Local Government Bill

HL Deb 10 June 2003 vol 649 cc47-112GC

(Third Day)

Tuesday, 10th June 2003.

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Elton) in the Chair.]

Clause 27 [Budget calculations: report on inadequacy of controlled reserve]:

Lord Hanningfield moved Amendment No. 74:

Page 12, line 4, leave out subsection (1).

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 75 to 79.

The clause lays down in statute a requirement on a local authority to have regard to reports from its chief financial officer when making decisions on its level of reserves. We had long discussions about the level of reserves in our previous sitting. Of course a local authority should have regard to the views of its chief financial officer on such matters. That is one reason why we employ a chief financial officer. We in local government would not employ someone in that role whose advice we did not seek and respect. However, to lay that down in statute is rather strange. I cannot see how the provisions could possibly be effective or warranted in principle.

In a spirit of open-mindedness, however, we tabled the amendments, which seek to work with the Bill and clarify how the provisions will operate in practice. For example, I do not understand how Clause 27(2) will work. What does it mean for a chief financial officer to report on the likelihood of reserve being inadequate for a previous financial year? We discussed that previously. The level of reserves for a previous Financial year may have no bearing at all on the level of reserves that an authority intends to set for the forthcoming financial year. If we are to have that provision, why is it not directed directly at the levels of reserves that an authority intends to set for the forthcoming year? I beg to move.

Baroness Hanham

I support my noble friend's amendment. We had many discussions at our previous sitting about the purpose of minimum reserves; now we have the inadequacy of controlled reserves.

I pick up the point that my noble friend made about subsection (2), which states, If in relation to the previous financial year it appears to the chief finance officer that a controlled reserve is or is likely to be inadequate". We all have to look back from time to time but the proposal is to look back at a reserve that was set for a previous year; it was either adequate or not adequate. If that refers to whether its adequacy should be reflected in the forthcoming year, the Bill should say so. The amount of reserves should be set for the forthcoming year and they must be set on the basis of the budget that is being considered. It appears inexplicable to us that that will be done in relation to the previous year. I am sure that the Minister will give us a good explanation in this regard.

Lord Bassam of Brighton

Amendments Nos. 74 to 79 would transform Clause 27 into a new free-standing duty on the chief financial officer to report to an authority if the officer believed that the reserves were inadequate. I entirely accept that that is a logical consequence of the opposition that the noble Baroness and the noble Lord have expressed to Clause 26. As it stands, without Clause 26, Clause 27 is redundant. However, if Clause 26 remains in the Bill, Clause 27 has an important role to play in its unamended form. Perhaps I should spell out what that is.

Regulations made under Clause 26 would require any authority to budget for at least a minimum level of reserves. But reserves are there to be used in the appropriate circumstances. Nothing in Clause 26 stops the use of the reserves, even if that brings them below the minimum level. But the fact that the actual level has fallen below the budgeted level means that some other element in the budget must have been overspent. It is right in our submission that the authority should be informed of the reasons why that has happened, so that lessons can be learned for future years.

We all learn from events in the past; they inform what we do in the future. I remember from my time in local government ensuring that we had a proper and legal budget. We had to understand what had happened in budget movements in the previous year in planning future years' budget strategy. It seemed to me to be an important piece of budgetary intelligence that we viewed what had happened, where the overspend occurred and what areas needed action in that regard. It seems plain to us that when setting next year's budget, all authorities should in any event review progress in relation to the budget to ensure sound foundations for the coming year. Clause 27 requires a report at that time if it is foreseen that the reserves at the end of the current year will fall short of the minimum.

If Amendments Nos. 74 to 79 were accepted, Clause 27 would become a duty on the chief financial officer to report if in relation to the forthcoming year it appeared to the officer that the reserves were or were likely to be inadequate. It seems that that is intended to apply to the reserves that are to be allowed for in the forthcoming year's budget. Clearly, that duplicates part of the duty placed on the chief financial officer by Clause 25 of the Bill. It is therefore unnecessary.

With that clarification of why we regard the provision as important, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Hanningfield

I still would like more clarity from the Minister. As the arrangements currently stand, what happens at budget time is that the financial officer reports to the council if he thinks that the proposed level of reserves for the coming year is inadequate. In the previous year, if reserves are used, reports are also given to the cabinet—they used to be given to a policy or finance committee. Whether reserves are used becomes obvious as the year goes on. They cannot be used secretly and they must be spent during the year. When one gets to budget time, what happened to reserves in the previous year is always obvious.

I understand what the Minister said and that there should perhaps be a report saying what had happened, but everyone who is closely involved will know what happened during the year. Surely the more appropriate information is the level of reserves for the coming year because the rest of it is history. As things stand now, that is what happens. The extra arrangements appear to be rather redundant. That was my point. The subsection appears to impose new duties unnecessarily on what happens now.

The situation involving Hackney or Walsall, if we want to discuss failing councils, would not involve the provisions. Everyone knew what has happening—the problem involved the incompetence of the members who were taking decisions. It did not involve the fact that the figures were not transparent or that people did not know. There was not much secrecy attached to them. The decision-making procedures in those councils were inadequate and no one could agree. We were supposed to be giving local government freedoms with the legislation, but in this regard we will give more restrictions. I take the Minister's point, but this involves much unnecessary work for local government.

Baroness Hamwee

I take the Minister's point about needing to have regard to the past in order to deal with the present and future. As he said, when he led a local authority, he was able to do that without having risk provisions on the statute book. Will he explain to Members of the Committee what has changed? Perhaps current councillors do not have the quality and skills of the noble Lord. I am sure that that is the case. Will he also explain what is achieved by a clause that depends so much on the chief finance officer? A chief finance officer who is worth his salt or who does the very minimum will do such work and report to members anyway. An orange flag on every local authority's calendar saying, "Keep thinking about what the reserves are", is perfectly appropriate but that need not be imposed by central government.

Lord Smith of Leigh

Will my noble friend clarify the situation with regard to Clause 28? If an authority was carrying out the duties imposed under Clause 28, inevitably the information that appears to be required under Clause 27 would be provided as part of the ordinary budget-monitoring process.

Lord Bassam of Brighton

Let us consider a real-world example. In my authority we used to have a real problem with the home-to-school transport budget. Each year, it seemed to balloon out of control. When I was leader, it grew from about £500,000 to £1.2 million. That had a massive impact on the LEA element of the education budget and meant that there were likely to be resource shortfalls in other parts of the authority's spending. I should have found it bizarre if we had not had a report from the finance team, including the chief finance officer, on the impact of that on our whole budget.

In this regard, we are saying that we want to ensure that retrospective reporting on those matters—providing us with the lessons—is provided across authorities. That is what the clause will achieve. Of course we see that the best comes from the best. We want to ensure that such reporting is there for everyone, so that there is transparency and a view is expressed that we can understand, so that we can plan better for the future. In ensuring that we have adequate reserves for future years for councils, we must understand what happened in previous years. After all, the auditors' annual management letter does not examine simply what is there in front of them; they look at the audit history and audit trails in the authority so that members can use the best information that is provided to plan for future budgets. That is what we are trying to achieve; it is not complicated.

The noble Lord, Lord Smith, asked about Clause 28. In that regard, we are trying to ensure that authorities follow good practice, monitor their budgets and take action if necessary when problems are identified. Why are we making budget-monitoring a statutory duty? The reason is plain. The financial difficulties that have affected some authorities recently appear to have been exacerbated by delays in detecting and picking up budgetary problems. A failure to report and understand those reports led to many of those problems. Our hope is that that will be confined to very few authorities. We must ensure that good monitoring processes are in place in all local authorities. That is what the Bill seeks to achieve. We must have such good practice so that members are given the tools with which to do the job so that they can make effective budgetary decisions for future years.

Lord Smith of Leigh

The Minister misunderstood my question. I was saying that presumably any authority that is carrying out duties under Clause 28, on monitoring budgets, would pick up any changes in levels of reserves. Clause 27 is therefore in a sense redundant. I return to the Minister's old days. If one looks at where expenditure has gone, one has presumably paid for the expenditure in some way. If one has not cut other budgets, presumably it has come out of reserves. That information is made available to members as part of any sensible, proper budget-monitoring process. The question was whether Clause 27 duplicates requirements that any good authority would follow in relation to duties under Clause 28.

3.45 p.m.

Lord Bassam of Brighton

It is not a matter of repeating those matters; I think they work in compensation for each other. They work together to ensure that members have that information.

Lord Hanningfield

We will come on to Clause 28 again in a moment. At present, the CPA looks at part of the audit system, there is the auditors' management letter and rigorous processes are in place. This part of the Bill, including the level of reserve for this clause and Clause 28, is restrictive; it looks as if the Government wish to nanny local government unnecessarily instead of giving it the freedoms that the Bill is supposed to provide.

I repeat what I have said and I will carry on repeating it. Whatever party is in power, we, as a Parliament, do not want to restrict local government too narrowly. Other countries do not—indeed, my continuing campaign in life is for us to treat local government as it is treated in other countries. I am sorry to have to say all that again, but I am sure we will come back to this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 75 to 79 not moved.]

Clause 27 agreed to.

Clause 28 [Budget monitoring: general]:

On Question, Whether Clause 28 shall stand part of the Bill?

Lord Hanningfield

I shall use some of the arguments we have used on previous clauses in speaking against Clause 28 standing part of the Bill.

Clause 28 requires authorities to monitor their budget position and take action where they think the budgetary situation is deteriorating. I will repeat what has just been said—if that happens, what does the Secretary of State think people do all day in local authorities? All of us have very competent financial teams which report to the members. I assure him that a lot of these staff monitor the budgets. Does the Minister really believe that some local authorities do not monitor their budget position during the year?

I repeat what I said a while ago. I have had some involvement, through the LGA, in some authorities that have not done so well, such as Hackney. The situation has been transparent; members have known about it, but they have not taken the decisions. Officers provided the information in Hackney, but the members did not take the right decisions to rectify the position. Therefore, these provisions do something that is not necessary. If we could legislate to make competent members, that would be a different matter. In its comments on this issue, the Select Committee said that the provisions would have no real impact. I hope that this clause does not stand part of the Bill.

Baroness Hanham

I think these provisions are about teaching your grandmother to suck eggs. I found it very hard when we discussed it last time to understand why Part 2 has been included. After all, local authorities are already controlled by financial legislation, financial regulations and their members. I appreciate that some buck the trend, but normally it is well understood that they have to work within financial regulations and that the chief finance officer has a very significant and important role to play.

I am struggling with the whole of Part 2 to understand why this particular bit has been picked out. Why do we not have entirely new financial regulations going across the whole gamut of local authority responsibilities if the Government are so concerned about it? Why pick out these particular aspects which, under normal circumstances, as my noble friend said, we would expect local authorities to deal with properly?

Chief finance officers' reports have been wilfully ignored in some instances, and I guess Hackney fell into that situation. But that, surely, does not require three major clauses in a new local government Bill. The provisions have to be picked out of the Bill rather than kept together with all the other financial controls and areas that are monitored.

It is also fair to say that the Audit Commission or the district auditor comment specifically on the reserve. My recollection is that those management letters always had a comment on reserves—whether they were perceived to be adequate, too many, too few, whether they were opaque and whether they should be there in the first place. It is not as if local authorities are not advised about reserves—they are. It is a very specific part of the monitoring process.

I simply fail to see what justifies the inclusion of these clauses, given all the other aspects of financial control which it is so important that local authorities maintain and consider. I support my noble friend in not wanting Clause 28 to stand part of the Bill. It might be helpful if the Minister gave us some indication as to why the focus has fallen just here. I am sure there are many other parts of local government finance legislation and regulations that could be included in the Bill, if required or necessary. However, it would he equally sensible to leave it all out and leave everything under one piece of legislation or control.

Baroness Hamwee

I think we are agreed that a competent or even moderately good chief finance officer and even moderately diligent members will have regard to these matters. Perhaps I could frame my support for the points being made by asking two questions. First, what in the provision will, in real life. ensure that a chief finance officer does the job if he is not otherwise inclined to? Secondly, what is the sanction for not complying with the clause?

The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

The noble Lord, Lord Hanningfield, started by saying that he would repeat some of the remarks he made on the previous amendments. In part of my answer, I shall repeat part of what my noble friend said in responding to the amendments, as he quoted some parts of the Explanatory Notes on Clause 28.

I realise this is upsetting to Opposition Members, but, in all sincerity, I guarantee that these clauses would have been included in a Bill introduced by a Conservative government. I suspect that the same arguments I am about to make would have been made by Conservative Ministers. The point is that they would be in such a Bill because they are wholly justified; they are not there to waste time; and it is not because we do not trust local government.

The noble Baroness, Lady Hamwee, referred to chief finance officers and, I think, half-diligent members. Some members of local authorities are less than diligent, and this clause places a duty on members rather than officers.

All well managed authorities monitor their budgets during the year, and if problems are identified they take action. We have to have this longstop—that is all it is—because financial difficulties that have affected some authorities recently have been exacerbated by delays in picking up budgetary problems or by failures to report them to members once officers knew about them. I repeat that this is, in effect, a duty on members. Our hope is that this will be confined to a few authorities, but to be honest, these problems should not be happening anywhere.

The monitoring process is one of the most fundamental aspects of effective financial management. A duty to monitor the housing revenue account budget during the year has been a statutory requirement since 1990. This clause will impose a similar duty for the general fund budget. Our aim in this clause has been to ensure that the process is carried out, but—and this is the important point—to leave the details and decisions to be taken to the authorities. It is not being prescribed by central government or Parliament. The clause requires that reviews are made from time to time—the frequency is for the authority to decide in the light of its own circumstances and the professional advice of its officers. If a deterioration is identified, it is for the authority to decide what action to take, if any. If the deterioration is minor or has been allowed for in setting the reserves, the authority may decide to use its reserves. In other circumstances, it might decide that remedial action is necessary. Either way, it is for the authority to decide. The purpose of the clause is to ensure that the reviews are done and that they are then considered by the councillors in that authority.

The clause works by requiring an authority to review the calculation of the budget requirement that it made when deciding its call on council tax. If the review produces a higher budget requirement than when the council tax was set, this constitutes a deterioration, and the duty to consider action to deal with the situation is triggered.

The rather technical-looking subsection (2) simply ensures that any changes in income and expenditure identified in a review are not absorbed by transfers to or from the reserves. Freezing the assumptions on reserve transfers means that predicted changes in income and expenditure carry through to the overall net figure. I think this is wholly reasonable in the circumstances. It is not designed to cause onerous problems for local authorities. It is confined to only a few, but, frankly, these problems should not be happening in any authority. It does not place a burden on the authorities; it certainly puts a duty on members. If there are any half-diligent, or less than fully diligent councillors, this clause will point out to them what their responsibilities were when they were elected to office in the first place.

Baroness Hamwee

I do not think there is any difference at all between any of us about the desirability of this. However, can the Minister answer my question about the sanction for failing to comply with the duty? I ask that because I am trying to envisage how this would operate in practice.

Lord Rooker

As I have said, the clause puts a duty on members, so we are talking about an authority. As far as a sanction for non-compliance is concerned, the district auditor will determine whether the laws are being obeyed. This would be a legal requirement, but the detail of its implementation is for the authority. Ultimately, if there is a wilful refusal to operate the law and an authority says, "We will not carry out a review from time to time", the district auditor can take action and, if need be, go to the courts to seek enforcement. Indeed, the matter could be dealt with by judicial review if there is a problem.

I am sure the noble Baroness is not on the side of giving sustenance to councillors who wilfully refuse to review their general budget from time to time. They choose the time and they choose the action as well. They choose how and when the budget is reviewed and they choose the course of action to take. They will obviously seek professional advice if there is a deterioration. I cannot conceive of sanctions being required against the sort of councillors elected these days, but ultimately, the district auditor is always there as a longstop on behalf of the public.

Baroness Hamwee

Of course I do not wish to support the incompetent or the wilful refusal. However, I do not want to see any more words in the statute than are absolutely necessary. After all, there are quite a lot, year on year. Does it come down to this—that the clause gives the district auditor a trigger to do something, but nothing that the district auditor would not do without the clause? It will deal with the wilful refusers, and all that is added in technical terms is that a judicial review might require an authority to take action. Anything else would be triggered, in any event, by the mechanisms of which we have all seen examples over the years.

4 p.m.

Lord Rooker

It would be, but, to return to what I said at the start, we have had very few examples, but there could have been a failure on the part of officers to report to members about a deterioration in the budget. Because the authority has a duty to review from time to time, it catches that situation. Where for various reasons it may have been defensible at the time, the officers did not report to the councillors that there had been a deterioration in the budget, that then brought on a crisis, one exacerbated by further problems. So because normal and reasonable councillors serving on normal and reasonable councils—the vast, overwhelming majority—would operate the clause and review from time to time, in effect that impels officers to report to the members, and the duty is then on those members to take action.

Lord Hanningfield

There is one matter we have touched on, but I do not think that the Minister has referred to it at all because so often he refers to "the council". At present, under the new legislation that has introduced cabinets, the council has only one particular purpose, which is to set a budget. Only once during the year does the council itself become involved in the detail of financial management. That is the case for every council for over 85,000 residents, which embraces most councils in the country. Those 85,000-plus people have cabinets with a member responsible for finance, working closely with the financial officer. As I have said, I know how many councils operate. Most councils would produce a financial report of some kind every month, presented either by the financial officer or by the responsible cabinet member.

The council itself would not be involved to any degree because it has no powers in these matters other than to set a budget each year. I wonder whether, even in discussing this proposal, that is recognised because over the year the council has no powers itself to change the budget. Therefore, even in the way that the Minister has presented this, that fact has not been recognised; namely, how modern local government has been operating over the past two years. I am afraid that the noble Lord, Lord Bassam, is totally out of date on how councils operate today because this system was not in place in the past.

Having been involved in the way we operate over the past two years, I have noticed a tremendous change. I hope that the Minister is fully aware that local government is very different since the introduction of the cabinet. Indeed, I have just come from a cabinet meeting in Essex held this morning.

Lord Rooker

If I did not know the noble Lord better, I would say that he is starting to filibuster. We are well aware of the changes. When local government structures are changed, surely the powers of the council are delegated either to committees, to officers or to the cabinet. There are scrutiny committees and questions at council meetings. So there are plenty of opportunities. It is absolutely true to say that at one point the full council may meet to endorse the budget to set the council tax, but monitoring carries on throughout the year, whatever the structure.

Not all councils have opted for this system. Some have elected mayors with executive authority. So all those structures still take account of the fact that if there is a deterioration in the budget but the financial reporting system is in place—the clause refers to the "authority"—the authority is in fact the area to which scrutiny has been delegated, such as the finance committee, the scrutiny committee, the cabinet member or the executive mayor, as well as reporting back to the council.

The clause as drafted takes account of the changes as well as the flexibility in local government structures that we have today, but which certainly was not there either in my noble friend's day or indeed in my day, because I was never there.

Lord Hanningfield

We have addressed this whole series of clauses because we feel strongly about them. I hope that the Minister will think again before we reach the Report stage about how we might achieve some of the objectives desired by the Government without passing all these clauses covering levels of reserve as well as more complicated matters. With that, I withdraw the Motion that the clause should not stand part of the Bill.

Clause 28 agreed to.

Clause 29 [Budget monitoring: Greater London Authority]:

Baroness Hamwee

moved Amendment No. 79A: Page 13, line 21, after "situation" insert "and the Mayor of London shall report the deterioration to the Chair of the London Assembly

The noble Baroness said: I have already declared my interests to the Committee, including my role as chair of the London Assembly. This is a probing amendment which seeks to understand whether, under Clause 29(3), there is a difference of approach as between the four functional bodies—that is, Transport for London, the Metropolitan Police Authority, the London Fire and Emergency Planning Authority and the London Development Agency—on the one hand and the Greater London Authority, which we have become accustomed to referring to as the "core GLA", on the other. I assume that, in referring to a body, Clause 29(3) includes the core GLA, because otherwise nothing would be left to be the subject of subsection (3)(a).

In the case of a deterioration of a functional body. Clause 29(3)(b) requires that to be reported to the Mayor and, unusually, to the Chair of the Assembly. I am not sure whether any similar provision is included elsewhere in legislation covering the Chair himself or herself.

The Chair would not know automatically about a deterioration in the position as regards the core GLA. As it happens, through a budget committee, the Assembly monitors the spending of the GLA, although inevitably that is by nature somewhat retrospective. But it is the Mayor's budget and it is his operation of it, as are the budgets of the functional bodies.

I have moved the amendment largely to determine whether there is a difference in approach and, as a sub-text, to suggest that if one seeks transparency and reporting in the public domain, then a provision such as reporting to the Chair of the Assembly would be helpful to ensure that it actually takes place and the Mayor does put matters into the public domain. I beg to move.

Lord Rooker

I confess that I had some difficulty understanding the amendment, given how the clause has been drafted. Then again, I do not fully understand the workings of the Greater London Authority or, indeed, the internal politics of the authority. I suspect that the amendment might have more to do with that than with the drafting of the legislation, for reasons that I shall explain.

Clause 29 places a duty on the Greater London Authority and its functional bodies to monitor their budgets and to consider what action to take if a deterioration is identified. Amendment No. 79A introduces a new duty into Clause 29 requiring the Mayor of London to report to the Chair of the London Assembly if the deterioration is identified in the budget of one of the Greater London bodies.

The amendment is completely unnecessary. If one of the functional bodies identifies a deterioration, the clause already places a duty on the body to report to the Mayor and to the Chair of the Assembly. If it were a deterioration in the Greater London Authority's own budget, current practice would ensure that it was made known to the Assembly, and the Assembly has sufficient powers to obtain information if there were any resistance.

Clause 29 was drafted in its present form taking into account a joint response received on the draft Bill agreed by both the Mayor and the Assembly, of which I understand the noble Baroness is a member. The reporting duty proposed in Amendment No. 79A was not requested in that response. I hope, therefore, in the light of this clarification, that the noble Baroness will not pursue her amendment.

Baroness Hamwee

I am not much clearer about this point, but I am not sure that we would be able to pursue this matter productively this afternoon. The Minister has said that the Assembly has "sufficient powers". Certainly it has powers to call the Mayor and officers before it to answer questions—of that there is no doubt—but if the Assembly does not know that an issue has been identified then it will not be prompted to call for those questions to be answered.

This is not a matter of internal politics. It is always difficult to convince others that sometimes one simply wants the Authority, as a new piece of government, to work well and to be seen to be proper and transparent. I want to make it clear that this is not a Liberal Democrat attack on the current Mayor. There are other things over which we could attack the Mayor, but this is not a part of that, nor indeed is it an attack on the professionalism of the current officers.

I am still a little lost, but perhaps the precise powers that would achieve what I am seeking is something that we could discuss outside the Committee. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 agreed to.

Clause 30 agreed to.

Clause 31 [Power to pay grant]:

Baroness Hanham moved Amendment No. 80: Page 14, line 25, leave out subsection (1). The noble Baroness said: We move on from the Greater London Authority, although I can hardly forbear to comment that the Mayor has just sacked his Deputy Mayor, so goodness knows what he gets up to as regards the Chair of the Assembly.

Baroness Hamwee

I beg your pardon?

Baroness Hanham

I am not telling noble Lords what is going on because I am not seeking any political purpose here.

Baroness Hamwee

The temptation is too great. Three years ago the Mayor of London offered the post of Deputy Mayor to a member of each of the political parties in turn. One party had the offer withdrawn almost immediately and I am sure that the noble Baroness will work out which one that was. Another party, my party, refused the offer before the Mayor could withdraw it. So I can say to the noble Baroness, Lady Hanham, that he does not get up to anything with me.

Baroness Hanham

Today's news is that he has sacked his Deputy Mayor. I mentioned it only because I thought that the noble Baroness would like to know.

I shall move on to Amendment No. 80. The purpose of this amendment is to put questions about the grant and grant powers under Chapter 1 of the expenditure grant. It seeks to probe exactly what are the circumstances under which these powers would be used.

The Explanatory Notes suggest that the expenditure grant is a power that is very wide-ranging, one that would enable any Minister to make a grant to any local authority of either capital or revenue. The notes also suggest that it is a power which, in the future, would largely eliminate the use of specific grants. I am aware that specific grants have been widely criticised by local authorities as their use has increased over the years. Today they make up a significant percentage of a local authority's total grant.

Currently such grants amount to around 15 per cent of the total local government finance settlement. However, in general they have been given to all local authorities for specific purposes and only in the most limited circumstances have they been made available to only a small number of authorities.

It is true that local authorities have long resented specific grants, believing that hypothecation is a contradiction in terms to a block grant. Therefore I cannot understand why, when this matter was discussed in another place, the Minister said that these powers would be welcomed by local government.

I could just about have understood if the power had been limited to enabling the Minister to pay out grant to, for example, an area hit by a natural disaster—replacing, say, the troubled and complicated Bellwin formula. But the Explanatory Notes make it very clear that that is not the case. Grants under public service agreements are, apparently, in the frame. as are those to a particular class of authority. We are presumably back to our "excellent" and "good" categories under the comprehensive performance assessment—or, more worryingly, would the grants be made to support the poor and the weak?

However, current legislation enables Ministers in the Office of the Deputy Prime Minister to make such limited grants in any event. So what is to be included under the clause? Why is it needed? Why is it so widely framed? Any opposition party must be highly suspicious of any legislation that may allow Ministers to do anything they want, when they want. Does the Minister want me to give way?

Lord Rooker

When you have finished your sentence.

Baroness Hanham

I have another paragraph.

4.15 p.m.

Lord Rooker

The noble Baroness referred to existing powers. If she could tell me to which section of which Act she is referring, I can check whether that is the one to which I shall refer or some other provision. That is important in discussing the issue raised by the amendment.

Baroness Hanham

Any Minister already has power to provide specific grants under normal legislation. That is my point: there are already powers in legislation for specific grants, however they are identified.

I was about to make one of the party political points on which the Minister is so keen, and on which I seldom get a chance to shoot back. To repeat: any opposition party must be highly suspicious of any legislation that may allow Ministers to do anything they want, when they want, and which leaves open the possibility of grants being given to favoured councils for undefined purposes. Of course, it is not just ODPM Ministers who will be able to dish out those grants, but any Minister—a matter to be dealt with under further amendments.

Further enlightening words in the Explanatory Notes point out that Treasury approval will be needed for any grant under that heading. In what areas under whose responsibility are applications expected to be made to that august and all-encompassing department? It would help our understanding of the situation if the Minister would explain in detail what is expected under the clause—what it is anticipated to cover—and why those grants currently made as specific grants in the local government finance settlement cannot just be paid as part of the block grant, which is precisely what local government would like, rather than ring-fenced, as they are at present.

My surmise is that the Local Government Association thought that it was welcoming a limited power to pay grants to local authorities for a small number of tightly defined purposes requiring urgent investment, not a sweeping power encompassing about 15 per cent of its total finance. I look forward to hearing the Minister's explanation. I beg to move.

Baroness Hamwee

I have tabled a later probing amendment. I was going to ask then, but perhaps it is appropriate to ask now, whether the Minister can confirm that Sections 88A and 88B of the Local Government Act 1988—

Lord Rooker

No, I am sorry; I thank the noble Baroness for giving way, but she can help me. All these amendments were originally grouped as one block. They have all been degrouped. I did not degroup them. I intend to answer each amendment in order. I shall not make a repeated compendium speech, because I could end up making the same speech on each amendment. I am more than happy to answer the questions, but, with respect, it is not on for the noble Baroness to regroup the amendments while she is on her feet.

Baroness Hamwee

I am not regrouping; I am asking a question pertinent to the point made by the noble Baroness, Lady Hanham. Can the Minister confirm that Sections 88A and 88B of the Local Government Finance Act 1988 will not be repealed? I ask that because that is pertinent to the question of the Baroness about the clause's purpose. As I understand it, those sections, which contain the grant-making provisions, introduced in 1992, will remain on the statute book. That was the sole purpose of my asking the question; I am not trying to speak to my later amendment.

Lord Rooker

Perhaps I may speak first to the lead amendment, Amendment No. 80—except that there is no group because Amendment No. 80 now stands on its own. I fully understand why the noble Baroness, Lady Hanham, asked her questions, because under the clause as drafted, subsection (1) could give rise to her thinking that we are up to naughty deeds. We are not.

The new grant-making power in Clause 31 is intended to allow Ministers or the National Assembly to pay grants without imposing undue restrictions on authorities on how they achieve desired outcomes, and so help to ensure that we keep ring-fencing to the absolute minimum necessary. In other words, it is part of the package of trying to reduce ring-fencing. I shall explain why.

Amendment No. 80 would remove Clause 31(1), which gives a Minister of the Crown power to pay a grant to a local authority towards expenditure incurred or to be incurred by it. The amendment would therefore negate the intention of the whole of Clause 31 and its dependent Clauses 32 to 35. We would have to continue using the cumbersome special grant power under Section 88B of the Local Government Finance Act 1988 to make unfenced grants.

That in itself encourages the use by some departments of their power to make ring-fenced grants and tends to lead to grant regimes that impose restrictive conditions on local authorities' expenditure decisions. The new power in Clause 31 will make it much easier to give grants that are not ring-fenced. Amendment No. 80 would therefore make it difficult to reduce ring-fencing and to free local authorities from restrictive conditions on grants. The clause provides an important element of the Government's desire to free councils to manage their own business, in line with our principles of public sector reform. We want councils to be responsible for their decisions.

In other words, freeing up the position as set out in Clause 31(1) avoids us having to fall back on Section 88B of the Local Government Finance Act 1988 to make unfenced grants. However, because that procedure is cumbersome, and because the centralist tendency is always there, some government departments tend to use their powers to stick in ring-fenced grants, with all their rules laid down about what local authorities can and cannot do.

The purpose of the Bill is to give freedom and flexibility to local authorities, so we do not want departments to fall back on their powers to introduce ring-fenced grants under the carpet or through the back door, simply because they do not want to use the Local Government Finance Act 1988—which, without Clause 31(1), would be the only other route. So the provision is not a means for Ministers to spend on a whim—obviously, Treasury approval will be required and Ministers cannot spend on a whim in any event, as the noble Baroness well knows. It is designed to pass the grant money over with the minimum possible conditions—indeed, on some occasions, with no conditions—but for a general purpose. It will be up to the local authority what to do with the money.

Given that we have a host of amendments with which I propose to deal in turn as they are moved, I shall briefly set out the general purpose of Clause 31 before we start to discuss the amendments. That may be useful.

Clause 31 provides a new wide-ranging power for Ministers to make expenditure grants to local authorities. It will create greater flexibility in delivering capital or revenue support to authorities and allow government departments to pay grants without imposing undue restrictions on authorities—as I mentioned.

At present, the only general grant-making power is the "special grant" power under Section 88B of the Local Government Finance Act 1988, which was, I remind the Committee, the poll tax Act. That was substituted by Section 104 of and Paragraph 18 of Schedule 10 to the Local Government Finance Act 1992. Exercise of that power requires not only Treasury consent but the laying of a report before Parliament for debate in Standing Committee. Once approved, a report cannot be amended and any changes required later can be achieved only by laying a new report before Parliament.

The procedure tends to lead to grant regimes that impose restrictive conditions on local authorities' expenditure decisions. It encourages the use by some departments of their own powers to make ring-fenced grants. We want to avoid that. The new power will make it much easier to give grants that are not ring-fenced.

However, we do not propose to repeal the special grant power, which will remain available for any cases in which it is appropriate to seek Parliament's approval for the award of a grant. We shall also continue to pay revenue support grant under existing powers, thereby preserving Parliament's right to oversee the awards.

As Clauses 31(3) and (4) make clear, conditions may be attached to the grant, which could include expenditure conditions, but there is no need to attach any conditions at all—subject to the circumstances. The structure of the provision is designed to ensure that conditions are attached only as a result of clear policy decisions, rather than arising through default, as is typically the case when departments use their own powers to make ring-fenced grants.

Clause 31(5) requires that, in England, the Treasury's consent will be needed to the exercise of the power. That will be an important safeguard against the imposition of spending conditions unless they are genuinely necessary and beneficial. That will stop Ministers taking that route to ring-fencing. In the short time for which I have been in the ODPM, I have felt a bit of frustration about grants paid.

A good example is the planning delivery grant, which we announced in December. It is not ring-fenced over the three years. It will be paid on the basis of better performance of the planning regimes, but, when the money goes to the authority, the authority can do what it wants with it—planning or anything else. The test of paying the money is an improvement in planning performance, but the money is not ring-fenced. So when the money arrives at the local authority treasurer, the local authority can do what it wants with it. We have tried to step back: to encourage improved performance in that function and to pay the money; but not be prescriptive about how it is spent.

Of course, the presumption is that the authority will already have spent more money to improve its performance to achieve the extra planning delivery grant, but when it receives the grant, it is not ring-fenced. So that is one example of a different kind of flexible regime under which money is paid to local authorities.

I hope that that helps to set the scene for the clause. I shall be happy to respond in detail to the amendments as they have now been grouped.

Baroness Hanham

I thank the Minister for that reply, which was clear but left me almost as confused by its clarity as I was when we started. I now do not understand the need for the power. One problem about specific grants has been precisely what the Minister identified: local authorities have been highly restricted in their use of them. I well remember the mental health grant, for example, under which one was confined as to what could be done. Ultimately, it was absorbed into the local government finance settlement, after it had run its course.

If specific grants are not really part of the Government's thinking, I do not understand why the power is required at all. Ministers could include whatever they want as part and parcel of the local government finance settlement and the money that local authorities receive. If grant is to be allowed to be used for any purpose at all, I do not understand why the power is necessary. If it is only to control Ministers, it may just have some benefit, but I suspect that they are not its prime target.

I understand that there are times when there are urgent, emergency reasons—natural disasters or something else catastrophic—that would normally fall under the Bellwin formula. But, as far as I understand it, the Bellwin formula will still apply. So that is not what this is about. It is about additional money that is being given to some local authorities to be used for any purpose, irrespective of why it is provided and by which Minister. I still find that extremely strange. The fact that this matter will not even come before Parliament before the grants are agreed makes the whole thing even more disturbing.

Unless I have completely misunderstood—not wilfully—the Minister's remarks, it seems to me that this grant-making power is not necessary, because of the wide way in which the Government are now looking at money to be given to local authorities, in what would truly be a block grant. It would be welcome were the Minister to tell me that we are returning to a true block grant, enabling local authorities to use it for whatever purpose, in whatever way and in whatever proportion they believe to be right. If that were correct, we should perhaps be getting somewhere. But in that case this power would be unnecessary. I remain very sceptical, and quite confused, about the benefits of this power, particularly when it is so wide-ranging.

4.30 p.m.

Lord Rooker

I want to be able to guarantee—but I can never guarantee anything—that by the time we discuss Amendment No. 95, the final amendment on Clause 31, everything will be clear. As we give a reasonable explanation in response to each of the Opposition amendments, the picture will form as to how Clause 31 operates. It is difficult. Were the amendments grouped together I could read out all the notes, but they have been split up and we should do better to deal with them separately.

Perhaps I may give an example, which I hope will be helpful, of the use of' other powers. Section 93 of the Local Government Act 2000 is used to make various health grants to local authorities. But grants made under the power must, according to the legislation, be spent on health and social services. Those grants are therefore inherently ring-fenced. The new power under Clause 31 will avoid this. It will in effect replace mainstream funding.

We are trying to move back from ring-fencing. We are not giving local authorities money to do anything that they want. The functions of local authorities are prescribed by Parliament anyway—some are statutory, some are non-statutory. But we want to reduce the amount of ring-fencing. It ties local authorities. They can have several streams of ring-fenced money, some of which are fully used, some of which are under-used. There is no possibility of vying between the two. Ring-fencing curtails and restricts the freedoms and flexibility of local government, and that is what the Bill is designed to open up and avoid. It is part of the process of trusting local government.

Lord Hanningfield

Would this be the beginning of the end of ring-fencing? I refer, for example, to the Bill dealing with bed-blocking. If local authorities are able to be fined for bed-blocking, will the Secretary of State for Health give local authorities some money in the first instance specifically to help with the problem? Would that kind of ring-fencing cease under this clause? Is it intended that money should go to local authorities and that they might then use it for different purposes?

Lord Rooker

First, I cannot talk about what is happening at present: the powers will come into operation only when the Bill is enacted. On the other hand, the example that I have given—the planning delivery grant—requires parliamentary approval. It is a good example of where we wanted to see improvements in the performance of local authorities. The question of bed-blocking is slightly different: on the one hand, NHS beds are being blocked, but on the other hand there are the social services, so one is vying between the two. I shall take advice, but it may well be the case that in such circumstances the Secretary of State could pay the grant to the local authorities with a view to solving the bed-blocking problem, and do it under this power. But the local authority would have to perform. There would have to be a measure of the outcome; namely, whether it had solved the bed-blocking problem. However, the number of beds or pillows that are ordered, the number of bureaucrats who are put on the job, which ambulances and which particular buildings are used are all restrictions in terms of the ring-fenced grant. Incidentally, none of the grant can be used outside the direct limits that we have given. That could come under the terms of the Bill and make the system far easier to use and, at the end of day, much more effective.

Baroness Hanham

I thank the Minister for that explanation. I am breathless to see whether, by the time we reach Amendment No. 95, we shall have solved the problem. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 81: Page 14, line 25, leave out "A Minister of the Crown" and insert "The Secretary of State

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 87. The Minister indicates that he was expecting me to do so and that it will not cause confusion in terms of his briefing.

The purpose of the amendment is to probe why such a wide-ranging power should be given to any number of Ministers of the Crown. We have discussed to some extent the fact that grants will come from various departments, and that may be the explanation. But we also want to ascertain which departments are to be included and why such grants should be subject to the Treasury and not also to the Secretary of State who has responsibility for the particular area.

In reply to the previous amendment, the Minister gave some examples but was not specific about the departments that are likely to be involved. The amendment gives him another chance to be so, and a further chance to explain clearly and specifically before we reach Amendment No. 95 what the intention is. I beg to move.

Lord Rooker

There is a simple, short explanation. Amendment No. 81 would mean that only a department that had a Secretary of State could use the new grant-making power in Clause 31. This would mean that any department that did not have a Secretary of State but had a Minister would not be able to use the power. The Lord Chancellor's Department would fall into this category.

Prior to the change in May last year, when MAFF became DEFRA, MAFF did not have a Secretary of State; it was a Whitehall department with a Minister but no Secretary of State. Therefore, in those circumstances the power could not have been used. DEFRA does have a Secretary of State.

Amendment No. 87 would restrict the determination of the amount and the manner of payment of a grant under Section 31(1) to a Secretary of State. Again, it would mean that this power was unusable by, for example, at the present time, the Lord Chancellor's Department. That is the reason, and that is the answer to the amendment.

Baroness Hanham

I thank the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham

moved Amendment No. 82: Page 14. line 26, leave out "incurred or

The noble Baroness said: The purpose of the amendment is to remove the provision allowing for grant to be made to a local authority for expenditure incurred by it in the past. This power would presently allow a government to make payment retrospectively—potentially to bail out an authority which had incurred expenditure for which it might or might not have had government authorisation or had got itself into trouble. This is potentially a kind of National Enterprise Board for the 21st century, except that it would be bailing out failed councils rather than failed companies.

Such exceptional central powers should not be retrospective. Retrospective power is a dangerous thing. It is not normally favoured in our law and it puts pressure on Ministers to intervene where otherwise they might not. We have now established that the Minister intervening would not necessarily be the Secretary of State.

The wide-ranging powers in this clause, if they are to be used at all, should be used only on the basis of the most scrupulous and objective conditions. Ideally, they should be subject to proper forward planning as any other use of taxpayers' money. So, I put my questions again: how exactly is it planned to use the retrospective power, or how does the Minister see it being used, and how retrospective can it be? Could a grant be made under the clause for some pet project—I have noted the example of Brighton Council; I cannot think why. On the face of it, it could be. There has to be some cut-off, limit or control.

I will move from the example of Brighton to that of Haringey council. It cannot be right that a Minister can say: "Haringey has got itself into a mess by overspending on a particular project. Let's give it a grant to get it out of trouble", without proper scrutiny of the situation. This provision potentially leaves a Minister or the Government open to charges of partiality or bias. Furthermore, it is not a proper use of taxpayers' money. The powers in this clause, if they are used at all, should be forward-looking, open and planned. I beg to move.

Lord Hanningfield

Perhaps I may add to my noble friend's point. I accept what the Minister has said; namely, that this provision will do away with the problem of ring-fencing and enable money to be given to local authorities in a wider way. But that does not apply to expenditure that has already been incurred. Therefore, this seems to be a different point from the one that the Minister has explained as regards why the Government want this power.

Lord Rooker

That is the reason that I shall give the answer that I am going to give.

I do not want to be ungallant, but it is a long time since I heard anyone mention the National Enterprise Board, so the noble Baroness is showing her age!

Baroness Hanham

I do it all the time!

Lord Rooker: Amendment No. 82 would mean that the new grant-making power in Clause 31 could be used only to make grants to a local authority towards expenditure,

"to be incurred by it",

not towards expenditure "already incurred". This would therefore preclude reimbursement grants, where a local authority incurs some cost and the Government subsequently pay to the authority some or all of the expenditure incurred. An example would be where the Government want to compensate authorities, say, for the extra costs of looking after asylum seekers, where, because of their peripatetic nature, it is not possible accurately to predict future expenditure need. Amendment No. 82 would mean that we should need to continue to pay reimbursement grants through Section 88B of the Local Government Finance Act 1988 or some other specific power, where available, which tends to cause delays in the payment of the grant to the affected authority and limits the flexibility with which the grant might be used.

That is the simple explanation. I repeat that the grants will not be paid without Treasury approval, and, as we shall see in relation to Clause 32, authorities are required to provide information to Ministers before such grants are made. So this is not a matter of doling out money on pet projects. I am not going to be wound up by this constant sniping of a crude political fashion. Labour Ministers do not fund "pet projects". I hope that Tory Ministers did not do so. That would be outwith the conduct of public life in this country. We did not do it previously, and we are not going to do it now.

Baroness Hanham

I thank the Minister. I am rather enjoying these amendments. They provide me with the first opportunity in a long time to have a dig at the Minister and for him to have a dig at me!

The more the Minister talks and the more the explanations come, the less I understand why Section 88B of the Local Government Finance Act is not being amended under this legislation. What is happening now is that there will be almost contradictory legislative powers running in parallel.

The Minister's comments on grants in relation to asylum seekers relate to what I had understood the subsection to be; namely, a permissive power for the Minister to help in a specific situation. No one could have initially foreseen what would happen in relation to asylum seekers. Local authorities were faced with a very serious situation and great financial outlay. In such a situation the provision would he perfectly proper and I would not have sought such an amendment. This is not just about that. We are talking about specific grants in totality. Therefore, it is such a wide power that it should fall under Section 88B of the Local Government Act 1988; and within the ordinary finance settlement. There would be exceptions, such as asylum seekers or natural disasters—I almost put those in the same category and in the same breath. I would then understand the power. But we are beyond that. The reimbursement powers, as described by the Minister, in this very wide power to get rid of specific grants, seem too wide for the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Baroness Hanham moved Amendment No. 83:

Page 14, line 26, at end insert "provided that the grant is available to all other local authorities of the same category on the same terms and those terms have been publicly certified as equitable by the accounting officer of the Department and that all documents and correspondence relating to decisions on such grant are made available annually to the Comptroller and Auditor General"

The noble Baroness said: The purpose of the amendment is to ensure that any grants are made on objectively published criteria; that they are certified by the department's permanent secretary; and that they are subject to the fullest possible scrutiny. That would become an onerous burden in the light of the wide-ranging powers that the Minister described. However, where there is scope for selective grants to individual authorities, it must be right to ensure that there is no question of the powers being used selectively.

The amendment would prevent the Government writing special rules for an individual authority. I hear what the Minister says about governments not abusing these powers. But under them there will be times when an individual authority can be given money. So the amendment would prevent the Government writing the special rules which the Explanatory Notes that say they may want to do. They might want to give some special grants.

We return to how to ensure that there is fair play on the special grants and that the sweeping power would be double-locked, so that it could be seen to be fair. I do not see why the Government should object to that, which would safeguard Ministers against any accusation of unfairness. I beg to move.

Lord Rooker

As the noble Baroness said, Amendment No. 83 aims to ensure that grants made under the new power in Clause 31 are available on the same terms to all authorities of the same category. The department's accounting officer has publicly certified those terms. However, the amendment would limit the use of the powers in Clause 31. It would be odd indeed were the Government, having determined the eligibility conditions for a grant, then not to use those conditions in distributing the grant. If there is a set of conditions for a grant to be distributed to authorities, we would be daft not to use them.

There may be circumstances in which a grant would appropriately be made to one particular authority. I understand—I do not know the background to this; I am just asking about it—that Section 88B of the Local Government Finance Act 1998, about which the noble Baroness obvioulsy knows a great deal more than I do, so if I am not careful I shall get my legs chopped off. has been used in that way in the past.

Parliament agreed that an additional grant should be provided to the London Borough of Hackney to aid the authority's revenues. That was an exceptional case, which met the Government's criteria for giving additional financial support as set out in the local government White Paper. Without the £25 million Hackney could not have agreed a balanced budget for 2002–03 and would have been unable to start building future financial stability. Although it would be appropriate for a grant to be made in such extreme circumstances through the existing special grant power in Section 88B of the 1988 Act, there may be less extreme cases in which it would be appropriate to use Clause 31 to make a grant to one authority only. The amendment would preclude that.

So I must say that I stand here naked in knowing nothing about Hackney—the past, the present or what is expected in the future, or how the money was paid. I presume that it was ring-fenced, in the sense that the authority had obviously got itself into a mess and the money was to get itself out of it. I presume that it was not given without strings. Furthermore, it is quite clear that the process used was one that Parliament approved as a one-off payment. That is the example that I cite, although I do not have the background. But that was a wholly exceptional case.

We want to retain the flexibility of the clause, in case there is a need to use it, instead of using the Section 88B powers, in which of course Parliament would be involved. That is the point. The point is not to circumvent Parliament, but there could be occasions when one authority, because of whatever special circumstances have arisen, would receive a one-off grant in circumstances that would be known to everyone. The grants would not be paid in secret. Information, as I have said, would have to be provided to Ministers before the grants were paid.

Baroness Hanham

I thank the Minister for his reply. I think what he said was that in the event of something being quite specific and quite unusual, the process involve what I have actually asked him to provide: it would ensure that there was proper support and agreement for it. We shall not go further into Hackney. It involved a specific situation—none of its services were working well. I think that anyone would agree that that was quite a different case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 84: Page 14, line 27, leave out subsection (2).

The noble Baroness said: We reach the point about whether Parliament is or is not included in the new grant regime. The purpose of the amendments is to test the reasons why the Secretary of State want such wide-ranging discretionary powers, and, if he does, to subject the use of those powers to control by affirmative resolution of Parliament.

It cannot be right that selective, discretionary powers of that kind should be exercised by Ministers alone. If included in primary legislation, grants to specific authorities but not others would be hybrid, requiring the very highest level of parliamentary scrutiny. Such potentially discriminatory powers should not be exercisable at the Secretary of State's pleasure. All rules surrounding them should be open to parliamentary control and that control should be achieved by affirmative resolution.

We return to where we started when we suggested that there are two forms of grants. There are specific grants, which any department may give and which would be included as a specific grant in the Local Government Finance Act 1988; and there are grants which may be given on a discretionary basis for a particular reason. If the grant is given as part of the Local Government Finance Act, it will be under Section 88B. That would be understandable because it would probably be well described within that block grant power. Where the powers are discretionary and open to selectivity, it would be proper for them to be implemented by affirmative resolution. I beg to move.

The Deputy Chairman of Committees (Lord Elton)

I must tell the Committee that if this amendment were to be agreed to, I should be unable to call Amendments Nos. 85 to 87 by reason of pre-emption.

Lord Bassam of Brighton

I apologise in advance that I shall take some time to work through the amendments, but I will try to give the noble Baroness a full response.

The new grant-making power in Clause 31 is intended to allow Ministers or the National Assembly to pay grants without imposing undue restrictions, in line with our freedoms and flexibilities approach, to authorities as they achieve desired outcomes, and so help to ensure that we keep ring-fencing to a minimum. For that reason, the LGA is very supportive.

The amendments would defeat one of the main aims of the provision, which is to offer an alternative, so that departments are able to make non-ring-fenced grants available to local government. Amendments Nos. 86, 89 and 91 would require a procedure that is even more cumbersome than the present special grant procedure, which requires the grant to be approved only by the House of Commons. That would be needed for every grant, including small or uncontroversial grants, or those being repeated from previous years.

Amendment No. 86 would mean that the amount and manner of payment of a grant made under Clause 31 would have to be considered and approved by both Houses of Parliament. Therefore, it would defeat one of the main aims of the new power, which is to make it easier to make grants without conditions.

Amendment No. 89 would mean that any conditions on a grant made under Clause 31 would need to be set out in an order and approved by both Houses of Parliament. I have sympathy with the evident aim of the amendment, which is to make it more difficult to place controls on a grant which would make it ring-fenced. But the Government have put in place separate machinery—a gateway process—to ensure that there will be no new ring-fenced grants that do not meet a set of criteria set out in the local government White Paper, Strong Local Leadership—Quality Public Services. Where a conditional grant is made, that will be as a result of clear policy decisions.

Amendment No. 91 would mean that both Houses of Parliament would need to approve the terms of any grants made using the powers in Clause 31. Amendments Nos. 91, 89 and 86 will make it more likely that departments will continue to use their own specific grant-making provisions, which may include more restrictions than are necessary.

In a previous discussion on Clause 31 in another place, some Members were concerned that that power will mean that Parliament would no longer be able to consider grants to local authorities. In England, parliamentary approval will still be needed in the ambit of each department's request for resources. Parliamentary approval will still be sought for the local government finance settlement each year, which provides the majority of funding to local government. In addition, the special grant power will remain available for any cases where it is appropriate to seek Parliament's approval for the award of a grant.

In England, where the new power is used to make grants, the 'Treasury's consent will be needed, which is an important safeguard against the imposition of spending conditions unless they are genuinely necessary and beneficial.

Amendment No. 88 relates to Clause 31(3). It states that a grant made, under this section may be paid on such conditions as the Minister…may determine". The amendment, which deletes the word "such", would seem to make no change to the meaning of the clause but simply make it ungrammatical.

Amendment No. 84 would remove Clause 31(2), which gives a Minister of the Crown the power to determine the amount of a grant made under Clause 31(1) and the manner of its payment. The amendment would make the power unusable because a Minister could make a grant but could not determine its amount or how it is paid. The amendment would therefore negate the purpose of Clause 31. We would have to continue using the cumbersome special grant power under Section 88B of the Local Government Finance Act 1988 to make non-ring-fenced grants. As with the other amendments, that would encourage the use by some departments of their own powers to make such grants. That tends to lead to grant regimes which impose restrictive conditions on local authorities' expenditure plans and decisions. So Amendment No. 84 would make it more difficult to reduce ring-fencing and would counter our efforts to free up local authorities from the overly restrictive conditions that exist with some grants.

I apologise for taking the Committee's time, but it was necessary to go through the impact of the amendments in some detail. I hope that, on reflection, the noble Baroness will feel able to withdraw her amendment.

Baroness Hanham

I am extremely grateful to the Minister for also replying to Amendment No. 85, which I have not moved. But he has done so, which saves me having to go through the words. I think that he is just trying to hurry me up, rather than anything else.

The Minister's reply just makes larger the question of why specific grants are being left in Section 88B of the Local Government Act 1988. If the power will mean that one does not require the restrictions on the grant for the specific reasons for which it has been given, then why on earth not just remove Section 88B and get rid of the power to make specific grants, which is what the complaint is all about? Local government is not happy with specific grants and never has been. To have those powers removed so that Ministers can only give money under the powers under the clause will make far more sense. I think that having the two provisions will just cause enormous confusion.

I am now even less clear on why we should have this provision, in addition to Section 88B, if we are trying to reduce the power of restriction and provide more flexibility. Either specific grants under Section 88B will become totally irrelevant and that power will never be used, or this power will be used, or there will be a hotchpotch of the two.

I think that the amendments have achieved some enlightenment, as they were intended to do. However, I do not know why the Local Government Association is not leaping up and down about the issue. Specific grants will still exist, and this provision will probably be used in limited circumstances. I do not think that the situation which the Minister described is the one that he intends to achieve. Nevertheless, I beg leave to withdraw the amendment.

[Amendments Nos. 85 to 87 not moved.]

5 p.m.

Baroness Hamwee moved Amendment No. 87A: Page 14, line 29, leave out subsections (3) and (4).

The noble Baroness said: The amendment proposes leaving out subsections (3) and (4) which allow conditions to be applied to the making of grants. I think that both Ministers have said that the new provision will allow grants to be made without undue restrictions—which is wholly consistent with what was said in the Commons. We applaud the reduction of restrictions and the reduction of ring-fencing. However, like the noble Baroness, Lady Han ham, I am still puzzled about which of the Bill's provisions will ensure that. We know that Section 88B of the 1988 Act is not to be repealed. I would feel much more comfortable about the proposals if it were repealed. We have heard about other Secretaries of State having the right to make grant. As I understand it, no other similar provision is to be repealed.

Under Clause 31(3), the grant, may be paid on such conditions as the Minister…may determine".

I wonder whether the Minister can explain how that differs from Section 88B(7) of the 1988 Act, which says that a special grant "may" specify conditions that the Secretary of State intends to impose. Does the "may" in the 1988 Act mean "must"? Do both "mays" mean "may", or do both mean "must"? I hope that that is a clear question.

By way of a small but not unimportant illustration I should like to cite an example which came to my attention today, regarding the cost incurred by fire authorities in implementing the Bain recommendations as part of the settlement that we hope will soon be achieved in the fire dispute. Implementing the recommendations will cost quite a lot; I understand that the cost to the London Fire and Emergency Planning Authority will be not far short of £500,000 in the current year. It is hoped, of course, that a grant will be made to enable the fire authority to meet that cost. The Minister need not look worried; I am not going to ask him to respond to any of the details. My point is that the fire authority and other brigades will need to take their own decisions on how best to spend the sums required to move into the new regime anticipated by Bain of prevention and of making appliances available to meet new criteria. If you like, it is about local autonomy.

Although that is perhaps not a good example, it is a concern which illustrates why we want as little restriction as possible. As we have heard, we do not want undue restrictions. I beg to move.

The Deputy Chairman of Committees (Lord Hogg of Cumbernauld)

I must advise the Committee that if Amendment No. 87A is agreed to I shall be unable to call Amendments Nos. 88 to 90 inclusive by reasons of pre-emption.

Baroness Hanham

I think that the noble Baroness, Lady Hamwee, has made a good point. If the grant is going to be paid on conditions, where goes this business of getting rid of the ring-fencing and the specific grants? The whole purpose of specific grants is to say for what they shall be used. As the noble Baroness said, subsection (3) would re-establish those conditions. I am therefore not sure that we are freeing up anything.

Lord Bassam of Brighton

I think that we all understand the impact of the amendment. The clauses as drafted allow Ministers to put conditions on a grant. The amendment would in particular remove provision as to the use of the grant and the circumstances in which it must be repaid. The amendment would ensure that only unfenced grants with no conditions could be made under the new power. I find it difficult to believe that the noble Baroness, Lady Hamwee, wants to achieve that end or thinks that it would be a sensible instrument of policy. However, perhaps she thinks that we should establish such a regime of extreme liberality in local government finance.

The effect would be that ring-fenced grants approved on policy grounds would continue to be made under departments' own specific grant-making powers, which may be more restrictive than necessary, or under the less flexible general Section 88B power in the Local Government Finance Act 1988. I think that that is the point of our proposals. That particular provision is less flexible. I think that that was one of the noble Baroness's concerns.

The noble Baroness, Lady Hamwee, asked a couple of specific questions which I shall try to deal with in turn. Both Section 88B and the new power can make grants with no conditions—unfenced—or with conditions, ring-fenced. We have separate machinery in place to ensure that departments do not make conditions when those are not justified. That machinery is called the gateway process. My understanding is that the Local Government Association is very much in favour of Clause 31, which it regards as an important statement and method of working. Specific grants need not be ring-fenced. They can have conditions in relation to which authorities receive them but still no conditions as to how they are spent. Reward grants, for example, fall into that category. Other examples are the planning grant, which has already mentioned, and the LPSA performance reward grant.

The noble Baroness, Lady Hamwee, picked us up on the use of the word "may". The usage of "may" in Section 88B(7) is the same as that in Clause 31(3) and means "may" and not "must"—conditions "may" be imposed. So there is a similarity. I know that there is always a fog over matters of local government finance, but I hope that that has cleared up at least some of it.

Baroness Hamwee

I am afraid that it has not. At least we have learned that "may" means "may". I assume that the gateway process could apply to grants made under either provision. It does not surprise me that the LGA is in favour of anything involving grant money going to local authorities. It is not so much that I am not persuaded of the value of a grant-making power; it is that I do not understand the basis on which the achievements are claimed.

I am persuaded that omitting the reporting provisions in Section 88B is a good thing. As I said before, however, I would be more convinced if Section 88B were to go entirely. I am not suggesting that Ministers should not have any rights at all to impose conditions, if only because I recognise reality. It is not even necessary to say that they may impose conditions because that is implicit. If conditions were not agreed to by a local authority the money would not go to them; so QED.

My perplexity is not fully addressed. I shall go away and find some hot towels after the debate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 88 to 91 not moved.]

Baroness Hanham moved Amendment No. 92:

Page 14, line 36, at end insert— "( ) Any grant paid under this section shall be reported to Parliament as a special grant report pursuant to section 88B of the Local Government Finance Act 1988 (c. 41) (special grants) within not more than five months of such grant being made."

The noble Baroness said: This amendment is in response to what I am beginning to regard as the arbitrary nature of the grant regime proposed by Clause 31. It is about scrutiny and safeguards. Clause 31(1), which we have debated at length, is quite clear. The Explanatory Notes state that,

"Treasury consent will be needed in all cases to the making of the grants".

We can see nothing in the clause to that effect. So from where will the money come?

As we have discussed repeatedly, Clause 88B of the Local Government Finance Act 1988 provides that the Secretary of State should state to which authority a grant has been paid,

"the purpose for which it is to be paid, and…the amount of the grant".

It continues that, in addition to the consent of the Treasury, a special grant report shall be laid before the House of Commons", and that such a report must receive affirmative resolution before the grant proceeds. That is what we are asking for in this amendment. We are also asking that it should pertain to Clause 31. I beg to move.

5.15 p.m.

Lord Rooker

The new grant-making power in Clause 31 is, as I have said previously. intended to allow Ministers or the National Assembly to pay grants without imposing undue restrictions on authorities in the way that they achieve desired outcomes and so help to ensure that we keep ring fencing to a minimum. That is why the LGA supports the new power.

Amendment No. 92 would require the grant to be reported as a special grant report under Section 88B of the Local Government Finance Act 1988 within five months. It would mean using the cumbersome Section 88B power in every case. I have previously explained that process. That would involve using it for very small or uncontroversial grants, or those being repeated from previous years. With the amendment, a grant made under the new power could be struck down after it had been paid by some later decision by Parliament not to approve the special grant. That would mean uncertainty and delay for local government.

In a previous discussion of Clause 31 in another place, some were concerned that that power will mean that Parliament would no longer be able to consider grants to local authorities. That is simply not the case. In England, parliamentary approval will still be needed to the ambit of each department's request for resources. Parliamentary approval will still be sought for the local government finance settlement each year, which provides the majority of funding to local government. In addition, the special grant power will remain available for any cases where it is appropriate to seek Parliament's approval to the award of a grant. In England, where the new power is used to make grants, the Treasury's consent will be needed—that is an important safeguard against the imposition of spending conditions unless they are genuinely necessary and beneficial.

I am really tempted to go to my notes on the next group of amendments, but I shall resist that. That would fall in line with the purpose of the amendment. I have a perfectly satisfactory answer but I had better stick to the approach that I began with—I did so in a somewhat heated moment. I said that I should stick to each amendment as listed, and I shall not deviate from that, tempted though I am.

Baroness Hanham

I will withdraw the amendment and move on to Amendments Nos. 93 and 94. That would help the Minister and me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 93: Page 14, line 36, at end insert— ( ) For each financial year the Secretary of State shall publish a table setting out—

1. (a) the grants made to each local authority under this section;
2. (b) the size and purpose of the grant; and
3. (c) the political control of the authority at the time the grant was made."

The noble Baroness said: I hope that the Minister will remember at a later stage how helpful I am being before he sends a nasty political barb in my direction.

Amendment No. 93 is simple. It is about open government; that is, setting out information for the public on what the grants are all about. Throughout our debate on the clause he has agreed to the need for that. Amendment No. 93 asks for a list of the grants being made under Clause 31; under what head they would be made and whether they were unusual or significant; and what their purpose was. That is a routine task. As the Minister said, the Local Government Act comes before Parliament but the amendments would require that those grants that have been given under the power to be listed. I am sure that the Minister will not object to that.

Amendment No. 94 complements and reinforces Amendment No. 93; it takes up the same point. At least the general rules of the general settlement should apply to everyone equally if the grant is equal—if it is a specific grant across the board. If it has been given not across the board but to a particular authority, the explanation under the list would be different. I beg to move.

Lord Rooker

Amendment No. 93 would require the Secretary of State to publish on an annual basis a table giving details on all grants paid under the new power in Clause 31. We do not believe that there is any need for such a requirement in legislation for reasons that I will explain. We already make information available, as noble Lords would expect us to want to do. For local authorities overall, one of the key tables provided at the time at which Parliament considers the annual local government finance revenue settlement sets out all known relevant special and specific revenue grants to be paid to councils each year. Each grant is listed separately together with the size of the grant. We will add those grants made under Clause 31 to that list. We also provided a list of grants as part of our announcement on freedoms and flexibilities. For individual authorities, we will look to consider setting out the allocations for individual authorities at the time that grants are made.

For example, a circular by the Department of Health that was issued at the time of the provisional local government finance settlement set out the allocations to councils for those grants that were announced at that time. The purpose of the grant will be made available at the time at which the grants are announced. We also draw together information on grants in a variety of forms in response to Parliamentary Questions of both Houses. Those reflect Members' interests at the time.

We do not publish the political control of the authority at the time at which the grant was made and do not believe that it would be appropriate or practical to do so for reasons that I will explain. Grants are given on the basis of need and not on the basis of political control, which, in any case, changes over time. Information on the political control of authorities is publicly available but grants are not until we make them and publish them. Prescribing some particular set of information to be published each year would add no benefit.

Amendment No. 94 would make it unlawful for the Secretary of State even to consider the political control of an authority in reaching decisions on the use of the power. It would require certification to Parliament by Ministers and officials that the political control of a local authority had not been taken into account, and so on. This is an unnecessary amendment because Treasury approval is already required to the use of the power. The Treasury will be exercising control over the grants made under Clause 31 and will need to be satisfied that there is proper justification for the amount of the grant, the manner of its payment and any conditions imposed on its payment. The payment of grant under that power will depend entirely on the eligibility criteria for the grant and not on the political control of the authority, which may, in any event, be subject to change.

Local authorities could, if so advised, seek judicial review of any distribution of grant moneys under Clause 31 if it appeared that the basis of distribution was tied to the political control of the local authorities concerned. The change proposed by the amendment is not found in the legislation governing the revenue support grant, which provides the majority of local government funding—several billion pounds a year—to local authorities. It is also not present in the grant-making power under Section 88B of the Local Government Finance Act 1988. We believe for those reasons and for practical reasons that that would be inappropriate. It would introduce an unnecessary bureaucratic requirement of a certificate to Parliament.

On the thrust of Amendment No. 93, we will add the grants under Clause 31 to the list that is already published so that everyone can see them at the appropriate time.

Baroness Hanham

I thank the Minister for that; he provided the reassurance that I was seeking. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 94 and 95 not moved.]

Clause 31 agreed to.

Clause 32 [Ancillary powers]:

On Question, Whether Clause 32 shall stand part of the Bill?

Baroness Hanham

I oppose the Question whether Clause 32 stand part of the Bill. I do so in order to probe the reasons for the wide-ranging power. Such a clause might be acceptable if the purpose of Clause 31 was limited but, as we have discussed in relation to preceding amendments, it is clearly not. It contains a wide-ranging power. The Minister will be familiar with the details. The Explanatory Notes, if nothing else, make it clear that the clause does not contain a limited power. This is an open door to endless paperwork and additional information. If the power related to specific powers in general, the various departments—as we now know it to be—should have virtually all the information that they need from general returns. That sounds as though a generalised fishing expedition would result from any use of the power, whether on a wide or narrow basis, probably resulting in unnecessary bureaucracy.

I am sure that the Minister will tell us that it would not be like that really, and that the requirement for information would be restricted only to a particular aspect, and so on. However, that is not what the clause says.

I look forward to the Minister's explanation of the clause's purpose, how it is proposed to limit any information being sought, including the requirements—

I do not mind one Minister not listening to me, but two not listening is almost more than I can stand! Are there four ears or two ears on the Front Bench?

I repeat: I look forward to the Minister's explanation about the purpose of the clause. It is jolly lucky that he has some written notes; otherwise, he would not know what I had been saying. I also look forward to his explanation of how it is proposed to limit any information being sought, including the requirement on local government officials which potentially will increase the bureaucratic paper mountain.

Lord Rooker

I am sorry about that. I have some stuff that I am not going to read out; that is what I was discussing just now.

Baroness Hanham

Really?

Lord Rooker

Yes. In a way, I am absolutely astonished that Clause 32 is in the Bill. I am amazed by the idea that it was necessary to include it in the Bill. I should have thought that there was loads of legislation involving what Ministers could ask local authorities, such as, "What are you doing on this, that or the other?". That happens all the time. We write letters asking for information. We are always told by officials, "Do not put burdens on local authorities. We must not ask them for too much information", and so on.

The power is specific to Clause 31. Someone obviously thought that it was necessary to include it in the Bill; one needs information to operate the clause. Applications for a grant can be on a one-off basis from the authority or Ministers may have an idea about a new scheme that requires a grant; one needs information or some eligibility criteria on which to pay the grant but not necessarily to ring-fence it. I should have thought that there were loads of ways in which Ministers could get information from local authorities in order to set that up. Parliamentary counsel must think otherwise; if not, it would not have included the clause in the Bill.

That is all I have to say, really. I feel totally and utterly inadequate that I cannot give chapter and verse about why Clause 31 could not have been added to all the other thousands of pages of legislation in which Ministers ask local government for information. That would enable us to say, "Under Section 31", as it may turn out to be, "Ministers can ask for that information". However, that clearly was not thought to be appropriate. Inadequate though I feel the answer is—in fact, if I were in opposition, I should not accept it—it is the best that I can do, I am afraid.

Baroness Hamwee

Whatever parliamentary counsel may be, does the Minister agree that it is not a very good psychologist? Is not the short point that if a Minister wanted information to assist in a decision to make a grant under Clause 31 and the local authority did not give it, that authority would not get the dosh?

Lord Rooker

No. The Minister may have paid the grant and then thought one day, "I wonder whether I got the outcome that I required from the grant?". There is an outcome to be measured. I have said that there is no problem with this; ring-fencing is not the same as measuring the outcome. Ring-fencing is highly prescriptive but the grants are paid for a purpose. Ministers should be able to check on the purpose. I return to planning. In due course—it may be in the next Session—the House will receive the Planning and Compulsory Purchase Bill. Another place is debating it today—it should be done with by now—and I hope that the carry-over Motion will be agreed to.

This is a classic example. We want to be able to measure the outcomes in improvement in planning performance without being prescriptive about how the money is spent, so the authority needs to be able to do that.

5.30 p.m.

Baroness Hamwee

I agree that measuring outcomes is hugely important, although, given that Clause 31 is about paying the grant rather than reviewing it, I wonder whether Clause 32(1) achieves that. I am not sure whether I should not shut up, however, because I might be on the way to suggesting to Parliamentary Counsel that further duties are imposed on local authorities.

Baroness Hanham

My understanding of the procedures of this Committee is that if everyone agrees to an amendment, it can be accepted. Is the Minister agreeing with me, after all that conversation, that Clause 32 is not a useful part of the Bill and we could therefore remove it, or will I be forced to bring it back on Report for the Minister to agree once again that it is not very valuable? I hope that the Minister might agree with me that it should not be part of the Bill and therefore this amendment might succeed.

Lord Rooker

No. My caveat was that if I was not the Minister I could not see why the clause was in the Bill. I have to trust Parliamentary Counsel, given the amount of legislation. I know the way they work: they would not put in a Bill something that duplicates a measure in another Bill. A golden rule of Parliamentary Counsel is not to legislate twice for the same thing, because one thing is for sure—one aspect will be challenged and it will lead to confusion. So it must be the case that in no other legislation is there a power that would fit this one. Therefore, I have to demand that the clause stand part of the Bill, even though I feel inadequate in the way I have explained it. I genuinely mean that—I should have paid more attention to this and got further and better particulars from my learned friends behind me.

Clause 32 agreed to.

Clause 33 [Application to Greater London Authority]:

On Question, Whether Clause 33 shall stand part of the Bill?

Baroness Hanham

This Motion is intended to probe the special provisions under Clause 33 for grants made to the Greater London Authority. Clause 31(1) gives the Secretary of State wide-ranging powers to pay a grant to a local authority. The local authority may subsequently transfer this grant to any functional body which requires funding for expenditure incurred. Clause 33 seems to confuse the matter. Under subsection (2), the Secretary of State may set conditions in any grant to the Greater London Authority which requires the Mayor to transfer funds to a particular local authority. Or, under subsection (5), the Mayor may receive a grant which he can decide either to transfer to a functional body or not, a s he thinks fit.

Is the Greater London Authority devolved or not? Under Clause 31, the Secretary of State may already pay grants directly to functional bodies. So there are two options: first, that the grant has passed through the Mayor, with or without conditions about its final use, depending on whether or not Clause 33(2) has been applied. The second is that the Secretary of State has cut out the middle man—the Mayor—and pays a grant directly to a functional body under the control of the Greater London Authority, which we all know is not a local authority.

Can the Minister explain why there are two options and on what basis the Secretary of State is to choose which one he uses? The drafting seems to be rather confusing and obscure.

Baroness Hamwee

I shall not repeat the questions the noble Baroness has asked which occurred to me as well. In subsection (5), I would particularly ask about another use of the word "may". One would have expected it to be "shall" or "must" in this context rather than "may". This does not quite seem to fit with the thrust of this part of the Bill. I am one of those who supports the autonomy of the Mayor. I am certainly not arguing against grants to the GLA or for the functional bodies, but I should like to understand the workings of this clause better.

Lord Rooker

In effect, Clause 33 slightly adapts the grant-making power in Clause 31 for the purpose of the GLA. This is to take account of the special relationship of the Greater London Authority with its four functional bodies, namely, Transport for London, the Metropolitan Police Authority, the London Fire and Emergency Planning Authority and the London Development Agency.

The grant power will operate in basically the same way as for other authorities, but any grants intended for the functional bodies will have to be paid via the Mayor of London. As Clause 33(4) makes clear, if a grant is earmarked by a Minister for one of the four bodies, the Mayor will have to pass it on to the named body immediately. Clause 33(5) allows Ministers also to pay grants to the Mayor which are not earmarked for any of the four bodies. In that case, the Mayor would have the option of using the grant himself—not personally, of course—or distributing it in a way he thought fit between the bodies.

This modification to the grant power for the GLA reflects the current arrangement for the issue of credit approvals to the GLA, which again has to be done via the Mayor. The arrangement acknowledges the central role of the Mayor in the GLA structure. It does not disadvantage the bodies at all and it is not possible for the Mayor to divert resources in a way contrary to Ministers' intentions. So this is a twin approach which reflects the current practice. I hope that the Committee will find it acceptable.

Baroness Hanham

I have always thought that the Mayor of London was a figurehead. I am concerned that he might shuffle the money through to his lesser bodies. However, the Minister has made the position clear and I withdraw the Motion that the clause should stand part.

Clause 33 agreed to.

Clause 34 [Wales]:

On Question, Whether Clause 34 shall stand part of the Bill?

Baroness Hanham

This clause refers to the position of Wales and how the grant-making provision under Clause 31 will be applied. Presumably this is a fully devolved matter. It is made clear in Clause 31(5) that no Treasury consent is needed for grants made in Wales. The question here, therefore, is one of scrutiny.

Taxpayers' money is levied by central government in Westminster, but we retain no control over how this money is spent and disbursed under the grant system provided for here. The matter will be one for the discretion of the Welsh Assembly. I am not challenging the devolution process—not really—I merely ask what provisions are in place in the Welsh Assembly to ensure that the eventual dispersal of funding in the form of grants made under Clause 31 is subject to a satisfactory level of public scrutiny and transparency.

For Ministers to make a grant in England, Treasury consent is needed. Why is there no similar provision for Wales? The Welsh Assembly cannot levy its own taxes; is it right for it to have absolute discretion in the use of United Kingdom taxes for grants in Wales, without any central government control?

Can the Minister say whether this marks a significant change in terms of grants and funding for the Welsh Assembly? On what basis have the changes been made? Will regular reports be made available of the progress of this system?

Lord Rooker

I shall give a short answer to the Motion because a longer response will be made later. I can confirm that the Welsh Assembly intends to put in place controls to ensure that the power is exercised prudently and properly. What I do not know is when or whether we will know even what are to be the draft controls before, say, the Bill receives Royal Assent.

However, it is axiomatic that, following the devolution settlement and the probity with which the Welsh Assembly is operating, the grants would not be made in Wales until controls have been put in place by the Assembly. I can put it on the record that those controls will be put in place which I suspect, although I do not know, will perform the same function as that performed by the Treasury for England.

Baroness Hanham

I think the Minister said that no grant would be paid under the terms of Clause 31 to the Welsh Assembly under Clause 34 until the United Kingdom Parliament or Ministers were satisfied that the controls were in place. Is that correct?

Lord Rooker

No, that is going much too far. I am simply saying that we have repeatedly said that, in England, the Treasury's consent is needed for award of the grants and that, in Wales, Treasury consent will not be required before the Assembly exercises its power to make grants. That is consistent with the devolution settlement. However, the Assembly intends to put in place controls to ensure that the powers are exercised prudently and properly. I am therefore assuming—it has to be the case—that before the Assembly exercises its powers to make grants it will have put in place the controls which I outlined to ensure that the functions are exercised prudently and properly. I did not say that grants would not be made payable after Royal Assent.

The Assembly will exercise the powers in Wales as that is consistent with the devolution settlement. However, it will not exercise the powers before it has put in place those controls. As I have said on the record, the Assembly intends to put in place controls to ensure that the powers are exercised properly. I therefore assume that no grants will be paid until those controls are put in place.

Baroness Hanham

Will the Minister also confirm that the grants in Wales will be listed as they are in the United Kingdom under the local government finance settlement, as we have discussed in previous debates?

Lord Rooker

I assume that that is the case. The Welsh Assembly will be the grant-paying body. This clause is not about UK Ministers paying grants to Welsh authorities or the Welsh Assembly. I should perhaps say that there is open government in Wales. Indeed, people in Wales sometimes claim that government is a bit more open there than it is in England. That is what devolution is about.

There should be no doubt about whether the Welsh Assembly will publish who has received grants, although it might not be done exactly as it is in England. I can say that no secret grants will be paid in Wales under the proposals. However, listing might not be done exactly as it is in England—by adding to the list, as I said, when the rate support grant and all the other grants are dealt with. There will be no secret grants, and a list of grants showing the amounts and the receiving councils will be made available.

Baroness Hanham

I hear what the Minister says. I assume that his assumptions are correct.

Clause 34 agreed to.

Clause 35 [Interpretation of Chapter 1]:

Baroness Maddock

moved Amendment No. 96: Page 16, line 2, at end insert— ( ) a town and parish council The noble Baroness said: Amendment No. 96 is a very simple amendment. It adds town and parish councils to the list of local authorities for the purposes of Part 3, Chapter 1 of the Bill. It is a probing amendment. The next clause talks about best-value grants for parishes. However, there is a question as to why town and parish councils cannot be part of the grant-paying regime. I suspect that part of the answer is that this is not something that the Government do very often. However, if they are going to try to introduce legislation that allows for many different possibilities, which clearly is the purpose of much of the Bill, it seems logical to include town and parish councils in the list. I beg to move.

Lord Hanningfield

I support the amendment. Later amendments deal with parish councils. I thought that an objective shared by the Government and the rest of us was to do what we can to build up and support our town and parish councils. I therefore very much support the amendment.

5.45 p.m.

Lord Rooker

Well, there is a logical explanation, in that the power in Clause 31 is intended to be a much more streamlined and flexible alternative to Section 88B of the Local Government Finance Act 1988. Parish and town councils are not among the bodies that can be paid under that Act; they do not receive grants under Section 88B. Clause 31 is designed to be, not a replacement for that power, because it will remain on the statute book, but a much more streamlined alternative. The Government have recognised that there is a need to provide the power to grant for parish and town councils for the purpose of best value duties under the beacon council scheme. Clauses 36 and 37, to which we shall shortly turn, deal with that.

Baroness Maddock

I heard what the Minister said; in part I pre-empted his reply; but, if I may say so. that was not a terribly logical answer. However, given what he said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 97: Page 16, line 7, at end insert— ( ) No power under this section is to be exercisable in relation to a regional assembly in England.

The noble Baroness said: The amendment is intended to probe where regional assemblies may stand in the new expenditure grant system, as laid out in Clauses 31 to 35. I know that the Minister will tell me that there are no regional assemblies yet, but they are in process. As we know from the Regional Assemblies (Preparations) Act 2003, which was recently passed by the House, and from what the Minister said in Committee last week, it is likely that a referendum to establish a regional assembly in one of the regions will be called before too long—always assuming that, somewhere along the line, the soundings exercise can be made to square with what is proposed.

That means that, before too long, we may have a fully fledged assembly functioning with a certain amount of devolved and independent power. Under Clauses 31 to 35, conditions are set out to adapt the expenditure grant provisions to the unique circumstances of the Greater London Authority and the Welsh Assembly—as we have discussed.

How would regional assemblies fit into that scheme? Is it envisaged that they could receive grant from central Government, as can the Greater London Authority? Would conditions be imposed for the use of such grants, as for the Greater London Authority, under Clause 33(2), or would they have autonomy, as does the Welsh Assembly, in the disposal of any grants made? What would be the allocation of funding to regional assemblies?

Throughout discussion of the Regional Assemblies (Preparations) Act 2003, there was considerable confusion about that. The Minister told us then—I can hear him saying it now: There will be no new powers, no new money and no new tiers".—[Official Report, 24/3/03; col. 552.]

My noble friend Lady Blatch, among others, pointed out that if the powers of a regional assembly were to be merely scrutinising and advising on regional strategy, it would have no need of the precepting powers that are to be made available to it. As we learnt during discussion of that Act, regional assemblies will not be categorised as local authorities, as the Greater London Authority is not. Nor will they take powers from local authorities, according to the noble Lord, Lord Rooker.

The situation is complex and unclear and we would welcome clarity about how grant funding and expenditure provision under this chapter would fit in with the Government's plans for regional assemblies, if they are even set up. I beg to move.

Lord Rooker

Well, the short answer to the last question of the noble Baroness is that they do not. With all due respect, as neither regional chambers nor elected regional assemblies are defined as local authorities under Clause 35 or listed there, the amendment is unnecessary and irrelevant. I shall not debate regional assemblies under the Bill because they are not part of it.

Baroness Hanham

I have not tempted the Minister. I am sad about that, because I thought that we might get some more information. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 35 agreed to.

Clause 36 [Best value grant: parishes]:

Baroness Hamwee moved Amendment No. 97A: Page 16, line 14, at end insert— ( ) charter trustees subject to any of those duties.

The noble Baroness said: This is a probing amendment, as are all our amendments today.

A form of local government which is not apparently covered by either Chapter 1 or Chapter 2 is charter trustees—of whom there are very few, but who are very proud of their status. My amendment seeks to include them in the Bill. The answer may be that none of them has the duties referred to which would attract the grant. I should be grateful for an explanation as to why they are not included. I beg to move.

Lord Bassam of Brighton

The noble Baroness has answered her own question. The amendment would add charter trustees to the Bill, and the purpose of Clause 36 is to enable grants to be paid. The amendment is not workable simply because charter trustees are not among the authorities subject to any of the best value duties set up under the Local Government Act 1999. So from our perspective it is entirely illogical—it makes no sense at all—to have a power to pay them.

My understanding is that charter trustees in general are bodies that have continuing responsibility for abolished local authorities. If that is the case, I cannot see much point in their having a best value regime. We should be giving counties such as Berkshire best value duties when Berkshire is there merely for ceremonial purposes.

Baroness Hamwee

That response is very helpful. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment No. 97B: Page 16, line 24, leave out subsections (4) and (5).

The noble Baroness said: Amendment No. 100A is grouped with this amendment.

I tabled these amendments in order to be consistent with my amendment to Clause 31. If the Minister simply wants to say that the answer is the same in this case, I shall be quite content. I beg to move.

Lord Bassam of Brighton

The amendment is not relevant. It would place central government in an odd position. We should be powerless to withhold the payment of grant to any best value parish in certain circumstances, particularly if an authority failed to carry out the best value duties for which the grant is payable. That makes the proposition in the amendment not a very sensible one. It would not be a sensible use of public money. I cannot see that the amendment is at all valuable. I should have thought that it was not worth pressing.

Baroness Hamwee

I am not sure whether there is sufficient answer to the question that I asked. I am not sure whether a proposal can be both irrelevant and not sensible at the same time. It is certainly relevant. In answer to my question whether the reason is the same as under Clause 31, the answer is probably "yes". I shall take it as that, and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment No. 97C: Page 16, line 33, leave out ", during or after" and insert "or during

The noble Baroness said: Amendment No. 100B is grouped with this one.

This is a probing amendment. I seek to change the provision which allows a determination about a grant to be made during or after the end of a financial year to one allowing it to be made only during that financial year. I do so in order to seek an assurance that this is not to allow for the retrospective application of conditions, or rather, retrospective only when the grant itself is retrospective.

Earlier this afternoon we discussed briefly the monitoring of outcomes. I have said that I understand that entirely, but it would be unfortunate if the Secretary were to decide, after having paid over moneys, that conditions ought to have been attached. I beg to move.

Lord Bassam of Brighton

This amendment seeks to remove the power for the initial determination that sets up the amounts payable, and any subsequent determination, to be made after the financial year to which the payment relates.

Amendment No. 100B relates to Clause 37 which provides for the grant to be paid to Welsh community councils taking part in the Wales programme of improvement, forming, I understand, part of the Welsh variant of best value. Both amendments would remove from the respective clauses the power for initial determinations and any subsequent determinations to be made after the financial year to which the payment relates.

It is hoped that the grants would be administered efficiently and promptly. However, circumstances could arise where the amounts payable could not be finalised until the year to which they relate has ended. This may arise, for example, if technical difficulties are encountered when establishing whether a particular parish or community council has a budgeted income that exceeds the required threshold. The amendments would make it impossible for any changes to be made to the amounts payable once the financial year to which they relate has ended, thus making it possible that some parishes or community councils would end up receiving less grant than otherwise they would be entitled to receive.

I see where the noble Baroness is coming from, but the clause provides an element of security to ensure that, because of technical difficulties that might arise during the budgeting process, the situation can be put right when the amounts payable are finalised for the year in which they are payable.

Baroness Hamwee

Can the Minister respond to the specific concern that, a grant having been made, this provision would make it possible for the Secretary of State subsequently to impose conditions? I hope that he will be able to respond by saying that that is not the case. I do not think it is, but I want to be clear about it. Having raised the matter, I should ensure that the answer is put on the record.

Lord Bassam of Brighton

I can say on the record that that is not the intention behind what we are seeking to achieve in the clause.

Baroness Hamwee

I am not sure whether that answers the technical question as to whether the possibility remains. Is that something that could be considered after our Committee proceedings today, so that we can be quite clear about it?

Lord Bassam of Brighton

I am happy to try further to clarify the point because I can see the suspicions which engendered the amendment. Let me put it like this: it is certainly not our intention that the clause should operate in that way. Yes, we shall think further on the issues which have been raised.

Baroness Hamwee

I am grateful for that response. If we can see this finally done and dusted after our discussions, then I am happy to say that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Lord Hanningfield moved Amendment No. 98: Page 16, line 35, leave out paragraph (c).

The noble Lord said: We welcome the Government's intention under Clause 36 to reward good performance in parish councils. We support awarding grants to enable councils to meet requirements of best value status, once it has been attained. We might even be prepared to support a power to grant-aid parish councils. I would certainly be interested in the Minister's views on that.

Our aim in the amendment is simply to remove the Secretary of State's power to revoke or vary a grant to a best value parish council within a single financial year. This will be accompanied by amendments which aim to ensure that any grant paid to a best value parish council or best value community council is transparent and debated before Parliament.

In Essex County Council, we feel it is vital that we support the work of parish councils to deliver quality services to our local communities. Parish councils are highly valued by the people in our county and their work is fundamental in many of the service areas most visible to the public.

This amendment would ensure that parish councils can plan for a full financial year without the threat of an unexpected change in funding from the Government. That is essential if resources are to be managed effectively to deliver quality services.

I accept there may well be a need to modify grants and, in some instances, to withdraw them. Nevertheless, as the Bill stands, there is no safeguard for ensuring that grants are not promised and then withdrawn at short notice or without transparency.

The Government are trying to support parish councils as a fundamental tier of local democracy, and attempting to fulfil their promise to allow local authorities of all kinds increased freedom to manage their resources more effectively. A reliable income stream is therefore fundamental to achieving this aim, particularly for small authorities like parish and community councils.

Baroness Hanham

I find it quite surprising that a grant may be revoked. I can understand that it might subsequently be varied, but why should it subsequently be revoked? Either it was justified when it was first given or it was not. If it was not justified, it should not have been given, and, if it was, I cannot see what would enable or prompt the Minister to revoke it subsequently. We should be grateful for an explanation.

The Explanatory Notes are our bible, as I have said in the past. They state in relation to Clause 36: By virtue of the Local Government Best Value (Exemption) (England) Order (SI 2000/339)— with which we are all intimately familiar— currently only 41 parish or town councils satisfy this criterion for a best value grant. So, presumably, we want to ensure that parish councils achieve high standards and receive best value grants. It would be a pity if, having achieved all that and having reached best value status, the grant was revoked. It is a question of why and under what circumstances.

Lord Rooker

We have some sympathy with Amendment No. 98. It is not the kind of thing we plan to do—we have one straightforward determination, one financial year, with everybody knowing where they stand; the money would be paid and spent, and that would be that. It is not our intention to use the power to determine or revoke best value grants in any arbitrary way, believe you me. But we think it is right to be able to compensate a council which had lost a significant amount of best value grant through no fault of its own but because of an administrative error. I am concerned about that, because councils can make mistakes filling in forms applying for grants and lose out purely because of administrative errors.

There may be circumstances in which some parish or town councils become eligible for best value grant quite late in the day after an initial determination of grant has been made. This power would allow us to make a replacement determination.

We would revoke a grant only for purely technical reasons. How it could happen I do not know, but a grant might be made to a council that was not eligible. I do not know whether that happens very often but those are the kind of circumstances envisaged. If a grant was made to a council that was not eligible, it would need to be revoked—before the money was spent, I hope. But it would not be our intention to use this power in an arbitrary way. It would be a crisis for a grant to be paid and then revoked.

The size of parish and town councils varies enormously. Some are tiny, while others are bigger than some small district councils, covering many thousands of people. It is simply not possible to compartmentalise them all as the same kind of body. I hope that that is a satisfactory explanation. I do not know whether there is any example of such grants to parish or town councils being revoked under the existing processes. However, I repeat what I said earlier, because it is relevant. Town and parish councils do not come under Section 88 of the Local Government Finance Act 1988. They are not covered, so I do not know of any circumstances in which grants have been paid and then revoked or varied under the existing processes.

Lord Hanningfield

I note the noble Lord's comments about grants being varied. One could accept that point. However, if a grant has been paid to a council that does not qualify, that would be the Government's fault. Parish, town and community councils could be frightened off by this kind of measure. Knowing that a grant could be revoked, the worthies could decide not to apply for it. I hope that the Minister might reconsider the part about revoking a grant, although I understand and accept the need to vary it. The Minister said that circumstances would have to be quite exceptional and I hope that he will reconsider the element of revoking a grant.

Baroness Hanham

Before the Minister replies, perhaps I may raise a further point. What happens if the revocation comes as a best value council suddenly becomes a non-best value council and the position changes in a financial year? This depends on Audit Commission reviews and how they operate. Is it possible that that might be one reason for it? If that were the case, would it be left to the end of a financial year before such a revocation took place? I think the Minister is struggling with this, and we are struggling too. A few concrete answers from the Minister's officials might get him off the hook.

Lord Rooker

If the noble Baroness thinks that I have been struggling so far, wait until she hears what I have to say now. If money had been paid to an authority on the basis that it was good or excellent and it changed during the course of the financial or the following year, we could not take the money back because it had been paid for a purpose. But listen to this other reason for revocation: we might get the parish council's name wrong. This is the best bit—it has happened occasionally, even with full local authorities, so we need to revoke and replace money under the right name. It beggars belief, but it has happened. I do not have an example, but apparently it has happened occasionally—very occasionally, I assume—with full local authorities. The name was wrong in an order and the money had to be replaced. That is another example.

Baroness Hamwee

That does beggar belief. If there is a mistake in the name and it should be Much Binding in the Marsh instead of Much something else—my imagination fails me—and there is no council with the wrong name, that is just a matter of rectification. Everyone, in all walks of life, makes the odd mistake. If the wrong name is that of another council and money has been paid, it is simply too tough to say, "Give it back, we did not mean you, we meant your neighbour". I am sure that the Minister's advisers cannot quite mean that. I hope not.

Lord Rooker

I have said all that I intend to say.

Lord Hanningfield

We wondered why we got so little grant in Essex this year. We must have been confused with Birmingham.

We hear the Minister's arguments. I think that we shall return to these issues as we proceed. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hanningfield moved Amendment No. 99: Page 16, line 35, at end insert—

() Any determination made under this section shall be reported to Parliament as a special grant report pursuant to section 88B of the Local Government Finance Act 1988 (c. 41) within not more than five months of the date of such determination.

The noble Lord said: The amendment aims to ensure the transparency of any grant paid to a best value parish council under Clause 36 by ensuring that it is scrutinised by Parliament.

We again welcome the Government's intention to reward good performance by parish councils, which are a fundamental tier of local democracy. We support awarding grants to enable councils to meet the requirement of best value status once it has been attained.

Our concern is to ensure that the distribution of grants is equitable and balanced, and parliamentary scrutiny will be helpful in ensuring that this is the case.

The amendment would ensure that grants paid under Clause 36 are reported to Parliament in the appropriate manner. This will maintain their transparency and the credibility of such transactions. I believe it will provide a better incentive for those councils striving to improve to see the grant system operating fairly and openly.

Lord Rooker

I regret that I cannot help the noble Lord. As I hinted when dealing with the previous amendment, we could not operate this because town and parish councils are not relevant bodies under Section 88 of the Local Government Finance Act 1988. It simply does not apply to English parish councils, so it would not be possible to use that mechanism.

There are about 400 district councils in England, 30-odd county councils, 30 London boroughs and 30-odd metropolitan district councils.

Lord Hanningfield

There are 300 district councils.

Lord Rooker

Okay. There are 8,000 parish councils, all varying enormously in size. We are in a different league altogether here. It would not be relevant. They are not covered by the 1988 Act, so the mechanism in the Act could not be used. However, the absence of a special report does not mean that Parliament would no longer be able to consider the grants under Clause 36. Parliamentary approval will still be needed within the ambit of the relevant department's request for resources, and Treasury consent will also be needed.

The grants made under Clause 36 are likely to be quite small or to be repeated. The need to continue to rely on the grant-making powers under Section 88 would be very cumbersome, as I have explained. Therefore, I hope that the amendment will be withdrawn.

6.15 p.m.

Baroness Hanham

May I take up a point just made by the Minister? I pursue this possibly out of my own ignorance here. If a grant must be approved by the Treasury, is any stage of such a decision made available to Members of Parliament? I appreciate that the Minister made the point that there are over 8,000 parish councils and so many decisions must be made, but equally a list should be made available somewhere to Members of Parliament which indicates what are those grants and for what they have been given. I ask that if for no other reason than it would be quite interesting to scrutinise the allocations and see what the money is being spent on, in particular given the different sizes of parish councils. Some are small and some large. We should like to know the purposes to which those grants are being put.

It may be that the Minister will leap to his feet and tell me that a list of these grants is always available on the Internet, the Intranet or in another form. Alternatively, it may be that they are not put into the public arena at all, in which case I think that that would be rather retrograde. We may wish to return to that with a different amendment seeking to establish how information about those grants is made available to the public.

I hope that the Minister feels free to answer my questions.

Lord Rooker

Speaking off the top of my head, there is no way in which we would agree to money being paid in secret. A list must be available somewhere, but the information on how those 8,000 parish councils are divided up administratively for payments and contact is not before me. Whether they are grouped as parish councils under their respective councils, I do not know. A list should be available. I shall find out the answer to this and certainly report back to the noble Baroness in due course.

Lord Hanningfield

I thank the Minister for that reply and I was pleased to listen to his last point. Obviously this is a good policy and we support it. Indeed, we are keen to see the initiative enjoy wider publicity. If some way could be found of making the process more public, that would add to its value. I am sure that either the Minister or we shall return to this point at a later stage with an amendment that would seek to ensure more publicity for this process. With that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 agreed to.

Clause 37 [Best value grant: communities]:

Lord Hanningfield moved Amendment No. 100:

Page 18, line 18, at end insert— ( ) Any payments made by the Secretary of State under subsection (1) must not be financed by monies recouped from debt free councils via capital receipts.

The noble Lord said: At this point we move on to the position in Wales. This amendment aims to ensure the transparency of any grant paid to a best value community council under the terms of Clause 37 by the National Assembly for Wales by ensuring that it is scrutinised by Parliament. This is a similar issue to that raised by the previous amendment.

Again, we welcome the Government's good intention to reward good performance in all kinds of councils in England and in Wales. We support awarding grants to enable councils to meet the requirements of best value status once it has been attained.

However, as we discussed under Amendment No. 99 in relation to parish councils in England, we would prefer all best value grants to be scrutinised by Parliament. If that cannot be done, let us introduce some form of process by which the award of grants is made more transparent. However, we also want to see how the Welsh Assembly may deal with the issue.

This amendment will ensure that grants paid under Clause 37 by the National Assembly for Wales are reported to Parliament in the appropriate manner. This will maintain the transparency and the credibility of such transactions and, as we discussed during the previous amendment, it will provide a clear incentive for those councils striving to improve their performance. I beg to move.

Baroness Hanham

I shall be interested in the Minister's reply, in which I hope he will explain whether this too is a devolved matter. Nothing in the Bill enables the scrutiny we seek. However, again it is important that these details are published in some form. People in Wales have a right to be able to see what grants are being paid to which local authorities. I presume that in the case of Wales, Section 88B of the Local Government Finance Act 1988 will pertain. If it does not—the Minister is shaking his head, suggesting that since Wales is not a local authority, it is not subject to the local government regime—will he let me know how Welsh community grants are reported?

As with the English parish councils, such information will help us towards greater transparency.

Lord Rooker

We are entering dangerous territory because of the devolution settlement. First I want to put it on the record—I am repeating what I said earlier, but it is relevant to this amendment—that Section 88B of the Local Government Finance 1988 does not apply to Welsh community councils. They are outside that legislation and therefore it would not be possible to make such determinations. There are around 750 community councils in Wales. In any event, as I said previously, the absence of a special grant report provided under Section 88B does not mean that Parliament is no longer involved because approval is needed under the ambit of the share of resources for the National Assembly for Wales. Furthermore, appropriate safeguards will be put in place in Wales to cover the payment of the grant.

However, it would be quite inappropriate for grants made by the National Assembly for Wales to be reported in a special grant report to Parliament. That would be inconsistent with the devolution settlement. This is a matter for the Welsh Assembly. It will put procedures in place and safeguards will be set up in relation to the payment of the grant. So we must leave this to the Welsh Assembly.

Lord Hanningfield

As we discussed during the previous amendment, I wonder whether it would be possible to make the process more transparent. Since Wales is included under the terms of the Bill, surely a form of guidance could be added. As with the previous clause, we would like the same transparency for Wales that we sought for the English parish councils. Even though this is a devolved matter, here a new national policy is being implemented. Surely it would be wise, for the reasons we have already set out, for the same to apply in Wales.

Lord Rooker

I shall take advice on this, but I think it would be inconsistent with the devolution settlement if we were to seek to instruct the Welsh Assembly. It must be accepted that this is a grey area. We are still in the early stages of devolution; it has been in place for only a few years. Many times it will appear that the boundaries look as though they are moving on the devolution settlement, but Wales is not the same as Scotland and the powers are totally different. However, in this case and at the community level, to be frank, it has nothing to do with us. We should not seek to give advice to the Welsh Assembly.

This legislation is necessary to make available the statutory procedure for this public money to be paid. Furthermore, the Welsh Assembly will not keep these matters secret from the citizens of Wales.

Lord Hanningfield

The Minister has said that he would look again at the powers of devolution to Wales. Perhaps he will let us know how they stand in relation to these areas.

Lord Rooker

I have not said anything of the kind.

Lord Hanningfield

The Minister said that he would look at this again.

Lord Rooker

No, I have not said that and I do not intend to do so.

Lord Hanningfield

I am sure that we shall return to this matter because it is relevant to my next amendment. For the moment, however, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 100A and 100E not moved.]

Lord Hanningfield moved Amendment No. 101: Page 17, line 26, leave out paragraph (c)

The noble Lord said: In moving this amendment I shall depart from my notes. I do so because they are totally inconsistent with what the noble Lord said about my last amendment. He said that in the matter of community councils we can give no directions to the National Assembly for Wales. The matter is devolved and it is up to the Assembly. However, Clause 37(6)(c) allows the Assembly to vary or revoke the grant, as we pointed out earlier is the case for the English Parliament. Surely, therefore, the response the Minister made on the last amendment means that we need to remove the power of revocation or variation from the Welsh Assembly because it would nevertheless have the power to do whatever it wishes.

I do not understand the position. Surely these two provisions in the Bill are totally inconsistent. The Minister said that we cannot tell the Welsh Assembly what to do, but here is a provision that does tell them what to do. I am absolutely sure that the Minister will not be able to respond. The reason why I am seeking more clarity in this area is because I knew that we were about to reach this amendment. What he said in his last reply will not be consistent with this provision. I beg to move.

Lord Bassam of Brighton

I shall attempt to achieve consistency across Ministers. I do not agree with the noble Lord that the provisions are inconsistent. When he has heard my response, he will realise why that is the case. We have some sympathy with the amendment, not least because it is our hope that only one straightforward determination will be needed for each financial year.

It is not our intention to use the power to revoke or vary a determination of best value grant in an arbitrary way. That is not what we seek, but we believe that it is right to be able to compensate a council that had lost a significant amount of best value grant through no fault of its own, perhaps as a result of an administrative error.

There may be circumstances when some Welsh community councils become subject to best value duties—and hence become eligible for best value grant—perhaps quite late in the day and after the initial determination of grant had been made. The power would allow a replacement determination to be made to allow them to receive grant. This provision has been included as a helpful measure, offering a degree of flexibility so that we could make an extra determination if it were to become clear that a community council had qualified to become subject to best value duties and thus required eligibility.

Lord Hanningfield

I am sorry, but the noble Lord has not answered my point. We have just pointed out on the earlier amendment that the Government have no power to tell the Welsh Assembly to publish or make available a list, but here the Bill takes the power to tell the Assembly that it can change or vary a grant. That is the point I sought to make.

The noble Lord, Lord Rooker, said that we cannot tell the National Assembly for Wales to publish a list, but we can tell them to vary the grant. I find the whole thing inconsistent and I do think the Minister has responded to that.

Lord Bassam of Brighton

I suppose it is part of the beauty of the workings of devolution. As regards powers, Parliament can choose not to give the power to the National Assembly for Wales, but if it chooses to do so, then it has to do it in a way that is consistent with the devolution settlement. This is the way the power should work.

Lord Hanningfield

I still do not understand how these two elements are separate in the devolution settlement. On a minor point such as grants to community councils, we cannot tell the Assembly to publish a list, yet we can tell it to make variations to the grant. I am afraid that I do not accept these responses.

Lord Bassam of Brighton

This is a matter of choice for the National Assembly for Wales. The power is in place. How the Assembly chooses to exercise it is a matter very much for itself.

Lord Hanningfield

I hear what the Minister has said, but I am sure that we shall return to these issues. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 agreed to.

Clause 38 [Grants in connection with designation for service excellence]:

Baroness Hamwee moved Amendment No. 101A: Page 17, line 35, leave out "any of the following

The noble Baroness said: I had asked for this amendment to be grouped with Amendment No. 101B as it makes no sense without it. Will the Minister be happy for me to speak to both amendments? I cannot say anything about Amendment No. 101A on its own.

Lord Rooker

Although the amendments are not together on the groupings list, I shall be quite happy to deal with them both.

Baroness Hamwee

I am grateful. An error has crept in somewhere in the procedure. In effect, Amendment No. 101A is consequential to Amendment No. 101 B, which questions the ability of the Secretary of State or the Welsh Assembly to make a grant for applying for designation based on excellence—here I suppose that we are talking about beacon status under the CPA regime—and a grant for rewarding the award of such a designation.

Earlier the Minister said that grants are made on the basis of need, but clearly that does not extend to this clause. It seems quite extraordinary that here we are allowing for the giving out of goodies to those who have been good boys and girls. That is more or less what this provision amounts to, other than the provision allowing for expenditure on disseminating information about best practice, which I am sure we would all support.

This clause was not dealt with at all in the Commons and I think it proper to ask the Government to justify its inclusion. I beg to move.

6.30 p.m.

Baroness Hanham

I support the questions posed to the Minister by the noble Baroness, Lady Hamwee. The clause raises the question of how much it costs to become a beacon or best value authority. If the clause is what the Explanatory Notes say it is, it enables the Government to repay to a local authority the costs that it has incurred to achieve beacon status or to become designated as "excellent".

That is an extraordinary admission of the folly and the amount that must be done to achieve such designations. We are always discussing the cost to local authorities of regulations and of various government squeezes. The clause seems explicitly to underline that. If the Government are to be able to pay to a local authority the money which all that has cost it, what are we talking about in terms of grant? Is it expected that the grant will be as much as it needs to be to achieve the status or to carry out the duties?

I am bound to say that when I scoured the Bill I missed the implications of the clause. As the noble Baroness, Lady Hamwee, said, it requires explanation so that we know exactly what is being proposed. On grant towards expenditure incurred, every other local authority which does not achieve excellence or best value status would also have spent that money. So why is it only those who achieve that status—they will receive a reward anyway for such a designation under paragraph (b)—that will receive grant for the costs incurred? Explanations are required for the clause and I congratulate the noble Baroness, Lady Hamwee, for having picked it up.

Lord Rooker

I shall break the habit of a lifetime and the commitment I gave earlier today. I shall not only do what I agreed to for Amendments No. 101A and 101B, but I shall also put a few words on the record about the clause. It may be more appropriate if I speak first to Clause 38 and then to the amendments.

Clause 38, which applies to England and Wales, provides that the Secretary of State or the National Assembly for Wales may pay grant to best value authorities, subject to any best value duty, in relation to any expenses that they have incurred in applying for the award of a designation based on excellence in provision of services. That was one sentence, by the way. Where a best value authority is awarded such designation, the power will also enable grant to be paid as a reward for such designation and in relation to expenses incurred or to be incurred by the authority in disseminating information about best practices.

The background to this is the beacon council scheme, introduced in 1998, to identify centres of excellence from which others can learn. Authorities are awarded beacon status on the strength of excellence in the delivery of specified services, supported by good overall performance and effective plans for dissemination. The scheme is open to all best value authorities in England, but subject to any of the best value duties in Sections 3 to 6 of the Local Government Act 1999. Beacon authorities are currently awarded a retrospective grant to cover the costs incurred in disseminating information about their best practices. Grants are paid by the Secretary of State under the special grant-making power of—here we go—Section 88B of the Local Government Finance Act 1988.

The local government White Paper confirmed the Government's commitment to the long-term future of the beacon scheme. Wales does not currently operate a beacon scheme, but may introduce something similar in the future. Clause 38 reflects the Government's long-term commitment to the scheme by establishing a specific legislative basis for paying grant to beacon authorities. It will also enable the Government to provide financial incentives to encourage participation in the scheme through grant relating to expenses that authorities have incurred in applying for beacon status and grant as a reward for gaining beacon status. That is why the clause is in the Bill.

I shall now deal with Amendment No. 101A. It relates to Clause 38, on which I have just given some background information and which provides for grant to be paid to best value authorities. Under Clause 38, grant can be paid for any of three purposes: first, as a grant towards expenditure incurred in applying for the award; secondly, as a reward for being awarded a designation; or, thirdly, as a grant towards expenditure incurred in disseminating information about best practices.

Amendment No. 101A would mean that where an authority was awarded a designation, grant would be payable both as a reward for being awarded a designation and towards expenditure incurred in disseminating information about best practices. Central government would not therefore have the discretion to restrict the grant to only one of the above purposes, which we may want to do.

Under Amendment No. 101B, which relates to the same clause, any grant payable under Clause 38 would be payable only for the third purpose—as a grant towards expenditure incurred in disseminating information about best practices. Central government would therefore not have discretion to pay grant for either of the other two purposes listed above. That could significantly limit policy options—for example, if it were thought that paying grant towards expenditure incurred in applying for an award would be a necessary incentive to encourage authorities to take part in the scheme.

I realise that this is a special, one-off provision, as it were, but I hope that what I have said about the two amendments and the background to the clause explains why the clause is in the Bill, which was a legitimate question. I hope that I have satisfactorily answered it.

Baroness Hanham

I want to come back on one question; again, to confirm what the Minister said. In Clause 38(1)(a), am I right that the grant towards expenditure incurred by the authority relates only to those designated as best value authorities? Would it be open to the Minister to decide that authorities which had not achieved that status ought to receive some sort of grant to enable them to apply for or advance their rationale for such status? The Minister may have answered that, and I apologise if I missed it.

Lord Rooker

True, it was wrapped up in my explanation of the clause, but any authority can receive a grant under paragraph (a)—that is, for the cost of applying for designation. So it is not just for those that are successful. Otherwise, there would be no incentive for authorities to apply. If they thought that they would incur the cost of applying if they were unsuccessful, they would be wasting that cost, so any authority can receive a grant under paragraph (a) for the cost of applying for the designation.

Baroness Hanham

I am sorry to be tiresome about this, but, as far as I understand it, a best value authority is an authority that has achieved best value status. The clause states: of the following to a best value authority". That suggests to me that the grant is payable only to an authority that has achieved best value status, not, as the Minister just said, any authority that applies for that status. That matters because, as the Minister just said, not to be able to give grant to any authorities applying would discourage them from doing so. But I do not think that that is what the clause states. There is a bit of nodding going on in the back row; I think that I am right to say that it would be payable only for expenditure incurred by an authority that had achieved best value status.

Lord Rooker

That is the shorthand of local democracy, if you like. The noble Baroness is quite right: if we read the first line of the clause—line 35—it states: The appropriate person may pay any of the following to a best value authority". But it applies to those who are applying for beacon status. If a best value authority applies for beacon status but fails to achieve it, it may receive grant under paragraph (a) for the expenditure incurred in making that application. But it must be a best value authority in the first place. Any confusion is my fault, because of the way in which I gave my previous answer, but that concerns best value authorities applying for beacon status.

Baroness Hamwee

I am grateful to the Minister for putting some flesh on the bones of the provision. As I understand it, the definition of a best value authority in Clause 123 applies in the clause, as it does throughout the Bill.

As I said, I understand the desirability of grants to assist the dissemination of best practice, and that the third purpose in Clause 38(1)(b)(ii) is necessary to trigger Clause 38(1)(b)(i)—the reward. It is questionable whether there should be a payment to reward the designation of beacon status, which carries with it various other rewards that one would have thought were perfectly adequate.

I do not accept the policy of financial incentives to apply to beacon status, but I am glad that we at least understand what are the proposals. We have been told that there is currently not only a grant-making power but a practice under our old friend, Section 88B, for the dissemination of best practice, so I am not persuaded of the value or desirability of the clause. However, I shall read carefully what the Minister said and, for the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 101B not moved.]

Lord Hanningfield moved Amendment No. 102: Page 18, line 5, at end insert— ( ) Any grant paid under this section shall be reported to Parliament as a special grant report pursuant to section 88B of the Local Government Finance Act 1988 (c. 41) within not more than five months of such grant being made.

The noble Lord said: We thank the Minister for his explanation of how he envisages the clause working—how best value and beacon status may be supported and that authorities will be able to apply for expenses in trying to achieve that status.

We have debated whether the clause is good, but we are here trying to add to the clause by stating that, although we agree with the Government's recognition that the application process can add to expenses, we are concerned to maintain the transparency of any grant paid to best value authorities for service excellence by ensuring that it is scrutinised by Parliament. That is the only way to ensure the transparency and credibility of such transactions. Importantly, that is also the best way to provide a clear incentive to those councils striving to improve. Can the Minister assure us that the grant system will operate in a clear and accountable manner? I beg to move.

6.45 p.m.

Lord Rooker

The answer has to be "yes". The noble Lord deserves a better explanation. The amendment would require any grants made under Clause 38 to be reported in a special grant report under the now—I should not say "infamous"—Section 88B of the Local Government Finance Act 1988 within five months.

This would not be workable because Section 88B does not apply to English parish and town councils or to Welsh community councils. It would not therefore be possible for a determination made under these clauses in relation to those bodies to be reported. It would also represent a significant increase in the scope of Section 88B.

In so far as principal local authorities are concerned, Amendment No. 102 would raise the possibility that a grant made under the new power could be struck down after it had been paid, by a later decision made by Parliament—I referred to this in relation to a previous amendment. Apparently the amendment would also apply to Wales and the requirement for parliamentary approval would be inconsistent with the devolution settlement.

The absence of a special grant report under Section 88B would not mean that Parliament would no longer be able to consider grants under Clause 38, as indeed is the case under the other clauses that we debated. Parliamentary approval will still be needed to the ambit of the relevant department's request for resources and, in England, Treasury consent will also be needed. In Wales, appropriate safeguards will be put in place.

In addition, the grants made under Clause 38 are likely to be quite small or to be repeated and therefore the need to continue to rely on the grant-making powers under Section 88B would be cumbersome. Furthermore, Amendment No. 102 would apply to Wales, and the requirement for parliamentary approval would be wholly inconsistent with the devolution settlement.

I hope that I have provided the noble Lord with an answer. The points that I have made about Section 88B being cumbersome and about the fact that Parliament knows what is going on, as I indicated in relation to Clause 36, should be taken in the round. No secret grants will be paid. No grants will be paid either without Treasury approval or without proper procedures in the Welsh Assembly, and they will be publicly listed in due course.

Lord Hanningfield

I thank the Minister for his comments. I do not intend to return to the discussion about devolution of powers to Wales, but this point also relates to a further amendment. This is a new policy and a new initiative. The point relates to wider publicity, if that is the right word—if there has to be Treasury approval and so on. The accountability that we should like to see is not provided.

Lord Rooker

No, it is even worse than that. I am informed that Treasury approval is not required under Clause 38, merely under Clause 36.

Lord Hanningfield

So it is worse. As I said, we support the policy. It is merely a question of the process of making it public, visible and accountable. Even if it does not apply to parish and town councils, because powers are not included in the previous Act, surely something could be done to make the process more transparent and visible.

Lord Rooker

I may be wrong—I have no experience of local government save for the period when I was a co-opted member of an education committee 30 years ago—but my experience is that local government is not slow in coming forward when grants are available. In fact, sometimes—I shall not go down the road of a current issue—local authorities over-egg the pudding. When changes are made to grant systems, it is suddenly discovered that all kinds of things fall out of the cupboard. The treasurer will say to members: "Let's get in with this little lot before they make changes". So I honestly do not think that local government will be unaware of the changes being made in this legislation.

I accept the point in relation to the 8,000 parish and town councils—although we have means of communicating with them, and many members of parish and town councils are members of district councils as well. The intention is not to keep quiet about this. I am sure that the LGA will make sure that its members are fully up to speed on the grants that are available.

Lord Hanningfield

Of course, it would not be the LGA looking after the town and parish councils.

There is a theme that we might want to reflect on before we go further in our debates on the Bill; namely, how we deal with parish and town councils. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 38 agreed to.

Clause 39 agreed to.

Clause 40 [Loans by Public Works Loan Commissioners]:

Baroness Hanham moved Amendment No. 103: Page 18, line 15, after "appropriate," insert "by order

The noble Baroness said: This amendment would limit the Minister's ability to make payments to the Public Works Loan Commission without an order of approval being laid before Parliament.

Clause 40 brings us to the subject of overhanging debt—the amount of money owed to the Public Works Loan Commission as a result of borrowing by a local council to provide housing. It relates also to the amount of debt and to paying it off.

In another place, it was suggested that the provision of such debt for 2003–04 was currently more than £600 million. That is a substantial figure. It is substantial, too, in the sense that the Secretary of State or the Minister will be making payments to the Public Works Loan Board for individual authorities, as I understand it, as they transfer their housing stock to registered social landlords and consequently ensure that the debt is written off.

Part of the problem as regards the transfer of housing to registered social landlords is that, sometimes, not all of it is transferred and some remains with the council. The amount of money that the Secretary of State is proposing to pay off will be different in proportion depending on which authority is involved.

It seems to us that, where this will happen and where the Secretary of State will have the powers to pay this money to the Public Works Loan Board, it is right that he should do it only with the approval of Parliament.

A further point arises in relation to Clause 41; namely, the right of the Minister and of authorities to use money from one good authority to pay off the debts of an authority that is not quite so well run. Some authorities do not have debts; they are prudent and debt free. We discussed these in relation to the pooling arrangements earlier in the Bill.

I hope that the Minister can accept an amendment along these lines. This amendment may not be brilliant, but it would ensure that Parliament would see what was being paid to the Public Works Loan Board, on what basis, and on behalf of which authority. I beg to move.

Lord Rooker

We believe that the amendment is unnecessary. It is based on a concern that the overhanging debt payments are not open to scrutiny. It seeks to reduce the Secretary of State's ability to repay the appropriate amount of an authority's debt and to hamper a transfer, voted for by tenants, taking place successfully. That is the summary of the points that I wish to make. However, in view of the remarks of the noble Baroness, I want to place rather more on record.

Clause 40 allows the Secretary of State to assist one or more English local housing authorities to meet debt liabilities through a payment to the Public Works Loan Commissioners. Amendment No. 103 would require the Secretary of State to make an order before making such a payment.

Clause 122(4) would require such an order to be made by statutory instrument. The requirement to make an order before a payment could be made could prevent the Secretary of State from paying the correct amount in respect of an authority's overhanging debt following a stock transfer.

Members of the Committee will be aware that the Office of the Deputy Prime Minister is quite open about housing transfer programmes. We publish on the ODPM website a list of those authorities that apply for a place on the housing transfer programme and we announce to Parliament those that secure a place. Once a transfer takes place, details of the transfer, including the number of dwellings, the sale price, private finance and overhanging debt payment are also included on the website and are freely available from the Office of the Deputy Prime Minister.

Overhanging debt payments were originally recorded in Her Majesty's Treasury's annual accounts. Since 2002–03, they have been recorded in the annual accounts of the Office of the Deputy Prime Minister. Therefore, payments are open to scrutiny by Parliament and by the National Audit Office. Were any such payments to be made by the National Assembly for Wales, they would be shown in the Assembly's accounts. There are no secrets about this.

The actual amount of the overhanging debt which the Secretary of State would repay is known only at the very last moment when the housing stock transfer takes place. As a minimum, the rate for new loans from the Public Works Loan Board is reviewed weekly, with any changes impacting on a local authority's debt redemption premium and therefore on the level of an overhanging debt payment. If the amount had to be specified in an order, which would be made and would have to be laid before Parliament at least 21 days before coming into force, the amount of the debt repayment specified in the order may not be the actual amount of overhanging debt that needed to be repaid.

The payment specified in such an order might be insufficient, leaving the authority with an outstanding debt or, indeed, an excessive amount. We should be unable to consent to the transfer if the order had not been made before the transfer, as the authority would be unable to meet its housing debt obligations and would remain eligible for housing revenue account subsidy. The purpose of Clause 40 is to remove that possibility, as we believe it is inappropriate for an authority with no housing to be in receipt of ongoing housing revenue account subsidy.

As I said, I believe that the amendment is based on the concern that overhanging debt payments are not open to scrutiny. I hope that I have said enough to assure the Committee that they are indeed fully open to scrutiny.

Baroness Hanham

I thank the Minister for his reply. I understand his point; namely, that the process is open to some scrutiny. But there is no better scrutiny than an order being laid before Parliament.

The trouble with these debt repayments is that it is fairly arbitrary as to which authorities are having debts paid off. Some substantial debts are being paid off. A question also arises as to where the money is coming from that the Secretary of State is using to pay off the debts. There is a suspicion that some of the money—money from pooling, for example—might find its way into those coffers. There is more than just a little concern about this.

The Chartered Institute of Public Finance and Accountancy has said that the playing field is not level and that taxpayers' money is being used in a discriminatory fashion—that is, to pay off debts. It has stated that there is also a measure of perverse incentive in the proposal, as it benefits authorities that have not maintained their housing stock in the past to a standard where the market value exceeds the historic debt; that is, authorities which, by definition, have let their housing stock run down. They will benefit from having debts paid off when they have not expended sufficient money on their stock for tenants to wish for them to be maintained.

I shall not pursue this amendment, but the Minister might like to take up the comment from the Select Committee Report which was in the evidence given by the Chartered Institute for Public Finance and Accountancy. He may have more to add on this matter.

7 p.m.

Lord Rooker

Perhaps I may put on the record that I resent the word "arbitrary". Stock transfer takes place only after a tenants' vote. There is nothing at all "arbitrary" about the issue. It is well known that the Government have a policy. There are three ways to get the extra money to meet the decent homes standards—stock transfer, armslength management organisations or private finance initiative. They are the only ways that local authorities will receive money for meeting decent standards. That is it. The reality is that they will not get dollops of money to continue badly-managed council housing.

In answer to what the noble Baroness said about CIPFA, in commenting on the draft Local Government Bill, it suggested that these provisions will lead to greater cost to government. However, CIPFA was one of the consultees when the DTI—as it was—issued its consultation paper in August 1999, which outlined the proposed options and arrangements for making overhanging debt payments. Its responses made no criticism of the principles of the proposal in respect of overhanging debt, nor any of the suggested routes for dealing with housing debt. Rather, its comments were centred on technicalities and made no mention of the cost implications to government. That is how I understand the position. I am always quite happy to receive further advice and particulars.

There is some suspicion about where the money is coming from. We are quite open about that. The noble Baroness spoke about some scrutiny. I have said how the amounts are made available—the stock and the dwellings. The tenants are balloted and the amounts follow. The ballot is done in public. It is not a secret ballot. It is a secret ballot for the tenants, but everyone knows about the ballots arid will report on them. So it is available to total scrutiny, not just some scrutiny.

Baroness Hanham

I thank the Minister for his reply. What is the total amount that is likely to he written off in the year 2003–04? I understand it to be a sum between £600 million and £800 million. I do not know whether the Minister knows the answer to that. I raised the matter in my opening remarks.

Lord Rooker

The provision for the current financial year of 2003–04 is £110 million.

Baroness Hanham

I thank the Minister for that. It is not quite as was said in the other place, but never mind. I leave the matter there. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Maddock moved Amendment No. 104: Page 18, line 17, leave out "a" and insert "each

The noble Baroness said: In moving Amendment No. 104, I shall speak also to Amendments Nos. 106 and 107. These are all amendments to Clause 40. As the Government and the Minister in his recent statements have made clear, and particularly when the draft Bill was published, this clause and the following clause facilitate the transfer of council housing to registered social landlords. I have no objection to that. However, I think we should look carefully at whether there is a level playing field and whether people are being given the right choice. The Bill is about local councils being given a choice. In fact, this is one of its most restrictive parts. If local authorities want to bring their houses up to a certain standard, this is one of the choices they have. It is the same for the tenants.

Clause 40 enables the Secretary of State and the National Assembly for Wales to make payments to local authorities in England so that they can meet the outstanding overhanging debts which we discussed in the previous clause. Clause 40 is about debts that arise from the Public Works Loan Commissioners. Sometimes early repayment of such loans attracts premiums or penalties. The Bill enables the Secretary of State or the National Assembly for Wales to meet these payments.

We discussed set aside on capital receipts earlier in the Bill. That is how the system is managed at the moment. In 1999 arrangements were made to pay overhanging debts. I am grateful to the Minister for the letter he sent me on these issues following Second Reading. In it he states that, since arrangements were put in place, £824 million has been paid to 10 local authorities for whole stock transfer.

That is a considerable amount of money. There may be considerable amounts involved in the future. To put the matter into context, basis credit approvals to all local authorities in England amounted to only £793 million in the year 2002–03 and £852 million is the estimate for the year 2003–04.

The noble Baroness, Lady Hanham, talked about discussions in the Select Committee of another place. One matter that came out from the National Audit Office was that this system of improving the property through large-scale voluntary transfer costs the taxpayer £1,300 more per property than if they remained with the local authority.

I have already mentioned the other problem of the denial of choice for tenants. The choice is not very real when one looks at the financial matters that surround it.

The inclusion of this power moves the Government further away from the level playing field that we would prefer to see. Therefore, we have tabled these amendments. The Government argue that payments made from a sum of money requested on an annual basis come from the Treasury as part of the Office of the Deputy Prime Minister's annual managed expenditure. They are made on the basis that it would otherwise have to pay ongoing housing revenue account subsidy to the local authorities. So, in practice, the overhanging debt payment is treated as a one-off payment, discharging that liability.

One can—as are the Government—pay £X million to an individual authority, or one could pay all authorities some money. We seek in these amendments to do that in order to make the situation fairer. The reduction in the liability to pay ongoing housing revenue account subsidy is the same amount.

I do not expect the Minister to accept these amendments for one moment because he has made it quite clear that the Government want to make sure that local authorities are pushed into this way of dealing with their housing. We do not agree with him and would like to see much fairer treatment across local authorities and that we do not have some local authorities getting large amounts of money. The advantage of what we propose is that it has the potential to release revenue streams within housing revenue accounts that could then be used under the prudential framework introduced in Clauses 1 to 6 and enable local authorities to finance renovation of their own stock. I recognise that the Minister will not approve of that, but I think that many people in local government would support a fairer use of this money.

If the Government wish to take powers to repay outstanding debt loans, we believe they should be applied equally between local authorities, regardless of whether a decision has been made to transfer the housing stock. The whole matter will get even worse when regional boards are distributing money to local authorities. At the moment, the Minister has said there are three ways in which people can deal with their housing stock—large-scale voluntary transfer, arm's length management organisations and PFIs. It seems to us that councils that go down the route of large-scale voluntary transfer get an advantage, and we want to see a fairer playing field. That is the purpose of these amendments. I beg to move.

Lord Bassam of Brighton

The noble Baroness gave an interesting speech. I know she has a great passion about these matters—housing being one of her interests. I appreciate where she is coming from on this issue, but there is a disagreement between us. We must acknowledge and accept that.

The noble Baroness has described the effect of Clause 40. In our view no amendment is required because the clause allows the Secretary of State, or in Wales the National Assembly, to make payments in respect of all authorities' debts, in proportion to those authorities' debts at the time.

As is understood by the Committee, the policy behind Clause 40 is to assist individual authorities who transfer their housing stock to a registered social landlord, but need assistance to meet outstanding housing debt liabilities where the receipt is insufficient to do so.

I think the amendments are based on a misunderstanding that we are somehow giving favourable treatment to those authorities which transfer their housing stock and for which we make an overhanging debt payment. That is not the case. My noble friend explained that there are three ways in which local authorities can take forward their policy in terms of investing back into the stock through ALMOs, through the PFIs or through this route. We think that provides the basis of fair and reasonable choice.

We say that clearly all authorities are treated on a fair basis. It is up to the local authority to choose whether it wishes to retain or to transfer its stock, based on a rigorous option appraisal which will involve tenants and other key stakeholders. If an authority or its tenants choose to retain its stock, the Government, though the housing revenue account subsidy, continues to ensure that a local authority can meet the cost of servicing its attributable debt.

However, where a local authority has transferred its stock, we believe it is inappropriate for an authority that has no housing to remain in receipt of ongoing housing revenue account subsidy. That would make a nonsense of the scheme.

That approach would be undermined by the amendments which are offered forward as a scheme to remove the Secretary of State's broad discretion and to require us to make payments to reduce or extinguish all English authorities' debts where the Secretary of State considered it appropriate to make such a payment for one authority.

The amendments would similarly constrain the National Assembly for Wales. It is a policy matter for the Secretary of State, or in Wales the National Assembly, to decide whether and how to contribute towards meeting local authorities' debt liabilities. The Secretary of State and the National Assembly should have the discretion to decide whether to make such a payment, or whether to leave it to authorities to use their own resources to pay off debts if those resources are sufficient. The amendments would of course take away that discretion.

Clause 40 is drafted sufficiently broadly to allow us to reduce or extinguish authorities' debts in other circumstances. By constraining the Secretary of State to reduce all authorities' debts proportionately, if he wished to reduce one authority's debts, the amendments would effectively prevent the use of the powers in Clause 40. So there is a clear divide here in policy terms. I have set out clearly our position. While I respect what the noble Baroness has said with regard to this, we simply disagree. We do not think she has the matter right.

Baroness Maddock

I thank the Minister for his not totally unexpected reply to my amendment. One issue he failed to address was the extra cost per property in doing it that way.

Lord Bassam of Brighton

I have the response to that. The £1,300 per dwelling was over 30 years and represents the cost of private finance. That comes from the NAO report and is in that sense a hypothetical calculation. Our argument is simple: over time, the benefits of the housing transfer, including bringing forward works and better performance, outweigh the costs. That is how we see it and that is how we think it will work in practice.

Baroness Maddock

I thank the Minister for filling us in on that matter. Does that mean that we do not take an awful lot of notice of National Audit Office reports? He seemed to dismiss it rather lightly.

I still think there is a large question mark here over whether some local authorities should end up in the position—

7.15 p.m.

Lord Bassam of Brighton

I invite the noble Baroness to agree at least to the proposition that the sum over 30 years which I described is pretty good value. Surely she is not saying that it is not.

Baroness Maddock

It was not that; it was the Minister's throwaway comments about the National Audit Office. However, let us forget that; it is not important. It is what comes of making throw-away comments to oneself—it is not always a good idea in such circumstances.

I appreciate that the Government approach the matter from different points of view. I think that there is a case to be made for creating a more level playing field for local authorities that are trying to improve their stock. Large sums are involved. That is not necessarily the fault of local authorities—very often it occurs because the housing is located in parts of the country with much lower housing costs. That is one of the reasons why their stock is not in good condition. I also remember the years when many local authorities were starved of the ability to spend money on housing. So the history is not simple.

I certainly do not think that local authorities should be penalised because they find themselves in that situation. However, I am concerned that some of them which do find themselves there are able to get out of it more easily than others which have been trying desperately to improve their properties. We may return to the issue. Given the Minister's comments, I may be able to improve the amendments. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 105: Page 18, line 18, at end insert— ( ) Any payments made by the Secretary of State under subsection (1) must not be financed by monies recouped from debt free councils via capital receipts.

The noble Baroness said: In moving Amendment No. 105 I shall also speak to Amendment No. 110. However, I shall not do so if that mucks up the Minister's speaking notes.

Lord Rooker

We have gone much more slowly than we should have today. I want to pull stumps. I shall not move that we adjourn until we agree to Clause 42 stand part. Amendment No. 110 will therefore be the last amendment that we debate today. After that, we will still have to agree that the clause stand part. However, given that there are only four groups of amendments left, I am quite happy to mix and match. If the noble Baroness wants to speak to Amendment No. 110 in moving Amendment No. 105 I will reply to them together. I have not read Amendment No. 110 but I shall now.

Baroness Hanham

It will be very enlightening. The purpose of the two amendments is to ensure that the capital receipts of debt-free authorities—which the Committee discussed last week, and which cannot benefit from these provisions—are not taken by the Secretary of State to be used to pay off the debts of perhaps less prudent authorities.

The first purpose of the amendments is to enable the Government to spell out in detail the circumstances in which they might intend to use the powers under this section. The Liberal Democrat amendments have probed, as we have in other clauses in the Bill, why the Government feel the need for selective powers at all and how we can prevent injustice and political decision-making. However, it is vital that the objective criteria that will govern the exercise of these powers are published. It is simply not good enough for the Minister to say—I do not know whether he is saying this—that these are reserve powers.

The amendments specifically attempt to prevent what would be an abuse of power—for the Government to seize the capital receipts of well-run, debt-free councils and use them to bail out the less prudent. Not only would that be wrong in principle, it would create a moral hazard for both good councils and bad ones. Why should any council seek to be a debt-free council and operate responsibly if it feared that its reward would be to see its capital receipts, or at least a proportion of them, creamed off? I beg to move.

Lord Rooker

A quick perusal of my speaking notes answers why the noble Baroness, Lady Hanham, has done me the favour of speaking to Amendment Nos. 105 and 110 together. My speaking notes for the two amendments are nearly identical. I can therefore comfortably cope with the grouping. However, and by the way, I do not want to give the impression that I think that the Opposition are speeding up. I still think that we have gone very slowly today.

Baroness Hanham

It has been perfectly normal.

Lord Rooker

No; we have gone very slowly. There are only three more sittings and we want to scrutinise the Bill properly.

Clause 40 allows the Secretary of State to assist one or more English authorities to meet debt liabilities through a payment direct to the Public Works Loan Commissioners. Both in Committee and on Report in another place, and through this amendment, there has been a suggestion that the pooling provisions in Clause 11 could apply to housing transfer receipts. It has also been suggested that there is a direct link between the money paid in respect of overhanging debt and the money likely to be collected through the pooling proposals. That is mistaken.

For the record, I hope that it is now recognised that receipts from a large-scale voluntary transfer by an authority that is debt free will not be subject to the pooling provisions. When a housing transfer takes place we expect the local authority to use the receipt as provision against any housing attributable debt. Any receipt over and above that will be subject to the already existing large-scale voluntary transfer levy, which is currently set at 20 per cent. As is prescribed in Section 136 of the Leasehold Reform, Housing and Urban Development Act 1993 this levy is paid into the Consolidated Fund.

Resources for making overhanging debt payments are not held within the Office of the Deputy Prime Minister provision for capital allocations. They are requested on an annual basis from the Treasury as part of the ODPM's annually managed expenditure and will not be found from the pooled receipts. That reflects the ODPM's liability to pay ongoing housing revenue account subsidy to a local authority with housing attributable debt which in practice the overhanging debt payment discharges. It also reflects the difficulty in knowing the level of resources required in advance. As such, the resources are not available to fund capital expenditure.

Since arrangements were put in place in December 1999 we have paid £824 million to the Public Works Loan Commissioners in respect of whole stock transfers in 10 local authorities. All that has taken place prior to proposals for pooling of capital receipts in this Bill.

We have made clear during passage of the Bill that redistribution is a fundamental principle of housing capital finance and that that can be delivered through pooling. We have always taken the view, as have other administrations, that it is right for a portion of the proceeds from the sale of council housing to be available for use in areas of greatest need. Recycling those resources back into housing means that other authorities with lower capital receipts will receive a fair share of housing resources where their need for housing investment is greater. For that reason, when the new capital finance system comes into force, the present system of set-aside will end, to be replaced by an explicit pooling system. That is the simplest way of providing the additional resources to contribute to housing investment nationally. It is not a reserve from which overhanging debt payments will be made.

I hope that the noble Baroness will accept that explanation. We have already debated Clause 11, but I fully accept that it is controversial and that we will return to it on Report. The above remarks are equally applicable to Amendment No. 110, which seems to be word perfect the same as Amendment No. 105.

Baroness Hanham

I thank the Minister for that reply which I shall want to read carefully before pursuing the matter further. The proposals on housing finance, how the stock transfer body is being dealt with, the payments to the Public Works Loan Commissioners and the new arrangements for improving set-aside are a major aspect of the Bill. The trouble is that the proposals are splattered among a number of clauses. I should therefore like to examine the issue more closely. I think that there are issues to which we need to return, particularly how the housing finance will work. I am grateful to the Minister for his explanation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 106 and 107 not moved.]

Clause 40 agreed to.

Clause 41 [Payments towards local authority indebtedness]:

[Amendment No. 108 not moved.]

Baroness Maddock moved Amendment No. 109: Page 18, line 40, leave out "a" and insert "each

The noble Baroness said: The amendments to Clause 41 are similar to those to Clause 40 except that of course Clause 41 is dealing with debts that are not by the Public Works Loan Commissioners. Otherwise they are the same. I do not intend to repeat my earlier remarks. I suspect that the Minister will also give me a fairly similar reply. I beg to move.

Lord Bassam of Brighton

The amendment is the same, and I am afraid that my speaking note is identical—in the words of my noble friend Lord Rooker, they are "word perfect the same". We simply disagree about the mechanism and about the approach which the noble Baroness is offering. We do not think that the amendments are relevant or will help as she suggests. I am sorry, but that is it.

Baroness Maddock

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 110 to 112 not moved.]

Clause 41 agreed to.

Clause 42 agreed to.

Lord Rooker

Before I move that we adjourn, I should like to make a plea. The next group of amendments, on Clause 43, comprises one dozen amendments.

Baroness Hanham

They will not be separated.

Lord Rooker

That is my point. I am referring to tomorrow's sitting.

Baroness Hanham

Yes.

Lord Rooker

I am not talking about the subsequent sitting. I want to give proper replies. If the amendments are degrouped it causes enormous pressure for staff. All I ask is that, if they are separated tomorrow, that should be done as early as possible.

Baroness Hanham

No—

Lord Rooker

The noble Baroness might awake in the middle of the night and think, "I think I will separate some of the amendments after all". I do not want to curtail her decision. All I am saying is that, if they are separated, the earliest possible notice of that would be highly beneficial. There is no need to make a commitment on it; I simply make that plea. This may be a convenient moment for the Committee to adjourn until 3.30 p.m. tomorrow.

The Committee adjourned at twenty-seven minutes past seven o'clock.