The true cost of corruption

Wherever one party has been in power for a long time and has resources to dispose of, disease is bound to set in, writes David Walker

Alleged corruption in the Strathclyde district of Monklands has hit the headlines partly because it besmirches the shrine of the area's former MP, the Blessed John Smith. But it is also because this tale of jobs for the boys, and the co-religionists, reminds us how unmodern parts of local government - especially Labour local government - remain. The Monklands allegations reveal a spoils system which in microcosm the ministers of George III might have envied.

Councillors looked after their pals; they looked after themselves. Those living in council flats got their repairs done quickest; the Coatbridgers (Catholic) got the lion's share of the caretaking jobs, leaving the Airdrionians (Protestant) out in the cold. It's unedifying, but how representative were the goings-on in Monklands? How far is the Neapolitan patronage that seems to have held sway in the tower blocks and maintenance depots of Monklands peculiar to west central Scotland and to those housing empires which, south of the border, the tenant's right to buy has done much to break up?

The answer is that the Monklands syndrome exists wherever Labour has been in power for a long while and has resources (such as council flats and contracts) to dispose of. In Rotherham, Glamorgan, Glasgow, Knowsley, North Tyneside, Sunderland, Manchester, Doncaster, Greenock and in Southwark, Newham and Camden - in other words throughout the conurbations and inner London - Labour has ruled for generations. If lively opposition is a guarantee of health in the body politic, then the Tories' heavy losses at the May elections may be a source of future disease.

In response to old-style corruption, various reforms were introduced. Councillors were required to declare interests, auditing was tightened and finance officers were given more powers of checking. Along with the introduction of compulsory tendering for services in the Thatcher years these measures ought to have put paid to the grosser forms of old-style corruption.

Within the Labour bastions, corruption has traditionally centred on jobs for manual workers and on the allocation of scarce council housing. In one West Midlands council, the chair of housing still oversees some 54,000 houses and flats, access to which is through a list based on a complex points system. Such systems lend themselves to abuse, and it would take a strong set of checks and balances to thwart the temptation to play the system to political or family advantage.

As well as old-style corruption, there are newer forms. A New Left, ostensibly puritanical and contemptuous of Labour's old guard, swept into power in London, Manchester and Edinburgh in the early Eighties. Grant-giving is one well-versed problem. Another was that many of the young guard turned out to be employees of one council who served as councillors in the next- door authority. This enabled them to become, in effect, full-time paid councillors. That was stamped on by legislation following the report of the Committee of Inquiry into the Conduct of Local Authority Business chaired by David Widdicombe QC.

The true extent of municipal corruption is unknown. What we do know is that teams of district auditors crawl over local accounts. In addition the Local Government Management Board and the Chartered Institute of Public Finance and Accountancy function as informal watchdogs on officers and elected members. Changing technology, however - for example, the electronic transfer of funds - has increased the opportunity for certain kinds of fraud, notably in the payment of housing benefit.

But these tend to be frauds perpetrated on the council by the public rather than by councillors. According to the ultimate body above suspicion, the Audit Commission, in 1993-94 in England and Wales, pounds 33m worth of fraud was detected. Of that only 10 per cent was committed by councillors or officers. In a system spending well over pounds 30bn a year, that is piffling.

Even in Monklands, a flagrant example of corruption, the cost has not been high. Robert Black QC, the Edinburgh professor who has been inquiring into Monklands, did not feel obliged to put a figure on the cost of nepotism. In contrast, slack management is far more costly. Compare the Monklands report with another recently issued by the Accounts Commission, the Scottish equivalent of the Audit Commission in England and Wales. This said that sick leave by manual staff employed by Scottish councils' direct service organisations - responsible for street cleaning, repairs, etc - is costing pounds 30m a year. Are Scottish council workers really that unhealthy?

Even if you allow for other figures suggesting that the sick leave of council white-collar staff is less than for civil servants, the question needs to be put: what costs the public more, old-style abuse of power by councillors or the iceberg of wasteful practices and mismanagement which despite the existence of an audit industry must be estimated at several billion pounds a year? The cost of corruption needs to be seen in context.

Councillors are none the less prone to temptation wherever money changes hands. One example mentioned earlier is grant-giving. The demise of the Greater London Council, an unprecedentedly generous provider of gifts to the voluntary sector, and financial cutbacks, have reduced the scope for councillors to reward friends and party colleagues employed by housing, social care, ethnic minority and similar committees. The temptation, though, remains.

Freemasonry lives on despite attempts by such councils as Camden to force officers and members to bare their chests, so to speak. Wherever men of a certain age get together (Newham in east London used to be a hotbed of Masonry), hands will be shaken and secret passwords exchanged.

Greater opportunities for corruption have been a paradoxical result of the Conservatives' bid to make councils more efficient by forcing them to tender services to private-sector contractors. The growth of compulsory competitive tendering and other forms of marketisation have opened the door to new frauds, as the House of Commons Public Accounts Committee warned a year ago. Whitehall officials are currently deeply worried about the possibilities of fraud inside the Government's Private Finance Initiative, designed to bring more private capital into public works.

The introduction of a "contract culture" into Labour's heartlands may be tempting a new kind of fraudster into the town halls in the shape of organised crime. Recent allegations suggest that in some of the big city districts criminal gangs have been attempting to infiltrate ward parties in order to position themselves for the award of service contracts. In North Tyneside, however, it was councillors who asked the chief constable of Northumbria to inquire into suggestions of political infiltration.

Paradoxically, the influx of new councillors in Labour areas may pose additional problems. Almost a third of new Scottish councillors have no experience of local government and that could reduce their capacity to keep an eye on the work of council and party officials.

Some kinds of corruption seem endemic, such as bribery over planning applications. A correlation can be made between the state of the property market and municipal prosecutions. The rules are tight, but a foreign trip here paid for by a developer, a gift from a builder there: who is to say a specific planning application was influenced as a result? This was where Newcastle upon Tyne's dynamic Sixties leader T Dan Smith came unstuck, though there are those now who would be prepared to pay the relatively small price of a bit of graft in exchange for a few more council leaders of his energy and charisma.