matter as a member of the Executive, other than to refer the matter to another executive member for determination.

The definition of a Disclosable Pecuniary Interest is significantly different from the former Prejudicial Interest definition: 

• It applies to interests of the member and their spouse or partner. This means that for registration, it is wider than the old requirements which applied only to interests of the member him/herself. But for disclosure and non-participation purposes it is significantly narrower than the old definition, as it omits reference to the member’s family or friends. 
• It is broader than the old definition of a prejudicial interest, in that it is a Disclosable Pecuniary Interest even if there is no likelihood that it might prejudice the member’s perception of the public interest. The Government has clearly taken the view that this element of the old Prejudicial Interest test would not stand up to scrutiny in the criminal courts, but it means that a decision which has only a minimal impact on a member’s property or employer can trigger a criminal offence.
• It is also narrower in that it applies only to very defined categories of interest and omits reference to matters likely to affect the wellbeing or financial standing of the member, or his/her family or friends. Whilst councils may wish to adopt local Codes which require councillors at least to disclose where a decision would affect or relate to family or friends, the removal of the power of suspension puts in doubt the ability of a Code to require that a member withdraw from consideration of a matter which directly affects family or friends.

The seven specific categories of Disclosable Pecuniary Interest also show significant changes from the old Model Code of Conduct. Bevan Brittan LLP will be publishing a line-by-line comparison, but at this stage we would point out that there are real difficulties with some of the definitions in the Regulations: 

• the “Employment” category applies only to employment or a business carried on for profit or gain, so excluding unpaid work for public, voluntary and charitable bodies (unless Special Responsibility Allowances constitute profit or gain). 
• the “Contracts” category only applies to contracts between the authority and either the member or a body in which he has a beneficial interest; however, the definition of “beneficial interest” includes directors, but omits employment on terms where the member would get a direct benefit such as a performance bonus from the existence of the contract.
• the “Contracts” category also appears to apply only once the contract has been entered, so that the member has no bar on participation during the procurement phase for the contract. 
• Gifts and Hospitality have been omitted from the regulations. So, if authorities wish to maintain a register of gifts and hospitality or provide advice to members on when to accept or decline gifts or hospitality, or when such a gift or hospitality might give the impression of bias, no statutory sanctions will be available for breach.

Transition to the new Regime

Transition to the new regime

The Localism Act 2011 (Commencement No. 6 and Transitional, Savings and Transitory Provisions) Order 2012 (SI 2012/1463) (the Order) disapplies the old standards regime as from 1 July 2012, other than for resolving outstanding complaints, and brings the new regime into force from the same day. The Order also partially commences certain provisions from 7 June so as to enable authorities to do the necessary preparatory work.

Every authority must have adopted a Code and Arrangements for handling member conduct complaints through Council by 1 July 2012.

In addition, the Order sets out the transitional arrangements for the changeover to the new standards regime under the Localism Act 2011. Two categories of outstanding complaints under the old Code survive – complaints which have been investigated by Standards for England and have already been referred to the First Tier Tribunal for determination, and complaints which by 1 July 2012 have been investigated by or on behalf of the Monitoring Officer and referred to the Council’s Standards Committee (which are now to be dealt with under the Council’s new Arrangements, without a power to impose a suspension).

The wording of the Order appears only to extend the life of complaints where the investigation has been completed and the matter referred back to the Standards Committee for determination. For all other complaints (i.e. those which for which the investigation has yet to be completed) under the Order as drafted there are simply no arrangements for them ever to be determined. Existing appeals to the First Tier Tribunal and legal proceedings in respect of determined complaints will be continued.

One unexpected new provision, not in the drafts and appearing without apparent consultation, is that a Standards Committee’s power to suspend is revoked from 7 June 2012, so that this sanction is now no longer available.  This has already caused considerable disquiet amongst authorities, given that these sanctions tend to be reserved to the more serious cases, and the change seriously weakens the sanctions that authorities can place upon members for breaches of the Code in its last few weeks.

Independent persons

Many will remember the concern that was caused by the last minute changes to the Localism Bill relating to the role of the Independent Person. For these purposes, the controversy was caused by the provision which barred existing independent members from being Independent Persons.  The regulations have now amended this by disapplying for one year the provisions in s.28(8)(b) which brought this on, as long as they are not in post on 1 July 2012, which would be difficult as the Standards Committees to which they are independent members will have ceased to be by then.

However, if councils are considering appointing their existing independent members as their new Independent Persons, there are two things to be aware of:  

• the regulations do not disapply s 28(8)(c), which provides that independent persons cannot be appointed unless the vacancy has been advertised and brought to the attention of the public, the would-be Independent Person has submitted an application, and the appointment has been approved by a majority of the members of the authority.
• the “no friends” provision in s.28(8)(a), which states that a person is not independent if they are a relative or close friend of a member, co-opted member or officer of the authority  or of a parish council.  As this is wider than before it is necessary to check this as well, otherwise they will not be eligible for appointment.

Model documents

While DCLG and LGA have both produced their own model Codes (covering only the member’s general conduct  and not the interests aspects) our view is that both these Codes are seriously flawed, lacking in clarity, very weak on confidentiality, respect and bullying, and open to political abuse now that Standards Committees no longer contain Independent Members and have an Independent Member Chairman.

On the interests aspects, the new definition of Disclosable Pecuniary Interests broadly equates to the old Prejudicial Interests, so there is no statutory provision comparable with the requirement to disclose personal interests. The model Code of Conduct which we have developed attempts to apply the DPI definitions to the member’s family and friends, and associated bodies such as employers and companies in which the member is a director, to ensure that members are still required to disclose such interests even where they do not preclude the member from participating in the decision-making process.

Bevan Brittan LLP have produced a model report to Standards Committee (and on to Council), model Arrangements and a model Code of Conduct which are all available free of charge to any local authority. If you would like a copy, please email Claire Booth.

DCLG has stated that it will conduct a post implementation review of the policy to abolish the Standards Board regime within the next five years, to check that the new local arrangements for local authority standards are operating as expected and that the new rules are not too onerous.

In the meantime, authorities need to adopt the new Code and Arrangements, and arrange for members (and the independent persons, whether or not they have been Independent members previously) to be trained on the new provisions - ideally of course before the new provisions start on 1 July 2012.

If you would like to discuss any of the matters raised in this Alert or if you require advice on the new standards regime, please contact a member of our Local Government team.