HC Deb 14 June 1989 vol 154 cc922-30
Mr. Blunkett

I beg to move amendment No. 293, in page 67, line 23, at end insert— '(3A) For the purposes of determining whether any business relationship exists under subsection (3) above, nothing in that subsection shall apply to any single payment by a local authority for a particular purpose where the authority certifies in making the payment that it does not anticipate any recurrence of the type of expenditure concerned.'.

Mr. Speaker

With this it will be convenient to consider amendment No. 294, in page 67, line 23, at end insert— '(3A) In calculating any aggregate for the purposes of subsections (3)(a) or 3(c) above, the amount of any grant, loan, or other advance shall be disregarded where the payment was made before the coming into force of this section.'

Mr. Blunkett

The amendment deals with the way in which the Bill is formulated in relation to companies. It aims to disentangle what is reasonable and acceptable from what does not make sense to anyone. It further aims to disentangle the position when one-off grants or the allocation of land result in individual companies or trusts being associated with a local authority to such an extent —if more than 20 per cent. of their board members or management committee members are from the local authority or associated with it—that they find themselves designated as influenced companies. If the proportion is more than 50 per cent. they will be regarded as local-authority controlled companies. A one-off grant or a one-off allocation of land should not be treated in that way as it would be reasonable not to infer an association with the local authority in those circumstances.

Labour Members believe that retrospection should not apply to the way in which resources have been allocated to a company, trust or organisation, so that they are not caught by something that has already happened in terms of influenced or controlled company status.

The Parliamentary Under-Secretary of State for the Environment (Mrs. Virginia Bottomley)

Amendment No. 293 proposes that the business relationship test will not be satisfied in the case of one-off payments where the local authority concerned has certified that it does not expect a recurrence of the same type of expenditure. The difficulty is that the one-off payment can be for any amount. Indeed, It could be for a sum so large that it more or less covered the entire operation of the company. It is hard to see how such a situation could be regarded as other than a very strong business relationship. Under the terms of the amendment, such a situation would not be caught if the local authority had certified that it did not intend or expect to make further similar payments, although there is no requirement not to make such further payments. In short, we find amendment No. 293 unacceptable.

Amendment No. 294 proposes that grants provided before the legislation came into force should be disregarded when calculating the business association test. Although that may seem superficially attractive, the crucial point in establishing whether the business relationship exists is whether the link is sufficient to provide the authority with influence, not when the link was established. If accepted, the amendment would mean that numerous companies which could clearly be influenced would be exempt from the proposals. I can assure the hon. Member for Sheffield, Brightside (Mr. Blunkett), however, that there can be no requirement to attach such conditions to contracts and such matters awarded before the legislation comes into force.

We have studied the proposals carefully and we have no wish to undermine the useful working of companies which make a valuable contribution. There are cases, such as housing associations, for which we have made exemptions. Our proposals are an important way to ensure that the rules of propriety in local government are adhered to, although it is still possible to use companies, where appropriate, to serve an appropriate end.

Mr. Allen McKay (Barnsley, West and Penistone)

Can the hon. Lady confirm the following? In my area, there is an innovation centre which uses European money and local authority money. Some of its directors are also councillors and the chairman of the company is Lord Mason. The centre serves a most useful purpose in acting as a seed-bed workshop, bringing together ideas and promoting jobs and job opportunities. It is doing excellent work.

My second example is a mining museum in the constituency of Wakefield, which would not have been set up but for the consortium of local authorities which provided the incentive and financial arrangements initially. Without local authority backing, that museum would not be there, and without local authority backing it is likely to disappear. Surely that is not right. Can the Minister assure us that those examples will be considered carefully before the proposals are carried out?

Mrs. Virginia Bottomley

I can certainly give that assurance. It is not appropriate to set up a company to undermine the capital rules for local authorities, but we accept, recognise and have encouraged many joint partnerships and a company is often the best way in which to proceed. I will look at the cases to which the hon. Member for Barnsley, West and Penistone (Mr. McKay) has referred.

Question put, That the amendement be made:—

The House divided: Ayes 122, Noes 216.

Division No. 241 [4.22 pm
AYES
Abbott, Ms Diane Howells, Dr. Kim (Pontypridd)
Alton, David Hughes, John (Coventry NE)
Anderson, Donald Illsley, Eric
Ashton, Joe Janner, Greville
Barnes, Mrs Rosie (Greenwich) Kaufman, Rt Hon Gerald
Battle, John Kirkwood, Archy
Beckett, Margaret Leighton, Ron
Beith, A. J. Lestor, Joan (Eccles)
Bell, Stuart Lewis, Terry
Bennett, A. F. (D'nfn & R'dish) Litherland, Robert
Bidwell, Sydney Livingstone, Ken
Blunkett, David Lloyd, Tony (Stretford)
Bradley, Keith Lofthouse, Geoffrey
Buckley, George J. McAllion, John
Callaghan, Jim McKay, Allen (Barnsley West)
Campbell, Ron (Blyth Valley) McWilliam, John
Campbell-Savours, D. N. Mahon, Mrs Alice
Cartwright, John Maxton, John
Clark, Dr David (S Shields) Meacher, Michael
Clarke, Tom (Monklands W) Meale, Alan
Clay, Bob Michael, Alun
Clwyd, Mrs Ann Michie, Bill (Sheffield Heeley)
Coleman, Donald Morris, Rt Hon A. (W'shawe)
Cook, Frank (Stockton N) Mowlam, Marjorie
Cook, Robin (Livingston) Murphy, Paul
Corbyn, Jeremy O'Brien, William
Cox, Tom O'Neill, Martin
Crowther, Stan Orme, Rt Hon Stanley
Cryer, Bob Owen, Rt Hon Dr David
Cummings, John Patchett, Terry
Cunningham, Dr John Pendry, Tom
Davies, Ron (Caerphilly) Pike, Peter L.
Davis, Terry (B'ham Hodge H'I) Powell, Ray (Ogmore)
Dixon, Don Prescott, John
Dobson, Frank Primarolo, Dawn
Douglas, Dick Rees, Rt Hon Merlyn
Dunwoody, Hon Mrs Gwyneth Richardson, Jo
Eastham, Ken Robertson, George
Fatchett, Derek Robinson, Geoffrey
Fearn, Ronald Rooker, Jeff
Field, Frank (Birkenhead) Rowlands, Ted
Fields, Terry (L'pool B G'n) Sheldon, Rt Hon Robert
Fisher, Mark Skinner, Dennis
Flannery, Martin Smith, C. (Isl'ton & F'bury)
Flynn, Paul Smith, J. P. (Vale of Glam)
Foot, Rt Hon Michael Snape, Peter
Foster, Derek Soley, Clive
Foulkes, George Spearing, Nigel
Garrett, John (Norwich South) Taylor, Mrs Ann (Dewsbury)
George, Bruce Taylor, Matthew (Truro)
Gordon, Mildred Wall, Pat
Gould, Bryan Wallace, James
Griffiths, Win (Bridgend) Walley, Joan
Grocott, Bruce Wardell, Gareth fGower;
Hardy, Peter Welsh, Andrew (Angus E)
Hattersley, Rt Hon Roy Williams, Rt Hon Alan
Haynes, Frank Winnick, David
Heffer, Eric S. Wise, Mrs Audrey
Hinchliffe, David Worthington, Tony
Home Robertson, John
Hood, Jimmy Tellers for the Ayes:
Howarth, George (Knowsley N) Mr. Martin Redmond and
Howell, Rt Hon D. (S'heath) Mr. Harry Barnes.
NOES
Adley, Robert Bevan, David Gilroy
Alison, Rt Hon Michael Biffen, Rt Hon John
Allason, Rupert Blackburn, Dr John G.
Amos, Alan Blaker, Rt Hon Sir Peter
Arbuthnot, James Body, Sir Richard
Arnold, Jacques (Gravesham) Bottomley, Mrs Virginia
Atkinson, David Bowden, A (Brighton K'pto'n)
Baker, Nicholas (Dorset N) Bowden, Gerald (Dulwich)
Beaumont-Dark, Anthony Boyson, Rt Hon Dr Sir Rhodes
Bennett, Nicholas (Pembroke) Braine, Rt Hon Sir Bernard
Brandon-Bravo, Martin Howard, Michael
Brazier. Julian Howarth, Alan (Strat'd-on-A)
Brown, Michael (Brigg & Cl't's) Howarth, G. (Cannock & B'wd)
Buchanan-Smith, Rt Hon Alick Howe, Rt Hon Sir Geoffrey
Buck, Sir Antony Hughes, Robert G. (Harrow W)
Burns, Simon Hunt, David (Wirral W)
Burt, Alistair Hunter, Andrew
Butterfill, John Irvine, Michael
Carlisle, John, (Luton N) Irving, Charles
Carrington, Matthew Jack, Michael
Carttiss, Michael Jackson, Robert
Chalker Rt Hon Mrs Lynda Janman, Tim
Channon, Rt Hon Paul Johnson Smith, Sir Geoffrey
Chapman, Sydney Jones, Gwilym (Cardiff N)
Chope, Christopher Jones, Robert B (Harts W)
Churchill, Mr Jopling, Rt Hon Michael
Clark, Dr Michael (Rochford) Kellett-Bowman, Dame Elaine
Clark, Sir W. (Croydon S) Kilfedder, James
Colvin, Michael Knapman, Roger
Conway, Derek Knight, Greg (Derby North)
Coombs, Anthony (Wyre F'rest) Knight, Dame Jill (Edgbaston)
Coombs, Simon (Swindon) Knowles, Michael
Couchman, James Knox, David
Cran, James Lang, Ian
Currie, Mrs Edwina Latham, Michael
Davies, Q. (Stamf'd & Spald'g) Lawrence, Ivan
Day, Stephen Leigh, Edward (Gainsbor'gh)
Devlin, Tim Lennox-Boyd, Hon Mark
Dickens, Geoffrey Lightbown, David
Dorrell, Stephen Lilley, Peter
Dunn, Bob Lloyd, Sir Ian (Havant)
Durant, Tony Lloyd, Peter (Fareham)
Dykes, Hugh Luce, Rt Hon Richard
Eggar, Tim MacKay, Andrew (E Berkshire)
Evennett, David Maclean, David
Fairbairn, Sir Nicholas McLoughlin, Patrick
Favell, Tony McNair-Wilson, Sir Michael
Finsberg, Sir Geoffrey McNair-Wilson, P. (New Forest)
Fishburn, John Dudley Madel, David
Fookes, Dame Janet Mans, Keith
Forman, Nigel Marlow, Tony
Forsyth, Michael (Stirling) Marshall, John (Hendon S)
Forth, Eric Marshall, Michael (Arundel)
Fox, Sir Marcus Martin, David (Portsmouth S)
Franks, Cecil Maxwell-Hyslop, Robin
French, Douglas Mills, Iain
Fry, Peter Montgomery, Sir Fergus
Gale, Roger Morris, M (N'hampton S)
Gardiner, George Mudd, David
Garel-Jones, Tristan Nicholls, Patrick
Gill, Christopher Nicholson, David (Taunton)
Gilmour, Rt Hon Sir Ian Norris, Steve
Glyn, Dr Alan Onslow, Rt Hon Cranley
Gorst, John Page, Richard
Gow, Ian Paice, James
Greenway, Harry (Ealing N) Patnick, Irvine
Greenway, John (Ryedale) Pawsey, James
Gregory, Conal Peacock, Mrs Elizabeth
Griffiths, Peter (Portsmouth N) Powell, William (Corby)
Grist, Ian Price, Sir David
Gummer, Rt Hon John Selwyn Raison, Rt Hon Timothy
Hague, William Riddick, Graham
Hamilton, Neil (Tatton) Ridley, Rt Hon Nicholas
Hampson, Dr Keith Ridsdale, Sir Julian
Hanley, Jeremy Rifkind, Rt Hon Malcolm
Hargreaves, A. (B'ham H'll Gr') Rossi, Sir Hugh
Hargreaves, Ken (Hyndburn) Rowe, Andrew
Harris, David Sackville, Hon Tom
Haselhurst, Alan Sainsbury, Hon Tim
Hayes, Jerry Shaw, David (Dover)
Hayhoe, Rt Hon Sir Barney Shaw, Sir Giles (Pudsey)
Hayward, Robert Shaw, Sir Michael (Scarb')
Heathcoat-Amory, David Shelton, Sir William
Heddle, John Shephard, Mrs G. (Norfolk SW)
Hicks, Mrs Maureen (Wolv' NE) Shepherd, Colin (Hereford)
Hicks, Robert (Cornwall SE) Shepherd, Richard (Aldridge)
Higgins, Rt Hon Terence L. Shersby, Michael
Hill, James Sims, Roger
Hind, Kenneth Smith, Sir Dudley (Warwick)
Hordern, Sir Peter Smith, Tim (Beaconsfield)
Spicer, Sir Jim (Dorset W) Twinn, Dr Ian
Squire, Robin Waddington, Rt Hon David
Stanbrook, Ivor Wakeham, Rt Hon John
Stanley, Rt Hon Sir John Waller, Gary
Stevens, Lewis Walters, Sir Dennis
Stewart, Andy (Sherwood) Ward, John
Stokes, Sir John Wardle, Charles (Bexhill)
Stradling Thomas, Sir John Watts, John
Summerson, Hugo Wells, Bowen
Tapsell, Sir Peter Wheeler, John
Taylor, Ian (Esher) Widdecombe, Ann
Taylor, Teddy (S'end E) Wilkinson, John
Temple-Morris, Peter Winterton, Nicholas
Thompson, Patrick (Norwich N) Woodcock, Dr. Mike
Thornton, Malcolm Young, Sir George (Acton)
Thurnham, Peter
Townend, John (Bridlington) Tellers for the Noes:
Townsend, Cyril D. (B'heath) Mr. Kenneth Carlisle and
Tredinnick, David Mr. Michael Fallon.
Trippier, David

Question accordingly negatived.

Mr. Blunkett

I beg to move amendment No. 297, in page 67, line 31, at end insert `and holds his position within the company, or voting rights in relation to it, by virtue of an appointment by the authority'

Mr. Speaker

With this it will be convenient to discuss amendment No. 298, in page 67, line 32, at end insert 'and holds his position within the company, or voting rights in relation to it, by virtue of an appointment by the authority.'

Mr. Blunkett

I should like to draw attention to the comments of the Association of British Chambers of Commerce on this part of the Bill. The association has expressed grave anxiety, not about the Government's intention to close what they describe as loopholes—[Interruption.]

Mr. Speaker

Order.

Mr. Blunkett

The disturbance was not the fault of the people around me on the Front Bench. I hope that hon. Members will bear with me.

The Association of British Chambers of Commerce is concerned, not about the Government's intention to close loopholes in the ability of local authorities to raise and spend capital outside the restrictions that exist in the form of capital regulations, but about the impact that this and other parts of the Bill relating to companies will have. It believes that one set of restrictions will have a chain reaction in other areas and it is worried that the valuable partnership which has been developing between local authorities and the private sector throughout the country may be damaged.

The association believes that the intentions expressed strongly by the Department of Trade and Industry and less strongly by the Department of the Environment to support this partnership may be undermined by regulations that seek to achieve a goal by what the association describes as holding up one's trousers by putting on braces, attaching a belt, tying them up with string and then ensuring that the person cannot move his legs. In terms of the rupture of this partnership, the association might have mentioned applying a truss, too.

As drafted, the Bill ensures that not only is a loophole to be closed, but a plethora of measures are to be used to prevent local authorities and the private sector from getting together to implement perfectly reasonable regeneration policies that provide jobs for men and women in the most deprived areas of our country —an objective that I believe all hon. Members would applaud. Partnership arrangements ensure that unity of purpose emerges from the work of local authorities with their local business sectors, in the best interests of their communities. The two go together: market forces and reliance on the private sector alone cannot work; nor can a wholly socially owned sector of the economy provide for all our needs. We must recognise that this partnership will enhance the living standards and lives of people. We need unity of purpose in social policy—investing in meeting needs, in training and education and in providing infrastructure and economic regeneration, and in the stimulus to the private sector which will result.

We believe that there is a thrust of policy in local areas across the country which mirrors the progressive and useful policies which have been adopted in places such as the Federal Republic of Germany, France and Italy, where the partnership between the local area and the private sector has yielded considerable fruit. That is why we and the chambers of commerce are worried about how the restrictions will apply to local authorities' capital programmes which are involved in joint companies or trusts, and about the chain reaction that will be touched off between one group of people and another. That is simply because, having been drawn into and having served on the board of management committee of a company, they will, by some sort of guilt by association, affect other such companies.

We recognise that the Government amendments go a little way towards accepting that, in the case of influenced companies which I described earlier, it would be right to restrict the knock-on effect. Our amendment asks the Government to accept the principle, which in Government amendments is partially accepted, that in the case of influenced and controlled companies, serving on one company should not in any way have an effect on one's activities in other areas.

Later in the debate when I hope to avoid making a speech similar to this one, we shall deal with a group of amendments which attempt to ensure that the restrictions promoted by Government amendments Nos. 31 and 281 can be refined still further. That refinement will mean that development by a local authority of a joint company will not result in the people who serve on it disqualifying themselves from independence from the local authority and will ensure that the companies and trusts with which they are associated escape from influenced or controlled status.

By serving on one company—for example, a combined heat and power scheme which might be adjudged to be influenced—people engaging in their normal practice as managers or employees elsewhere should not be placed in a position where anything else they serve on will automatically be judged to be an influenced or controlled company. That is not acceptable and does not make sense in terms of allowing enterprise and innovation to flourish. As the Association of British Chambers of Commerce rightly says, it will make those who are involved wary of taking part in joint ventures. That means that they will be unable to play a part even in normal community activity about which they previously may have had no qualms. Such activity could create influenced or controlled status for the bodies on which such people serve.

As a consequence, any expenditure by a local authority on a company, even if the money is raised in the private sector, will be looked upon as part of the capital credit controls in the Bill. Local authorities and many other bodies will find themselves enmeshed in the maze, in the net that is being woven around this area of activity. That is why our amendments also seek to ensure that the 20 per cent. or above limit on those serving on a company or trust is lifted. That will mean that influence will not start to be designated at that level. Just because one fifth of those on a management board or trust of a company happen to be associated with a local authority should not automatically bring that company within the capital restraints and credit limits of the local authority.

Association and the formulae for influence and control should not apply where more than one local authority is involved. Someone taking part in his own time in the activities of a concern and who works at a senior level in a neighbouring local authority could trigger the machanism for influence or control. That is because that person would breach the 20 or 50 per cent. limit on the number of people on the management board or trust. That is extraordinary and during the debate, sooner rather than later, we hope to be able to put it right.

We recognise the Government's ideological obsession with the market economy and their desire to exclude local authorities from as much as possible of the joint activity that is taking place. They also want to ensure that, while the private sector can raise as much as it likes from the market, the public sector cannot. However, even in the Government's terms, these proposals go too far and that is why we seek to amend them.

4.45 pm

It would be quite wrong if people who genuinely believed that they were excluded suddenly found themselves included. It is not right that just because a company has a contractual arrangement with a local authority someone who works for that company should be affected in any way by the Bill. For example, a cleaner working for a contracting firm should not suddenly find that his presence on a joint body or company triggers the mechanisms that I have described. That is beyond the bounds of reasonableness. The Government amendments would not deal with such a situation but ours would, and that is why we are arguing that common sense should prevail.

No one outside the House engaged in business or commerce or in a local authority of any persuasion is arguing that the restrictions should be as tight as they are or that the levels of direction from the centre should be as great as those that are proposed. Tragically, in the media there is a lack of awareness of what will happen when this part of the Bill becomes law. How many people outside are aware that virtually at a stroke it will destroy the local authority-run public transport sector? It will do that by undermining the ability of local authorities logically to invest in public transport, because any such company that is influenced or controlled will automatically fall within the credit limits. That will wipe out the public expenditure investment in other local authority service areas.

We are asking the Government to be reasonable. I know that the House has much to deal with and that we shall deal with major issues that everybody wishes to debate. I wish that as much attention could be directed to the provisions dealing with the impact on partnerships or those dealing with the impact on rents and the local authority rented sector as will be directed to dog registration. However, that is the way the House works and the way in which the media view things. I hope that, with the assistance of my hon. Friends, I shall be able to keep my later speeches brief.

Mrs. Virginia Bottomley

The speech by the hon. Member for Sheffield, Brightside (Mr. Blunkett) again shows a great deal of misrepresentation of our proposals. It is absolutely clear that the Government must act when a company has been set up in order to undermine the capital rules. The Government must also act when such a company or a local authority company disregards the propriety and standards that a local authority would apply. We have no wish to undermine or to put in jeopardy a great range of useful and productive companies that are based on partnership between public and private sectors.

Consider just one area of misrepresentation. The hon. Gentleman said that he did not think that where only 20 per cent. of the members of a company board were linked with a local authority the company should be treated as influenced by the authority. Nor do we. We are proposing that that should happen only when both that has occurred and when half or more of the company's business is associated with the same local authority, or where there is some other similar test of a close business relationship with the same authority.

It may not be possible to discuss in detail all the amendments that the hon. Gentleman and his hon. Friends have tabled on this issue. Perhaps we should welcome or feel sad about that. But a number of them reveal a misunderstanding about the detail of what we propose and the way in which they will operate. I assure the hon. Gentleman and those who have expressed concern that there are areas where individuals or categories of companies will be exempted either permanently or temporarily. We have discussed a number of specific cases and in virtually every case a solution has been found.

The hon. Member for Barnsley, West and Penistone (Mr. McKay) referred to two companies in his area, the Yorkshire mining museum trust and the Barnsley business innovation centre. I assure him that there have been discussions with both of those companies, which seem satisfied with the outcome. We are prepared to listen. We shall be bringing forward regulations to deal with the detail of many of the proposals.

The hon. Member for Brightside would like to change the association test with a local authority to that of appointment. That may superficially seem attractive, but in many companies which are clearly subject to local authority influence the authority did not appoint anybody to the company.

It is easy for two local authority officers—a chief executive and a treasurer, for example—to form a company with themselves being the two founder members and directors. The articles of association then provide that all future members of the company shall be admitted by the board of directors and that all members of the company shall be directors. The two officers admit a number of councillors, and the two then resign. The membership and hoard of the company are then composed exclusively of councillors, but the local authority has not made any of the appointments. I hope the hon. Gentleman will appreciate how important it is that we take the steps that the Government are proposing.

I am grateful to the hon. Member for Brightside for referring to amendments that we shall be moving to address concerns expressed by the British Chamber of Commerce, an issue raised in Committee by my hon. Friend the Member for Taunton (Mr. Nicholson.) They will ensure that people who provide their services voluntarily as directors and secretaries to local authority control companies will not be regarded as associated with the parent authority by virtue of that connection alone.

I hope I have assured the House that these are important measures, that they are necessary and that statements about adverse effects have in some cases been mischievously circulated and have no justification.

Amendment negatived.

Amendments made: No. 31 in page 67, line 33, after 'time' insert 'both an employee and either'. No. 32 in page 67, line 34, leave out `or subject to the influence'.

No. 281 in page 67, line 38, leave out 'professional or managerial services' and insert

  1. '(i) advice with regard to the authority's interest in any company (whether existing or proposed to be formed), or
  2. (ii) advice with regard to the management of an undertaking or the development of land by a company (whether existing or proposed to be formed) with which it is proposed that the authority should enter into any lease, licence or other contract or to which it is proposed that the authority should make any grant or loan, or
  3. (iii) services which facilitate the exercise of the authority's rights in any company (whether by acting as the authority's representative at a meeting of the company or as a director appointed by the authority or otherwise)'.
[Mrs. Virginia Bottomley.]

Amendment proposed: No. 295 in page 67, line 46, after first 'in', insert 'a branch or constituency section of.'—[Mr. Blunkett.]

Question, That the amendment be made, put and negatived.

Amendment proposed: No. 296 in page 67, line 46, after 'body', insert 'in the area of the authority'.—[Mr. Blunkett.]

Question, That the amendment be made, put and negatived.

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