Disclosable pecuniary interests – what did the Government intend to capture?

Paul Hoey examines the limited circumstances in which the Government intended disclosable pecuniary interests to arise and explains what this means for monitoring officers.

There has been much discussion lately of whether councillors need a dispensation to take part in setting the council tax because of the rules on disclosable pecuniary interests. Much of this discussion has unfortunately been unhelpful, driven as it has been by intemperate language from politicians on the one hand about ‘goldplating’ and necessarily defensive reputation-protection on the other hand from monitoring officers.

This article looks at what the Government’s intentions were when they legislated for disclosable pecuniary interests, whether the legislation as drafted in fact achieves their purpose and what this means for monitoring officers when it comes to ensuring propriety of decision-making.

Firstly the bare facts. For an interest to be a ‘disclosable pecuniary interest’ (DPI) it must be an interest which falls into one of the categories set out in regulations. If it is not covered by one of those categories, then it is not a ‘DPI’. Hence, Brandon Lewis’s most recent pronouncement that "being a council taxpayer is not a DPI" is quite accurate as that is not one of the categories in the regulations – though I’m not aware anyone had ever argued that it was; the debate had been about whether having property in the area (which is a category of DPI) gave you a ‘DPI’ in setting a property tax.

If a councillor (or his or her partner) has a DPI, they must do two things. They must register that interest – straightforward enough. And if they "have a DPI in any matter to be considered" they must not take part in the discussion or vote on the matter without a dispensation. It is this wording which leads to the confusion. What does "having a DPI in any matter" mean?

I will return to look at what the Government thinks what it means in a moment but as background to that consideration, I think you need to consider the consequences of ‘having a DPI’ to help reflect on the intention.

If you have a DPI and you fail to register it or you participate in a meeting without dispensation, then under the Localism Act you have committed a criminal offence. In getting rid of the old national administrative penalties, the Government’s policy from the outset was to replace them with a narrower criminal penalty. Hence, crude press releases such as "in future corrupt councillors will go to jail not to a quango". In introducing this offence, Ministers stressed that their policy was not to force councillors to have to declare interests in a large number of matters as they believed the old system did, but to capture by the offence those very few councillors who might deliberately abuse public office for their own financial benefit. It was thus only ever intended to cover a very narrow range of interests.

However, Ministerial policy intention and legal drafting do not always make happy bedfellows. Does the odd phrasing "having a DPI in a matter" adequately capture the narrowness of the intention? Under the old Code, people had got used to qualifying phrases about interests such as "relates to or is likely to affect", "to a greater extent than the majority of inhabitants", "a reasonable person". None of these qualifying phrases were kept – rather it is simply now a bald statement. Hence the argument about how wide or narrow it really is.

As a further pointer to the Government’s intention that it was only ever meant to capture a narrow range of interests, we can also look at the ‘guidance’ issued by DCLG last summer to help members understand the new rules. This is of course not statutory guidance nor is it a legal opinion, so you put on it what weight you choose.

However, in that document the Government did decide to qualify the bald legislative statement. It said you must not participate "if you have a DPI relating to any business" to be considered. So the Government view here is that the DPI must relate to the business. This seems to take us further forward as to their intent.

The previous Code had talked about a matter "relating to or affecting" your interest. The Government is now saying, to be a DPI, the business has to relate to, not merely affect, your DPI. So, a much narrower test. This is a more sensible phrasing than simply "having a DPI in the matter" - it makes it clear the Government had in mind that something must be directly about the thing, rather than just affecting it.

To illustrate the difference, let us look at four different type of planning issues. Firstly, a planning application made by the councillor themselves, about their own property. On a practical and public interest level it is hard to argue that the councillor doesn’t have some sort of financial interest in the outcome of that planning application. And taking part in discussion and voting through your own planning application goes against all principles of effective governance. It must be clear this is meant to be a DPI. And, to use the words of the DCLG guide the matter clearly relates to your registered interest – that is ownership of 1 Acacia Avenue. So we can safely say the Government intended this to be caught by the offence and we believe it is indeed.

However, what if it is not the councillor’s planning application but instead is his or her next door neighbour’s? Again it is hard to argue that any reasonable member of the public would think it right somebody should be able to participate in a decision which so clearly affects them and their property. But note the wording I’ve used – affects their property. I think the Government did not intend to capture this as a DPI and their guide indicates that was not their intention. Whether the word ‘in’ in the legislation sufficiently conveys this is of course open to argument.

My third example is something local but not next door. For example, there may be plans to turn a house one hundred metres down the street from the councillor’s house into a bail hostel. As with the second example, most people would think the councillor would have their judgement clouded by their proximity to the development and the potentially controversial nature, but it fails the Government’s intended DPI test still more than the property next door. So again, this was not intended to be a DPI.

My final example is something more wide in its effect - the classic example of a supermarket development in a town. If you take a wide view of DPIs there is an argument that if a councillor lives in a neighbourhood where such a development is taking place they have an interest to declare, as there is some effect on their interest, even if remotely. However, most people would think it quite appropriate that a local councillor should be able to take part in matters which affect their community significantly. Hence, the tests added to the 2007 Code to remove these doubts – "affected more than majority" and "reasonable member of the public". One argument has been that the removal of these tests by the Government back to the bald statement "a DPI in any matter" has captured these as an interest once again as it has an effect, however remotely, on one of the councillor’s registered interests. But this was clearly not the Government’s intention and nor would it be a sensible policy to disallow democratic participation to such an extent at pains of a criminal offence. This example is of course analogous to the council tax position.

So, we think the Government only intended to capture one of the four examples above as a DPI. The wording of the legislation doesn’t help them achieve this purpose but we do believe this was nevertheless their intent – hence their frustration when they see DPIs being stretched so that example number four is covered when they only wanted to cover number one.

But what does all this mean for monitoring officers? Well, I want you to forget about DPIs and think about the public interest. Most people accept that the chances of rafts of prosecutions for non-declaration of DPIs is quite remote – and the more distant the interest the more remote that possibility seems - but that does not mean to say you should ignore the wider issues. Dispensations are ultimately a safe but bureaucratic way of removing any doubt or any theoretical risk of prosecution. But it seems a longwinded way of reaching a simple result. And what would the point of capturing the fourth example be if it is always going to get a dispensation come what may?

Of the four examples quoted above, most reasonable people would argue that in two, if not three, of the four examples the councillor should not be taking part. The third example has of course more subtlety because there are more factors to weigh up but there is clearly some sort of line to be drawn between two and four as to what is and isn’t acceptable in terms of participation or voting. The DPI provisions don’t do it, nor do we believe were they intended to. They either capture only number one or all four depending on how far you are willing to interpret the legislation and policy intent.

Certainly when we train councillors on understanding their local codes and put these scenarios in front of them, there is universal acceptance that participation in one, two or three would be unacceptable. Indeed, our experience is that members are often more cautious, and certainly more sensitive to public perception, than the allegedly "over-cautious monitoring officers".

So when we explain to them that only number one is certainly caught by the new provisions and it is our view that numbers two and three aren’t (or at least weren’t intended to be) they look alarmed. That is because they clearly believe it is not right for members to participate in those circumstances. Sometimes we are able to say don’t worry, your council has ‘goldplated’ your code (and remember it is the council not the MO who adopts the code) and you do have to declare these other interests under your code, albeit they do not carry the criminal sanction so are local matters. Sometimes we have to say well yes you have partly captured these but your rules still allow you to vote. But all agree they shouldn’t so we look back at the underlying principles and conclude that such behaviour would not uphold the principles of selflessness, integrity or objectivity and therefore, in spite of what their code says, they should not vote on the issue. And sometimes they have not added anything beyond the DPIs in which case we have a longer discussion about the key principles and also consider matters such as a councillor’s son’s planning application which would not be caught anywhere.

So what I am concluding is that, in the understandable desire to understand what a DPI is in the absence of any authoritative statutory guidance or caselaw, sight has been lost of the underlying principles of public life. DPIs were only intended to be a specific narrow range of interests, underpinned by a criminal sanction. By seeking to stretch them to the point where their application and potential sanction become ridiculous risks forgetting the public interest and setting up needless antagonism. Instead more thought needs to be given to the way your council itself regulates ‘other’ interests. The law clearly saw local codes as being able to include interests which were not DPIs, but saw them as more minor matters to be determined locally.

The Government only ever intended DPIs to arise in very limited circumstances for, as they saw it, the more serious matters. It is up to councils themselves to decide where other lines are drawn but all our experience tells us most councillors know where the public interest lies and it is wider than DPIs. It is therefore a matter for the local authority, not the DPI test, to determine where you and your councillors see the public interest line should be drawn when it comes to declaring interests.

Paul Hoey is co-director of Hoey Ainscough Associates, a consultancy which has worked with over one hundred authorities in helping to implement the new arrangements. Paul can be contacted on 07899 063 930 or by This email address is being protected from spambots. You need JavaScript enabled to view it..