Grand Committee Report of 12 May 1999

Official Report of the Grand Committee on the Local Government Bill
Wednesday, 12th May 1999.
The Committee met at half-past three of the clock.
[The Deputy Chairman of Committees (Lord Lyell) in the Chair.]
Clause 14 [Secretary of State's powers]:
Baroness Hamwee Baroness Hamwee moved Amendment No.65:
Page 10, line 30, leave Out subsection (5)
The noble Baroness said: In moving Amendment No.65, I shall speak also to Amendments Nos.66 and 67 grouped with it. These amendments relate to Clause 14 of the Bill, dealing with the powers of the Secretary of State, which are commonly known as the intervention powers. The first of my amendments seeks to leave out subsection (5), which may be described as the "hit squad" provision. Subsection (5) enables the Secretary of State to give directions as to who shall exercise particular local authority functions, or, alternatively, that an authority shall comply with his or her nominee's instructions in relation to the exercise of the functions. Those powers go right to the heart of the relationship between central and local government.
The subsection is clearly intended for the most extreme circumstances. But neither Clause 14 itself nor the draft protocol that is being discussed between the Government and the Local Government Association states that. Quite apart from my general distaste for this provision in the Bill, the amendment provides an opportunity for Committee to hear from the Minister the criteria that will be applied by the Secretary of State in using these powers. It may follow that we shall wish to see on the face of the Bill the criteria that would be applied if the subsection is to remain in the Bill.
The protocol is written in fairly generalised terms. It does not appear to explain what would constitute failure in the sense in which that concept might be applied in particular circumstances. The Secretary of State's nominee is not expressly subject to the duty of best value, which applies to the best value authorities. When the question was raised on an amendment in another place, the Minister said it was implicit that the nominee would be subject to that duty. The amendment was withdrawn on that basis. The honourable Member for Southampton, Test said that it was difficult to conceive of the Minister acting outside the overall scope of the Bill. That also suggests that there may be some scope for amending this provision to make explicit what appears to be implicit.
However, that is not my main complaint. The subsection raises the issue of who will judge the performance of local authorities. Will it be the users or, as we would say, the electorate rather than the Secretary of State, particularly when the Government still have on
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their agenda annual elections for all authorities? This seems to be an unnecessarily heavy-handed and wide-ranging power for the Secretary of State, rather than local electors being able to say, "We do not like this. Let us get rid of the lot who are doing it".
Amendment No.66 provides for discussion with the authority concerned around the time when the Secretary of State gives a direction under any part of Clause 14. Subsection (6) deals with all directions under Clause 14. and the authority concerned will be given the opportunity to make representations. My amendment proposes the wider input of representatives of best value authorities generally, which would be helpful in the circumstances of any use of these powers by the Secretary of State. I hate the term "failing authorities". I shall use it because Members of the Committee will understand what is meant by it in the local authority context. I prefer the Bill's idea of continuing improvement. It is much more positive.
At any rate, the issue of any failing authority, or an authority failing in any service, is an issue for all best value authorities, particularly in the local government sphere. There will be useful comments to be gleaned from the local government world in general if this situation were to apply. The last of these amendments proposes that no direction under Clause 14 should he given unless there is a resolution approved by the relevant Select Committee. I have used the words that I have because departments change; "the Department of the Environment, Transport and the Regions" might become outdated.
The short point here is the scrutiny of the Secretary of State's executive action. I appreciate that this may not be the right time to address how Parliament generally runs itself and issues of modernisation. The Select Committee could, however, have a useful role. The use of capping powers requires debate by the Commons. Intervention would be another example of extreme action by the executive and there should be some method for Parliament to hold the executive to account. I beg to move.
Lord Dixon-Smith: I should like to say a few words in support of the general argument of the noble Baroness, Lady Hamwee. There is always a greater problem of defining failure in this specific regard. There is no obvious way of making a distinction between what is a general failure, which might possibly justify outside intervention—although there ought to be other ways of dealing with it—and what is a specific failure. It can he a highly publicised breakdown of the service, perhaps in social services and occasionally in education—matters which stir up immense local and very often national publicity. In fact, I feel extremely sorry for social services departments, which all too often are in the dreadful position of being open to the charge of a neglect of duty if something goes wrong. Yet, if they pursue their duty with assiduity, they may be charged with pursuing that duty to the point where they have become unreasonable in the other direction.
There is, therefore, considerable difficulty in defining failure. Clearly, a number of different actions are being postulated to the Secretary of State, including of course

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a local inquiry. That may be appropriate in some circumstances. However, in what I would call the "Clause 5 situation", one would presumably be talking about a general failure of administration of a service, rather than a specific instance. But there is a lack of clarity here as to what might happen and when. We could certainly improve the Bill if there were a greater degree of clarity. I accept that there is also a need for flexibility.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): The noble Baroness said that this goes to the heart of the relation between local and national government; and to some extent it does. However, it would be a novel position to say that national government have no powers of intervention. Yet, in effect, the noble Baroness's Amendment No.65 would remove entirely the powers of the Secretary of State to intervene directly in an authority which is failing, or to nominate someone to do so on his behalf.
As the noble Lord, Lord Dixon-Smith, said, there are a number of measures short of that and all of those measures would need to be considered over time. Ultimately, though, that is a power which rests with the Government under the Bill, or with the National Assembly for Wales in the case of Wales. If they were removed they would have no power to take over the responsibility for exercising a function on behalf of an authority, nor would they be able to intervene directly in the internal management of that authority, even in the most extreme and difficult cases. That would be a serious undermining of the effectiveness of the Bill.
Although it is true—and I shall repeat it as often as I have to—that those powers would be used sparingly and in the last resort, it is nevertheless also true that Clause 14 in a sense provides the teeth of the Bill and has an effect because of its deterrent value. Without its provisions the duty of best value cannot be effectively enforced in those areas where an authority is evidently failing to deliver services to its electorate. Removal of the subsection would remove power from the Secretary of State to address what would be substantive failings, including serious and long-term systemic failure which, if we are honest, has applied in the past where the authority has itself conspicuously failed to act, despite having been given the opportunity to do so by central Government.
The noble Baroness asked about the criteria. In a sense, reference to substantive failings and serious and long-term failure covers a number of criteria. There are no specific criteria in that sense, but important principles are set out in the protocol which are highly relevant. They include principles in relation to the process which provides that local authorities should normally be given opportunities to put things right themselves, except in cases of extreme urgency which is the so-called fast-track procedure with which we shall be dealing later.
The powers contained in Clause 14(5) would not only be exercised only rarely; they would also be exercised only after options under the previous
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provision, Clause 14(2), had been fully explored. Those powers are very much in keeping with the White Paper commitment for responsibility to be transferred to any authority or a third party in cases of serious service failure. The Government recognise that those powers in Clause 14(5) are strong and substantive. They is why they will be used only to tackle cases where the severity of the failure merits the use of those powers. In our view, it is unlikely that this will include more than a handful of cases, but such cases need to be addressed and the Secretary of State needs to have a full range of intervention powers to do so.
The noble Baroness asked, in the case of designating a nominee, what were the duties of the nominee in relation to best value. In a sense, the question is answered by asking what a nominee would be brought in to do. The answer is: to address the conspicuous failings of the authority itself to address objectives of best value. Therefore it means that the nominee would be subject to all aspects of the best value framework.
The second amendment in this group seeks to make provision for representatives of best value authorities, and not just for authorities themselves, to make representations about the report on which the intervention is based and about the direction proposed before the Secretary of State is permitted to issue a direction under Clause 14.
We dealt with the issue of representatives of local authorities in another context on earlier clauses. The Government are committed to working with best value authorities and their representatives. That is why the Bill provides best value authorities themselves with the opportunity to make representations about reports which provide the trigger for intervention and about any direction issued under the clause, with the exception of the most urgent of cases.
Moreover, noble Lords will be aware of—indeed the noble Baroness has referred to—the protocol intervention which we are in the process of agreeing with the Local Government Association under the Framework for Central Local Partnership. That protocol will set out the principles underpinning intervention and the broad procedures to be followed. It will contain a section on the role of the Local Government Association in any intervention.
Noble Lords have access to a draft of the protocol, which has also been sent to the Delegated Powers and Deregulation Committee. It is therefore clear that the LGA, or where appropriate other associations of best value authorities, will be very much involved in that process. The Welsh Office is developing separately with Welsh Local Government Association a similar protocol for intervention. I understand that the Home Secretary and the Association of Police Authorities are moving along the same lines. In addition, the new improvement and development agency, will provide a supportive role in assisting authorities in achieving continuous improvement.
The protocol will set out how representatives of best value authorities will be involved in the process of intervention—the approach will need to be flexible over time as we learn from this process—and will give them

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a clear role. Therefore, I do not consider Amendment No.66 to be necessary and I hope that the noble Baroness will not press it.
Amendment No.67 is bizarre. It would require that any direction issued under Clause 14 must first have secured the approval of the relevant Select Committee—I assume of another place. I suspect that this stems from a slight misunderstanding, not only of the purpose of this provision, but also of the role of Select Committees. The fact is that Select Committees do not usually scrutinise individual directions. Indeed, they rarely go to that level of scrutiny and it is not generally regarded as their job. If the amendment were adopted, it would represent a significant change in a Select Committee's powers.
The noble Baroness, Lady Maddock, seems to think that she can offer a precedent, of which no doubt she will inform us.
Baroness Maddock:I agree with the noble Lord.
3.45 p.m.
Lord Whitty: I thank the noble Baroness. That raises one of the constitutional points that will possibly be dealt with in the context of this Bill.
Your Lordships will be aware that Clause 14 contains a whole range of intervention powers, from the more technical powers contained in Clause 14(2), to the more extensive powers in Clause 14(5). It would be inappropriate for the Secretary of State to require the approval of a Select Committee before he could direct an authority under Clause 14(2)(a) simply to amend a performance plan. Even for the more extensive powers under Clause 14(5), it would still require a major constitutional change in the role of Select Committees. It could also impose unnecessary time constraints on the process of intervention. Therefore, I do not think that the involvement of Select Committees in this process—at least at the present stage of development of the role of Select Committees—would be appropriate. I trust that that amendment will not be pressed.
Perhaps I may crave the Committee's indulgence. I wish to put on record another issue relating to Clause 14(5) which is currently under consideration. The Government intend to bring forward further amendments for consideration at the next stage in order to ensure that the provisions relating to the powers of the Secretary of State and the National Assembly for Wales to intervene in failing authorities are as clear as possible.
We propose to bring forward amendments to clarify the Secretary of State's powers in Clause 14(2) and Clause 14(5) and their relationship to existing legal provisions. That would have the effect of ensuring that the intervention process is both fair and flexible. They would fundamentally be technical amendments, and would not in any sense further extend the powers of the Secretary of State or the National Assembly for Wales to intervene over and above the provisions already in the draft Bill. Their aim would be to clarify how the powers currently set out in the Bill would operate and ensure that they could be used effectively.
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Additional amendments to Clause 14 may be necessary at a later stage to address potential inconsistencies between the best value regime and other legislation where the Secretary of State or his nominee takes over the functions of an authority. We have identified a number of cases in which a conflict or inconsistencies may arise. The most obvious relates to the Secretary of State's role in the appeals system as provided for under planning law. We shall need to bring forward an amendment to clarify that position. I merely place that intention on the record at this stage. In the light of those remarks, I ask the noble Baroness to withdraw the amendment.
Baroness Hamwee: I hope that the Government will be prepared slightly to expand the amendments that they intend to bring forward; clarity will certainly be welcome. The noble Lord used words that were not unexpected. He referred to authorities which are "evidently failing to deliver". He used phrases like "substantial and serious long-term failure", and said that the powers under Clause 14(5) would be applied only after Clause 14(2) had been fully explored. I said that was not unexpected. However, I should like to see a further reference on the face of the Bill which would "rein in" an over-ambitious Secretary of State. One must always think in terms of future Secretaries of State—for example, three governments on—and not necessarily the current Secretary of State.
Lord Whitty: A Liberal Democrat Government!
Baroness Hamwee: Yes. A Secretary of State of any party should have proper controls on her or his powers.
With regard to Amendment No.66, the answer that the Minister gave was a good deal more helpful than that given in another place, where it was said that duty of best value would be implicit. It is not, and I entirely see what the Minister is saying. Clause 14(1) takes us directly to the issue of achieving the best value duty. Therefore, I see the connection more clearly than I did before, although common sense told me that that was the case.
As regards the proposal for scrutiny, as my noble friend Lady Maddock indicated, Select Committees do not have such powers, or do not use those powers at present. That is not to say that they should not, or that our procedures should not be modernised to enable scrutiny. There is a good deal of scope for expanding the role of Select Committees, although, as I said, this is not the appropriate Bill for addressing general issues regarding the modernisation of Parliament. However, the manner in which the Secretary of State's use of such powers is scrutinised, and how he or she is held accountable, is a serious issue. It cannot be disposed of by the suggestion that Members of the Committee do not understand how the other place works. I admit that I do not understand that as well as my noble friend. I look forward to the amendments to Clause 14. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos.66 and 67 not moved.]
Baroness Hamwee Baroness Hamwee moved Amendment No.68:
Page 11, line 7, at end insert—
("( ) For the purpose of subsection (8) above, urgency means there is immediate danger of substantial harm or substantial financial loss.")
The noble Baroness said: In moving this amendment, I wish to speak also to Amendment No.69. These amendments relate to the clause dealing with intervention powers and in particular the urgency provisions.
There are no criteria on the face of the Bill as to what is meant by "urgent". The memorandum from the Department of the Environment, Transport and the Regions to the Delegated Powers and Deregulation Committee refers to particular circumstances and to authorities failing to address problems. The Bill contains no references of that kind. Clause 14(8) allows the Secretary of State to give directions without complying with some of the earlier subsections if he considers the direction to be sufficiently urgent.
Amendment No.68 suggests some definition of urgency. I have suggested that it means,
"there is immediate danger of substantial harm or substantial financial loss".
Of course, the words "immediate" and "substantial" are the most important there. I have tabled this amendment in order to ask the Minister to explain on what the Government base their assessment of the need for this power. What particular examples do the Government have in mind with a view to seeing whether some criteria can be written in?
Amendment No.69 provides that in circumstances of an urgency direction, the authority concerned is, at any rate, given an opportunity to make representations within a reasonable period after the direction has been made. If the Secretary of State uses these powers, he must inform the authority. It would be useful to provide specifically that the authority can make representations afterwards, although I recognise that that will be after the powers have come into play. The draft protocol recognises that, except in cases of urgency, the authority will normally be given the opportunity to make the necessary improvements itself. I should like to see that on the face of the Bill.
I have tabled the amendment in the hope that any imposition of a nominee will not be for any long period; that the powers of the best value authority will be returned to it as quickly as possible; and that any intervention will be part of a continuing process and not the end of the story. On Report in another place, the Minister said (at col.469 of the Official Report) that the Government were giving consideration to the best way of keeping those interested informed. I hope the Minister can expand upon that this afternoon. I beg to move.
Lord Whitty: These amendments deal with emergencies as the noble Baroness has said. The Bill provides that in urgent cases, the Secretary of State can issue a direction without giving the authority the opportunity to make representations about the report—if indeed there had been a report—or about the direction proposed and without having regard to any statement of
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action produced under Clause 9(2). In these circumstances, he must notify the local authority or its representatives of the direction and his reasons for issuing it under fast-track procedures.
As we indicated at earlier stages, the circumstances in which we envisage the fast-track procedure being used will be rare and it will be used only in those situations which are set out fairly clearly in the draft protocol on intervention. That has been produced in conjunction with the LGA and aims to clarify these and other provisions of the Bill. It recognises that the fast-track procedure will be used only in exceptional circumstances where either the severity or persistence of failure, or the continued risk of harm or financial loss, shows that urgent intervention is necessary.
The first amendment of the noble Baroness, Amendment No.68, refers to urgent intervention where there is immediate danger of substantial harm or substantial financial loss. It therefore reflects some of the points in the protocol. However, the reference to "immediate" in relation to financial loss may mean an immediate decision that is being taken but the financial loss may well be longer term. That could equally well occur in relation to "harm". Therefore, to place such a formula on the face of the Bill might impose an over-rigid constraint on the ability of the Secretary of State to act and remove the flexibility that we need. Clearly, in terms of substantial financial harm and financial loss, there is a need to act immediately, even though the loss that the decision or the course of action implies may not occur immediately. It could be that the long-term health as well as the short-term health of an individual or group of people cared for by the local authority could be under threat if a decision were carried through. We are therefore faced with the need for rather more flexible definitions, which is the point of the protocol. The protocol can be relatively easily adapted to changes agreed between ourselves and the LGA, whereas if we were to put it on the face of the Bill we would have a rigid formula which we could not easily alter.
Furthermore, the amendment does not deal with the case of persistent and systemic failure where perhaps ultimata or final opportunities to put it right have been missed by the failing authority. Therefore, again, there is a need for urgent action by the Secretary of State, albeit that there have been warnings and interventions under Clause 14(2) powers or other powers previously. In other words, there may be cases in which a local authority has a history of failure of which both it and the Secretary of State are well aware, but which they have taken no action to address. In those cases, the Secretary of State may not wish for a lengthy and time-consuming intervention before taking action.
I repeat: this is very much a last resort power. Nevertheless, because it would be dealing with extremely unusual situations, many of which would have been subject to the earlier powers, it is important that we maintain a certain degree of flexibility in these provisions.

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Amendment No.69 would make provision for best value authorities to make representations about directions issued under the fast-track procedure after the Secretary of State or National Assembly for Wales had issued a direction under the clause.
I have already made it clear in this and other contexts that the Government are utterly committed to working with authorities and the representatives of authorities, and that is the case here, too. However, in cases where immediate urgent action is needed there may not be time for the Secretary of State to let authorities produce detailed action plans or to make representations about the nature of the direction he is imposing. We envisage that in such cases considerable dialogue would normally have already taken place between the Secretary of State, the authority and local authority representatives and that therefore the authority would be well aware of the failure but in practice would have failed to take substantive action to address it.
The protocol sets out the procedures for bringing an intervention to an ordered close. The noble Baroness referred to the duration and the hope that any such intervention would always be for a limited period. That is also our hope, but there is a horses-for-courses issue here. The protocol setting out the procedures between ourselves and the Local Government Association will provide for regular monitoring of a function, assessment of whether the authority is in a position to resume and sustain effective responsibility for the function concerned and, during the period of intervention, there would clearly need to be a regular dialogue between the Secretary of State, or the National Assembly, and the local authority and its representatives. 'We therefore do not believe we need to make a separate provision to allow authorities to comment on a direction that has already been implemented. The protocol will deal with the post-intervention situation.
I hope that the noble Baroness will accept those reassurances and will not press the amendments.
4 p.m.
Baroness Miller of Chilthorne Domer: Having listened to what the Minister has said, if I had not had Annex A which would cause the intervention to happen I would have felt reassured. However, as one goes through the examples of the triggers—a failure of process in particular—those are not substantial or urgent things. I agree that where a Secretary of State is taking what I am sure we would all agree is a fairly commonsense view of what is urgent that is fine, but in the picture painted by my noble Friend perhaps an over-ambitious Secretary of State might fail to publish details of how a performance compared with others and those sorts of things to me do not seem to give any reason to believe that substantial harm may result. It might do, but it easily might not do. The way that part of the protocol is drawn up at the moment seems to make a far stronger ease for Amendment No.68 than if I had not read all of those reasons why intervention might be triggered. There are some matters, perhaps in the failure of substance section, which deserve to be included and are reasonable. However, in the failure of process section, them are some matters which could in
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the worst circumstances be abused and regarded as relatively trivial. In terms of reasons for intervening, Amendment No.68 is important.
Baroness Hamwee: My noble friend makes a fair and entirely apposite point. It gives me no pleasure to feel as critical as I do of the Government with regard to this clause given that, in general, we support this part of the Bill. We want to see the best value scheme working and working well. However, the powers that we are discussing are extreme. The amendments address a situation considered by the Secretary of State to be sufficiently urgent as to make it appropriate for him to take action without giving the authority concerned an opportunity to make representations and without having regard to a statement which the authority concerned may have sent him.
I accept what the Minister says about these powers being applied only in circumstances where other attempts to put matters right have been exhausted. However, as they are so extreme, surely the Government must insist that their draftsmen consider which words it is proper to put on the face of the Bill. In these situations terms such as "the use of flexibility" are not good enough. We owe it to the best value authorities, their communities and all the interest groups they serve to be entirely clear about the triggers for the criteria in respect of the use of powers at the very end of the spectrum.
Of course I do not suggest that my wording is perfect and if the word "immediate" is inappropriate then that is the kind of thing that can be looked at. But when the Minister talks about systemic and persistent failure one has to qualify that kind of failure on the face of the Bill. One has to state what kind of failure merits urgent intervention. Systemic and persistent failure can comprise anything from a general failure—which should elicit a response from the local electorate at the ballot box—to something serious which greatly endangers people. I do not suggest that people should be harmed before any necessary powers are used.
We shall come back to this point. As I say. it does not give me pleasure to make this point as firmly as I do because I would like to see the best value duty work well and successfully and—to use current jargon—to see the partnership between local government and central government in this area work well too. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No.69 not moved.]
Clause 14 agreed to.
Clause 15 [Power to modify enactments and confer new powers]:
Baroness Hamwee Baroness Hamwee moved Amendment No.70:
Page 11, line 21, at end insert—
("( ) If the Secretary of State thinks that an enactment prevents best value authorities from generating income directly related to the exercise of their functions he may, by order, make provision modifying or excluding the application of the enactment in relation to those authorities.")
The noble Baroness said: In moving Amendment No.70, I shall speak also to Amendment No.75. I say for the record that these amendments are grouped with Amendments Nos.71, 76 and 77 which stand in the name of the noble Lord, Lord Dixon-Smith.
We turn here to the Henry VIII powers which give the Secretary of State powers to modify enactments and to confer new powers. I freely admit that this section has given me a little difficulty, hearing from colleagues on the one hand how disgraceful it is to give the Secretary of State such powers, but knowing myself that they could be used to the great benefit of local government.
Amendment No.70 relates to the range of powers given to local authorities which may be constrained by their inability to charge. The amendment seeks to enable charges to be made not as a separate income-generating activity, but as part of the best value regime.
I shall give the Committee some examples. Local authorities could often give better value if they were not restricted in what activities they could undertake connected with their functions.
When I chaired the planning committee in the London Borough of Richmond-upon-Thames, my vice-chairman commented very sensibly that the authority would be in a better position to advise developers of what they could do within the unitary development plan, what was worth taking forward and so on, if the cost of the time of that discussion could be recovered from the developers. We were only talking about £25 an hour. Sadly, that was found by the House of Lords to be ultra vires in the case of McCarthy and Stone.
Other authorities have had similar difficulties such as charging for discretionary services where it is very arguable that the council tax payers as a general body should not be paying. Other instances include licences for tables and chairs on the highway. The council can charge only for the cost of processing the licence but would like to be able to make a small charge to recognise the space occupied. There is a similar issue with regard to skips and other highways' obstructions. Again, there is noise pollution, when a noise team has to be called out.
In the City of Westminster, charging for public conveniences was discontinued following audit objections. On building control fees, local authorities can recover only reasonable costs; so there is no surplus. On filming on the public highway, it is sensible to allow the authority to charge for providing support services to organisations which film on the public highway.
There are a number of examples of such possible charging which, were they to be allowed, would enable the local authority to carry out its functions more effectively.
I am aware of an authority which has recently been advised that it is not permitted to sell advertising space in its own publications. It was advised that Section 111 of the Local Government Act 1972 does not apply, and express authority beyond that in the 1972 legislation would be required to enable it levy charges in
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connection with its own publicity. All it wants to do is charge advertising space in its own newspapers in order to carry out its functions of consultation and dissemination of information more effectively. This example is particularly telling in the context of best value which, by definition, requires wide consultation and the dissemination of information and, as we all know, there is a price attached to that. Through this amendment, I seek to ask Government to put local authorities in the position where they are able to consult economically, efficiently and effectively.
Amendment No.75 is tabled in the hope that perhaps a little assurance may be given to those Members of the Committee who I know remain shocked at this proposal being in the Bill. Indeed, I have been under some pressure to seek to take out the whole of this clause. I have chosen instead to propose an amendment that no order is made under these powers unless its effect is to extend the powers of the best value authorities. That may be implicit. I believe it was a surprise to many noble Lords, and no doubt a great relief to the Government, that the Delegated Powers and Deregulation Committee dealt so gently with the Bill. I have heard various comments that it was bought off by Government assurances and I have talked before about whether we should always expect there to be a benign Secretary of State using his or her powers benignly. I hope that the Minister can give some assurances as to how this power would be used which will, I am sure, be to the interest of the House more widely than just to Members of the Committee. I beg to move.
4.15 p.m.
Lord Dixon-Smith: I have three small amendments in this group. They are very simple and the Minister could close his eyes, swallow and accept them should he so choose—I suspect he will not.
The first is to insert after the word "power" the words "or exemption". I put that in for the sake of clarity. With the exception of the Greater London Authority, which is not yet in being, local authorities work within a framework of law which exists; they are constrained by the law. I remember in my time in Essex that we used to have one solicitor who specialised in advising us whenever we came to the limits that the law permitted, which I may say was quite often. On occasions, we disregarded his advice on the grounds that no sane person would challenge us in what we were doing. So the law is an interesting concept.
The question that I ask myself is: are we asking for a power to extend the law, which is implicit in what the noble Baroness, Lady Hamwee, was saying, or are we rather asking for an exemption for that particular piece of law to apply to a particular circumstance, so that something can be done which is beneficial? It is a moot point whether a power to extend the boundaries of the law is positive or negative. In many instances, an exemption rather than a positive power will be required, which is why I added the words "or exemption".
I added Amendment No.76 for consistency in the Bill. Wherever we mention authorities elsewhere in the Bill, we seem to have mentioned best value authorities.

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It might be beneficial for the Bill if, every time the word "authorities" appears, it is preceded by the words "best value". We would then all know exactly which bit of ground we are standing on.
We are discussing the obligation of the Secretary of State to consult. Clause 16(1) as drafted states:
"Before the Secretary of State makes an order under section 15 he shall consult such authorities or persons as appear to him to he representative".
I interpret that as a measure that is left to his discretion. I wish him to consult both best value authorities and persons. As the clause is drafted he could consult one or the other and would still be complying with the law. I simply suggest that at for the sake of clarity of meaning we delete the word "or" and insert the word "and" to ensure that both groups are consulted. I look forward to hearing the Minister's reply.
Lord Hunt of Tanworth: The general dislike of Henry VIII powers is so great that one's instinct is to be extremely suspicious of them. The Committee will know, however, that the Local Government Association is anxious to have these powers and I am persuaded that they are right. The best value regime is a new scheme. No one is quite sure exactly how it will work and what kind of problems it will run into.
There must be a power for the Secretary of State to authorise exemptions. That may constitute an extension of powers or may simply be a question of an authority doing something differently that it is prevented from doing at present. Until some of the schemes get off the ground, however, it is difficult to say what changes, if any, will be needed. The question therefore concerns what safeguards exist to prevent the misuse of these powers. The Delegated Powers and Deregulation Committee is absolutely right in saying that the measure should be subject to the affirmative procedure. That seems to give the necessary flexibility as well as providing safeguards against a misuse of Henry VIII powers. I therefore support the proposal.
Lord Whitty: In view of some of the comments of the noble Baroness perhaps I should place on record that whether or not we believe that all future Secretaries of State will be as benign as the Deputy Prime Minister, we must expunge any feeling that anybody can buy off the Delegated Powers and Deregulation Committee by promises or anything else. The Delegated Powers and Deregulation Committee, probably for the reasons just indicated by the noble Lord, Lord Hunt of Tanworth, reached a judgment that the Henry VIII powers here-in so far as you can regard them as such, and not everything that Henry VIII did was non-benign—will in fact have a benign influence on the introduction of a best value regime.
Indeed the illustrations that the noble Baroness reeled off as regards the frustration of a number of local authorities in terms of what would appear to be red tape are precisely the kind of issues that we will have to tackle. I am not promising her that we will tackle all those particular ones. We will need to build a consensus among authorities as. to whether or not we can take action. As the noble Lord, Lord Hunt, has just said, this
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can also be a matter for affirmative resolution. Nevertheless those are the kind of matters that we have to get out of the way if the best value regime is to operate to full effect.
That is why we need flexibility for the future and why Clause 15 has been drafted in the way that it has. No one can claim at this stage to know or understand all the ways in which best value might be achieved and all the barriers which it might come up against that would require some legislative alterations. It is really only by providing flexibility of legislative response that we can assure flexibility in local delivery. Clause 15 will enable the Secretary of State to modify or exclude the application of existing legislation or enact new legislation where that will help authorities to achieve best value. That is the best way of expressing it. As the Committee will know, we have also identified four broad areas where these clauses will be able to assist best value authorities in achieving best value. They are, in broad terms first, facilitating joined-up service delivery (that is, working across organisational boundaries by pooling budgets and the integration of services within and between authorities); secondly, the regularisation of powers in respect of partnership arrangements, including the operation of local authority companies; thirdly, clarifying the circumstances under which local authorities can provide goods and services to others; and, fourthly, making better use of local authority assets. Those broad areas cover most of the circumstances in which we would raise them. There may, however, be others.
The way in which Clause 15 is currently drafted would enable existing legislation to be modified to give authorities the powers that they need to achieve best value. We recognise and provide in Clause 15 that for many best value authorities the issue is not just that existing powers need to be changed but that new powers may have to be made available to them so that they can make the most of their assets in achieving best value.
Those are wide powers, but they are all geared to achieving best value and they are all subject, as the noble Lord, Lord Hunt, has just said, to the parliamentary safeguards of affirmative resolution.
I do not believe that Amendment No.70 would help resolve those points. Before we can enable best value authorities to carry out income-generating activities, as required by the clause, we have to consider issues beyond the best value area. First and foremost, local authorities' activities must be firmly tied in to the best value framework and to statutory responsibilities. The purposes of the Secretary of State's powers through Clause 15 is not to permit local authorities to trade as such and to generate income as such, but to ensure that they have the right powers with which to achieve best value within the framework of their existing functions, which may include in the process trading and income generation. I do not believe that the amendment as drafted makes that clear. Indeed, we do not believe, therefore, that if we specified that the objective had to be best value we would need explicitly to put in income generation, or by implication, trading.

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Amendment No.75 seems to provide that any orders under this clause would have to extend the power of best value authorities. I understand what is meant by that and we do want to ensure that best value authorities have all the powers they need to enable them to deliver best value to the local taxpayer; that is why the Bill is drafted in such a way as to give them extra powers where necessary.
We also need to address the fact that some enactments inhibit the delivery of best value in a different way. That is why Clause 15 also gives the Secretary of State powers to modify or to exclude the application of enactments to best value authorities. It will not necessarily be an extension of the powers; it may well be a modification, an exclusion or an exemption where that will help them achieve best value. We wish to ensure that the Secretary of State has maximum flexibility, therefore we would wish to limit the situation of explicitly extending powers to local authorities. The current drafting of Clause 15 achieves that flexibility.
There is a related point in the first amendment from the noble Lord, Lord Dixon-Smith. I understand the intention behind Amendment No.71 and agree with the view that in certain cases legislation makes it difficult for authorities to achieve best value and exemptions are needed. However, Section 15(1), as drafted, already permits the Secretary of State to exclude the application of specific legislation to best value authorities. Amendment No.71 does not add to that; it duplicates it and does not achieve anything more than is already provided for in the Bill in Clause 15(1). I therefore consider the amendment unnecessary.
I turn to Amendments Nos.76 and 77 which stand in the name of the noble Lord, Lord Dixon-Smith. Clause 16 requires the Secretary of State to consult all authorities or persons which represent those interests affected by order made under Clause 15. I confirm that we intend this to include representatives of best value authorities. Clearly consultation is a key component of the whole regime of best value. However, Amendment No.76, as drafted, would, in effect, implicitly limit the obligation laid on the Secretary of State to consult. Requiring him to consult best value authorities would mean there would be no duty under that clause to consult those other non-best value bodies which represent interests affected by the Secretary of State's proposals to modify legislation. That could be unnecessarily restrictive. I can assure the noble Lord that it is our clear intention that the Secretary of State should consult all those representing persons affected by the proposals, and that goes beyond best value authorities. To pick them out explicitly in this sense may actually restrict the powers under this clause. We also need some flexibility in that consultation. Taken together, Clauses 76 and 77 would reduce that flexibility and I would therefore ask the noble Lord not to press his amendment, and the noble Baroness to withdraw her amendment.
4.30 p.m.
Baroness Miller of Chilthorne Domer: The Minister mentioned partnership working. I do not have the draft Bill about political structures in front of me, so I am unable to check this. If it were necessary, will this clause facilitate partnership working between authorities? Will the Secretary of State be able to facilitate varying political structures under which authorities might be operating so that they can foist delegated executive authority on to a committee of two or more of those authorities, which the next Bill will preclude? Would it be this clause that will be relied upon, or will there be provision in the next Bill giving a similar power to the Secretary of State? I am not clear whether the powers in this clause will apply to that next Bill, too.
Lord Whitty: This power would apply to the ability to modify any legislation. However, the particular example which the noble Baroness raises will be dealt with more by the next Bill than by this Bill. The circumstances she describes are more about the exercise of functions than about removing or altering legislation. We can probably debate that in the context of the draft Bill which will be scrutinised shortly.
Baroness Hamwee: Some useful points have been made, particularly on the generality of the power. As regards trading, I will read carefully what the Minister has said. He understands that I am not here seeking a general power on the part of authorities to be able to trade, but merely to raise income which will assist them better to carry out functions which they already have. It will certainly alleviate the cost of exercising functions which may be fairly narrowly directed in terms of the beneficiaries of those functions and where there is a major question mark as to whether the whole of the taxpaying base should bear the cost.
I thank the Minister for that reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos.71 to 75 not moved.]
Clause 15 agreed to.
Clause 16 [Orders under section 15: procedure]:
[Amendments Nos.76 and 77 not moved.]
Clause 16 agreed to.
Clause 17 agreed to.
Clause 18 [Contracts: exclusion of non-commercial considerations]:
Baroness Hamwee Baroness Hamwee moved Amendment No.78:
Page 12, line 42, at end insert—
("( ) The first order under this section shall provide for environmental considerations to cease to be a non-commercial matter.")
The noble Baroness said: This amendment deals with the exclusion of non-commercial considerations from contracts. Perhaps cheekily, but nonetheless seriously, my amendment proposes that:
"The first order under this section shall provide for environmental considerations to cease to be a non-commercial matter".
I hope that the Minister will be able to give us some assurances about the Government's approach to environmental considerations in this context. The clause permits the Secretary of State, by order, to change the list of non-commercial considerations that a local authority can take into account when putting a contract out to tender. In other words, the basis for the award of the contract can be more than narrow financial considerations. I understand that reference has been made in another place to the need to include various social matters in the list of considerations such as quality training, health and safety, disability, racial equality, equal pay and gender equality.
A number of environmental performance matters could, and should, be included in such a list. For instance, it could include a history of prosecution under environmental legislation for pollution or other environmental damage. It might also include a reference to whether the organisation concerned is registered as having approved environmental management systems. I refer to the Eco-Management Audit Scheme (EMAS), which is the voluntary scheme for individual industrial sites in local authorities where companies and authorities have established a programme of positive action to protect the environment and to seek continuously to improve performance. Another such system is the international industry standard for environmental management (ISO-14001). I hope that the Minister will be able to give assurances about environmental considerations rapidly leaping up the list of considerations that are to be taken into account. I beg to move.
Lord Harris of Haringey: I am sure this amendment is well-meaning, but I wonder whether it is appropriate to specify in this way that one particular set of issues should have priority over all others. It is important that, in progressing this matter, there is wide discussion between all those who might be affected, and that there is some consensus as to the legitimate non-commercial considerations that are to be excluded from the regime in this way.
My understanding is that there have been substantial discussions between the Local Government Association, the Confederation of British Industry and the TUC. They have examined a range of issues, and have identified a number of matters as non-commercial considerations which local authorities should legitimately take into account when awarding contracts. They include: the quality of training offered; the pay and conditions of employees; health and safety circumstances and the reassurances that are given; and matters to do with equal opportunities.
I do not suggest that environmental issues are not important; I fully agree with the noble Baroness that they are extremely important. All I am saying is that the matters currently under discussion as possibly providing a basis for exemptions under this clause are also extremely important, and I should be sorry to see them pushed back under the terms of the amendment, however well-meaning the intention.
Baroness Maddock: I shall be brief. I was rather disappointed to hear the previous comments of the noble
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Lord, Lord Harris of Haringey. The problem with environmental matters is that too many people believe that they are well-meaning—which is why we have failed in this country to make the progress that other countries have made in environmental matters. I say that on the basis of a recent visit to Germany. Every time I go there I am impressed by the progress Germany has made environmentally, not only in the field of transport but in all other areas. As long as we continue to believe that people who care about the environment are well-meaning, and that these matters are well-meaning, we shall fail to put them at the heart of our legislation and ensure that we take them on board properly.
Lord Harris of Haringey: Before the noble Baroness sits down, what I attempted to put across was not that environmental issues were well-meaning, or indeed that the noble Baroness herself was well-meaning—although I am sure she is—but that the intention behind this proposal was well-meaning in its attempt to put these considerations at the centre of the proposal. My point is that there are a number of matters which should legitimately be at the centre, and which should be achieved by a process of consensus rather than simply writing them into the Bill at this stage, possibly before that consensus is created. The important point is to create that consensus around environmental issues. It will not be created by simply writing it into legislation.
Baroness Farrington of Ribbleton: Amendment No.78 would require the first order made under Clause 18 to provide for environmental considerations to cease to be a non-commercial matter. The amendment would place an unhelpful constraint on the exercise of that power. It is important to note that the list relates to matters that are not permitted, not the other way around. Everything that is not included in the list can be taken into account, provided that other legislation does not prevent it.
Environmental considerations as such are not explicitly defined as a non-commercial matter at Section 17 of the Local Government Act 1988. Therefore, I can only assume that the noble Baroness, Lady Hamwee, is bringing forward this amendment on the understanding that such considerations could be included within the existing definitions, although having listened to this short debate, I am not quite clear about that.
Our purpose in Clause 18 is to provide for the updating of Section 17 of the 1988 Act, which regulates the contracting functions of local authorities. Regulation is achieved by prohibiting local authorities from having regard to certain specified non-commercial matters in the contractual process. The comments of my noble friend Lord Harris of Haringey on the current consultation that is taking place in this area are extremely important.
The problem with the 1988 Act is that it makes no distinction between matters which may be relevant to the performance of the contract and those which are truly non-commercial. That is the problem that we seek to address. Clause 18 therefore provides a power to remove or modify by order the so-called non-commercial considerations. To the extent that

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environmental considerations could be caught by the existing constraints contained in the 1988 Act, the Clause 18 power would allow us to tackle any problem so long as changes are consistent with government and EC policy.
I assure the noble Baroness, Lady Hamwee, that we have considered carefully whether any such changes are necessary. However, our main priority is to deal with workforce matters. I say that in the context of the widest meaning of "workforce matters". I do not believe it is sensible to place unnecessary conditions on the Clause 18 power. I hope that in the light of those remarks the noble Baroness will feel able to withdraw the amendment.
Baroness Hamwee: I do not dissent from the notion that there should be a consensus as to the matters that would be the subject of such an order. I have no objections to the first order, including the list that the noble Lord, Lord Harris of Haringey, suggested to the Committee. They are all important points. But as my noble friend Lady Maddock said, environmental considerations tend to be regarded as add-ons, or as some sort of optional extra. In this place we are rather far behind people outside who recognise—the Government have expressed this themselves—that it is necessary to take into account sustainable development in order to sustain all our futures. Our social futures, our economic futures and so on are all bound up together. To treat environmental considerations as some sort of optional extra is to fail to understand the importance of the issue. Having said that, the Minister has indicated that workplace matters in the wider sense, as she put it, are likely to comprise the initial focus. Can she indicate to the Committee any timetable and who will be consulted as regards the laying of any order under this clause?
Baroness Farrington of Ribbleton: My understanding is that wide consultation is already taking place, not only with best value authority representatives but also with those concerned with good public procurement practice as providers and with all those with an interest in this matter. If there should be any further consultation, or any information about the exact timing of that, I shall write to the noble Baroness.
4.45 p.m.
Baroness Hamwee: I thank the Minister for that reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 18 agreed to.
Clause 19 agreed to.
Clause 20 [Transition from compulsory competitive tendering to best value]:
Baroness Hamwee Baroness Hamwee moved Amendment No.79:
Page 13, line 11, leave out ("2nd") and insert ("1st")
The noble Baroness said: This amendment seeks to propose a slightly different date for the end of compulsory competitive tendering. The Bill proposes that the provisions listed in Clause 20 shall cease to have
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effect on 2nd January of next year. This amendment proposes the date of 1st January of next year. My query concerns the number of authorities which will have let a contract under CCT before that date. I have already raised this matter. I have received a Written Answer informing me that the information is not centrally recorded. I asked about a number of dates. It seems odd that, irrespective of the arrangements for recording the information, the Government have not inquired—or have implied that they have not inquired—how many authorities would be affected by this measure before putting the date of 2nd January into the Bill. I am sure the Minister will tell us that the Government have a fair amount of information on this matter because I am sure they will want to assess the effect that their proposals will have.
After the Written Answer was published I was contacted by an assiduous member of the public who reads Hansard who informed me that this information has been recorded by the Local Government Management Board and is held by the Department of the Environment, Transport and the Regions. Perhaps the Minister can inform the Committee of the precise position here. I take the point that was made at the helpful private meeting with the Minister; namely, that there has to be a cut-off at some point. Furthermore, authorities need to know about this matter in advance so that they can make preparations for whichever of the regimes is to apply. That is entirely sensible. However, I query whether we have the correct date in this regard. I am told that the 1997 class of unitary authorities is particularly affected by this measure, as are the white collar contracts let under the CCT regime which will be coming up for renewal.
The best value regime is to start 12 months from the date the Bill is passed, or earlier by order. The memorandum from the department indicates that best value is expected to be introduced on 1st April 2000 and that there will be guidance as to the interim period. As is well known, we want to see the back of CCT, but we are concerned about what could perhaps be the messy introduction of its successor. I also take the opportunity therefore to ask whether those authorities which will continue to exercise functions via a contract let under CCT will automatically be regarded as having achieved best value until that contract expires.
There are two questions implicit in the amendment. I beg to move.
Lord Whitty: While the amendment represents a change of only one day, we carefully chose the day to take account of the existing CCT timetables, in particular for the initial implementation of professional white collar services in England.
We considered that it was important to ensure that authorities receive a clear message that they must comply with the existing legislation and not anticipate the introduction of best value by abandoning at a late stage those tender exercises which had already started. In order to comply with the implementation dates for white collar services up to 1st January 2000 authorities will have commenced the tendering process well before Royal Assent of the Bill might be expected. It normally

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takes about 12 months to prepare for and to complete a tendering exercise and to commence the contract. That principle also applies to existing CCT contracts which become due for resetting in the period.
I regret that I am unable to give the noble Baroness the information that she seeks. We will investigate the availability of statistics from the Local Government Management Board but we are not normally directly "plugged into" that information. 'With regard to choosing the date, we are anxious to provide as much time as possible to make sensible preparations for best value without the distraction of CCT for those authorities with contracts that will run after that date. January 2nd immediately follows the last planned implementation date for white collar professional services, which is 1st January 2000. The choice of 2nd January will therefore ensure that those authorities reorganised in April 1997—principally the unitary authorities—will be able to go ahead with the process that has already started in putting, for example, personnel and finance services out to competition. They will therefore not waste the period of preparation that is already approximately five months under way and will be considerably further down the line by the time of Royal Assent. Those authorities will then be able to achieve one round of CCT on the financial and personnel services.
We have, however, carefully avoided exposing any information technology services to CCT on 1st January 2000 because of the obvious problems associated with the year 2000 bug. If we were to repeal CCT on 1st January that could lead with regard to the other white collar services to the abandonment of a tendering exercise at a late stage in the process. I hope that that at least goes some way to explain the choice of 2nd January and to explain that it would be disruptive for those authorities to bring forward that date. If there is any more information I can provide to the noble Baroness about the number of contracts involved, I will of course do so. However, we do not have it immediately to hand in the department.
Baroness Hamwee: The Minister does not promote his case as well as he might. What he has said about white collar services and so on is entirely understandable. I repeat that I would have expected that careful inquiry would have been made as to whether a slightly different choice of date would have had a more or less disruptive effect on best value authorities. He said that as much time as possible needs to be given to switch regime, which I entirely understand. However, I do not believe that my proposal to reduce by one day at a period when most of the country is expected still to be recovering from the night before the night before will affect this very much.
On the back of this, I asked a question about authorities which are continuing to function via a contract let under CCT. Will that automatically achieve best value, because they will have had no option but to operate under that contract, which will go on into the period when the best value duty has started? I have in mind the occasional problems which authorities have with contractors—they may be just the same under the
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best value regime—and with enforcing the contracts. Will there be any different approach to authorities in judging what they are doing for the purposes of best value if they are continuing to operate in regard to some functions under old contracts? Is there any difference between their operation using contracts under the different regimes?
Lord Whitty: I am not entirely sure that there is a hard and fast answer to that. Local authorities will be bound by contracts which they have already undertaken and there will be no power under the best value regime to breach those contracts, except in so far as the contracts themselves have penalties or break points. If it were seen that a CCT-style contract were not delivering best value, that could be dealt with only at the end of that process in normal circumstances. There may be some modifications to that in particular cases. but in general a contract signed would have to be completed in that form, and there are no additional powers to break that contract.
Baroness Hamwee: I thank the Minister for that reply. It is important for authorities to be assured that they are not going to be tripped up because the rules have changed part way through the term of the contract. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20 agreed to.
Clause 21 agreed to.
Clause 22 [Accounts]:
[Amendment No.80 not moved.]
Clause 22 agreed to.
Clause 23 agreed to.
Clause 24 [Co-ordination of inspections, &c.]:
On Question, Whether Clause 24 shall stand part of the Bill?
Baroness Hamwee: What is intended by Clause 24(3)? Clause 24(1) starts by mentioning,
"a person or body to whom this section applies",
that person or body having regard to certain guidance. Clause 24(2) states that "this section" applies to a number of inspectorates. This is the clause which was so usefully inserted by the Government in another place. Clause 24(3) states that the order will,
"apply to a person or body specified in the order"
I can well see that different orders may be made in connection with perhaps fire, social security administration or schools inspectorates, but I cannot see what is added by Clause 24(3). Being rather tedious, because I could not understand it, I thought I should not let the opportunity pass without asking for an explanation.
5 p.m.
Lord Whitty: There is a fairly simple explanation, in that we are listing in Clause 2 the inspectorates that already exist. It is possible that future legislation might create other inspectorates in particular areas and we would need powers for the Secretary of State to specify

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those additional inspectorates. We need that flexibility, which is why the subsection is included. It is no more complicated than that.
Baroness Hamwee: If that is the case, then perhaps it would be less opaquely dealt with by subsection (2) providing that subsection (3) lists them and such other bodies as may be included in an order. Perhaps it is rather unfair to push the Minister further at this stage.
Clause 24 agreed to.
Clause 25 [Guidance]:
[Amendments Nos.81 and 82 not moved.]
Clause 25 agreed to.
Clause 26 [Commencement]:
Baroness Hamwee Baroness Hamwee moved Amendment No.83:
Page 16, line 37, at end insert ("or may by order provide that any of those sections shall not come into force in relation to Wales")
The noble Baroness said: With this amendment, we return to the question of Wales. On Monday, my noble friend Lord Thomas of Gresford said that he came to whinge for Wales, but I did not think that it was so much of a whinge as a very proper claim for Wales, now that it has an Assembly, to be able to run its own affairs rather more than this Bill seems to anticipate. I agree with my noble friend, even though I have fallen into the trap myself, that to provide that in the case of Wales the Secretary of State should actually be read as being a reference to the National Assembly for Wales is a fairly off-hand way of dealing with Wales. I admit that I myself have talked about the Secretary of State without saying "or the National Assembly", as the case may be.
My amendment proposes that the National Assembly shall say that it does not want any of the clauses of the Bill to come into force in relation to Wales—in other words, it should run its own affairs. It occurred to me that it might be worth exploring briefly whether this might be a possibility following the example given in the Water Industry Bill with which the Minister is dealing. That sets out a new regime in Scotland but allows for the Scottish Parliament to implement it or not. This is a somewhat similar provision.
Clause 26 allows the National Assembly for Wales to advance the implementation of certain orders, so why should it not be able to defer them, even indefinitely? I beg to move.
Baroness Farrington of Ribbleton: Clause 26 has been very carefully constructed to achieve two complementary aims. It places the duty of best value on a statutory footing in line with the Government's manifesto commitment to do so. At the same time, it provides both the National Assembly for Wales and the Secretary of State in England with local discretion to commence aspects of the duty earlier than the automatic commencement dates if they feel that that is appropriate. Both our election manifesto and the local government White Papers in England and Wales made it clear that the Government intended to introduce best value and repeal CCT at the earliest
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legislative opportunity. This Bill delivers on that promise and provides for a timely introduction of the duty of best value after Royal Assent.
The Government have made it clear that in England, we intend to commence the general duty on 1st April 2000, but to help authorities to prepare it makes sense to commence provisions which allow us to issue statutory guidance and to make orders setting out what is required in conducting best value reviews and publishing best value performance bands, as well as specifying performance indicators as early as possible. Clause 26(2)and 26(3) allow the Secretary of State in England and the National Assembly in Wales the flexibility to do so. The date of commencement on the general duty in Wales is likely closely to mirror that in England but that is a matter for the Assembly to determine, or whether the automatic 12 month commencement arrangements set out in subsection 26(1) will apply.
Amendment No.83 would, however, allow for the automatic commencement provisions set out in Clause 26(1) to be overridden by the National Assembly. At this point, perhaps I should declare a personal interest as a former Labour group leader and chair of the Association of County Councils, which involved working with both the Welsh counties—as they then were—and the Welsh districts. The noble Lord, Lord Dixon-Smith, referred to the occasions when we all—some more quietly than others, as he acknowledged—opposed certain aspects of the previous government's legislative programme. From my experience, across all political parties and those authorities that were controlled by independent groups. none welcomed the introduction of compulsory competitive tendering. In a way, therefore, the noble Baroness is raising with tongue slightly in cheek the question of whether people want to keep compulsory competitive tendering. Welsh local authorities have been vigorously piloting best value and would not welcome a delay in introducing this other regime.
Clause 26 as currently drafted provides certainty to authorities about the latest date by which their legal obligations will commence. Flexibility for the Assembly in taking decisions about whether early commencement for some or all of the provisions would be appropriate, as would consistency in assuring that authorities in England and Wales move away from CCT to best value at a similar base and on similar timescales. In the light of my remarks, I hope that the noble Baroness will feel able to withdraw the amendment.
Baroness Hamwee: I thought that what I was doing applied only to the best value clauses, since Clause 20 is not within this commencement provision. I am not trying to retain the imposition of CCT on Wales for a nanosecond longer than is absolutely necessary. My Welsh colleagues may have something to say on this subject at another stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26 agreed to.
Clauses 27 and 28 agreed to.
Clause 29 [Limitation of council tax and precepts]:
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.84:
Page 17, line 23, at end insert ("until 1st April 2005")
The noble Lord said: In rising to move Amendment No.84, I should also say that I am rising to give the noble Baroness, Lady Hamwee, a moment's relief. This again is a fairly simple and straightforward amendment. One's approach to it depends on whether one is an optimist and believes that the world and that local government work well, or whether one is a pessimist or, possibly worse, a cynic. At least I have the assurance that the noble Baroness, Lady Hamwee, is an optimist because she has an amendment grouped with this one which reached the same conclusion as I have but in a different way.
The thinking which lies behind capping is what I would consider to he philosophically different, not to say almost philosophically opposed, to Part I of the Bill, which we have just completed, dealing with best value. Best value creates procedures which are designed to make local authorities—best value authorities—function better and more effectively in the interests of their council tax payers, and indeed the taxpayers generally, bearing in mind the enormous domination which central government funding has on any local authority.
They have to comply with best value because somewhere in the background to all this, I have read that there is a built-in efficiency factor. In a response to a question from my noble friend Lord Bowness about how the local authorities were to meet the administrative costs which best value might impose, the Minister said that it was assumed that any additional costs which might be imposed on local government would be met from within the efficiency factor savings, so that there would be no net increase in the cost of public expenditure.
We have a financial inducement on local government to produce better value, and in fact to become administratively and in a cost sense more effective and efficient. Then at the end of the Bill we come to this paradoxical situation where we will continue capping, and apparently, as the Government have not inserted a sunset clause, for all time.
It seems to me that it is unarguable, if you are an optimist, that if best value works and achieves what the Government expect, the need for capping will disappear. If that is so, my amendment ensures that that is what will happen. At least, that is the intention of it, but I may be told that I do not have the right wording for that intention.
The other procedures which exist within the best value regime to catch up with recalcitrant authorities would adequately control the situation into the future. This is a perfectly reasonable proposition. Of course, if you are a pessimist, or still worse a cynic, and you believe that the administrative complexity of best value will not work and that it will not be so successful, you
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might want to argue against the shut-off date. But we should be able to accept a shut-off date like this for capping, and I hope that will happen. I beg to move.
Baroness Hamwee: My amendment grouped with the noble Lord's has the same effect. We are very much opposed to capping and to tabling an amendment which acknowledges that any kind of capping will continue. We are merely acknowledging, at any rate for the purposes of debate in Committee where we shall not have any Divisions, that this is the form in which the Bill has been sent to us from another place. The year 2005 is, in our eyes, very much a lower preference than tomorrow. There is therefore likely to be quite a straightforward debate, perhaps at a later stage on whether the clause and schedule shall stand part.
The new capping powers that are being proposed have been described very much as reserve powers, but I believe I am right in saying—the Minister will correct me if I am not—that that is not actually on the facie of the Bill. They are powers which will be used exercising criteria that he will set, but because the provisions are to be slotted into the Local Government Act 1992 they are no less and no more reserve powers than crude universal capping under that regime. We welcome all moves to alleviate capping but, frankly, along with CCT, the sooner it goes the better.
Lord Hunt of Tanworth: These are clearly important amendments and I support them very strongly. I shall not repeat the arguments for them. Many people from all parties have felt that capping should go. It is probably also accepted that it would be politically and for many other reasons difficult to do it in one fell swoop, as many of us would like to have seen. However, the way the Bill is drafted does not really foreshadow the end of capping. It is capping in a different form, possibly with some relaxation, with some greater tolerance, but nevertheless a capping regime continuing.
I do not consider that the Bill can be seen as the end of a process because there are many questions such as, is it how the best value regime develops; how does it make capping unnecessary; what happens to business rates; and what powers local authorities will have over rating revenue. I do not see that a situation should be foreseen where those reserve powers should hold good for all time, so I support very strongly the amendments to put a date on them.
5.15 p.m.
Lord Whitty: I regret that we shall probably not agree on this. I am certainly not a pessimist and, as noble Lords will know, I am not a cynic, but I am rather cautious here. I understand and sympathise with the wish that these powers are not used after 2005. Indeed, I hope their use will cease, if possible, before 2005. However, 2005 is not very far off. We are engaged, in partnership with local government, in a whole range of measures to modernise local government. We hope that most of that agenda will be in place by 2005, and best value is clearly a major part of that programme.

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There is another side of the issue which relates to financial accountability, and there is yet another side which relates to modernisation of decision making. There will be some hiccups in the process of modernising local government. We could not put our hands on our hearts and say that all the financial accountability will have been achieved through best value by 2005. There is a continuing responsibility on government to represent national taxpayers as well as to protect the local taxpayers in this. Therefore we consider that we need to retain reserve powers. While we expect all local authorities to be responsible and prudent and to provide their local taxpayers with a decent service at a price they are prepared to pay, even in 2005, despite all our reforms and best intentions, there may still be one or two authorities which decide to act irresponsibly. If they do so, we intend both to protect the local taxpayers and to protect the national taxpayers' interests. These are, however, reserve powers. I can assure the noble Baroness of that. We hope that they will hardly be used, if at all. But, as of today, I cannot be as optimistic as the noble Lord in predicting that by the year 2005 all financial irresponsibility will have been removed from local councils. We cannot write in that date and leave local people open to the risk of some irresponsible council exceeding what would be a reasonable limit. I therefore ask noble Lords not to press this matter. I note the noble Baroness's remark that it may be returned to. I look forward to more detailed debate at that stage.
Lord Dixon-Smith: I have to say, sadly, that I am not grateful to the Minister for his reply. It was not wholly unexpected—I did not expect that we should be fortunate enough to receive an immediate concession based on the absolute good sense and the force with which we have argued the point.
I remember all too well how capping began. It was introduced as a reserve power for emergency use and it was remarkable how it evolved into something that was controlling virtually everybody. I must admit that I am still concerned, and I shall continue to feel concern for as long as the provision remains. This is an issue on which we shall probably have to beg to differ. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
[Amendment No.85 not moved.]
Schedule 1 [Limitation of Council Tax and Precepts]:
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.86:
Page 20, line 20, at end insert—
("( ) An authority shall not be eligible for designation or nomination unless its proposed expenditure per head of population falls within the upper quartile of per capita expenditure for that class of authority and its rate of increase in expenditure is also within the upper quartile rate of increase for that class of authority.")
The noble Lord said: The purpose of this amendment and the other amendments grouped with it is to place some limitations on capping, if capping there has to be. Amendment No.86 is designed specifically to remove
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a very large group of local authorities from the capping regime. It states that,
"An authority shall not be eligible for designation or nomination unless its proposed expenditure per head of population falls within the upper quartile of per capita expenditure for that class of authority and its rate of increase in expenditure is also within the upper quartile".
That is actually rather modest. I could perfectly reasonably have produced an argument to say that the exemption should apply to everybody in the 90 per cent below the upper decile, but I thought I would give the Minister the chance to agree with me again. I do not seem to be very successful in persuading him of the virtue of my proposals. The effect of this proposal is simply to specify those authorities that might, if the reserve power, as we shall call it, has to be used, have it applied to them.
Amendment No.87 simply flows from that. If Amendment No.86 were to succeed and be accepted, then Amendment No.87 would be necessary to make sense of the English within the Bill and it would have no greater effect than that. The provision in Amendment No.88, also in this group, is what I have now come to regard as a standard request. Amendment No.89 is rather more important. It is an attempt to have the capping criteria defined in advance and published. At present, local authorities set their budgets, the Secretary of State examines them, says he does not like this one or that one and that he therefore intends to cap them, and the orders are passed accordingly, or the procedure is entered into. If knowledge of the criteria he intended to apply were to be available to local authorities before they entered into their budget process, most of them might have some recognition of those criteria and seek to avoid capping and the administrative trouble that it causes.
I am aware of the argument that this proposal creates a pre-capping condition and that it enforces capping. Indeed, it could; but the whole idea is to give local authorities the option to decide for themselves whether they want to run into this barrier, with the administrative procedures that it implies. They would then have to make their case to the Secretary of State for a variation, if that was their choice, which might or might not succeed; or they could choose not to do so, and comply with the conditions that they know are coming. Since we know that there are reserve conditions, one must assume that they would not be set in too onerous a fashion. Amendment No.90 is tabled simply for the sake of producing consistency and Amendment No.91 is the standard after consultation with best value authorities.
This group of amendments is important. The amendments seek to ensure that, if capping is to have effect, it really does affect only those authorities that are already high spenders and those that are increasing their council tax at a rate which is among the highest for that particular group of authorities. If capping is to continue, I believe that that is not an unreasonable restriction to place on its use. I beg to move.
Lord Whitty: Amendment No.86 is understandable in terms of the objective of the noble Lord and the noble Baroness of getting rid of capping altogether. It is

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presumably, therefore, an attempt to get rid of capping for 75 per cent. all authorities. Nevertheless, I feel that the selection of the 25 per cent. as described by that amendment cannot be the correct choice even from the noble Lord's own point of view. He is effectively saying that only those authorities with a high level of spending per head of population as well as a high rate of increase in spending should be capped.
Most governments have recognised that there are inevitable and justifiable differences in levels of expenditure. Local authorities might spend more per head of population because they have a relatively high number of school children, or a relatively high number of elderly people, or people who need help from social services, or because there is a sparseness of population, or because they have a higher level of deprivation and there are a number of other reasons why services might cost more. As a result, their absolute level of expenditure and their rate of increase of expenditure might be in the upper quartile simply because numbers are increasing more than in other authorities.
We recognise that when we distribute grant and we use a formula that takes this and many other factors into account, as indeed did the previous administration and every administration I can remember. It is slightly odd, therefore, to pick out the definition of those to whom a capping regime would apply by these criteria. As I have said, it would exclude 75 per cent. but it would hit those who have the highest need and the highest level of expenditure reflecting that need. In other words, by and large the poorer areas of the country could be capped and the more well-off areas of the country could not be capped whatever the rate of increase in their council tax.
I would say in passing that, if that were the case, most, if not all, of those authorities with which the Deputy Prime Minister has had to have words this year would escape entirely any future capping regime and that would be a cumulative case in the future. In other words, while it would no doubt be an achievement from the noble Lord's point of view to exclude a significant number of authorities from capping, he would be penalising those who are least able to take that degree of penalty and allowing to escape many who may be highly profligate in areas that do not have the same level of need. For example, an authority such as Torbay, which had one of the highest increases in council tax this year, would escape from being capped while an authority like Blackburn, which had a much lower increase in council tax, would be susceptible to capping under this formula. That is probably not the intention. The intention is to get as many councils as possible out from under capping. but this is not the right approach.
I am also slightly bemused by Amendment No.89. This would, in effect, achieve the opposite of what the noble Lord intends. It would mean a degree of return to the crude, universal capping policy which he is so against. Even though some of his colleagues in the previous regime were not, I understand the consistency of view of the noble Lord on this matter. If we are to set effectively the criteria and therefore the implied level before budget setting, then we are basically returning to a crude, universal form of capping which the Government have undertaken to abolish, We want local
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authorities to take responsibility themselves for deciding the budget, not with regard to a level preset by the Government but in the light of their own spending needs and the available resources. The old system of capping, which this would bring in by the back door, meant that some authorities simply set their budget requirements at the level of the capping limit. That is not a sensible system of financial accountability and we do not want that to happen under the new regime.
We hope that the new "best value" part of this Bill and other changes we are proposing on the structure of local government and so forth will help local authorities to modernise and improve. We therefore hope that we will not have to use these reserve powers. We would not wish to reintroduce by the back door a system of universal capping.
Amendments Nos.88 and 91 deal with consultation. They seek to ensure that there is consultation between the Secretary of State and, presumably, the authorities subject to the use of reserve powers, although the draft refers to best value authorities. Not all best value authorities will be affected by this part of the Bill. It will only be the billing authorities. We agree that it is important to work closely with local government and to have a good consultative relationship with local government. The amendment as drafted will not be practical. It is important both to local authorities and to their taxpayers that if there is designation of an authority, then that authority is informed as quickly as possible and that if a local authority is to be capped under these powers, it needs to know its maximum budget requirement as soon as possible, so that it can revise its spending plans and inform its taxpayers accordingly. Any requirement to engage in any wide-ranging consultation at that stage would introduce an unacceptable delay into that process. This would not be in the interests of local authorities to impose. While I accept the general commitment to consultation which lies behind this clause, laying down such consultation during that period would not help. Neither would it help the financial accountability of the local authorities which are targeted under the capping regime, limited though they may be. I hope, therefore, that the noble Lord will see that these clauses are inappropriate and will see fit to withdraw them.
5.30 p.m.
Lord Dixon-Smith: For a moment there I hoped to achieve a wipe out because the Minister was going to accept that the upper quartile needed to spend the money and that he would accept my removal of the lower 75 per cent. —the lower three quartiles—and we would have done it and we would not need the sunset clause. That was clearly too much to hope for. I shall have to read the Minister's response with considerable care to make up my mind whether I wish to take this matter further. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos.87 to 91 not moved.]
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.92:
Page 21, line 34, at end insert ("provided that the principles for designation or nomination are the same for authorities in the same category of authority")
The noble Lord said: This amendment could have appeared in the previous group. It is another standard request and I wonder whether the Minister would consider it. I beg to move.
Baroness Farrington of Ribbleton: The Secretary of State can use his reserve powers only to designate or nominate an authority if its budget requirement is excessive. To decide whether the budget requirement is excessive, he must determine a set of principles. If he determines any categories of authorities, the set of principles used to decide whether the budget requirement is excessive must be the same for all authorities within a category. Therefore, the principles for designation or nomination are the same for all authorities, which is the position the noble Lord, Lord Dixon-Smith, seeks to achieve.
Once the Secretary of State has decided that an authority's budget requirement is excessive, he may then designate or nominate the authority. He must tell the authority what principles he has used to decide that the budget requirement is excessive. Any council he designates will have the opportunity to challenge the designated amount, and before it can be capped there must be a debate in the other place.
The Secretary of State may, however, decide not to proceed with designation after receiving information from the local authority and instead may decide to nominate the authority.
The Secretary of State is always under a duty, enforceable by the courts, to act consistently in relation to different authorities.
Amendment No.92 is therefore unnecessary, and I ask the noble Lord, Lord Dixon-Smith, to withdraw it.
Baroness Hamwee: Before the noble Lord responds, I believe that at the start of the Minister's response she referred to the Secretary of State deciding to designate. I am not sure whether the term "designate" was used because it has a particular meaning here. The Minister seems to be saying that in order for principles to be applied consistently, the Secretary of State must first categorise the authorities. It was at the start of her response. I may have misheard, but I should be glad if she could confirm, as she appeared to imply that the principles must be applied consistently and the Secretary of State does not have the ability to set his own sets of categories and then apply certain principles.
Baroness Farrington of Ribbleton: The Secretary of State must at all times act reasonably. The Secretary of State, in deciding whether to designate an authority, must have regard to other categories of authority. I shall confirm to the noble Baroness whether I am right in saying that within different categories of authorities particular circumstances may be taken into account which may apply to only some
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of the authorities within that category. However, in doing that, the Secretary of State must still remain reasonable.
If one were to consider fire authorities, the well-known old story of the Isle of Wight as a fire authority must be considered within the category of fire authorities. However, the Secretary of State could have a different determination because the Isle of Wight was unable, even though the grant formula assumed it could, to ask Hampshire to drive fire engines over the border.
The Secretary of State may determine categories of authorities, but the same set of principles must be used for all the authorities within that category. I hope that that answers the question. If there are any remaining difficulties, I shall write to the noble Baroness.
Baroness Hamwee: I am grateful for that. I did not quite catch the word "determine", which is where I stumbled in listening to the Minister's initial response, so that has clarified the matter.
Lord Dixon-Smith: I am grateful to the Minister both for her detailed explanation and for the reassurance that she placed within that explanation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No.93:
Page 22, line 51, leave out ("section 70") and insert ("sections 70 and 71")
The noble Lord said: I beg to move Amendment No.93. I shall refer to the other amendments grouped with it in the appropriate place. I can assure noble Lords that these are all technical amendments and they relate mainly to the Greater London Authority Bill which has recently been introduced into this House. In its Committee stage in another place, some amendments were made to the provision in the Bill for substitute calculations. Most of the amendments tabled here reflect those changes to the GLA Bill. There are some others which are equivalent to further amendments which the Government propose to table during the GLA Bill's passage through your Lordships' House.
The amendments include changes to ensure that references to the GLA in the Local Government Bill are accurate and take account of the special arrangements for the budget requirement and tax-setting calculations which are set out in the GLA Bill. This has also one further consequential amendment in order to ensure that the provisions for billing authorities are consistent with those for the GLA and for other major precepting authorities.
I apologise for the number of amendments, but I assure noble Lords that they are not substantive and simply ensure that this Bill and the GLA Bill are consistent in their provisions relating to the GLA and related matters. I beg to move.
On Question, amendment agreed to.
Lord Whitty Lord Whitty moved Amendments Nos.94 to 102:
Page 24, line 24, leave out ("70 to 75 of") and insert ("70, 71 and 73 to 75 of and Schedule 6 to")
Page 24, line 47, after ("Act") insert ("or for item P2")
Page 24, line 49, leave out from beginning to end of line 5 on page 25 and insert—
("(7) For the purposes of subsection (5) above the authority may treat any amount determined in the previous calculations for item P in section 44(1) above as increased by the amount of any sum which—

(a)it estimates will be payable to it for the year in respect of additional grant, and

(b)was not taken into account by it in making those calculations.

(7A) For the purposes of subsection (6) above the authority may treat any amount determined in the previous calculations

(a) item P1 in section 73(2) of the Greater London Authority Act 1999, or

(b) item P2 in section 74(4) of that Act,

as increased by the relevant portion of any new additional grant.
(7B) For the purposes of subsection (7A) above, "the relevant portion of any new additional grant" means the amount of any additional grant payable, to the authority for the year which was not taken into account by the authority in making the previous calculations, but—

(a)in the case of item P1, reduced, as may be prescribed, by such sum as tie Secretary of State considers represents the portion of the amount which relates to defraying the special item in whole or in part, and

(b)in the case of item P2, restricted, as may be prescribed, to such sum as the Secretary of State considers represents the portion of the amount which relates to defraying the special item in whole or in part;

and "special item" has the same meaning in this subsection as in sections 73 and 74 of the Greater London Authority Act 1999 (see section 74(2) of that Act).
(7C) In subsection (7B) above, "prescribed" means specified in, or determined in accordance with, either

(a)the report under section 85 of the Local Government Finance Act 1.388 relating to the amount of additional grant in question, or

(b)regulations made by the Secretary of State under section 73(3)(b) of the Greater London Authority Act 1999 (in relation to item P1) or under section 74(5)(b) of that Act (in relation to item P2),

as the Secretary of State may determine for the purposes of paragraph (a) or (b) of subsection (7B) and any particular financial year or years.")
Page 29, line 29, leave out ("section 70") and insert ("sections 70 and 71")
Page 30, leave out lines 37 to 39 and insert—
("(3) If it—

(a) has made calculations in relation to the year in accordance with sections 32 to 36 above, or

(b) has made substitute calculations in relation to the year in accordance with section 37 above,

it shall make substitute calculations in relation to the year in accordance with sections 32 to 36 above, ignoring section 32(10) above for this purpose.")
Page 31, leave out lines 17 to 21 and insert—
("(3) Where the authority is the Greater London Authority and—

(a) it has made calculations in relation to the year in accordance with sections 70 to 75 of the Greater London Authority Act 1999 and sections 47 and 48 above, or

(b) it has made substitute calculations in relation to the year in accordance with sections 70, 71 and 73 to 75 of and

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Schedule 6 to the Greater London Authority Act 1999 and sections 47 and 48 above,
it shall make substitute calculations in relation to the year in accordance with the provisions mentioned in paragraph (b) above.
(3A) Where the authority is not the Greater London Authority and it has made

(a) calculations in accordance with sections 43 to 48 above, or

(b) substitute calculations in accordance with section 49 above,

in relation to the year, it shall make substitute calculations in relation to the year in accordance with sections 43 to 48.")
Page 31, line 22, after ("calculations") insert ("required by subsection (3) or (3A)")
Page 31, line 42, after ("Act") insert ("or for item P2")
Page 31, line 44, leave out from beginning to end of line 1 on page 32 and insert—
("(9) For the purposes of subsection (7) above the authority may treat any amount determined in the previous calculations for item P in section 44(1) above as increased by the amount of any sum which—

(a) it estimates will be payable to it for the year in respect of additional grant, and

(b) was not taken into account by it in making those calculations.

(9A) For the purposes of subsection (8) above the authority may treat any amount determined in the previous calculations—

(a) for item P1 in section 73(2) of the Greater London Authority Act 1999, or

(b) for item P2 in section 74(4) of that Act,

as increased by the relevant portion of any new additional grant.
(9B) For the purposes of subsection (9A) above, "the relevant portion of any new additional grant" means the amount of any additional grant payable to the authority for the year which was not taken into account by the authority in making the previous calculations, but—

(a) in the case of item P1, reduced, as may be prescribed, by such sum as the Secretary of State considers represents the portion of the amount which relates to defraying the special item in whole or in part, and

(b) in the case of item P2, restricted, as may be prescribed, to such sum as the Secretary of State considers represents the portion of the amount which relates to defraying the special item in whole or in part;

and "special item" has the same meaning in this subsection as in sections 73 and 74 of the Greater London Authority Act 1999 (see section 74(2) of that Act).
(9C) In subsection (9B) above, "prescribed" means specified in, or determined in accordance with, either—

(a) the report under section 85 of the Local Government Finance Act 1988 relating to the amount of additional grant in question, or

(b) regulations made by the Secretary of State under section 73(3)(b) of the Greater London Authority Act 1999 (in relation to item P1) or under section 74(5)(b) of that Act (in relation to item P2),

as the Secretary of State may determine for the purposes of paragraph (a) or (b) of subsection (9B) and any particular financial year or years.")
On Question, amendments agreed to.
Schedule 1, as amended, agreed to.
Clause 30 [Major precepting authorities: further regulation]:
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.103:
Page 17, line 24, after ("applies") insert ("for the purpose of limiting the liabilities of billing authorities (including liability resulting from the limitation of council tax benefit subsidy)")
The noble Lord said: Amendment No.103 is somewhat important. Anybody reading the Bill for the first time and coming to Clause 30 might well pause—unless he was a local government finance aficionado and immediately expert in all its intricacies—to wonder exactly what Clause 30 was all about. It certainly is not explained. It comes in Part II, "Regulation of Council Tax and Precepts", and in a sense it is part of that.
Clause 30 in fact deals with the council tax benefit subsidy limitation scheme. Without going into the detail of that scheme at this stage, as I shall do so in relation to subsequent amendments, it would help the Bill enormously if the reason for the presence of this clause in the Bill were explained. The amendment simply does that. It states that the section applies,
"for the purpose of limiting the liabilities of billing authorities (including liability resulting from the limitation of council tax benefit subsidy)".
With that introduction, the rest of the clause becomes clear; but without it, it is somewhat obscure. On that basis, I beg to move.
5.45 p.m.
Baroness Farrington of Ribbleton: Amendment No.103 struck me as rather obscure, and I thank the noble Lord, Lord Dixon-Smith, for clarifying its intention to Members of the Committee. I assume that the amendment seeks to limit any liability that a major precepting authority may have to a billing authority to those abilities arising from the council tax benefit subsidy limitation scheme.
The Committee will be aware that this scheme is already in operation. Clause 30 is simply a technical provision to ensure that any major precepting authority which exceeds the guideline pays its contribution to the council tax benefit cost to its billing authority. The amendment as drafted applies to any liability of a billing authority and it is therefore doubtful whether it would have any effect. I therefore ask the noble Lord to withdraw the amendment.
Lord Dixon-Smith: I shall have to consider the Minister's reply. I agree that the purpose of this clause is to provide legal authority for precepting authorities to pay back to billing authorities deficits that might arise as a result of the billing authority not receiving subsidy from the DSS which it would have received before the limitation scheme was applied. The billing authority, which receives its subscription from the DSS, will receive back only that money which applies to its share of the deficit, while the part that is capped in relation to the major precepting authority will not come back to the authority. This Bill makes provision for that money to be paid by the major precepting authority.
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I may not have explained that very clearly but it is rather a difficult area, where the ratepayer is in effect required to provide a subsidy for what is otherwise a social security benefit. That is the reality of the position. It is in fact another cap. The DSS has an element of right on its side. It has said that if a local authority pushes up its rates in a way that it considers unreasonable, it will not pay the benefit that would otherwise be paid because that is the consequence of someone else's decision; namely that of the local authority.
It is very difficult to see how to rationalise this, but it is a completely new departure that council tax payers are being invited to support—indeed made to support—social security benefits. I tabled this amendment in an attempt to make clear the intention of this clause. I did not think that the amendment imposed any limits. I thought it was a straightforward explanation. My attempts at limitation, which I admit are likely to fail grossly, come in the next group of amendments.
Baroness Farrington of Ribbleton: I thank the noble Lord for giving way. I am sure the fault is entirely mine. I am not sure that I understand his clarification as much now as I did before he expanded it. Perhaps it would be for the benefit of the Committee if, between now and another stage of the Bill, we worked out what we are both referring to and understand, and whether the amendment would achieve what the noble Lord believes it would achieve.
Lord Dixon-Smith: It was my intention to withdraw the amendment, but I thought some explanation was needed as to why I tabled it, although the Minister has not quite understood the point I was trying to make.
Baroness Hamwee: Before the noble Lord withdraws the amendment, whatever the detail of the drafting, an attempt to provide a guide for the reader is entirely right. We regard council tax benefit limitation, as the noble Lord has said, as a matter of how welfare provision is dealt with: whether it is a matter for national support or whether it is dealt with at a local level. Many criticisms have been made of this scheme.
The point that I wish to make concerns the oddity of primary legislation dealing with what is a subsidiary issue. Anything that can help the reader to understand that this provision is required as a result of secondary legislation that has already been dealt with, is to be welcomed. I realise the matter is difficult. I congratulate the noble Lord on his valiant attempt.
Baroness Farrington of Ribbleton: If the correspondence is three-way, both the noble Lord, Lord Dixon-Smith, and I myself will benefit from the noble Baroness's knowledge.
Lord Dixon-Smith: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.104:
Page 17. line 26. at end insert—
("( ) No budge. shall he judged excessive unless the amount calculated exceeds the authority's SSA and the authority's expenditure per head is in the upper quartile for that class of authority.")
The noble Lord said: I admit straightaway that these amendments are bound to fail; this scheme is in existence and we cannot have the billing authorities in technical deficit because there is no legal authority under which precepting authorities can pay back to them the funds that have caused that deficit.
We should recognise, however, that the impact of the scheme is pernicious. Areas which are relatively poor and which have a high proportion of housing problems, low-value houses and social problems will be much harder hit by this scheme than areas which are relatively well-off. The LGA, has calculated what would happen if all authorities exceeded the threshold amount by 1 per cent in relation to their 1998–99 budget requirements.
In the worst-off authorities the average estimated percentage of their total council tax income coming from the benefit is 24 per cent. The impact on council tax of the limitation scheme—as a result of the rise which the LGA postulated at 1 per cent above the threshold—is again about 1 per cent. If, however, you make the same calculation in relation to the best authorities the increase in council tax is only 0.1 per cent. Therefore, those who can afford to have the limitation—if it applies to them—are least affected by it. That is somewhat hard and pernicious.
I do not intend to press these amendments because I admit that they are bound to be inadequate. I have put them down with the quite deliberate intent of provoking a discussion on the machinations of this particular scheme. I beg to move.
Baroness Hamwee: I am not sure that this is a contribution to the debate on the machinations of the scheme. However, the amendments give me the opportunity to ask about the drafting. Clause 30(2) states,
"Whether an amount is excessive shall be determined by reference to criteria specified and published by the Secretary of State."
New Section 52B(2) states,
"The question whether the amount so calculated is excessive must be decided in accordance with a set of principles determined by the Secretary of State."
Why is it that in one part of the Bill we talk about a set of principles and in another criteria? Is there some significance in the different phraseology?
Lord Whitty: The noble Lord, Lord Dixon-Smith, has indicated the difficulty of this matter in that there is already a scheme in place resulting from orders in the previous legislation. This amendment deals simply with the precepting side. Therefore questions which go to the basis of the scheme are difficult if not impossible to deal with in the way the noble Lord intends.
Perhaps I may record the principle behind the scheme; namely, that when there is an excessively large increase in council tax we do not believe that the national
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taxpayer should pay the costs arising from local decisions. That is the aim of the scheme. But it is the increase in council tax that matters here rather than whether the council is in a certain quartile or is budgeting above or below the SSA, or whether that expenditure per head is in the upper quartile in absolute terms. It is the rate of increase in council tax which triggers this provision and it is a fairly straightforward trigger. There is of course a limitation in that no local authority, including the poorest, can be worse hit than the average would be in the same situation.
The clause relating to the precepting authorities provides for regulation that will require major precepting authorities which exceed the guideline to make payments to the billing authorities. The noble Lord has explained this matter. It does not affect the establishment of the scheme as a whole. The regulations are relevant to billing authorities but have a knock-on consequence for precepting authorities. Councils have already taken this scheme into account in setting their council tax for 1999 to 2000. If we were to adopt the amendments of the noble Lord we would prevent some major preceptors from paying their contribution to benefit costs to the relevant billing authorities despite having picked up the contribution from their taxpayers. It will therefore result in a shortfall which would have to be met by both the preceptor and its billing authorities. And of course no billing authority would be excluded from the scheme by the amendment; it would solely affect some major preceptors. There would therefore be a somewhat perverse effect from the combination of Amendments Nos.104 and 105, which the noble Lord recognises.
The noble Baroness referred to Clause 30(2). The two schemes are separate. There is no difference in intention between the two terms, but I am advised that it is helpful to have different terms to distinguish the two schemes. If the noble Baroness requires further clarification, I will of course let her have it.
Amendment No.106 deals with consultation before setting the criteria of a scheme. On that, of course, we consulted local authorities at the same time as we consulted on the 1999–2000 local government finance settlement, and there is ongoing consultation with LGA officers to discuss the practical details of implementation. I do not see great benefit in setting out a requirement in a legal instrument in the way that Amendment No.106 would provide.
Amendment No.107 would bring forward the date at which the Secretary of State would need to make an announcement on the criteria which are to apply under the council tax benefit subsidy limitation scheme.
Provisional details of the criteria for council tax benefit subsidy limitation are announced as part of the provisional local government finance settlement at around the beginning of December. These are then subject to full consultation and a final announcement is made as part of the final settlement normally announced during February. There does not seem to be any practical reason to move away from this timetable. Most local authorities are familiar with the settlement system,

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and it provides time for any modification of criteria in the light of any changes between the provisional and final settlement.
I do not see any benefit of writing an additional consultation period into this Bill as I understand Amendment No.107 is designed to do. I can understand the frustration of the noble Lord, Lord Dixon-Smith, about the first of these amendments not being able to achieve what he intends. The other two amendments, I would suggest, are not necessary. I therefore ask the noble Lord to withdraw.
6 p.m.
Lord Dixon-Smith: I am grateful to the Minister for his explanation. I am somewhat concerned as to one aspect of it. I accept that we have a scheme which is in existence and I accept that we have to deal with the situation which that creates. Therefore I cannot complain about what there is in this Bill because it puts right a situation which requires to be put right.
One difficulty which I have is that we are dealing with a situation where the limitation applies on the rate of increase of council tax, and consistently over the years, the biggest variable in a local authority in making its budget has been the amount of money it will receive from central government. Although the council tax increase may be said to be at the initiative of the individual authority, very often it is as a result of a force majeure situation because the subscription that is received from central government has varied. Not only is that a direct monetary effect, but of course it usually has a multiplier effect when it is then applied to council tax because of the domination of local authorities' money.
The scheme will need to be administered with great care because it is not generally experienced that the moneys that local authorities receive from the centre simply go up in a straight line in relation to inflation. There are all kinds of factors which are taken into account for all kinds of very good reasons. At any one time, individual authorities are benefiting and keeping quiet, while other authorities are being squeezed and are complaining like mad. This will need to be looked at carefully, because it will be a situation where individual authorities' requirements will be paramount. The idea of getting broad principles will be quite tricky. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos.105 to 107 not moved.]
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.108:
Page 17, line 37, leave out ("authorities or")
The noble Lord said: This is a simple amendment. The clause refers to,
"authorities or categories of authorities".
I think that it should refer only to "categories of authorities" so I propose the removal of the words "authorities or".
Amendment No.109 is grouped with Amendment No.108. I believe that everything done in Part II of the Bill should be consistent with everything done in Part 1.
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I thought that should be explicit rather than implicit and that is the only reason for that amendment. I beg to move.
Baroness Farrington of Ribbleton: For the purposes of council tax benefit subsidy limitation, the Secretary of State will determine criteria to decide whether the budget requirement is excessive. When determining these criteria the Secretary of State may refer to whatever factors he sees fit.
Amendment No.108 would ensure that these factors could apply only to categories of authorities and not to different authorities.
Amendment No.109 would additionally require the Secretary of State to determine categories of authorities that were consistent with Clause 1 of this Bill, that being the section which defines best value authorities, including various types of local authorities, police authorities and fire authorities.
This year, we used the same criteria and factors for all authorities. However, a few authorities pointed out that there were particular circumstances which applied only to their individual authority and argued that these should be taken into account.
Although we did not agree that this was right for this year, it is possible that in future years there might be good reasons for differentiating an individual authority because of its particular circumstances. This flexibility is needed to ensure that the Secretary of State can act fairly. I should remind noble Lords that the Secretary of State is under a duty, enforceable by the courts, to act consistently in relation to different authorities. I therefore ask the noble Lord to withdraw Amendment No.108.
We would agree that it may also be right in future years, in the interests of fairness, to have different factors for different categories of authorities. Where that is the case, it might be necessary to have categories of authorities other than those we intend to be listed in Clause 1 of this Bill. In addition, Clause 1 includes a number of categories of authorities which will be best value authorities but not covered by the council tax benefit subsidy limitation scheme, and the read-across is not helpful.
Amendment No.109 also represents, therefore, an unnecessary restriction to flexibility. I hope the noble Lord will feel able not to press it.
Lord Dixon-Smith: I am grateful to the Minister for her explanation, which I shall study. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No.109 not moved.]
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.110:
Page 17, line 41, after ("State") insert (", after consultation with best value authorities, ")
The noble Lord said: This is a fairly standard request to include in consultation. Clause 30(4) states:
"The Secretary of State may by regulations make provision"
I seek to add the words,
"after consultation with best value authorities".
We have been seeking to include this throughout the Bill and this is yet another instance where I have made that request. There is no need to explain it again. I beg to move.
Baroness Farrington of Ribbleton: Amendment No.110 would require the Secretary of State to consult best value authorities before making the regulations requiring major precepting authorities to pay their contribution to the costs of council tax benefit to billing authorities.
As I have previously explained, the provisions in Part II do not apply to all best value authorities and I presume again that the amendment is intended to apply only to those authorities potentially subject to council tax benefit subsidy limitation and covered by Clause 30.
We have already discussed the importance of central and local government working closely together. The Government do consult or discuss issues with local authorities or their representatives whenever it is appropriate. However, as I said earlier, setting out this requirement in a legal instrument is neither helpful nor necessary. In this case it represents an unnecessary restriction. I therefore ask the noble Lord to withdraw the amendment.
Lord Dixon-Smith: Once again, I am grateful to the Minister for her explanation and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No.111:
Page 18, line 31, leave out ("60(8)") and insert ("70(8)")
The noble Lord said: Amendment No.111 is a minor, technical amendment to correct a numbering error to ensure that this Bill and the Greater London Authority Bill are consistent. The Liberal Democrat Benches may recognise that it is an amendment which their colleagues in another place put forward but which we persuaded them to withdraw at that point in case there were any other numbering changes. This is the same as the Liberal Democrat amendment and I trust that it will therefore receive universal acclaim. I beg to move.
Baroness Hamwee: I thank the Minister for taking the point on board—a small triumph!
On Question, amendment agreed to.
6.15 p.m.
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No.112:
Page 18, line 35, leave out subsection (11)
The noble Lord said: In moving Amendment No.112, I should explain that I find it slightly strange. Here we are in the middle of May debating a Bill which may come into effect some time later this year—let us not put a date on it—and subsection (11) reads:
"In its application as regards the financial year beginning with 1st April 1999 this section shall have effect".
We are now way past 1st April 1999 and I find myself wondering whether we are behaving in a normal and consistent fashion in what I can only describe as producing a bit of post facto legislation. It may be that there is a perfectly normal and rational explanation for this which is important. If there is I shall be glad to hear it. I beg to move.
Baroness Hamwee: I can see that there is a difficulty with the particular amendment because it would leave a problem with regard to who bears the cost of the new scheme in the current financial year. Having said that, the noble Lord is absolutely right to remind the Committee of—I cannot say "impropriety" because that would be putting it too high. However, it is certainly undesirable that we have passed the start of a financial year and are having to deal with regulations at the level of primary legislation after the start of that year. It would have been much more satisfactory if we had been able to deal with the whole of the council tax benefit limitation scheme before the year in which it was to start to take effect.
Lord Whitty: In response to the noble Lord. Lord Dixon-Smith, I can give a rational explanation but whether I can give a normal one may be another matter. We are in the same bind as with the previous amendment. We have a scheme that has been perfectly legitimately advanced under the existing regulations, but from which the precepting authorities would be in an anomalous situation were we not to make provision for them.
The amendment would not have the effect the noble Lord intends. It would not prevent the council tax benefit subsidy limitation scheme operating for 1999–2000 as that is provided for under Clause 30(7) rather than Clause 30(11). That scheme is already established. Local authorities, both billing authorities and major precepting authorities, have set their budgets knowing that that is established for this year and, if they have exceeded the guideline for the scheme, they are collecting their contribution to council tax benefit cost now.
The clause is required simply to ensure that major preceptors which may have exceeded the guideline should pay their contribution to their billing authorities. Amending a clause to prevent them from so doing would simply lead to a shortfall which would have to be made up next year by either or both the preceptor or the billing authorities. That would not leave us in a more rational situation; it would leave us in a less rational situation. In general, I fully accept the strictures about supposedly retrospective legislation but this is a consequence of a power that the Government already had. It is tidying up the effect of that power and making sure the cost lies where it should. I would therefore ask the noble Lord to withdraw his amendment.
Lord Dixon-Smith: I am grateful to the Minister for his explanation. The amendment only becomes irrational if it happens to succeed and, since I have no intention of pressing it, it is not irrational at all. It enabled me to make the point that this retrospection post facto

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legislation is undesirable. That is what I wish to do and it indicates yet another area of concern about this whole scheme. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 30, as amended, agreed to.
Clauses 31 to 33 agreed to.
Schedule 2 agreed to.
Remaining clauses agreed to.
Title agreed to.
Bill reported with amendments.
The Deputy Chairman of Committees (Lord Chesham): That concludes the Committee's proceedings on the Bill.
The Committee adjourned at nineteen minutes past six o'clock.