Local Government and Housing Bill

HL Deb 23 October 1989 vol 511 cc1149-252

3.25 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Hesketh.)

On Question, Motion agreed to.

Clause 64 [Application of and orders under, Part V]:

Lord McIntosh of Haringey moved Amendment No. 56A: Page 71, line 14, at beginning insert ("Subject to subsection (1A) below").

The noble Lord said: My Lords, I should like to speak also to Amendment No. 56C. The amendment arises out of the consultation document on local authorities' interest in companies which was received by the local authority associations last Tuesday, 17th October. I apologise to the House for the fact that the amendments are starred, indicating that they are new or have been amended, but when I say that they arise out of that consultation document which has been available for less than a week, noble Lords will understand the difficulty that we have in keeping up with and responding to the flood of consultation documents which come from government and with which local authorities and their associations are expected to be up to date. Having made that slightly ungracious point, let me say that in many ways the consultation document contains elements which we welcome.

In particular, we have been concerned with the status of housing associations in the part of the Bill which deals with controlled and influenced companies and which seeks to place restrictions on companies which are controlled or influenced by local authorities.

The original exemption for housing associations was in terms of registered housing associations; that is, housing associations registered with the Housing Corporation. There are of course a number of other types of housing association, which in our view should also be exempt from the provisions of Part V. We are talking here about unregistered housing associations and what are called "care and repair" organisations.

The National Federation of Housing Associations has been in contact with the Department of the Environment about this matter. It seems to us to be a logical piece of tidying up of the legislation and a removal of an unnecessary restriction on the housing association movement. I hope that the amendment, or something similar, will secure the support of the Government and the House. I beg to move.

Lord Ross of Newport

My Lords, I support what the noble Lord, Lord McIntosh, said. My name should probably also be attached to Amendment No. 56C. I hope that the Government will accept the amendments which seem to be highly desirable. I should have thought that the Government would have no difficulty in accepting them.

Lord Hesketh

My Lords, the amendments would exempt from the provisions of Part V all housing associations within the meaning of Section 1(1) of the Housing Associations Act 1985 and bodies established by such associations for the purposes mentioned in Section 4(2)(e) of that Act; that is, providing repair and improvement services.

As your Lordships know, both in another place and in the Committee of this House, we stated our intention that all housing associations registered with the Housing Corporation will be exempted from the provisions of Part V. The consultation paper on Part V which we sent to the noble Lord, Lord McIntosh, and the local authority associations last week confirmed that such a direction would be made and I think we can provide no firmer an indication of our intentions than that. I have explained before that we do not believe that it is appropriate for the exemptions to be put on the face of the Bill. If such things are enshrined in that way it removes the flexibility to add to the list without contemplating primary legislation. That would just not be practical and, indeed, not necessary. We have given a firm undertaking to exempt housing associations registered with the Housing Corporation.

The amendments, however, seek to take that exemption wider by including all housing associations, whether registered with the Housing Corporation or unregistered. We had good reason for not including all unregistered associations in the exemption. The definition of a housing association is wide. It covers any body which prohibits the division of resources between its members, and which includes among its objects certain activities in connection with housing. There is no limit on the other activities that may be included, and no requirement that the housing activities should actually be pursued. To exempt any organisation that meets this definition would therefore provide a major loophole.

The same problem faced us in attempting to isolate the voluntary bodies that should be exempted, given the wide interpretation that can be given to a voluntary organisation. We have, in fact, arrived at a suitable set of criteria whereby we can provide a wide exemption for such bodies. This is set out in the consultation paper, and I will be explaining this in detail when we come to Amendment No. 71 in the names of the noble Lords, Lord Hayter, Lord Ross of Newport and Lord McIntosh of Haringey. One of the main qualifications for such exemption will be that the body should be established solely for charitable purposes. I am happy to say that I understand from the National Federation of Housing Associations that it feels that, given this and the other criteria which I will be setting out when I speak on Amendment No. 71, the unregistered associations which it had in mind in contemplating this amendment would find themselves exempt.

We believe that this is a satisfactory solution to the concerns reflected in the amendment and I ask the noble Lord, Lord McIntosh, to consider withdrawing it.

Lord McIntosh of Haringey

My Lords, I am grateful for that response which I shall have to read carefully. It is an improvement to have the assurance which we have been given that charitable housing associations, even if they are not registered with the Housing Corporation, will be exempted. That goes a long way towards meeting the concerns expressed in the amendments, as the Minister said.

Without giving any undertaking that we might not wish to come back at a later stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.30 p.m.

Lord McIntosh of Haringey moved Amendment No. 56B: Page 71, line 14, after ("company") insert ("whether or not made the subject of a direction under section 66(1) below").

The noble Lord said: My Lords, in moving Amendment No. 56B, I wish to speak also to Amendments Nos. 59A and 62A. We have already started to discuss the issue of exemptions from Part V and the definitions of controlled and influenced companies. We spent a great deal of time in Committee, as did honourable Members in another place, discussing the nature of exemptions from Part V of the Bill.

In these amendments we propose something that we tried to do in another way in Committee. We indicated at Second Reading that it was high on our list of priorities. Our aim is not to have a series of individual exemptions which are either forced on the Government or which the Government have been persuaded are right by pressure here or from any outside organisation. We propose some way of cutting through the tangle of exemptions which is becoming more and more a feature of the Bill. We seek a rational approach which covers all kinds of organisations.

The amendment seeks to enable companies which would be influenced companies to apply to the Secretary of State. They could make a declaration that the relationship created by this part of the Bill between themselves and the local authority was not one which affected their purposes or activities. If the Secretary of State received such an application, he would have a duty to investigate. If he satisfied himself that the application was correct—in other words that the relationship was not one which affected the purposes or activities of the company—then he would declare the company exempt. He would recognise that the facts were in accordance with the application.

It is not as if there were not provision already for this kind of determination by the Secretary of State. The Government have already moved a considerable way towards exempting certain kinds of voluntary organisations from the provisions of Part V of the Bill. As we have just been discussing, they have already exempted registered housing associations and are now proposing to exempt housing associations which are charities.

There are a number of other categories where it has been indicated, either in terms of what regulations are to contain or in terms of consultation documents, that companies will be exempted. Let me give some examples: companies financed under Section 78(1) of the Local Government Act 1988. These are organisations like joint bureaux set out under that Act by local government to assist it in its purposes. Then there are companies where the only link with the local authority is a donation by that authority. That figure which was £500 has now been extended to £2,000 under the amendment of the noble Lord, Lord Hayter.

We have already discussed companies which are registered charities. There are exemptions where fewer than half the directors are associated with the local authority under Clause 67. There are exemptions where the local authority concerned declares that the company is managed independently of the local authority or where it has not taken into account in settling the terms of any transaction with the company the borrowing or capital expenditure proposed to be undertaken by the company. Exemptions have been made for companies or organisations which are part of national networks, of advice centres such as the National Association of Citizens' Advice Bureaux. Exemptions have been made for building preservation trusts which are registered with the Architectural Heritage Association. There is a considerable list of exemptions.

The problem with all these exemptions is that the process is irrational, responding to pressure rather than setting criteria which can be followed and understood by those who wish to seek exemption. The department itself does not seem to be entirely clear, in its consultation documents, what the position is. Paragraph 50 of the consultation document issued last week says: Why in spite of meeting these tests it was inappropriate for the company to be regarded as part of the local authority sector, and (if there are any) the reasons that ensure that the company cannot be used to avoid any of the controls to which it, or its parent local authority, would otherwise be subject". In other words, these are the questions to which answers would otherwise have to be sought.

The Government are, in effect, proposing to saddle private companies and the local authorities with which they have dealings with a deemed legal relationship which may bear little relation to the facts. So putting the initiative on the companies or organisations themselves to apply to the Secretary of State seems to us an effective way of dealing with the problem. It is effective not only because it cuts out the elaborate process of exemption initiated by government, but also because it provides a continuing power, a continuing process, which can be effective after Royal Assent.

The problem with legislation which is as prescriptive as this is that conditions may change after the Bill has become law. It may be difficult for the wording of the Act then to reflect changed circumstances. After all, this is an area in which local government has been changing quite considerably. The whole process of the use of companies, which are influenced or controlled by the local authority, in joint ventures is one which I should have thought was no longer party political. It is, I believe, widely accepted that co-operation between local authorities and the voluntary sector and co-operation between local authorities and the private sector is effective and valuable in enabling local authorities to carry out actions for the benefit of the people in their area which otherwise they would find it difficult to do and to achieve greater influence and greater resources for those purposes.

This is not a matter of party controversy. We all want to see such joint ventures succeed and continue to succeed. I hope that the Government will feel that by accepting the amendments they would make the process easier and avoid the confusion, difficulty and obstruction which in our view is inevitable if the Bill is left unamended. I beg to move.

Lord Hesketh

My Lords, Amendment No. 56B would apply all references in Part V to a company to all companies, whether or not they were exempted by a direction under Clause 66(1). The effect would be to override the power given by Clause 66(1) to the Secretary of State to exclude companies from the category of companies subject to local authority influence.

Because every reference to a company in that clause would apply whether or not there had been an exemption direction, it would cease to matter whether a company was directed to be exempted. Every company that met the tests in Clause 66 would become subject to the same rules under Clause 67. That would negate the effect of the undertakings that I have given that certain types of company would be exempted.

The purpose of Amendment No. 62A is to insert new subsections (1A) and (1B) into Clause 66. Subsection (1A) would make provision on the face of the Bill for influenced companies to make an application to the Secretary of State for exemption from the controls. Subsection (1B) would place an obligation on the Secretary of State to consider the application and, if he was satisfied that the company was not influenced, to make a direction exempting the company. Amendment No. 59A provides that any direction made under the new subsection (1A) should be exercised in the standard manner in relation to different cases.

The amendments seek to place requirements on the Secretary of State so that he would be under an obligation to consider applications from influenced companies which considered that their relationship with local authorities was such that they were not influenced, and then to exempt those companies if the Secretary of State was satisfied with their case.

I am sure that in tabling the amendments the noble Lord has in mind those cases in which companies satisfy both the business relations and personnel association tests required from an influenced company but nonetheless can demonstrate that they operate independently from their parent authorities. We believe that in such cases it may be appropriate to grant exemption. There is nothing between us on that. We have no intention of imposing unnecessary controls on companies which operate independently of local authorities even is they satisfy the conditions under strict interpretation of the rules.

Under Clause 66(1) as drafted, the Secretary of State has a power to direct that, although a company may satisfy the tests for an influenced company, it should not be regarded as such for the purposes of these provisions. We have already demonstrated our willingness to use the power by agreeing to exempt all Citizens' Advice Bureaux which are registered with the national association. It is possible that a number of local bureaux may be influenced companies under the proposals. We have agreed, however, that they should be exempt because their constitution and other factors effectively mean that they operate independently of local authorities.

We remain prepared to consider all applications from other influenced companies in a similar position. We believe that there is no need to place a requirement on the Secretary of State to use his direction-making powers as proposed in the amendment. It is well established in law that in exercising his discretion to exempt persons from statutory provisions a Minister would have to consider each case on its merits and would have to act reasonably.

We should also not wish to limit the Secretary of State's flexibility as proposed in Amendment No. 59A. While a consistent approach will of course be adopted, the House will no doubt be aware that there are many different types of company in which local authorities have interests and an element of flexibility must therefore be retained.

I hope that I have shown that the aims of the noble Lord in tabling the amendments can and will be met under the Bill as drafted. More specifically, I can assure your Lordships' House that, where the Secretary of State can be satisfied that an influenced company operates independently of local authorities, he will consider the case for exemption on its merits. With that assurance, I hope that the noble Lord, Lord McIntosh, will feel able to withdraw his amendment.

Baroness Fisher of Rednal

My Lords, before the noble Lord sits down can he say whether the National Exhibition Centre would fall within the category which he has just described?

Lord Hesketh

My Lords, I am not the Secretary of State. As I have explained, the case would be examined on its merits.

3.45 p.m.

Lord Ross of Newport

My Lords, what has been described is a bureaucratic nightmare. Some exemptions have been granted and we welcome that. However, there are a host of bodies which will be caught up by this clause, despite the small amount of flexibility which the Government have introduced since the Bill was first published.

I believe that the Government are shutting the door after the horse has bolted. The problem they are trying to tackle, and with which some of us have some sympathy, probably arose a good many years ago. It appears that the Government have no faith in the electorate. Local authorities are elected every four years or so. Only 25 per cent. of local authority revenues will now come directly from individuals. Ratepayers—or poll tax payers as they will be—can make up their minds whether a local authority is becoming too involved in business matters in which they think it should not be delving and vote accordingly.

I hope that the next government—perhaps of a different complexion—will make a bonfire of such bureaucratic nonsenses and return some real power to local authorities to do what they think is in the best interests of their constituents. That would allow them to get on with the job without having to make applications to the Secretary of State and hoping that he will act sensibly.

It bothers me a great deal, and I believe that everyone in this House should be concerned, that, under the type of arrangement that we are now setting up, very worthy bodies will have to apply to the Secretary of State in order to be able to continue in business. All the form filling and bureaucracy that goes with that is beyond belief. I loathe all of it.

Lord McIntosh of Haringey

My Lords, I am particularly grateful for the intervention of the noble Lord, Lord Ross of Newport. However, I suspect that in a sense, he spoke against the amendment which I have been forced to put down. He rightly complained about the bureaucracy involved in making applications to the Secretary of State, whereas the amendment provides that there shall be on the face of the Bill a power to make application to the Secretary of State. I agree with him: I would rather sweep the whole lot away. I can give him an assurance that the next Labour Government will sweep the whole lot away.

In the meantime we have to deal with the Bill as we find it. Despite the honeyed words of the Minister and the assurances which have been given, I am far from satisfied that he has answered the point that is made in the amendments. That point is that there should be on the face of the Bill a recognised procedure which gives companies which are affected by the strict letter of the legislation, as the Minister described it, but which ought not to be affected because they are genuinely independent—as he recognised—a right to appeal to the Secretary of State.

The problem with the process of continuing exemption as pressure is exerted is that it becomes, in effect, the exercise of grace and favour by the Secretary of State. That cannot be a good way to legislate. It cannot be right that the National Association of Citizens' Advice Bureaux has to take the initiative to protect itself and write to the Secretary of State seeking an exemption although there is no provision for such an exemption on the face of the Bill. It cannot be right that we have to go through the arguments about housing associations or architectural heritage trusts, or any of the other cases which have a good case for exemption.

It ought to be written on the face of the Bill that independence should be capable of being established easily and should give exemptions from the provisions of the Bill, regardless of the criteria which have been set out in Part V of the Bill. We would rather lose Part V of the Bill as a whole. Part V is a reflection of the paranoia about the activities of local government which has been a characteristic of legislation and the Government's attitudes over the past 10 years. But, failing that, I believe that the amendments make things clearer. They make it easier for those companies which should be exempted and which are not so well connected as to have lines of communication with the Secretary of State to take advantage of the provisions for exemption. In the circumstances, I think it right that I should seek the opinion of the House.

3.50 p.m.

On Question, Whether the said amendment (No. 56B) shall be agreed to?

Their Lordships divided: Contents, 76; Not-Contents, 99.

DIVISION NO. 1
CONTENTS
Allen of Abbeydale, L.	Listowel, E.
Amherst, E.	Llewelyn-Davies of Hastoe, B.
Ardwick, L.
Attlee, E.	Lloyd of Kilgerran, L.
Aylestone, L.	Longford, E.
Blyth, L.	McIntosh of Haringey, L.
Bonham-Carter, L.	Milner of Leeds, L.
Boston of Faversham, L.	Mishcon, L.
Bottomley, L.	Molloy, L.
Broadbridge, L.	Nicol, B.
Bruce of Donington, L.	Northfield, L.
Buckmaster, V.	Peston, L.
Carmichael of Kelvingrove, L.	Phillips, B.
	Ponsonby of Shulbrede, L. [Teller.]
Carter, L.
David, B.	Rochester, L.
Dean of Beswick, L.	Ross of Newport, L. [Teller.]
Donaldson of Kingsbridge, L.	Rugby, L.
Dormand of Easington, L.	Sainsbury, L.
Ennals, L.	Salisbury, Bp.
Ewart-Biggs, B.	Seebohm, L.
Falkland, V.	Sefton of Garston, L.
Fisher of Rednal, B.	Serota, B.
Gallacher, L.	Shackleton, L.
Galpern, L.	Shepherd, L.
Gladwyn, L.	Somers, L.
Graham of Edmonton, L.	Stallard, L.
Grey, E.	Stedman, B.
Hampton, L.	Stoddart of Swindon, L.
Harris of Greenwich, L.	Strabolgi, L.
Hayter, L.	Taylor of Blackburn, L.
Henderson of Brompton, L.	Thurlow, L.
Howie of Troon, L.	Turner of Camden, B.
Hughes, L.	Underhill, L.
Hylton, L.	Wallace of Coslany, L.
Irving of Dartford, L.	Walston, L.
John-Mackie, L.	White, B.
Kearton, L.	Williams of Elvel, L.
Kinloss, Ly.	Willis, L.
Leatherland, L.

NOT-CONTENTS
Airey of Abingdon, B.	Boyd-Carpenter, L.
Alexander of Tunis, E.	Butterworth, L.
Alexander of Weedon, L.	Caithness, E.
Allerton, L.	Carnock, L.
Annaly, L.	Carr of Hadley, L.
Arran, E.	Clanwilliam, E.
Ashbourne, L.	Cockfield, L.
Auckland, L.	Colnbrook, L.
Barber, L.	Constantine of Stanmore, L.
Beloff, L.	Cottesloe, L.
Belstead, L.	Cox, B.
Bessborough, E.	Cullen of Ashbourne, L.
Blatch, B.	Daventry, V.
Borthwick, L.	Davidson, V. [Teller.]

Denham, L. [Teller.]	Munster, E.
Effingham, E.	Murton of Lindisfarne, L.
Elibank, L.	Nelson, E.
Ellenborough, L.	Norrie, L.
Elliot of Harwood, B.	Nugent of Guildford, L.
Erroll of Hale, L.	Oxfuird, V.
Faithfull, B.	Peyton of Yeovil, L.
Fraser of Kilmorack, L.	Porritt, L.
Gainford, L.	Pym, L.
Gardner of Parkes, B.	Rankeillour, L.
Gridley, L.	Reay, L.
Harmar-Nicholls, L.	Rippon of Hexham, L.
Havers, L.	St. Davids, V.
Henley, L.	St. John of Fawsley, L.
Hesketh, L.	Shannon, E.
Hood, V.	Sharples, B.
Hooper, B.	Shaughnessy, L.
Hylton-Foster, B.	Skelmersdale, L.
Johnston of Rockport, L.	Strathcarron, L.
Kaberry of Adel, L.	Strathclyde, L.
Killearn, L.	Strathcona and Mount Royal, L.
Kimball, L.
Kinnaird, L.	Strathmore and Kinghorne, E.
Lauderdale, E.
Long, V.	Strathspey, L.
Luke, L.	Sudeley, L.
Lyell, L.	Swinfen, L.
Mackay of Clashfern, L.	Terrington, L.
Macleod of Borve, B.	Thomas of Gwydir, L.
Mancroft, L.	Thorneycroft, L.
Manton, L.	Trumpington, B.
Margadale, L.	Ullswater, V.
Marley, L.	Vaux of Harrowden, L.
Maude of Stratford-upon-Avon, L.	Westbury, L.
	Whitelaw, V.
Merrivale, L.	Wolfson, L.
Mowbray and Stourton, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

3.58 p.m.

[Amendment No. 56C not moved.]

Lord Teviot moved Amendment No. 57. Page 72, line 5, at end insert ("and").

The noble Lord said: My Lords, in moving this amendment I wish to speak also to Amendments Nos. 58 and 59.

These are comparatively simple amendments which remove passenger transport executives from the list of local authorities in Clause 64(3), where controlled or influenced companies are caught by the Bill. They replace it with a power by order of the Secretary of State to apply the legislation should the need arise. There is thus no loss of the ability ultimately to control the activities of passenger transport executives if the Secretary of State deems that necessary. All the other bodies in the list are local authorities; passenger transport executives are not. They are statutory corporations created under the Transport Act 1968 which are controlled by a board of directors.

There is a fundamental difference between the statutory position of local authorities and that of passenger transport executives in relation to the ownership of subsidiary companies. Under the Transport Act 1968, executives have specific power to acquire shares in companies for the purposes of their business. The Act then goes on to provide that an executive is prohibited from doing anything through a subsidiary company that it has not power to do itself. Thus, there already exists a statutory duty to control the activities of any such companies. So far as I am aware no similar power exists in the case of local authorities. Parliament thus envisaged that passenger transport executives would conduct some of their business through the medium of companies but it did not envisage making a similar provision for local authorities.

There are many examples of such companies in which PTEs, singly or acting together, have acquired shares in companies either by purchase of an existing business or by forming a new one. The Department of Transport is aware of those companies and their activities. We understand that it is not the general intention to restrict existing passenger transport executive companies and it is likely that on application they would be exempted from the controls.

PTEs (if I may be allowed to abbreviate) have thus shown that they are prepared to honour both the spirit and the letter of the law in the operation of subsidiary companies. It would therefore seem unnecessarily restrictive and bureaucratic to have to handle exemption applications for a considerable number of companies. My amendment would make that unnecesary and give the Minister power in the future to control the activities of any particular PTE if he felt it appropriate.

One other problem for the passenger transport executive that this amendment would redress is that of minority interests in companies under Clause 68. There are many instances in which PTEs have and will wish to acquire minority interests in companies: for example, a joint company with operators to promote and administer a travel card; with developers and operators for a light rail transport system; or jointly with a developer in order to exploit property, for instance, commercial development at a bus station.

Under this Bill as at present drafted in any instance where that occurred an application would have to be made for the exemption of the company, whereas if my amendment is accepted that would be unnecessary. The fact of having to apply for an exemption could unnecessarily delay the formation of such a company or, more important, deter commercial concerns from involving a PTE in the formation of a company. That could prevent a PTE from influencing the way in which a company was structured or even the value of its equity share if it were able to negotiate participation after exemption from the controls had been obtained.

Passenger transport executives were created to operate in a commercial environment. They have shown themselves capable of doing so. In my view it would be much more sensible to allow them to continue while retaining a power to control them if it seemed that any commercial activity was going beyond what was acceptable. The Department of Transport has been provided in advance with a copy of this amendment and I hope that my noble friend will feel able to accept it. I beg to move.

4 p.m.

Lord Underhill

My Lords, I should like to support the noble Lord in this amendment. He has covered the case and explained its purpose in very great detail. As he said, it must be emphasised that the PTEs function at arm's length from local authorities. There is no reason whatever why they should be listed in the very long list of bodies which could be described in any way as companies in which local authorities have an interest. A PTE has its own board of directors and must, I repeat, function as a company at arm's length from the local authority.

Where there is a joint authority covering a number of local authorities for transport purposes, it is already provided for in subsection (3)(k) of this clause. That factor is provided for. It does not affect the position of the PTEs.

An important provision emphasised by the noble Lord, Lord Teviot, is that this amendment in no way takes away from the Secretary of State the power to include a PTE in the list of local authorities for that purpose, if the need should arise in the future. There is therefore not the slightest reason why the Government should not accept this amendment, take the PTEs out of the mandatory provision and leave an optional power for the Secretary of State, should he decide to use it in the future.

Lord Lloyd of Kilgerran

My Lords, I rise briefly to support this amendment. As the noble Lord said, it is a simple series of amendments. On the face of it it makes complete common sense in a practical kind of way. The noble Lord, Lord Teviot, has great experience in transport matters. I have heard him speak frequently on these matters in this House. I support the amendment.

Lord Reay

My Lords, these amendments would remove passenger transport executives from the list of local authorities whose interests in companies are regulated by Part V of the Bill, and instead give the Secretary of State a power to extend the provisions to passenger transport executives by order.

The Government fully understand the unease felt by the passenger transport executives in being described as "local authorities", even if only (as here) for one limited purpose. We agree that the passenger transport executives are a distinct kind of organisation. In many ways, they can be regarded as standing in the same relationship to their controlling passenger transport authority as a nationalised industry does to its controlling government department. We would not want to suggest that we are undermining that distinction.

The reason why Part V of the Bill exceptionally brackets PTEs together with local authorities is for the sake of simplicity. We consider that the policy that should be applied to companies controlled or influenced by PTEs should be broadly the same as for companies controlled or influenced by a local authority. Indeed, if PTEs were themselves limited companies, and not statutory corporations, there would be no need for any special reference to them.

That is not to say, however, that we think that the rules for PTEs and their companies should be exactly the same as for local authorities and their companies. There is sufficient difference in the circumstances and in the legislation to make it essential to examine the questions separately. Therefore it is and always has been our intention that PTEs and their companies should be dealt with in a separate order under Part V. There is no question of simply treating them on the same footing as ordinary local authorities.

Since the main effect of my noble friend's amendments would be that there was a separate PTE order and since that is our intention also, we believe that these amendments are unnecessary. However, they would also, I am informed, have the unwelcome side effect of casting doubt on whether references to local authorities in Part V always covered PTEs. In that respect, the amendments are defective.

I hope, therefore, that, with the assurance that it is our firm intention that there should be a separate order to deal with the application of Part V to PTEs, my noble friend will feel able to withdraw his amendment.

Lord Teviot

My Lords, with all due respect to my noble friend, I am rather more than disappointed with his response. Should I put down a further amendment with the leave of the House, would there be any chance of any measure coming forward from the Government to deal with this situation?

From what I have said, I feel it is clear that the PTE situation is vastly different. I take his point that the PTE is not a limited company but a statutory corporation; even so, a statutory corporation with a board of directors is a very different entity from a local authority. With all respect to local authorities, I am very much of the same opinion as the noble Lord, Lord McIntosh, in this matter. In fact during the last Division I abstained from voting because I felt it would be a matter of hypocrisy. I abstained on that account. It is totally out of order for me to vote on this matter on this part of the Bill.

My noble friend looks puzzled. I feel that the reference to the passenger transport executive should definitely be removed. Do I understand from my noble friend that there is no possibility that he could accept an amendment on this issue at Third Reading?

Lord Reay

My Lords, with the leave of the House, perhaps I may answer. We believe that the main anxieties of my noble friend are and will be adequately taken care of. Of course I am quite willing to read his arguments and reconsider the matter; but I can give no assurance that I shall look with favour on another amendment.

Lord Teviot

My Lords, I shall read very carefully what my noble friend has said and consider how to deal with the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 58 to 59A not moved.]

Lord Hesketh moved Amendment No. 60: Page 72, leave out lines 15 to 17.

The noble Lord said: My Lords, in moving this amendment, I shall also speak to Amendments Nos. 80 and 81.

Amendments Nos. 60 and 81 are technical amendments which delete Clause 64(5) and Clause 36(7)(c). Amendment No. 80 is a consequential drafting amendment.

As they stand, Clauses 64(5) and 36(7)(c) enable the order-making powers available to the Secretary of State under Parts V and IV of the Bill respectively to be exercised differently in regard to certain companies in England and Wales. These powers are no longer required in the light of Clause 183 making separate provisions for Wales agreed to by your Lordships in Committee. I beg to move.

On Question, amendment agreed to.

Clause 65 [Companies controlled by local authorities and arm's length companies]:

Lord McIntosh of Haringey moved Amendment No. 60A: Page 72, line 19, after ("directs") insert ("in accordance with published criteria").

The noble Lord said: My Lords, in moving Amendment No. 60A, I should like to speak to Amendments Nos. 61 A and 71 A. These amendments deal with the same issue. They refer to the requirement on the Secretary of State in Clause 65 that when he makes a direction that a company is controlled by local authorities, it should be in accordance with published criteria.

Although the House did not agree with me, I have already complained that much of this legislation gives the Secretary of State a free hand to exercise a grace and favour on whether companies shall or shall not be declared as controlled or influenced companies. The concept of controlled and influenced companies has not been wished on the Secretary of State. It has been introduced in this Bill in order to deal with preceived abuses by local government of its powers. However, the Secretary of State must not complain if and when he finds that the complexity of the legislation that he is introducing causes a great deal of additional administrative work. The administrative work will be, even greater if it is difficult for those who need to work within the law—as law it will be when this Bill is passed—if they are not given a clear idea of what is intended by the legislation and who are to be excluded and who are to be included by the legislation.

The Minister stated in reply to an earlier amendment that there were cases where companies would be genuinely independent even though they were covered by the strict letter of the law. If that is the case, the law is clearly inadequate.

Although we should like to get rid of the whole nonsense, with this amendment we are seeking a more modest approach. We are trying to get the Secretary of State to spell out in public his criteria for inclusion or exclusion. We propose to insert the words: in accordance with published criteria in order not only that justice shall be done, but that it shall be seen to be done. I beg to move.

4.15 p.m.

Lord Hesketh

The purpose of the three amendments is to place a requirement that any orders made by the Secretary of State are made in accordance with published criteria.

Amendment No. 60A relates to the Secretary of State's power in Clause 65 to exempt a company from being regarded as under the control of a local authority. Amendment No. 61A relates similarly to Clause 66 with regard to local authority influenced companies. Amendment No. 71A relates to the order-making power in Clause 67 for regulating, forbidding or requiring the taking of certain actions in relation to influenced companies.

We intend no secrets in the criteria that we shall use in exercising the powers under this part of the Bill. We began a year last June by publishing a detailed consultation document on our proposals. We followed this with a further paper when the Bill was published, responding to the comments that we had received, and making further proposals. We have promised a further detailed consultation paper that we sent last week to the local authority associations, and we shall make it more widely available as soon as possible. Let me therefore turn to the three powers to which this requirement for publication of criteria would be applied.

The first two are the powers for exemption. We envisage using this power in two ways. First, there would be certain general exemptions which would cover all companies of certain descriptions. The consultation paper gives details of these, and they will be contained in general directions which, in the usual way, will form part of the circular that we shall issue.

The second type will be individual exemptions. The consultation paper describes the broad categories of such exemptions as we foresee at present. We shall be glad to consider others. To that extent we have already published the critieria that we shall apply. Any amendments as a result of the consultation process will be incorporated in the eventual circular.

However, there will remain the possibility that there will be one-off cases where we are persuaded either that a company which comes within the critieria is nevertheless genuinely independent of the local authority, or that for some reason we can be certain that it will never undertake activities contrary to the rules and that there is some advantage in not formally applying the controls. In these one-off cases it would be inappropriate to have to invent some further criterion and publish it before we could act.

In short, we think that we have already published our criteria. Any further ones that we are persuaded to accept will be in the general circular that explains the provisions. But we think that it would be advantageous to retain the flexibility of also being able to exempt one-off cases. On that basis, I hope that the noble Lord, Lord McIntosh, may feel able to withdraw his amendment.

Lord McIntosh of Haringey

My Lords, the Minister is seeking to persuade the House not that justice is being seen to be done, but that justice is in practice being done. I do not doubt his good will. I do not doubt the improvements that have been made in the consultation documents which have recently been issued. However, the fact remains that the Government have been quite unable to define in legislation the criteria which shall determine the dependence or independence of companies which work with local authorities.

It is quite clear that the provisions in Clauses 64 to 70 do not work because of the provision for all these exemptions. It is also clear that even if the legislation were right, the Government do not have enough confidence in their understanding of the issue of independence from local authorities to be able to set down comprehensible and readily available published criteria for these determinations.

In effect, the argument that there may be one-off cases where the Secretary of State would wish to grant exemption, even though the published criteria do not apply, is a confession that the Government have failed and are continuing to fail to determine what they mean by this legislation. It is a most unsatisfactory situation. It is not one on which I can seek the decision of the House, but I hope that the House will recognise that this part of the Bill is in an ineffective and unsatisfactory state. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness David moved Amendment No. 61: Page 72, line 43, at end insert— ("(3) Without prejudice to the generality of subsection (1) of this section, the Secretary of State shall exercise his powers of direction under that subsection in respect of any company which would otherwise be a controlled company for the purposes of this Part of this Act—

1. (a) whose activities, in the opinion of the Secretary of State, are predominantly designed to facilitate co-operation between local authorities in the discharge of statutory duties; and
2. (b) whose financial transactions, in the opinion of the Secretary of State, are such as to justify exemption from the provisions of this Part of this Act relating to controlled companies.").

The noble Baroness said: My Lords, I rise to move Amendment No. 61, which is in my name and that of the noble Baroness, Lady Carnegy of Lour, who asked me to say that she was very disappointed she could not be here this afternoon. She has to be in Scotland.

During the Committee stage before the Summer Recess I brought to the attention of noble Lords the serious consequences which Part V of this Bill may have for those regional public library systems which have become companies. Since then there have been discussions with the Minister and his officials, and I thank them for that. But I regret to say that, so far at least, the Minister has not seen fit to accede to the very reasonable requests which have been made to him by myself, by the Library Association and by representatives of the regional library systems.

Under the Public Libraries and Museums Act 1964, public libraries have to be provided in every part of the country by local authorities. Each local authority is independent in this respect, but it makes sense for them to co-ordinate their activities on a regional basis. They do this to make it possible to operate common services more economically and, in particular, to operate an interlending system which is one of the characteristics which make the British public library system one of the best and most envied in the world.

The 1964 Act acknowledged the importance of this regional co-operation by requiring the relevant Minister to group local authorities regionally for this purpose. I have to say that for the past 25 years successive governments have been in flat breach of their statutory duty to do this. It is almost unbelievable that this should be the case, but it is so and the Minister knows it. It is not a case of governments having failed to exercise a power, but of having failed to carry out a statutory duty. They have therefore acted unlawfully. This meant that the regional library systems were in legal limbo. The officers appointed to run them by local authorities were personally responsible for the financial affairs of the systems. That situation was clearly undesirable and so each regional system cast around for some way to regularise its position. Two of them found it convenient to convert themselves into commercial companies, owned and controlled by the local authorities in their areas. That of course is where the present Bill comes in. Because these two regional systems are commercial companies controlled by local authorities, they are governed by the provisions of Part V of this Bill.

The Government's view, which I perfectly understand although I do not agree with it, is that the activities of these regional systems are discharging local authority functions and therefore it is appropriate that any borrowing carried out by the systems should be governed by the provisions of this Bill. There is perfect logic in that. But there are times when logic should not be allowed to create immense and perhaps unmanageable practical difficulties for worthy public services if, by making an exception, no great breach of principle is involved. That is exactly what we are asking for.

The two regional library systems involved are the London and South-East Region—commonly referred to as LASER—and the North-West Region Library System, NWRLS. It will be convenient if I speak in terms of LASER, but the same considerations apply to the other case and indeed to other regional systems which are contemplating becoming companies.

The borrowing which a regional library system needs to undertake is infinitesimal in relation to the potential borrowing companies intended to come under the provisions of this Bill. LASER, for example, might need to borrow to acquire new premises and to acquire new computer facilities. There will be no truly new expenditure involved here. All that will be happening is replacement of existing facilities. Nevertheless, LASER will be caught by the provisions of the Bill unless the Minister is prepared to use his powers under Clause 65(1) to direct that a company is to be exempted. LASER will of course spread the cost of this borrowing among its 42 participating local authorities. The amount that each has to provide may be in the region of £50,000.

I ask your Lordships to imagine the problems involved in getting the treasurers' departments and the chairmen of finance of 42 local authorities to include amounts of that order in massive capital budgets. If just one of those 42 authorities fails to get the provision included, the whole package will fall to the ground and LASER will have to start again, increasing the amount to be shared among the remaining 41 authorities. This may go on for ever and in the meantime a valuable public service may find itself undermined, even destroyed. Is that really necessary in order to impose the very last word, letter and comma of a system which has the power of exemption built into it?

That point is important. The Bill already allows the Minister to exempt particular companies or classes of companies from Part V of the Bill. If any kind of company deserves to be so exempted, it is the regional library system companies which I have described. In our discussions with Ministers and officials about this matter, it has been suggested to us that there are other devices—I might even say dodges—by which LASER could escape the rigour of these provisions. So the Government are actually prepared to see any borrowing by LASER, for example, not counted in the total borrowing of local authorities. But instead of doing this in a straightforward, honest and sensible manner they suggest that we should do it by finding what I would regard as almost dishonest ways round the provisions.

Amazingly, the Government have suggested that an organisation like LASER, which is currently predominantly financed and therefore controlled by local authorities, might retain predominant financing by local authorities but allow control to pass to the other organisations which also participate in its activities. So there would be a separation between the people carrying the burden of cost and the people who actually controlled decisions. I continue to be amazed, and so is the Library Association, that government can come forward with this suggestion, which some might call irresponsible.

When representatives of the Library Association and I, together with a deputy county treasurer, saw the noble Lord a week ago on this matter, we pointed out to him that wisdom often consists of knowing when to avoid perfection. That is exactly what we are asking him to do in this case. My amendment suggests one way in which it would be possible for him to exempt a class of company without breaching his principles. He can do that or he can simply exempt LASER and the north-western system by name. In any event, it would be much better for him to do things in a straightforward manner than by the dodges which have been suggested to us.

I hope the Minister can indicate that he is willing to look at this point again. I know that his colleague in the Office of Arts and Libraries, Mr. Luce, fully recognises the difficulties for the regional library systems if nothing is done. I suggest that he and the noble Lord need to put their heads together and come up with something which has a bit of British common sense in it, instead of sticking to the letter of the law to the point of imbecility.

I spoke to the noble Baroness, Lady Carnegy, last night on the telephone and she asked me to say that she supports this amendment very strongly indeed. She hopes very much that the Minister will be willing to take it away, if he does not accept it immediately, and come back with something else on Third Reading. I beg to move.

Lord Graham of Edmonton

My Lords, I very much hope that the Minister has not only listened to what has been said but has taken it aboard. Otherwise he will have the book thrown at him, speaking in the context of the library service. It seems to me to be a most sensible suggestion. I listened very carefully to the noble Baroness, Lady David, who made an excellent case. At the end of it, she was really wanting the Minister to be helpful and was not at all being dogmatic in moving her amendment.

By the amendment, she wants the Minister to exercise the power that he has, I imagine, to control companies not remotely like the ones which have been created by local authorities to do this sort of work. They are not exceptional, but they are certainly unusual and out of the general run. The Minister and his advisers are being told: if this power is in the Bill to allow the Minister to make exemptions, then it is proper for the Minister to make exemptions in this situation.

What does the amendment say? It is intended to exempt the categories which the noble Baroness, Lady David, has mentioned, whose activities, in the opinion of the Secretary of State, are predominantly designed to facilitate co-operation between local authorities"; Not only that, but they are designed to facilitate co-operation between local authorities in the discharge of their statutory duties.

Unless the Minister is going to dig his toes in simply because this is something that he and his advisers did not think of in the first instance or they have a better way of doing it, then I honestly think that he has a very difficult case to make when one looks at the whole realm of the library service and the crucial part a proper service can play in making life better for our children and indeed for everyone in the community. We are asking the Minister to be sensible and to allow local authorities carrying out their statutory duties to be able to do so under the aegis they consider best. Perhaps I have stopped the Minister giving the House good news, in which case I shall stop talking.

4.30 p.m.

Lord Hesketh

My Lords, this amendment, as the noble Baroness, Lady David, clearly drew to your Lordships' attention, is aimed at the position of companies such as those which provide inter-lending and similar services for library authorities in London and the South-East. The problems which have been laid before the House by the noble Baroness pose an interesting and difficult question. Part of the purpose of the proposals in Part V of the Bill and of the complementary proposals in Part IV is to ensure that the same rules apply to the capital finance raised by local authorities, whether they raise it directly themselves or through the intermediary of a company. As part of their general economic policy, the Government think that the highest importance must be attached to the control of demands for capital in the public sector of the economy.

The local auhority sector forms a part of the public sector; it is therefore of great importance that there are effective rules for that sector as there are for the rest of the public sector. We think that the local authority sector of the economy must be taken to cover, in addition to local authorities themselves, those companies which local authorities control or dominantly influence. Just as private sector companies have subsidiaries and associated companies, so these play the same role in the local authority sector.

We believe there can be little dispute that these regional library companies are effectively a part of the local authority sector. They are there to help local authorities discharge statutory duties. Their income derives largely from payments from local authority funds. If they borrow, that borrowing will eventually be paid back from local authority resources, and the same would apply to any other company controlled by local authorities which, in the words of the amendment, is predominantly designed to facilitate co-operation between local authorities in the discharge of statutory duties". We therefore think it is proper that borrowing by such companies should be regarded and controlled in the same way as borrowing by the rest of the public sector. The arguments for special treatment for the regional library companies rest on two points. The first is that the sums are relatively small; the second is that a large number of authorities are involved, thus making it difficult, as the noble Baroness, Lady David, pointed out, to get agreement on making the necessary provision within capital control systems.

It would be very nice to say that it is only a small amount. However, if our aim is to control public sector demands for capital we cannot simply disregard small amounts here and there. Eventually, they will add up to a large amount. If we make provision centrally for this type of expenditure, it is bound to be an expense out of the amount available for allocation to local authorities. That is the same as pre-empting local government's own decisions about priorities.

In other words, this amendment is either an invitation to nibble away at the controls on public sector finance or an invitation to pre-empt local decisions over priorities for capital finance. The regional library systems have an enviable record of success. I can say that personally, having met the delegation which came with the noble Baroness to visit me last week. However, we do not think it is fair to other causes to single them out for special treatment: nor do I think it is practical to do so. Everyone with a particular interest thinks that it should have priority. We would have a series of claims for special treatment, each pointing to some factor which makes the case unique, in the eyes at least of those making the claim.

I have so far addressed the arguments behind the amendment. I have to say in addition that the amendment would not constitute a satisfactory basis for legislation. The Bill already gives the Secretary of State power to make an exception. The amendment sets out to add a duty for him to do so, but only in cases where the financial transactions in his opinion justify that exemption. The amendment gives no indication as to how that justification is to be assessed. There are therefore no foundations for the edifice which the amendment would construct. In closing, I can only say that I personally gave very serious consideration to the visitation I received from the noble Baroness, and I hope that the arguments I have outlined will explain why we feel that we have to resist her amendment.

Lord Graham of Edmonton

My Lords, before the noble Lord sits down, his case has rested very heavily upon the fact that this could be the thin end of a very big wedge so that if this easement, this kind of exemption, was made, the flood-gates would open. Can the Minister tell the House how many comparable situations there are to the one which has been pleaded by the noble Baroness, Lady David? If, as I suspect, they are very few indeed that can make the same case, surely the Minister would be quite safe in giving this exemption. If there are literally dozens or hundreds of other cases, surely that raises the basic question that the legislation itself is flawed because good cases are being kept out.

I believe that the Minister has made a very weak defence of the Government's position. Can he say how many comparable appeals or requests are likely to be made? If this is not the kind of exemption that is going to be made, can the Minister tell the House the kinds of exemptions he is prepared to consider?

Lord Hesketh

My Lords, my arguments were slightly broader than the noble Lord, Lord Graham, has indicated. I have to say that his premise rests on the fact that there are no other cases. It has to be faced, whether we like it or not, that if such an exemption were granted there would be every reason—as I stated clearly—to invite others to feel that they too could follow that route.

Lord Peston

My Lords, before the noble Lord sits down—I appologise to him for intervening in an area which is not normally my own—it does not seem to me that the control of public expenditure, which is what he referred to—

Lord Harmar-Nicholls

My Lords, I thought that after the mover of the amendment has spoken and had been answered, the question was not open to general debate under the rules we have agreed.

Lord Peston

My Lords, it was my belief that the noble Lord had not completed his remarks. I was using the device of intervening "before the noble Lord sits down". However, I should not use it if it were remotely against Standing Orders.

A noble Lord

Carry on.

Lord Peston

My Lords, on the assumption that it is not, I was inquiring whether the noble Lord the Minister really is trying to argue that the public expenditure control criterion is central to this matter. I do not believe that the mover of the amendment had any intention of getting into quite so complicated or deep a field.

The point at issue is one which I believe the noble Lord himself fully understands. Sometimes, in framing legislation, there are at the periphery almost unforeseen consequences. I for one find it impossible to believe that the noble Lord would wish to achieve any result that would place the regional library associations at risk in any way whatever. Essentially what is being put forward here is a de minimis argument which I, for one, standing somewhat outside this whole area, as I say, cannot believe that the Government would wish to reject. Indeed, I understood from the tone of the noble Lord's reply that he does not really wish to reject it. He simply cannot find a way out of it which is not the classic civil servant's "slippery slope" argument.

Would the noble Lord, since it is not too late, try to pursue the line of finding a way out of the problem in order to make sure that this is regarded as a special case? I think the whole point is to say that this a special case. It is not the usual slippery slope; it is a case which I was hoping the noble Lord would treat a little more sympathetically.

Lord Nugent of Guildford

My Lords, my noble friend Lord Harmar-Nicholls intervened on a point of order. It is not in order for noble Lords other than the mover of the amendment to speak after the Minister has replied. The device of saying, "Before the noble Lord sits down" is familiar but there is a limit to which it can be streched. The noble Lord, Lord Graham, gave it a pretty good stretch when his question developed into a mini-speech. It is in the interests of all noble Lords to try to keep to the rule and I believe that noble Lords opposite are stretching it a little.

Baroness David

My Lords, I am extremely disappointed with the Minister's answer. I had not believed that the amendment was perfect but I had hoped that in the weeks since we saw him he would have thought of a way around the issue and that we should have had a more sensible response.

We are not asking for a great deal. Sticking to the rules in this way is being extremely rigid and dogmatic, especially when the sums involved are extremely small. Once again, I hope that the Minister will discuss the matter again with the Minister for Arts and Libraries, who, like himself, is sympathetic about the situation. A way should be found around it.

I shall not divide the House, but I warn the Minister that I shall come back at a later stage. Last night the noble Baroness, Lady Carnegy, told me that she also is ready to come back, so I warn the Minister that the amendment has support from his side of the House. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 66 [Companies subject to local authority influence]:

[Amendment No. 61A not moved.]

Lord McIntosh of Haringey moved Amendment No. 62: Page 74, line 21, leave out ("special category company") and insert ("banking or insurance company or a member of a banking or insurance group").

The noble Lord said: My Lords, this is a technical amendment made necessary by changes to the Companies Bill in Committee in another place. I beg to move.

Lord Hesketh

My Lords, I am grateful to the noble Lord, Lord McIntosh, for moving the amendment.

On Question, amendment agreed to.

[Amendment No. 62A not moved.]

Lord McIntosh of Haringey moved Amendment No. 63: Page 74, line 45, leave out ("not less") and insert ("more").

The noble Lord said: My Lords, I should like to speak also to Amendments Nos. 64, 65 and 66. I express my gratitude to the Government for accepting the point that we made in Committee. It was that companies which are owned exactly 50–50 by the local authority and the private sector should not be covered by the definition of local authority-controlled companies. The four amendments give effect to the provision that a company must have a majority local authority ownership in order to be a controlled company. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 64, 65 and 66: Page 75, line 1, leave out ("not less") and insert ("more"). Page 75, line 14, leave out ("equals or"). Page 75, line 22, leave out ("equals or").

On Question, amendments agreed to.

Lord McIntosh of Haringey moved Amendment No. 67: Page 75, line 49, at end insert ("or (cc) at any time within the preceding four years he has been associated with the authority by virtue of paragraph (a) above. (5A) If and to the extent that the Secretary of State by order so provides, a person is at any time associated with a local authority if").

The noble Lord said: My Lords, Amendments Nos. 67, 68, 69 and 70 give effect to a matter which we debated in Committee. I am grateful to the Government for their co-operation in the drafting. The Bill as drafted provided that former employees, consultants, spouses and business partners of members and office holders in local political parties counted towards the "personnel link" in local authority influence. We believed that to be going too far in tarring with the brush of local authority influence those people who could only remotely be thought to be under that influence.

Amendment No. 67 gives the Minister an opportunity to bring back those categories of people if there is an element of abuse or if their exclusion is used in avoidance schemes. We believe that by agreeing to put the provision on the face of the Bill and then only providing the Secretary of State with the power to bring them back the Minister has gone some way towards meeting the points raised in Committee. I am grateful and I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 68, 69 and 70: Page 76, line 17, leave out ("any of paragraphs (a) to (c)") and insert ("paragraph (b) or paragraph (c) of subsection (5)"). Page 76, line 21, leave out ("paragraph (a)") and insert ("subsection (5)(a)"). Page 76, line 26, leave out ("(5)(g)") and insert ("(5A)(g)").

On Question, amendments agreed to.

Clause 67 [Requirements for companies under control or subject to influence of local authorities]:

4.45 p.m.

Lord Hayter moved Amendment No. 71: Page 76, line 39, at beginning insert— ("(1A) No power exercisable under this section shall be taken to confer any power to make an order in relation to an independent voluntary organisation company within the meaning of subsection (1C) below. (1B) A voluntary organisation company is a company which is also a voluntary organisation within the meaning of section 137(2D) of the Local Government Act 1972. (1C) An independent voluntary organisation company is a voluntary organisation company for the purposes of subsection (1A) above, albeit that it may be deemed by virtue of Clause 66 above to be influenced by a local authority, where

1. (a) the company is established for charitable purpose; and
2. (b) the company is not a company under the control, within the meaning of section 65 above, of that local authority; and
3. (c) either
1. (i) no more than 49 per cent. of the total voting rights of all members having the right to vote at a general meeting of the company are at that time either members or officers of that authority; or
2. (ii) no more than 49 per cent. of the directors of the company are at that time officers of that authority; or
3. (iii) no more than 49 per cent. of the total voting rights at a meeting of the directors of the company are held either by members or by officers of that authority; and
4. (d) that local authority has obtained from the company before the commencement of the relevant financial year, a written statement signed by the Directors of the company that the company is managed independently of that local authority;
5. (e) in entering into any business relationship within the meaning of section 66 above with the company, that local authority has not taken into account any proposals by the company to borrow or enter into any credit arrangement; and
6. (f) that local authority has not provided undertakings to meet more than 49 per cent. of the company's liabilities to its creditors in the event of default by the company.

(1D) No power exercisable under this section shall be taken to confer any power to make an order in relation to any company, for which, in the relevant financial year, the financial assistance provided to the company by the local authority by which it is influenced by virtue of section 66 above, is less than the relevant minimum for the purposes of section 36 subsection (3) of this Act.").

The noble Lord said: My Lords, in moving the amendment, my noble friends and I are trying to bring some logic into the question of exemptions from some of the provisions of the Bill. The impact of Part V on independent voluntary organisations has been a source of concern to all sides of the House. I emphasise that fact that voluntary organisations are not always large. Sometimes they are small and it is then all the more important to consider their position.

In Committee we debated at length the ways in which voluntary organisation companies could fall into the definition of local authority-influenced companies and thereby become subject to controls particularly on capital borrowing. We also debated the unwelcome intrusion into the affairs of voluntary organisations in which the Bill could result, including local authorities having to discover to whom the members of voluntary organisation management committees are married. Noble Lords may not believe that, but I assure them that the provision appears in the Bill.

I am happy to say that the Government share many of our concerns and are keen to except the genuinely independent voluntary organisations. I am grateful to the noble Lord, Lord Hesketh, for writing to me on this subject and for meeting me and representatives of the National Council of Voluntary Organisations to discuss it. As a result we are in broad agreement about most, if not all, of the criteria for defining an independent voluntary organisation. My amendment sets down those criteria, which I shall explain.

However, we appear to disagree about the means for giving effect to the definition. I propose that the Bill should not relate to independent voluntary organisations. Therefore, when Clause 67 specifies requirements for: companies under the control of local authorities and companies subject to the influence of local authorities". it should be made clear on the face of the Bill that none of the requirements relates to independent voluntary organisations.

I understand the Minister to be proposing that Clause 67 should relate to voluntary organisations but that certain categories of voluntary organisation will be exempt through regulations. The Minister has already indicated some of the categories.

There is an important difference in principle between those two positions. My position makes absolutely clear the fact that this part of the Bill does not relate to genuinely independent voluntary organisations. I believe that in the interests of both the Government and the voluntary sector that should be made abundantly clear. I understand the Minister's position to be that this part of the Bill could relate to independent voluntary organisations but that the Secretary of State is minded to exempt them through regulations. The voluntary sector is in no doubt as to which position it prefers, having considered the matter carefully. In the light of the meeting with the noble Lord, Lord Hesketh, I shall listen with great attention to his reply.

I now move on to the amendment itself which, on the face of it, looks rather complicated. It begins with the definition of an independent voluntary organisation. This is the result of detailed discussions between officials and the National Council for Voluntary Organisations. I believe it covers all the areas of potential abuse which the Government are seeking to stop. Its starting point is the definition of a voluntary organisation contained in Section 137 of the Local Government Act 1972. That would seem to be the logical starting point.

The amendment then states quite clearly that voluntary organisations must have charitable objectives. That also appears to be fair. It then states that the voluntary organisation must not be a local authority controlled company. Surely the Government agree with that. The amendment then covers a potential abuse whereby a local authority could maintain effective control of a company by co-opting members or officers onto the board in their own right rather than as representatives of the local authority. Subsection (b) of the amendment prevents that abuse. Surely the Government agree with that.

The amendment continues by stating that the voluntary organisation must provide the local authority with a statement confirming its independence. That would normally be done by reference to the organisation's constitution. Again, surely the government agree with that. Paragraphs (d) and (e) state that the voluntary organisation must not be used as a means of helping a local authority to circumvent capital borrowing controls through credit or borrowing arrangements or through loan guarantees above a certain proportion. This addresses the very heart of the Government's concerns clearly and explicitly. Once again, surely the Government agree with that. Finally, the amendment introduces a de minimis criterion as proposed by the Minister in his letter to me.

I therefore believe that these criteria provide a clear definition of what we mean by independent voluntary organisations and that we can, therefore, exclude them entirely from the Bill. There will, of course, be some voluntary organisations which do not statisfy the cirteria which I have just outlined and yet should be exempted, for one reason or other, from the proposed controls. Those situations could be dealt with in the regulations, as proposed by the Minister. However, it is essential to recognise that these organisations are in a different position from the much larger category of independent voluntary organisations to which this Bill should simply not apply in the first instance. I feel certain that the amendment will appeal to the many noble Lords who are associated with voluntary organisations. I beg to move.

Lord Harmar-Nicholls

My Lords, are we not being a little too pedantic in our approach, on Report, to this series of amendments? I consider that the battle has been won. To write this point into the Bill is one thing and to have it put into operation by regulation is another, but the end result is the same.

The battle is won in the sense that we have had from the Minister as clear an indication as is possible that the regulations will be able to do this. The noble Lord said that the independent voluntary organisations had various facets; that some were not easily identifiable and others were. When a measure can be carried out by regulations, that identification can be made in the light of the facts. The general point has been made, not only on this amendment but on others, that the measures should be looked at separately from those that are mandatory on local authorities. One understands that point and I have some sympathy with it. However, in order to rectify the position does it really matter whether we write it into the main Bill or whether it is in the form of a regulation which sets out how the Bill should be operated? I merely suggest to noble Lords that having won three quarters of the battle, and with such a long Marshalled List, is this the time to go into the sort of detail that we would do in Committee?

Lord Ross of Newport

My Lords, I am surprised that the noble Lord, Lord Harmar-Nicholls, believes that these matters should be left to regulations. I should have thought he would support the view that it would be better if the voluntary organisations were not affected by the Bill at all, which would be so much simpler.

I congratulate the noble Lord, Lord Hayter, on the progress he made. I recognise, too, that the Government have gone a long way towards meeting the argument put from all quarters of the House. The real reason why I believe it is important to have clearly spelt out in the Bill that voluntary organisations are not affected is that doubts will still exist until the regulations are published; and surely it is unnecessary if some find themselves caught by this situation.

We know the reasons behind this legislation. It is to seek to control the capital expenditure of local government, but there is another side to that coin. Local authorities are inundated with requests and calls for help of one kind or another. I cite Portsmouth cathedral as a case in point. I happen to be one of the people trying to assist Portsmouth cathedral to raise £3 million. So far the three letters I have written to charitable bodies have produced precisely nothing. Last week I received a letter urging me to telephone Portsmouth councillors because, though the cathedral authorities ad hoped to receive in excess of £100,000, if not rather more, it was rumoured that the chairman of the finance committee, or of the policies resources committee, was thinking of offering only £50,000. In fact, £1 million has already been raised by the cathedral workers and local people. It is sad that, having raised that money from their own resources, the local authority is not coming up to scratch. The local authority represents, as a whole, the citizens of Portsmouth and ought to have some concern for the cathedral, which is in a very desirable part of the town and is now in some trouble.

I give that as one example. When I was leader of my own county council we were constantly receiving requests for money. Quite rightly, probably on the recommendation of the chief executive, councillors occasionally said, "If you are going to to give money to this voluntary organisation, do you not think we ought to have someone representing the local authority to make sure that the money is properly spent?" That is the other side of the coin. Therefore, I believe that our request is reasonable. I believe that the Government are going some way to meet us and I thank them for that. I am grateful to the noble Lord, Lord Hayter, for what he has already done in this field and I strongly support him.

Lord Seebohm

My Lords, the position of voluntary bodies within local authorities is important and will become even more important if this Bill is implemented. To my mind it is essential that the proposals in the amendment should be on the face of the Bill. This aspect is now a vital part of local authorities. It is essential that the amendment tabled by the noble Lord, Lord Hayter, should be accepted.

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Ross of Newport, answered one part of the objection to the amendment put by the noble Lord, Lord Harmar-Nicholls, when he said that it is necessary to put these proposals on the face of the Bill in order to make the position clear from the outset without waiting for regulations. There is a further point that the noble Lord, Lord Harmar-Nicholls might like to consider. Regulations which give can also take away, and the power of the Secretary of State to shift the goal posts in the exemption of voluntary organisations from coverage under Part V of the Bill can work in both directions. In my view, that is an additional reason why it is necessary—indeed essential—to have this amendment on the face of the Bill.

There cannot be any serious argument that independent voluntary organisations of the kind to which this amendment refers are going to be abused by local authorities or used as an excuse for the breach of public expenditure controls. That was the rather pathetic argument to which the Minister was reduced in responding to the amendment tabled by my noble friend Lady David. My noble friend made it clear in her amendment that the regional library associations spent so little in capital and had such a complex relationship with local authorities that it would be absurd to include them.

The argument here is slightly different in that the independent voluntary sector has no interest in breaching the public expenditure guidelines. However, the sector performs an absolutely essential function in assisting local authorities to carry out their very wide responsibilities. These organisations include such bodies as the National Housing & Town Planning Council, the Council of Voluntary Welfare Work and even the information technology centres that on many occasions are set up jointly by local authorities under the training agency.

It is clear that we are not talking here about major breaches of public expenditure controls but a commonsense extension to the non-profit sector in our society. I hope that whatever concessions have been made so far will not blind noble Lords to the absolute necessity for this amendment to be agreed and to be on the face of the Bill.

5 p.m.

Lord Hylton

My Lords, I have been associated with a good many voluntary bodies and in some cases I have been a founder member. It becomes clear, as these amendments rumble on, that Part V of the Bill was far too widely drafted in the first place. I support and congratulate my noble friend on the clarity of his drafting. The noble Lord, Lord Ross of Newport, very properly mentioned that this amendment will remove a great deal of doubt. Once this amendment has been agreed, and if there is any doubt still left, that small amount can be removed by regulations. Such regulations are unamendable and this is a much better way of proceeding.

Lord Hesketh

My Lords, this amendment would exclude voluntary organisations, as defined in the amendment, from the scope of the controls on companies influenced by local authorities. I shall shortly be suggesting how the Government have come some way to meet the concerns which have been expressed. I am rather worried that the noble Lord, Lord McIntosh, may be devaluing the currency of concessions in the light of his last remarks.

At the Committee stage I said that we will consider applications from voluntary bodies for exemption from these controls where there was a clear case that, in spite of being dependent on local authorities for more than half their funds, and having substantial links in personnel with the local authority, the organisation was nevertheless independent of the authorities involved. I was pressed to set out general rules of exemption. We have now sent to the local authority associations a consultation paper on the implementation of Part V which sets out our proposals in this, as well as other, areas. First, we are proposing that there should be a general exemption to cover all voluntary organisations where the business connection with the council is not more than a grant of £500 or less a year. We aimed this to be the same as the sum in Clause 35, which is the level below which reports are not required from voluntary bodies. The Chamber decided to raise this to £2,000, and we accept now the argument for a similar increase here. I give that commitment today.

This may seem a small item, but it will ensure that where a local authority does no more than give a small grant to a voluntary organisation, the authority need not consider whether the grant when aggregated with other local authority grants, might be significant. Secondly, and more importantly, we have proposed exempting all voluntary bodies which met a definition rather like that in the amendment, but with certain important differences. These differences are as follows. First, the organisation is for charitable purposes only. The reason for this is that voluntary organisations on the definition used in the amendment can cover an enormous range of activities many of which would not be recognised by bodies such as the NCVO as a genuine voluntary organisation. We must therefore have the safeguard that they are for charitable purposes.

I should say that in the consulation paper that we have circulated this requirement appears as being a registered charity. The noble Lord, Lord Hayter, has however convinced me in discussions we had that this is wrong. It is sufficient to require charitable status. Secondly, we think that the opinion as to the independence of the company should be formed by the local authority, not the company, It is the local authority that is affected by the outcome, and it should be able to control the process. Thirdly, we do not think that it is necessary to add the last of the conditions, that in paragraph (f) of the amendment. In addition, we have accepted Amendments Nos. 67, 68, 69 and 70. As long as we do not find avoidance schemes being developed, these will make it much simpler for everyone concerned to apply the rules, and should reduce the risk of inappropriate companies being caught by the controls. I hope that the noble Lord will agree that this package of proposals goes a long way, if not all the way, to meeting his concerns, and on that basis I hope that he will be able to withdraw his amendment.

Lord Hayter

My Lords, I find myself in some difficulty. I have not seen the consultation document, and whether I should have done, I do not know. There is no doubt that the Minister has been good enough to make some concessions which go quite a long way towards solving the problems of the voluntary organisations. My inclination, if I have the concurrence of my two supporters—they seem to be shaking their heads—is to ask to withdraw the amendment. I ask that the House agree that the amendment be withdrawn.

Amendment, by leave, withdrawn.

[Amendment No. 71A not moved.]

Lord McIntosh of Haringey moved Amendment No 71B: Page 76, line 49, at end insert— ("(1A) Any order made under subsection (1) above in relation to investigations by the Commissioner for Local Administration shall require the local authority to use its power of control to ensure that the company provides to the Commissioner information on request, to the extent that such requests are reasonable.").

The noble Lord said: My Lords, since we have failed to get a rational overall look at exemptions, we now have to go through this part of the Bill virtually line by line. We have to tidy up what is a peculiarly clumsy and overbearing series of legislative provisions. This amendment would have the effect of placing on the face of the Bill the terms on which local authorities may be required by regulation to make control companies subject to the powers of investigation by the local ombudsman, the Commissioner for Local Administration. This amendment is affected by the consultation document that appeared last week. Paragraph 74 of that document lays down the requirement that will be imposed on local authorities and companies where there is a control or influence relationship.

The requirement is that in the case of control companies that do not operate at arm's length, the local authority has to use its powers to ensure that the company does not commit injustice through maladministration. If the local ombudsman decides to investigate a complaint that the local authority has failed to use its power to this end, the authority will be required to use its power of control to ensure that the company co-operates with the ombudsman in the investigation of a complaint.

That seems to be a proper extension of the power of the local authority ombudsman. The noble Baroness, Lady Stedman, is such a doughty defender of the ombudsman system and I hope that she will feel able to support us in this amendment. I do not believe that it is particularly controversial. The amendment does not introduce any new obligations on the ombudsman, but it adds to the scope of his activities. I hope that this amendment will receive the support of the House. I beg to move.

Lord Hesketh

My Lords, this amendment would require an order under Clause 67 to require an authority to use its powers of control over a controlled company to ensure that a local ombudsman gets the information he needs. The amendment brings us to the role of the commissioner for local administration—the local ombudsman—in relation to companies under the control of the local authority.

The proposal contained in our consultation paper is that local authorities should be required to ensure that companies under their control do not commit injustice through maladministration. If there are then complaints of injustice caused through maladministration by local authority controlled companies, the local ombudsmen will be able to see whether the local authority has discharged that obligation.

It is an interesting question whether we need to add to the basic requirement of preventing injustice through maladministration by local authority companies a further requirement to get more information for the local ombudsman. This is exactly the kind of point which the consultation exercise is designed to bring out. I am therefore happy to give an undertaking that, in the course of the consultation exercise, we shall ensure that this question is fully examined. I can see strong arguments in favour of it. I hope with that undertaking the noble Lord will be able to withdraw his amendment.

Lord McIntosh of Haringey

My Lords, it is a little cheeky for the Minister to give me an undertaking that this matter will be examined in the course of the consultation process. The matter will be examined in the course of the consultation process whether or not the Government like it. Submissions to him in response to the consultation document will make the point that I have been making. I was drawing the attention of the House to the matter because it is something on which we need further assurances.

If the Minister can give me an assurance not only that it will be considered in the course of the consultation process but that the Government will listen seriously to what is said, pay attention to it and seek to give effect to it, I shall be happier that the assurance has some validity.

Lord Hesketh

My Lords, with the leave of the House, I think that I can go most of the way with the noble Lord. I said that the Government see strong arguments in favour of it. That must be considered as indicative.

Lord McIntosh of Haringey

My Lords, I am grateful to the noble Lord. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 p.m.

Lord McIntosh of Haringey moved Amendment No. Page 76, line 49, at end insert ("1A) No order shall be made under subsection (1) above in relation to activities referred to in section 2 of the Local Government Act 1986, or to other activity considered to be pursued in the interests of securing political advantage, before the completion of consultation with such organisations representative of local authorities as appear to him to be concerned").

The noble Lord said: My Lords, this amendment refers back to political restrictions, an issue of which the House may have hoped it had seen the last during our previous Report stage sitting. However, we think it necessary for there to be consultation with local authority associations before regulations are introduced under Clause 67, the clause which gives powers to make requirements for controlled and influenced companies, on the publication of materials which if a local authority published them would be in contravention of the political publicity provisions in Section 2 of the Local Government Act 1986; and, secondly, on any action undertaken with the purpose of securing electoral advantage for a candidate in an election or for a political party.

We refer again to the consultation document which came out last week. I have not yet made the point which I should have made that it has been promised considerably before the date on which it was published. It was extremely difficult for us to give it adequate attention and to reflect it in the parliamentary consideration of the Bill. This is a matter which should and could have been available much earlier, in time not only for this Chamber to consider it at all stages of the Bill but also for another place to have considered it earlier.

I refer now to paragraph 75 of the document which is one of the most paranoid pieces of so-called consultation that I have yet seen. We already have in the 1986 Act, as amended by the Local Government Act 1988, provisions about political publicity by local authorities. As recently as last Thursday we talked about political activities by local government officers. Paragraph 75 of the consultation document now proposes that the order-making power in Clause 67 will be used to prohibit local authorities from using or allowing controlled or influenced companies to undertake either activities which the authority itself is prohibited from undertaking under Section 2 of the 1986 Act, or from doing, any other thing with the intention of securing electoral advantage for any particular candidate in an election or for a political party".

What basis do the Government have for believing that companies falling within Part V of the Bill will be used for that purpose? What basis do the Government have for saying that companies which now fall within Part V have done anything for a political purpose? After all, these companies have existed for a considerable time. Many of them are voluntary organisations. Many of them collaborate with private industry, which is hardly likely to encourage political propaganda at the expense of the company. All of them have a mixture of ownership and control which I should have thought would in itself inhibit them from taking part in political propaganda. In addition, the provisions of the 1986 Act have been in force for three years already so that everybody knows exactly what is meant by political publicity and party political activity.

It is not as if we are talking about a new kind of organisation or new definitions of political activity. What is happening now is that, seeing a whole new range of restrictions imposed on these companies by Part V, the Government are unable to stop themselves from seeking the most absurd and pettifogging restrictions on controlled and influenced companies. If there is a shred of evidence that controlled and influenced companies have been doing what is complained about and what is outlawed under the 1986 Act, I shall listen to it very seriously. I am not aware of any such evidence; and failing such evidence, the amendment should be agreed to.

Lord Hesketh

My Lords, this amendment would prevent the Secretary of State introducing an order to give effect to one of the proposed rules for local authority controlled companies before the completion of consultation with local government. This is the rule requiring local authorities to use their powers of control to prevent companies which they control issuing party political publicity or otherwise seeking party political advantage.

In the first place, we most certainly do not have any intention of introducing any order before we have properly consulted local authorities. That is why we have already prepared a detailed consultation paper, and sent it to the local authority associations. We further intend to circulate the paper to all principal local authorities, so that they are aware of the consultation process. I therefore regard the amendment unnecessary. Having said that we would consult, and having started the consultation process, I think that any court would regard it as a denial of legitimate expectations if we were to go ahead without waiting for, and considering, the comments.

I was puzzled about the choice of this one topic as that on which we must await for the outcome of consultation. Our proposals in this respect are simply to extend to companies controlled by local authorities the rule to which the authorities are subject; that they must not use their powers and resources for party political purposes. It seems to us to be one of the most obvious requirements of any system of regulating companies under the control of local authorities. On that basis, it would seem to be one of the rules about which there is likely to be the least disagreement, though from the noble Lord's remarks, I can see that that is not the case. However, we feel that there is a case, and therefore we shall resist the noble Lord's blandishments with his amendments.

Lord McIntosh of Haringey

My Lords, the Minister has chosen to give a procedural rather than a substantive answer. Of course it is possible to argue in relation to any of these amendments which reflect the consultation document that it would be wrong for Parliament to prejudge the results of the consultation and therefore to put on the face of the Bill amendments which deal with any matter which is in that consultation document. The argument has already been used and no doubt will be used again this afternoon. But if, as is the case here, the consultation document is produced so late during the passage of the Bill that consultation time does not expire until after the legislation has presumably received Royal Assent, then that becomes no more than a subterfuge to stop proper parliamentary consideration of what is in the Bill and what are clearly the Minister's intentions with regard to it and the regulations to be made thereunder.

The substantive point which the Minister completely failed to answer is my challenge to him to produce a single example of a case where a company which would be influenced or controlled by a local authority under the terms of this part of the Bill has actually been abusing the provisions of the Local Government Act 1986 by indulging in political publicity or advocating the support of a particular candidate. I still await any sort of answer, any single example, of such an abuse.

Lord Hesketh

My Lords, our case is that if we are to have a strong set of rules for the local authority sector, they must be comprehensive. That is why they are comprehensive.

Lord McIntosh of Haringey

My Lords, the Minister knows perfectly well that that is no answer. The fact of the matter is that the Government are so paranoic about local government and so determined to bind it hand and foot that even where there are organisations which have existed in some cases for many years and even where there is legislation which has been on the statute book for three years, the Government are not even prepared to look for, let alone to report, any abuses before adding another shackle to the chains which already bind local government. In my view that was a thoroughly unworthy response from the Government. Therefore I think it is only proper that I should seek the opinion of the House on this amendment.

5.22 p.m.

On Question, Whether the said amendment (No. 71 C) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 99.

DIVISION NO. 2
CONTENTS
Addington, L.	Cledwyn of Penrhos, L.
Ardwick, L.	Cocks of Hartcliffe, L.
Aylestone, L.	David, B.
Birk, B.	Dean of Beswick, L.
Bonham-Carter, L.	Donaldson of Kingsbridge, L.
Bottomley, L.	Dormand of Easington, L.
Broadbridge, L.	Ennals, L.
Buckmaster, V.	Ewart-Biggs, B.
Callaghan of Cardiff, L.	Falkland, V.
Carmichael of Kelvingrove, L.	Fisher of Rednal, B.
	Gallacher, L.
Carter, L. [Teller]	Galpern, L.

Gladwyn, L.	Peston, L.
Graham of Edmonton, L.	Phillips, B.
Grey, E.	Pitt of Hampstead, L.
Hampton, L.	Ponsonby of Shulbrede, L. [Teller.]
Harris of Greenwich, L.
Hatch of Lusby, L.	Rochester, L.
Hayter, L.	Ross of Newport, L.
Houghton of Sowerby, L.	Russell of Liverpool, L.
Howie of Troon, L.	Seear, B.
Hylton-Foster, B.	Sefton of Garston, L.
Irving of Dartford, L.	Shackleton, L.
Jeger, B.	Shepherd, L.
Kagan, L.	Somers, L.
Kearton, L.	Stedman, B.
Kilmarnock, L.	Stoddart of Swindon, L.
Kinloss, Ly.	Strabolgi, L.
Listowel, E.	Taylor of Mansfield, L.
Llewelyn-Davies of Hastoe, B.	Turner of Camden, B.
	Underhill, L.
Lloyd of Kilgerran, L.	Wallace of Coslany, L.
Lockwood, B.	Walston, L.
Longford, E.	White, B.
McIntosh of Haringey, L.	Williams of Elvel, L.
Mellish, L.	Willis, L.
Milner of Leeds, L.	Wilson of Rievaulx, L.
Nicol, B.	Winterbottom, L.
Northfield, L.

NOT-CONTENTS
Ailesbury, M.	Kimball, L.
Alexander of Tunis, E.	Long, V.
Alexander of Weedon, L.	Lucas of Chilworth, L.
Allerton, L.	Luke, L.
Ampthill, L.	Lyell, L.
Annaly, L.	McColl of Dulwich, L.
Arran, E.	Mackay of Clashfern, L.
Auckland, L.	Macleod of Borve, B.
Beloff, L.	Mancroft, L.
Belstead, L.	Manton, L.
Bessborough, E.	Margadale, L.
Blatch, B.	Marley, L.
Blyth, L.	Maude of Stratford-upon-Avon, L.
Boardman, L.
Borthwick, L.	Merrivale, L.
Boyd-Carpenter, L.	Mersey, V.
Butterworth, L.	Montgomery of Alamein, V.
Caithness, E.	Mottistone, L.
Campbell of Alloway, L.	Mowbray and Stourton, L.
Campbell of Croy, L.	Munster, E.
Carnock, L.	Murton of Lindisfarne, L.
Carr of Hadley, L.	Nelson, E.
Clanwilliam, E.	Norrie, L.
Cockfield, L.	Orkney, E.
Coleraine, L.	Orr-Ewing, L.
Colnbrook, L.	Oxfuird, V.
Constantine of Stanmore, L.	Peyton of Yeovil, L.
Cottesloe, L.	Rankeillour, L.
Cowley, E.	Reay, L.
Cox, B.	St. Davids, V.
Craigavon, V.	Sharples, B.
Cullen of Ashbourne, L.	Skelmersdale, L.
Daventry, V.	Strathcarron, L.
Davidson, V. [Teller.]	Strathclyde, L.
Denham, L. [Teller.]	Strathcona and Mount Royal, L.
Dilhorne, V.
Elibank, L.	Strathmore and Kinghorne, E.
Elliot of Harwood, B.
Faithfull, B.	Strathspey, L.
Falmouth, V.	Sudeley, L.
Fraser of Kilmorack, L.	Teviot, L.
Gainford, L.	Thomas of Gwydir, L.
Gardner of Parkes, B.	Thorneycroft, L.
Gridley, L.	Trefgarne, L.
Havers, L.	Trumpington, B.
Henley, L.	Ullswater, V.
Hesketh, L.	Vaux of Harrowden, L.
Hooper, B.	Whitelaw, V.
Johnston of Rockport, L.	Wyatt of Weeford, L.
Kaberry of Adel, L.	Wynford, L.
Killearn, L.	Young of Graffham, L.

Resolved in the negative and amendment disagreed to accordingly.

5.30 p.m.

Lord Dean of Beswick moved Amendment No. 71D: Page 76, line 49, at end insert— ("(1A) An order made under subsection (1) above may include requirements designed to secure that any company concerned seeks in its awarding of contracts for the supply of goods or materials and of services and the carrying out of works:

1. (a) the provision of fair wages;
2. (b) the furtherance of equal opportunity; and
3. (c) the promotion of health and safety.").

The noble Lord said: My Lords, the amendment will give the Secretary of State the power to use the order-making provisions of Clause 67 to require local authorities to secure that any company in the influenced or controlled categories (at the Secretary of State's discretion) would have to seek when awarding contracts for the supply of goods, materials and services and the carrying out of works, such equal opportunity requirements as the provision of fair wages and the promotion of health and safety.

Your Lordships will recall debates during the passage of the Local Government Bill 1988 when a number of similar amendments about the issue of contracts compliance were rejected by the Government. One area which was accepted was in relation to work designed to secure the objectives of Section 71 of the Race Relations Act 1976 relating to the employment of members of the black and ethnic minority populations. I do not wish to reopen the debate in respect of local authorities' general practices, but it is suggested that the Government might wish to avail themselves of this opportunity to seek further controls on the private and semi-public sectors by safeguarding fair wages and health and safety in such operations.

In their Part V proposals, the Government are setting apart those companies which do extensive business, or have other links through their boards of directors, and so forth, with local authorities, and subjecting them to a potential range of requirements under Clause 67 alongside the local authorities with which they are deemed to have a new legal relationship.

In those circumstances, however, the Government will doubtless wish to demonstrate that the companies concerned measure up to the public sector in all aspects of performance. The Government would probably argue that such orders would serve largely to confirm the position that already exists in those companies. They presumably would not wish to argue that fair wages, as generally understood within an industry after negotiations between employers and unions, and the promotion of health and safety both under existing British legislation and the developing provisions of the European Community, should not be areas that such companies would wish to take seriously as part of their personnel policies.

If that is the case, a requirement that a company in the influenced or controlled category should seek, in its own awarding of contracts for goods and services, to ensure that such provisions are upheld would doubtless proceed naturally from its concerns in that area and would clearly contribute to a well understood chain of such supportive provisions through the economy. Is the Minister prepared to accept the amendment? I beg to move.

Lord Hesketh

My Lords, the amendment would permit an order under Clause 67 to include provisions to ensure that companies controlled or influenced by local authorities pursue policies aimed at fair wages, equal opportunities and the promotion of health and safety. The amendment is unneccessary because, if there were a case for making provisions under Clause 67 for any of those purposes, the power in the clause is already wide enough to cover them. To include specific provision on those three topics only would cast doubt on the width of the power. More importantly, however, the amendment is misconceived. It is our intention to ensure that companies that are properly regarded as part of the local authority sector are, where appropriate, subject to the same rules as local authorities.

Parliament discussed in great detail last year the rules to which local authority contracts should be subject. The results are embodied in the Local Government Act 1988. It is our view that companies which are subject to the influence or control of local authorities should observe the same rules as those to which local authorities themselves are subject under Part II of the 1988 Act. We therefore think that it would be wrong for the legislation on local authority interests in companies to suggest that different rules apply. For those reasons, I cannot accept the amendment.

Lord Dean of Beswick

My Lords, I am disappointed by the Minister's reply because what he says is not the case in the real world. The public sector, and the private sector working within the public sector, are not often bound by the same standards. Safety is one of the biggest areas for concern. There are good employers in the private sector who have the fullest regard for the safety of their workers and comply with the Acts, but there are a host of others who do not, especially in the building trade. One of the reasons for that is that, to reduce prices, corners are cut. Safety measures are one of the biggest casualties. That often results in casualties and sometimes fatalities.

I do not wish to repeat what has been said about the employment of coloured and ethnic people because that subject has been debated at length. The Minister has not satisfied me, and he will not satisfy many people in the public sector, that they will be subject to the same criteria as a result of the Bill. We say that they will not. Having heard what the Minister said, I can only express my disappointment and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 71E: Page 76, line 49, at end insert— ("(1A) No order made under subsection (1) above shall have the effect:

1. (a) in the case of employees of a controlled company, of applying restrictions otherwise applicable under section 1(5) above to such employees; or
1185
2. (b) in the case of employees of an influenced company, of regarding such employees as holders of posts which are politically restricted within the meaning of Part I").

The noble Lord said: My Lords, the amendment requires consultations with the local authority associations before regulations are introduced under Clause 67 (the clause giving power to make requirements for controlled and influenced companies) in two areas: first, the publication of materials which, if published by a local authority, would be a contravention of Section 2 of the Local Government Act 1986 on political publicity; and, secondly, any action undertaken with the intention of securing electoral advantage for a particular candidate in an election or for a political party.

Paragraph 75 of the current consultative document puts forward extraordinary proposals. It underlines the near paranoia which seems to characterise Part V. The Government have already legislated for alleged political publicity by local authorities under Section 2 of the Local Government Act 1986, as amended by the Local Government Act 1988. Provisions concerning the political activities of local government officers are, as has been extensively debated, contained in Part I of the Bill. The interpretation and application of the clause bristle with difficulties.

Moreover, the practice of local authority publicity since the legislation was passed has yielded as few examples to clarify its intended application as existed when it was debated in Parliament. The practical interpretation of the legislation therefore remains as uncertain as it was when Parliament first looked at it three and a half years ago. The Government have yet to put forward a convincing case, as was further debated in both Houses early in 1988, for the legislation. Yet now they propose to extend such controls, with no evidence of any need for that, in order to influence and control companies under the legislation.

It would be useful if the Government could indicate what thought has been given to the possible effect on private sector trading companies of restrictions on their publicity activity which was designed for a different purpose but which nonetheless might complicate their commercial operations.

It is incumbent upon the Government to produce evidence before an order covering this kind of activity is made. The slur is even more serious than that made against the majority of local government officers under Part I of the Bill. Local authorities themselves are bound by statute to provide their services and conduct their activities within the community in a manner which is reasonable and fair. One local authority no longer in membership of the AMA has recently attracted some notoriety with a suggestion that some of its housing services might not have been provided on a wholly fair basis between different parts of its electoral areas. It may be that the Government have evidence that this or any other authority has been using influenced or controlled companies to further such alleged policies. If that is the case, then the Government will no doubt prefer to lay such evidence before the House and noble Lords might find it very interesting.

In its absence, however, surely it would be better if the Minister would state that this order-making power will not be used, at least until such time as an abuse has been identified or can at least be shown to be reasonably likely to occur. Legislating for abuses which would not occur is only one way of lowering the overall professional standards of local government, while increasing the atmosphere of suspicion which has been generated by so much of the Government's approach to the rest of the public sector over the past few years. I beg to move.

Lord Hesketh

My Lords, this amendment relates to the power under Clause 67 whereby the Secretary of State may make an order placing requirements on local authorities in relation to companies that they control or influence. The amendment states that any such order should not apply the restrictions on political activities set out in Clause 1(5) in the case of employees of local authority controlled companies. Similarly it states that any such order should not have the effect on employees of local authority influenced companies of being regarded as holders of politically restricted posts within the meaning of Part I of the Bill.

This amendment has to be looked at in two parts. First, the position of employees of a controlled company. As noble Lords are aware, our philosophy as regards such companies is that they are very much a part of the local authority and as such the rules and regulations that apply to the conduct of the local authority should also apply to any company that it controls. This also goes for the employees of the company for whom the same basic rules must apply as apply to employees of the local authority. Thus it is our intention that employees of controlled companies shall be subject to Section 80 of the Local Government Act 1972 which will prevent them from being elected and holding office as a member of the authority that controls them. Paragraph 18 of Schedule 11 to the Bill provides for this.

Regarding further controls, it would clearly be possible to require local authority controlled companies to impose conditions of employment on future new employees restricting their ability to undertake public political activity. We have not proposed to do so. However, if companies were shown to be being used as a means of evading the controls in Clauses 1 to 3, we should certainly wish to consider whether action was required.

The second part of the amendment deals with the employees of local authority influenced companies. They are in a different position. We recognise that the local authority in such cases does not have the same very close relationship with the company concerned. However, in the case of influenced companies, the order will require the local authority, by imposing an appropriate condition on their transactions with the company, to ensure that the company, as opposed to its employees in their personal capacities, does not do anything with the intention of securing electoral advantage for any particular candidate in an election or for a political party. It is for those reasons that we resist the noble Lord's amendments.

5.45 p.m.

Lord Dean of Beswick

My Lords, before the Minister sits down and before we dispose of the amendment, can he give us a brief resume of the type of company he is talking about? Having spent a long time in local government, I find it difficult to obtain evidence that there are many of those companies about anyway. Perhaps they have mushroomed in the past 10, 12 or 15 years. I know of none influenced or owned to any degree by a local authority in the private sector where the local authority would have the deciding vote. I think such companies would be scarce and difficult to find. Perhaps the Minister can give us one or two examples.

Lord Hesketh

My Lords, an example would be the NEC in Birmingham. I do not have a comprehensive list to hand. However, I propose to write to the noble Lord, Lord Dean, giving him a substantial list of both types of companies, as he has requested.

Baroness Fisher of Rednal

My Lords, before the noble Lord sits down, perhaps if he sends that information to my noble friend he will send a copy to me. I have already mentioned the NEC this afternoon.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for that brief reply. I understand the interest of the noble Baroness, Lady Fisher; she has already spoken of the National Exhibition Centre at Birmingham.

I shall not press the amendment, I shall examine what the Minister has said. Some companies have been completely privatised by the Government and taken from local authorities. I am talking about some of the local airports. They were very valuable holdings controlled by the local authority; but because of what I think are the rather paranoid views of the Government on local authorities, the Government brought in legislation making them limited companies, to the detriment of the local authorities. We can now no longer question what is going on at some of those airports, either in another place or in this Chamber.

However, having said that, I shall examine with interest what the Minister says in his letter to me, and perhaps bring the matter back for further discussion on Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 71F: Page 76, line 49, at end insert— ("(1A) Any order made under subsection (1) above in relation to any criterion of independence in respect of a registered charity shall provide that a company shall fulfil the criterion if it is, or is in the process of becoming, such a charity").

The noble Lord said: My Lords, this is a probing amendment which is designed to secure an assurance that the definition of "registered charity" as a criterion for exemption from influence will not be interpreted too strictly. The amendment simply states that a company which is in the process of becoming a registered charity should be regarded as such for the purposes of seeking exemption, or gaining such exemption from the Part V "influence" category.

Paragraph 49 of the consultative document sets out proposed criteria for exemption where a company is a registered charity which is managed independently of the local authority. In those circumstances, such a company which would otherwise be regarded as influenced shall be exempted. The gaining of charitable status can be a lengthy process, and it would seem unreasonable for influence in some sense to be deemed still to exist where the company concerned was in the process of becoming a charity. The Government may object that it might be difficult to establish the point at which the company becomes a charity, or that some applications may fail. However, in relation to that latter point, the Government can presumably provide a direction so that a company in such a situation would then automatically become influenced if it did not otherwise fall outside the categories. As regards the point at which the process starts, it would be simplest to suggest that the point of application to become registered would be the simplest cut off point.

The Government would doubtless not wish the fairly complex provisions of Part V to cut across the process of becoming a registered charity, whether by introducing controls or deemed relationships which may cut across that application, or simply by diverting away from that process scarce resources within what will often be fairly small enterprises. I beg to move.

Lord Hesketh

My Lords, the amendment would prohibit any order under Clause 67 requiring a company to be a registered charity as a condition for being treated as independent.

Technically, the amendment is misplaced since the question of independence is relevant to exemption under Clauses 65 or 66 from the requirements of the rules, not to the content of the rules. That takes us back to the questions which we discussed under the amendment of the noble Lord, Lord Hayter. The House will recall that we suggested certain criteria for the recognition of independence. If a voluntary organisation which is a company meets those criteria then its independence from any local authority would be recognised by exempting it, even if, prima facie, it meets the tests of being under local authority influence. One of those criteria was that the company should be a registered charity.

As I explained, after we had sent our consultation document to the local authority associations and I had given a copy to the noble Lord, Lord McIntosh, I had a meeting with the noble Lord, Lord Hayter. In that meeting he convinced me that it was wrong to require a body to be a registered charity. The reason is not merely that given in the amendment; namely, that the charity might be in the process of registration. It is also possible that the charity may be an exempt charity, which does not need to be registered. As I made clear in relation to the amendment of the noble Lord, Lord Hayter, we therefore accept that it would be wrong to insist on registration. It is sufficient that the company is solely for charitable purposes.

In that way, we think that we have gone even further than the noble Lord, Lord Dean of Beswick, has asked. We do not ask even for the process of registration to be started: it is sufficient that the body is charitable.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for that generous reply. It gives us what we asked for. I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 71G: Page 76, line 49, at end insert— ("(1A) Any order made under subsection (1) above in relation to a declaration by a company of independence from a local authority shall provide for the manner and frequency of such declaration to be determined by the authority").

The noble Lord said: My Lords, Amendment No. 71 G is designed to deal with the issue of the manner and frequency of declarations as to whether a company is managed independently of the local authority. That is a matter which, in our view, ought not to be laid down by central government. There are differences in the relationships between local authorities and the companies concerned which affect the best way in which declarations of independence should be made and how often they should be made.

It seems to us that the Government have gone much too far in specifying the detail of the reporting system which is to be imposed. It is referred to in paragraph 49 of a consultation document which went out last week. The reporting system provides that voluntary organisations which—I was going to say, are registered charities, but that point has been made—have charitable purposes may gain exemption from the influenced category if, for example, the local authority declares that the company is managed independently of itself. The point about a local authority declaration of independence has already been accepted by the Government. Our objective is to ensure that it is made in a flexible and effective way. I beg to move.

Lord Hesketh

My Lords, the amendment again takes us back to the discussion of the amendment of the noble Lord, Lord Hayter. In that amendment, there was provision for recognising the independence of companies from local authorities on the basis of certain criteria. One of those was a declaration by the company that it was managed independently of the local authority.

As I explained, we propose to exempt companies that meet certain criteria which are similar to those proposed by the noble Lord, Lord Hayter, but differ among other things on the point of Amendment No. 71G. We agree with the point of the amendment. It is the local authority, and not the company, which in the first instance is affected by a company being held to be under the influence of the authority. Therefore, the initiative for determining the question of independence ought to rest with the local authority. Otherwise, the local authority might be prejudiced by the failure of the company to act. As I explained, we propose that the' arrangements should be in line with the proposals in the amendment.

In the light of that explanation, r hope that the noble Lord will feel able to withdraw his amendment.

Lord McIntosh of Haringey

My Lords, I am afraid that this is another case of our having to respond very rapidly to a consultation document which ought to have been produced a long time ago. I am interested—I do not believe that I should say more than that—to hear what the Minister said. I shall read very carefully what he said. I do not believe that it is appropriate to seek to come to a conclusion on the matter now or to seek the opinion of the House on the amendment. I beg leave to withdraw the amendment.

Amendment, be leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 71H: Page 77, line 29, at end insert— ("No power exercisable under this section shall be taken to confer any power to make an Order in relation to a law centre").

The noble Lord said: My Lords, this is a very simple and straightforward amendment. It seeks to exempt law centres as a category from the provisions of Part V of the Bill. I believe it is universally accepted that law centres provide a valuable service which is complementary in many ways to the work of the citizens' advice bureaux. It has already been accepted that those should be exempted en bloc; that is, in regulations rather than on the face of the Bill. I hope the Government will feel that the analogy between their work and the work of other organisations which have been or will be exempted is close enough for them either o accept the amendment now or agree that regulations will be made which will exempt law centres. I beg to move.

Lord Hesketh

My Lords, the purpose of the amendment is to ensure that no order can be made under Clause 67 in relation to a law centre. It effectively provides a complete exemption for all law centres. The amendment is clearly intended to ensure that the important work carried out by law centres is not adversely affected by the proposals in Part V of the Bill. I am not sure, however, why they have been singled out in that way since there are numerous other advice agencies offering similar services.

It is no part of the Government's intention to frustrate the valuable contribution provided by law centres or any other advice agencies which clearly provide an essential service to local communities. That is borne out by our decision, which we have already made known, to exempt all citizens' advice bureaux from the scope of the provisions. As we have said, we remain willing to consider similar exemptions for other networks of advice agencies which find themselves in a similar position.

There is no need to make provision on the face of the Bill, however, as that merely limits the Secretary of State's flexibility. It is certainly not appropriate to single out law centres in the way proposed by the amendment. The Secretary of State will have the power to exempt by order any categories of companies or individual companies and will use that power as necessary. I repeat that the Government are willing to consider cases sympathetically for any network of advice agencies which, although caught by the strict interpretation of the provisions, can demonstrate that they operate independently of local authorities. That is why we resist the amendment.

Lord McIntosh of Haringey

My Lords, perhaps the Minister can help me a little more. I appreciate what he said and I find his sympathy very helpful. I certainly do not wish to pursue the amendment. However, he used the phrase, "any network of advice centres". Law centres do not normally exist as part of a network of advice centres. Law centres are set up in a certain part of a borough, district or town by a local authority, or by neighbourhood initiative, and subsequently gain local authority support. Would the Minister be willing to reconsider the use of the word "network", which seems to be unnecessarily restrictive for this purpose?

Lord Hesketh

My Lords, the difference is that with citizens' advice bureaux we were dealing with a national association, which was why we were able to take the line that we did. I am sure that the same would be possible if there were a national association of law centres. The point touched upon by the noble Lord, Lord McIntosh, is that they vary in many small ways. That is why I am not in a position to be able to say what I said in relation to CABs.

6 p.m.

Lord McIntosh of Haringey

My Lords, the Government have made that difficulty for themselves in proposing a formulation that works perfectly well for citizens' advice bureaux which are part of a network, but does not, as I have indicated, work for law centres which are not necessarily part of a network. I apologise for this interrogation at Report stage, but we are dealing with something that could not be raised in Committee because the consultative document had not come up. Is the Minister willing to think about the restriction that the use of the word "network" imposes on the Secretary of State's freedom of action? He expressed sympathy for the proposal to exempt law centres, and expressed appreciation of their work. It would be a pity if they were to suffer because they are not part of a network. I wonder whether the Minister can help us any further.

Lord Hesketh

My Lords, I cannot help the noble Lord, Lord McIntosh, in the way that he wants. The advantage of having a national association or federation is that it can provide the imprimatur—if I may put it like that. The noble Lord asks me to say that we will change the basis. We looked at the citizens' advice bureaux on that basis because they had a national association. The problem arises here with the individuality.

Lord McIntosh of Haringey

My Lords, I think that that is a purely fictitious problem. I do not think that the question of having a national association or not is anything other than for the convenience of the Secretary of State rather than of the essence of the nature of law centres. There is an association of law centres, but I do not know whether all law centres belong to it. This is perhaps a matter about which the Minister might be willing to talk to me before Third Reading. The Government are causing themselves difficulty which I am sure that they would not wish to do on mature reflection. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68 [Control of minority interests etc. in certain companies]:

Lord McIntosh of Haringey moved Amendment No. 71J: Page 78, line 3, at end insert— ("(2A) In determining for the purposes of subsection (2) above whether a company, which is a non profit making company using a facility which is financially assisted by a local authority, is an authorised company, no use by or benefit to residents of the area concerned shall be interpreted to mean a benefit or use available exclusively to such residents.").

The noble Lord said: My Lords, this amendment, which again relates to the consultative document, refers to the type of authorised companies in which a local authority will be permitted to hold minority interests. A number of different kinds of companies are set out in an annex to the consultative document. They are not even set out in the main text of the document. One of the additional companies authorised is a non-profit-making company which provides a facility used by or for the benefit of residents in a local authority's area, and to which the local authority gives or has given financial assistance.

That information is far from being enshrined in law. It is not even in regulations or in a consultative document issued towards the final stages of the passage of the Bill. It is in an annex to the consultative document. Since we cannot write regulations or consultative documents, the only way in which we can deal with matters of this kind which indicate, whether well or badly, the Government's intentions, is by proposing amendments to the Bill.

The point that we are trying to make here is that the measure should cover not only companies that provide a facility, used by or for the benefit of residents in a local authority's area, but should cover matters that affect the area or its residents as well as being for the benefit of residents outside the area. In many social issues it is difficult for the coverage of an organisation to be restricted by the local authority boundaries. The wording of the annex to the consultative document appears to indicate that unless they are restricted by the boundaries of the local authority area, they will not be covered by the exemption. I cannot believe that that was the intention. I hope that the Government will be able to help us on this point. I beg to move.

Lord Hesketh

My Lords, this amendment brings us to the question of the companies in which it is proper for a local authority to be involved as the holder of a minority interest.

The Government take the view that it is entirely proper and appropriate for local authorities to be involved in companies—that is, to have a vote at the general meeting or to appoint to the board of directors—where an important policy end related to the functions of the authority is thereby served. They do not consider it appropriate in other cases because they do not think that local authorities should be participating in companies simply for the sake of having a say in the running of the company.

One of the categories of company in which we think it entirely proper for local authorities to be involved are companies which are set up on a non-profit-making basis and which provide some facility for the benefit of the local authority's area. A "non-profit-making basis" of course refers to the common provision which forbids the distribution of profits, dividends or resources to members of the company.

Until we read the amendment of the noble Lord, Lord McIntosh, we had not thought that anyone would have taken the second element of our definition of this class of company to mean a benefit exclusively for the inhabitants of the area. We most certainly had no such intention. I am therefore happy to give an undertaking that we shall not, in drafting the order to implement this part, attempt to introduce any such restriction.

On the basis of that undertaking, I hope that the noble Lord, Lord McIntosh, will be able to withdraw his amendment.

Lord McIntosh of Haringey

My Lords, I am grateful for that assurance which goes a long way to meeting the point that I sought to make in moving the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 72: Page 78, line 9, leave out ("the authority") and insert ("that or any other local authority or by a company which is under the control of a local authority").

The noble Lord said: My Lords, Amendment No. 72 is another of those amendments which reflect discussion in Committee. I must thank the Minister and the department for their assistance with the amendment.

Clause 68(4) forbids a local authority to take steps whereby someone disqualified from membership becomes a director of a company in which the local authority is involved, but an exception is made for those who are disqualified only because they are employed by the local authority. That exemption should extend to those who are employed by other local authorities or by companies controlled by local authorities. It is a common sense improvement and widening of the exemptions which would otherwise be somewhat harsh and restrictive. I commend the amendment to the House. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 73: Page 78, line 42, leave out ("account to the authority for") and insert ("make a declaration to the authority, in such form as they may require, of").

The noble Lord said: My Lords, this amendment also follows on from debate in Committee. Then we discussed the rules about payment from companies to councillors and officers of a local authority. In the Bill as drafted, councillors and officers who receive payment from a company must surrender any remuneration that they would receive from that company for work which they would otherwise do for the local authority.

We have also discussed the whole question of councillors' remuneration and it looks as if the proposals in the Bill would be unnecessarily complicated. All that is required in the terms of the amendments is that the officer or councillor should declare the receipts. The authority then has freedom to decide whether he should be forced to surrender the income. The phrase, in such form as they [the authority] may require", means that the authority can say that it is not interested in travelling or subsistence payments, for example, which are in line with local government rules and which there would not 11:, any need to declare. This is a useful little piece of tidying up which I hope will be acceptable to the House. I beg to move.

Lord Hesketh

My Lords, I should just like to give my heartfelt thanks to the noble Lord, Lord McIntosh. I commend this amendment to your Lordships.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 74: Page 78, leave out lines 45 to 51.

The noble Lord said: My Lords, I spoke to this amendment when I moved Amendment No. 73. I beg to move.

On Question, amendment agreed to.

Clause 70 [Authorities acting jointly and by committees]:

Lord McIntosh of Haringey moved Amendment No. 75: Page 79, line 14, leave out from ("would") to ("local") in line 15 and insert ("not to be under the control of any one").

The noble Lord said: My Lords, in moving Amendment No. 75 I shall speak also to Amendments Nos. 76, 77 and 78. These amendments are concerned with authorities acting jointly which jointly influence companies, as well as with the rules which would affect whether a company is controlled or influenced if it is supported jointly by more than one local authority. That joint influence will only apply if each local authority meets both part of the personnel test (that concerns the people who are involved in the company) and the business relationship test, which is the question of how much of the business of the company is with the local authority.

There are three questions which have to be put in order to decide whether a company is controlled or influenced: first, is the business relationship satisfied by a group of local authorities or companies under their control?; secondly, is the personnel test satisfied by that group collectively?; thirdly, is part of the personnel test met by each of the local authorities concerned?

It is a very complex formulation which is not easy to grasp at first sight. However, the conclusion is that all three tests have to be satisfied if the company is to be controlled or influenced. The difference between control and influence is that a majority means control and influence is 20 per cent. or more.

In our mind there is some doubt which has arisen since the amendment was tabled in my name; it is a doubt about the relationship of these amendments, particularly Amendment No. 78, to Clauses 65 and 66. I wrote to the Minister on this point last Friday and he was good enough to give me an indication of his response. It is so complex a matter that I shall not weary the House with it, especially since it will not affect the passage of these amendments. In very simple terms what worries us is that Clause 65 states that for control to take place the local authority should have either a majority at the annual general meeting or power over a majority of the directors. Clause 66 makes similar provision at the 20 per cent. level for influence. We are worried that Clause 70 could mean that just one person would bring the company into the orbit of influence or control.

I am prepared to read carefully the initial response that the Minister has given to me on this matter. I am certainly prepared to be convinced, if such be the case, that my worries are not well founded. Subject to that proviso, as a whole the amendments seem to us to be a valuable additional provision. I commend them to the House. I beg to move.

Lord Hesketh

My Lords, in the broad overview we very much welcome these amendments. I am grateful to the noble Lord, Lord McIntosh, for writing to me about what he rightly describes as a particularly complex area in which he requires clarification. I believe that he has seen the first part of my reply and I feel he has the certain knowledge that my door is always open in order to provide further exemplification if that is required.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 76, 77 and 78: Page 79, line 18, leave out from ("be") to ("of") in line 19 and insert ("under the control"). Page 79, line 21, leave out from ("control") to first ("of"). Page 79, line 22, at end insert— ("(1A) In any case where, apart from this section, a company would not be treated as being subject to the influence of any one local authority, it shall be treated as being subject to the influence of each of a number of local authorities (in this section refered to as a "group") if the conditions in subsection (1B) below are fulfilled with respect to the company and the group of authorities. (1B) The conditions referred to in subsection (1A) above are—

1. (a) that at least one of the conditions in paragraphs (a) to (e) of subsection (3) of section 66 above would be fulfilled—
1196
1. (i) if any reference therein to the company being under the control of a local authority were a reference to its being under the control of any one of the authorities in the group or of any two or more of them taken together; and
2. (ii) if any other reference therein to the local authority were a reference to any two or more of the authorities in the group taken together; and
2. (b) that at least one of the conditions in paragraphs (a) to (c) of subsection (1) of section 66 above would be fulfilled if any reference therein to the local authority were a reference to those local authorities who are taken into account under sub-paragraph (i) or sub-paragraph (ii) of paragraph (a) above taken together; and
3. (c) that if the condition (or one of the conditions) which would be fulfilled as mentioned in paragraph (b) above is that in subsection (1)(a) of section 66 above, then, so far as concerns each local authority in the group, at least one person who, in terms of subsection (5) of that section, is associated with that authority has the right to vote at a general meeting of the company; and
4. (d) that, if paragraph (c) above does not apply, then, so far as concerns each local authority in the group, a person who, in terms of section 66(5) above, is associated with the authority is a director of the company.").

On Question, amendments agreed to.

[Amendment No. 78A not moved.]

6.15 p.m.

Clause 36 [Application of Part. IV]:

Lord Hesketh moved Amendment No. 79: Page 43, line 45, at end insert— ("(bb) a trust to which, by virtue of an order under section 69 below, the provisions of section 66 below are applicable; or").

The noble Lord said: My Lords, Clause 36(5) provides an order-making power for the Secretary of State so that the new system for capital finance can be applied to companies either controlled or influenced by local authorities as defined in Part V of the Bill. As such companies operate as an extension of their parent local authorities we think it is quite right that their capital transactions are brought within the scheme of controls contained in Part IV.

It is possible, however, for trusts, as opposed to companies, to operate in very much the same way as companies. There is an order-making power, therefore, in Clause 69 in Part V of the Bill whereby the Secretary of State could bring non-charitable trusts influenced by local authorities within the new statutory framework.

Amendment No. 79 is required so that the new system for capital finance could also, if necessary, be applied to influenced trusts. There are no hidden motives here. We have no intention of discouraging local authorities which wish to retain interests in trusts. We simply wish to ensure that trusts in which local authorities have a dominant influence do not provide a means of avoiding controls on local authority capital finance. The amendment will achieve that and I commend it to your Lordships. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendments Nos. 80 and 81: Page 44, line 24, at end insert ("and"). Page 44, line 26, leave out from ("case") to end of line 28.

The noble Lord said: My Lords, I have already spoken to these amendments. I beg to move.

On Question, amendments agreed to.

Clause 37 [Capital purposes]:

Lord McIntosh of Haringey moved Amendment No. 81A: Page 45, line 13, leave out from ("investments") to end of line 15.

The noble Lord said: My Lords, we move from one extremely complex area to another which I certainly find particularly complex. Part IV deals with definition of expenditure for capital purposes. In the consultation paper Capital Expenditure and Finance which the Government issued in July 1988 there was introduced the concept of what they called approved investments. The significance of approved investments is that under the new capital expenditure control system they would not count as expenditure for capital purposes. When the investments are realised they would not be subject to what are called the reserved part provisions which apply to capital receipts.

I shall not weary the House with the provisions of the consultation paper but I think it is worth saying that in the response to that paper a number of financial institutions—City institutions—expressed views which deserve consideration by Parliament. The purpose of these amendments is to give expression to that and to enable the Government to tell us more about their thinking on approved investments.

The group which submitted evidence in response to the consultation paper included County NatWest, Gartmore, Hambros, Lloyds, Mercury, Rothschild, Scrimgeour, Citicorp and a number of others. They argued that the definition of approved investments could be widened. In other words, more investments could be taken out of capital expenditure controls, yet the Government would not lose any effective measure of control and there would not be any breach of the interests of poll tax payers. I have moved the amendment to give the Government an opportunity to indicate the definition of approved investments, and to ask whether they have given any constructive thought to the suggestions put forward by the City institutions. I beg to move.

Lord Hesketh

My Lords, as the noble Lord, Lord McIntosh, has said, we do indeed now move to a complex part of the Bill. It is so complex that I had to inspect three separate, alternative, possible answers to the noble Lord's question when reviewing the matter over the weekend.

As it stands, the Bill recognises three classes of investment. First, there are approved investments which will be specified in regulations made under Clause 63. The acquisition of approved investments is not expenditure for capital purposes and need not be charged to a revenue account. The realisation of approved investments is not subject to the requirement to set aside a reserved part for debt redemption. Approved investments are the sort of investment in which it is appropriate to hold temporarily surplus funds, such as revenue balances, unapplied capital receipts and moneys set aside as provision for credit liabilities. A proposed list of approved investments was set out in a consultative paper sent to the local authority associations last week. They include bank and building society deposits, gilt-edged securities, eligible bank bills, Treasury bills, and certain others.

The suggestions from the City were considered in drawing up the list of approved investments, although only a certain number of their suggestions, such as eligible bank bills and short Treasury bills, were taken up. I hope that that answers the noble Lord's question on the point of approved investments.

Lord McIntosh of Haringey

My Lords, it goes some way to meet the points that were made. When the Minister refers to gilt-edged securities and loans to, and deposits with, banks, building societies and other recognised financial institutions, he goes some way towards the definition which we are seeking. I would have hoped that he might go further and include in approved investment loans to the authority in substitution for external borrowings, loans to other local authorities that are subject to the new system, and loans to other public bodies whose external finance or capital expenditure is classified as public expenditure.

However, it is not a matter on which I expect the Minister to respond immediately. I simply read that series of requests into the record. I shall read carefully what he has said and consider whether any further action needs to be taken. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 39 [Expenditure excluded from section 38(1)]:

Lord Hesketh moved Amendment No. 82: Page 47, line 2, leave out ("defrayed") and insert ("met").

The noble Lord said: My Lords, in moving Amendment No. 82, I speak also to Amendments Nos. 101, 108, 110 and 111. These are all technical amendments concerned with accounting terminology. I beg to move.

On Question, amendment agreed to.

Clause 43 [Register of loan instruments and certain existing loans]:

Lord Hesketh moved Amendment No. 83: Page 50, line 28, at end insert ("and, if they think it appropriate, a local authority may appoint as a registrar for some or all of the purposes of such a register a person who is neither an officer nor any other employee of the authority").

The noble Lord said: My Lords, local authorities which have issued stocks or bonds have to keep a reigster of the holders. They do not necessarily keep the register themselves. Some authorities use outside registrars, such as the Bank of England registrar's department.

In another place, the Government was pressed from the Opposition Benches to confirm that this practice of contracting out could continue under the Bill, and my right honourable friend gave the undertaking. However, we have looked again at the text of the Bill and perceive that there could be some doubt. The purpose of this amendment is to make the matter clear beyond peradventure. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 84: Page 50, line 31, leave out ("made to") and insert ("in respect of which any payment or repayment falls to be made by").

The noble Lord said: My Lords, the House would not thank me for a summary of all the changes that there have been in recent years in the structure of local government. Suffice it to say that, as a result of local government reorganisation, some loans which were originally raised by authorities which have been abolished are now the responsibility of other authorities.

This amendment secures that a local authority's register will contain particulars not only of the authority's own borrowings but also of loans which have been inherited and for which the local authority is now responsible. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 85: Page 51, line 7, after ("regulations") insert—

1. ("(a) generally with respect to the keeping of a register required to be maintained under this section;
2. (b) modifying all or any of the particulars specified in paragraphs (a) to (c) of subsection (4) above; and (c)").

The noble Lord said: My Lords, as it stands, Clause 43 permits regulations to be made to specify additional particulars which must be entered in the register. It does not, however, permit any variation in the manner in which particulars are to be entered. Let me give one small example. Where stock is held by several joint owners, it is universal practice nowadays for only four, rather than all of them, to be named in stock registers or on certificates. The first amendment would permit regulations to be made to enable local authority stock registers to be maintained in accordance with standard practice.

The second amendment is concerned with the evidence and the jurisdiction of the courts. It secures that copies of register entries are prima facie evidence of the matters specified in the entries, defines the nature of any certification by a registrar as to the transfer of a loan instrument, and confers jurisdiction on the courts to rectify incorrect register entries and to determine questions of title as to loan instruments. These provisions follow closely the corresponding provisions in the Companies Act. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 86: Page 51, line 8, at end insert— ("(7) A copy of an entry in a register maintained under this section which is certified by a registrar of the register and purports to show particulars entered pursuant to subsection (4) or subsection (6) above shall be prima facie evidence of the matters specified in the entry. (8) A certification by a registrar of a register maintained under this section of any instrument of transfer of a loan instrument is to be taken as a representation by him to any person acting on the faith of the certification that there have been produced to the registrar such documents as on their face show a prima facie title to the loan instrument in the transferor named in the instrument of transfer; but such a certification shall not be taken as a representation that the transferor has any title to the loan instrument. (9) If—

1. (a) the name of any person is, without sufficient cause, entered in or omitted from a register maintained under this section, or
2. (b) default is made or unnecessary delay takes place in making any entry required to be made in such a register,

the person aggrieved may apply to the High Court or a county court for rectification of the register. (10) Where an application is made under subsection (9) above, the court—

1. (a) may refuse the application or order rectification of the register;
2. (b) may decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register; and
3. (c) generally may decide any question necessary or expedient to be decided for rectification of the register.").

On Question, amendment agreed to.

Clause 50 [Basic credit approvals]:

Lord McIntosh of Haringey moved Amendment No. 86A: Page 58, line 2, leave out ("Before the beginning of each financial year") and insert ("By a date not later than 20th December in the financial year preceding that in which it is to have effect").

The noble Lord said: My Lords, in moving the amendment, I speak also to Amendments Nos. 86B and 86C.

This matter received some consideration at Committee stage. My noble friend Lord Graham of Edmonton moved an amendment which provided that there should be a deadline of 30th November for the issue of credit approvals for the ensuing year. In response, the Minister said that it was far better to rely on the goodwill of the parties concerned and the Government's desire to issue credit approvals as soon as possible rather than to impose a deadline.

When we were considering the matter in Committee, we did not realise the extent to which deadlines were necessary. It is 23rd October. The overspill will carry on until 16th November. The Queen's Speech will not be until 21st November. The Chancellor's Autumn Statement will hardly be made before the very end of November. Indeed it is now being suggested that it should be called a Winter Statement rather than an Autumn Statement. This not only erodes parliamentary time—that would not matter quite so much—but the time available for local authorities to prepare their budgets for the ensuing year and to engage in the consultations with government about the very detailed approvals which will be necessary from government in order for the authorities to produce their budgets. In a sense, the same thing happens to central government. However, in considering this Bill I am not concerned with their difficulties but with those of local authorities.

In Committee my noble friend moved a deadline of 30th November. To show how reasonable we are, we now propose that it should be 20th December. In Amendment No. 86B we propose that the period of consultation shall be not less than three weeks. It was stated in Committee that government liked a period of six weeks for the consultation process to be completed. We are squeezing the local authorities as well as government. I think that noble Lords will feel that that is fair. It is a tough task for local authorities to respond effectively to consultation about credit approvals within a period of three weeks. But the overriding importance of getting the credit approvals agreed before Christmas is such that we think that local authorities will be prepared to live with this shorter consultation period. Then, in Amendment No. 86C, we add that: No regulations shall be made in respect of a financial year after the date of 20th December, which we have already specified.

I have talked about the delay that there will be this year. Of course the delay in preparatory work this year, as this legislation is still proceeding, is even greater. The very regulation for establishing the process of credit approvals was first issued in a consultation paper only last Thursday. So it is extremely difficult for us to understand what is in the Government's mind and extremely difficult for us to repsond in responsible way to it. But we have tried to do that. We have tried to be reasonable. We have squeezed the local authorities as well as the Government.

However, we cannot imagine how local authorities will be able properly to consider the basic credit approvals for the year beginning 1st April, unless they have the full period from 20th December until the end of March, in order to take account of the limits which have been set by government, in order to make their plans for the following year accordingly and in order to set a community charge level at the time that they are supposed to do it. There are already indications that the complexity of the community charge for 1990 is such that many local authorities will not get valid demands out until April or even May of next year. That is a very serious situation and one caused not by any dilatoriness on the part of local authorities, but by the sheer complexity of the legislative provisions which are being forced upon them. If the basic credit approvals for the forthcoming year are not available until the new year, then the risk of the whole process falling behind is very much greater.

I hope that the Government will see these amendments in the spirit in which they are put down, a spirit of compromise, with the proposals which we put at Committee, and that they will find the support of the House. I beg to move.

6.30 p.m.

Baroness Blatch

My Lords, I am not sure how my noble friend the Minister will reply to this amendment, but I want to speak strongly in support of the thrust behind the amendment. It is reasonable to expect that this year there will be delays in getting to local authorities information that they require for making their budgets. If the Bill remains as drafted then, instead of information getting to local authorities by the beginning of the financial year, it could in extremis get to local authorities after their budget-setting meeting, and the information about credit approvals will have an impact on the community charge.

So I am not sure whether the date of 20th December is a correct date or whether it should be written into the body of the Bill. But what I want to support is that the information on credit approvals is got to local authorities as soon as possible, preferably before the end of the year preceding the year in which the credit approvals apply, and almost certainly before the budget-setting meeting of most local authorities, which probably takes place in early to mid-February.

Lord Hesketh

My Lords, these amendments cover issues which we discussed in Committee and which were also considered extensively in another place. Let me deal first with Amendment No. 86A. It is hard to disagree with the noble Lord, Lord McIntosh, and my noble friend Lady Blatch, and we do not disagree that we have emphasised the importance of stability and forward planning in the system.

More importantly, we have given assurances, both in this House and in another place, that we will issue credit approvals as early as practicable. I will repeat these assurances tonight, but I will also explain again why we do not think a statutory deadline is sensible.

Let me start with my assurance, because I know the noble Lord, Lord McIntosh, will be keen to have that on the record again. We fully in tend to do our utmost to issue credit approvals to the same timetable as we have issued capital allocations in the past. I would remind your Lordships in passing that we have achieved the present timetable without a statutory deadline. That means that we would aim to have basic credit approvals issued before Christmas; in other words, in line with the statutory deadline which the noble Lord, Lord McIntosh, is now proposing.

The deadline in the Bill at present is technical. No government will issue basic credit approvals as late as 31st March. The difficulty with a realistic statutory deadline is simple. What date should one make it? If it is too late—say, 28th February or even 31st January—it is worthless. Indeed it may be worse than worthless, because there is always a danger it will be seen as a target and will cause credit approvals to be issued later than they might have been. If it is too early—say, 30th November—then it is not attainable. That is because as I explained in Committee, credit approvals cannot be issued before the Autumn Statement. And one has to allow a reasonable time for consultation after the Autumn Statement.

So that means one must go for a date round about Christmas, as this amendment has done. That is about the right date, and it is a date we would hope to meet. But if it is statutory, then it is not possible to miss it, even by a week, if for an exceptional reason it is sensible to do so.

So for example if, as a result of consultation, we wanted to consider a slight change in the distribution of credit approvals, it may not be possible to do so because there might not be time to make the change. Or if, for whatever reason, local authorities were late with their bids for expenditure for some particular and perfectly valid reason, we may not be able to give them a few days' grace.

In brief, like the noble Lord, Lord McIntosh, we want an opportunity for meaningful consultation, and we want to take account of the latest possible information and bids from local authorities. That is not compatible with a fixed statutory deadline close to the point where we hope to issue credit approvals, because we will meet the deadline without difficulty nine times out of ten. But the tenth time, when it is sensible to issue credit approvals a week later, we will be caught and have to make a less sensible distribution.

That brings me to Amendment No. 86B concerning consultation. This subject has been thoroughly aired both here and in another place. In one sense, there is very little between us. We both believe that it is important for dialogue and consultation to take place between the Government and local authorities on this matter. But the difference between us is that the Government do not believe that it is useful to make this consultation statutory.

The noble Lord, Lord McIntosh, said in Committee that the present ad hoc arrangements need to be strengthened by statutory—presumably central—consultation. He implied that this was a bad thing. But if there is anything ad hoc about the present arrangements, it is because we carry out consultations at a service block level. The Department of the Environment consults on housing allocations, the Department of Transport consults on transport allocations and so on.

Thus, it is not surprising that practices vary from department to department. I would be worried if they did not. Planning for a road programme is very different from planning for local environmental services. So why should the discussion between the Department of Transport and local authorities on roads be the same as that between the Department of the Environment and local authorities on local environmental services?

In a nutshell, we think it is right that consultation should take place at departmental level where needs can be sensibly discussed. Consultation at a central level would be less meaningful because one can only look at need when one looks at what the money is being spent on. And if consultation is to take place at departmental level, then we think there is no reason why it should be contrained to take place in a common format by legislation.

I would add that the departmental consultation seems to work very well. Let me take housing as an example. We have been consulting with local authorities since last year on the review of the generalised needs index which will be fed into the calculation of annual capital guidelines. The HIP process, in which each authority submits bids and discusses them with the department is well established. On 23rd November a meeting of the Housing Consultative Council will consider proposals developed by this department in consultation with the local authority associations for the distribution of housing annual capital guidelines for next year.

We believe that the necessary consultation processes already operate well at present. We firmly intend to continue them and we leave open the offer made by the Minister for Local Government in his letter of the 12th July to consider proposals for their further development. We remain of the view that there is nothing to be gained from a move to statutory consultation.

Finally, Amendment No. 86C seeks to require that any regulations requiring basic credit approval to specify amortisation periods would have to be made not later than 20th December in the financial year preceding that in which the regulations are to be have effect. We have, as your Lordships will be aware, responded to consultations with the local authorities by adopting the reducing balance method set out in Schedule 3 in place of our earlier proposals for equal instalments of principal. We therefore have no reason at present for wishing to make use of the regulation-making power to specify amortisation periods. The only credit approvals which will carry specific amortisation periods will be supplementary credit approvals issued in relation to expenditure which is only expenditure for capital purposes by virtue of the Secretary of State so directing under Clause 37(6). Subsequent special credit approvals must by virtue of Clause 51(5) themselves specify an amortisation period. If at some future date we were to decide that there was a case for making such regulations, I have to tell your Lordships that this amendment does not add anything. The regulations would have to be made before basic credit approvals were issued: otherwise the basic credit approvals would not specify a borrowing period. So whatever date is set for basic credit approvals being issued under Subsection (1) is in effect also a deadline for these recommendations.

In summary, on Amendments Nos. 86A and 86B we are very close both to the Opposition and to my noble friend Lady Blatch in terms of our objectives, but in both cases we disagree that a statutory framework is appropriate. I have explained the reasons why and I hope that the assurances I have given will be of some comfort to the noble Lord, Lord McIntosh. We believe that Amendment No. 86C is unnecessary for the reasons I have just given; and I hope the noble Lord, Lord McIntosh, may see fit to withdraw his amendments.

6.45 p.m.

Lord McIntosh of Haringey

My Lords, let me deal first with Amendment No. 86C. I understand the point which the Minister makes about the amortisation period and I am glad to have his assurance that it is not intended that there should be any change in the system for amortisation, which was amended, as he has reminded us, at Committee stage.

Turning to Amendments Nos. 86A and 86B, I am bound to say that I do not think there is any real understanding of the nature of the problem which is facing local authorities. I referred to the consultation paper which was issued last week. It was not really a consultation paper but a note about capital finance regulations and it was received by local authority associations on 19th October, last Thursday. It states: the following statutory instruments will need to be made under Part IV of the Local Government and Housing Bill:

1. (a) Local Authority Capital Finance Regulations;
2. (b) Local Authority Capital Finance (Rate of Discount) Regulations, to be made annually to prescribed a rate of discount under Clause 46 of the Bill;
3. (c) Local Authority Approved Investments Regulations, to be made under Clause 63(1)"—

that is the matter we have been debating this evening—

1. "(d) Local Authority Borrowing Regulations, to be made under Clauses 40(5) and 43(6);
2. (e), Local Authority Companies Order, to be made under Clause 36(5) of the Bill;
3. (f) an order under Clause 36(5) of the Bill to make provision in respect of Passenger Transport Executives;
4. (g) Parish and Community Councils (Capital Finance) Regulations to be made under Clause 36(3);
5. (h) Local Authority Capital Finance (Repeals and Consequential Amendments) Order, to be made under Clause 186(2)".

This is a very long list of statutory instruments which will have to be made under only one part of this Bill. It is not that they are actually being made or that we have any indication that they will be ready when Royal Assent is given to the Bill. This is just a note from the department saying that these statutory instruments will be required. The note goes on to say that there are technical legal reasons why they have to be in separate statutory instruments.

Then it gets worse, because the next paragraph states that Annex A gives proposals for regulations to be included in the Local Authority Capital Finance Regulations and Annex B lists proposed repeals and consequential amendments. Separate consultation has taken place on the Local Authority Capital Finance (Rate of Discount) Regulations, and the content of the the Local Authority Companies Order is in the letter for local authorities which was sent out on 17th October.

Annex C indicates other provisions that are currently envisaged, and states that consultations on these other items will take place as soon as practicable. What that means is that for many of the statutory instruments not only are there no draft regulations and not only is there no draft of the statutory instrument, but the consultation has not yet taken place.

The prospect of getting proper decisions out of the Government on these essential elements to local authority finance in time for local authorities to plan their finance for 1990–91 is minimal. There is hardly a chance that any of these things will take place. The idea that under one part alone of this Bill we have eight separate lots of statutory instruments and that for the majority of them even the consultation as to their content has not yet taken place by 23rd October is—I was going to say farcical—an outrage. It is totally unacceptable and it is equally unacceptable that this legislation should be forced through this House at this time in October in such a short interval before the end of this Session when the next Session cannot come before the 21st November. That means that the Autumn Statement which will determine the capital allowances cannot come until the end of November and thus local authorities are being held over a barrel. Everything is being done for the convenience of the Government, who are complicating legislation in ever greater detail and complicating the way in which local authorities are controlled and bound hand and foot by central government legislation.

I suggest to the House that this simply shows that the Government have got their regulation machinery totally out of control and that there is no prospect whatsoever of our achieving a reasonable deadline in 1989 for decisions about the 1990–91 budget. The Minister's reply was so complacent, so weak and so inadequate in the face of the facts that I am strongly tempted to seek the opinion of the House on it. But before doing so I want to give the Minister an opportunity to try to rescue the situation from the Government's point of view.

Lord Hesketh

My Lords, I fear I am not going to be able to satisfy the requirements of the noble Lord, Lord McIntosh. He will expect me to say that we are trying to achieve the impossible. I deny that, and I really feel I can do no better than remind him of the remarks that I made earlier. He knows what they are and he disagrees; he will not thank me for repeating them to him.

Lord McIntosh of Haringey

My Lords, I do not think the Minister gives me any choice. He has not sought to defend the timetable as it has taken place up to now, 23rd October. He cannot possibly expect us to believe that this is going to be one of the nine times out of ten when there will be a final decision by the 20th December. I think it is necessary to show the Government that this is not a matter on which local authorities can continue to be led by the nose. I think the noble Baroness wishes to intervene and I will gladly give way.

Baroness Blatch

My Lords, I am grateful to the noble Lord for giving way. He knows that I am sympathetic with the plea to government about getting information to local authorities n time for them properly to plan their expenditure. Therefore I want to ask the noble Lord, Lord McIntosh, whether he would not think again about the reply that he received. Given that this year is a special case in terms of this legislation, I would argue very strongly on the side of local authorities that we do not delay this legislation and that it is put into place as quickly as possible. Also I urge that we should accept the assurances that the aim will always be to have the information out well before Christmas of the financial year in which the new legislation applies. It would be unfortunate to press the matter to a vote because of all the arguments about a specific date in the year. With all the support that I can muster for the plea being made by the noble Lord, Lord McIntosh, I ask that information should be made available to local authorities as early as possible in order to enable proper planning.

Lord McIntosh of Haringey

My Lords, that was a somewhat lengthy intervention. I must remind the noble Baroness and the House that we raised all these matters in Committee. We proposed a timetable which was brushed on one side. We were given the same smooth words about "doing our best" and "nine times out of 10 it will work". If in Committee we had said to the Government that they must have eight separate sets of statutory instruments on Part IV of the Bill; if we had said, "You will not get out the first consultation paper until 17th October"; if we had said, "On 18th October you will be issuing a note to the working party saying that some of the consultation has yet to take place", we should have been howled down and told that we were scaremongering.

This is no longer scaremongering. The ability of Government to make the financial provision for local government in 1990–91 is at stake. Unless we express our detestation of the complexity of these regulations and the failure of Government to make them within an adequate timescale we shall be failing in our duty. If the result of having a deadline is that the whole legislation must be delayed for a year—and I suspect that we are moving towards that—so be it. However, we cannot allow local authorities to be browbeaten in the way that is now being proposed.

The amendments are reasonable. They take account of the arguments put forward in Committee. In particular, they make life hard for local authority associations. They are the minimum that we should be requiring and the House should take a decision on them.

6.52 p.m.

On Question, Whether the said amendment (No. 86A) shall be agreed to?

Their Lordships divided: Contents, 49; Not-Contents, 76.

DIVISION NO. 3
CONTENTS
Addington, L.	Llewelyn-Davies of Hastoe, B.
Airedale, L.
Ardwick, L.	Lockwood, B.
Avebury, L.	Longford, E.
Barnett, L.	McIntosh of Haringey, L.
Birk, B.	Nicol, B.
Blackstone, B.	Ogmore, L.
Bottomley, L.	Phillips, B.
Callaghan of Cardiff, L.	Pitt of Hampstead, L.
Carmichael of Kelvingrove, L.	Rea, L.
	Rochester, L.
Cledwyn of Penrhos, L.	Ross of Newport, L.
Cocks of Hartcliffe, L.	Sainsbury, L.
David, B.	Seear, B.
Dean of Beswick, L. [Teller.]	Shepherd, L.
Dormand of Easington, L.	Stedman, B.
Fisher of Rednal, B.	Strabolgi, L.
Galpern, L.	Taylor of Blackburn, L.
Graham of Edmonton, L.	Taylor of Mansfield, L.
Grey, E.	Turner of Camden, B.
Harris of Greenwich, L.	Underhill, L. [Teller.]
Houghton of Sowerby, L.	Walston, L.
Irving of Dartford, L.	White, B.
Jeger, B.	Winchilsea and Nottingham, E.
Kagan, L.
Kilbracken, L.	Winterbottom, L.

NOT-CONTENTS
Alexander of Tunis, E.	Beloff, L.
Alexander of Weedon, L.	Belstead, L.
Arran, E.	Blatch, B.
Auckland, L.	Blyth, L.
Beaverbrook, L.	Boardman, L.

Borthwick, L.	Marley, L.
Caithness, E.	Maude of Stratford-upon-Avon, L.
Campbell of Alloway, L.
Campbell of Croy, L.	Merrivale, L.
Carnock, L.	Mersey, V.
Clanwilliam, E.	Moran, L.
Coleraine, L.	Mottistone, L.
Colwyn, L.	Mountevans, L.
Cox, B.	Munster, E.
Craigavon, V.	Murton of Lindisfarne, L.
Davidson, V. [Teller.]	Napier and Ettrick, L.
Denham, L. [Teller.]	Nelson, E.
Elibank, L.	Onslow, E.
Elliot of Harwood, B.	Orkney, E.
Ferrers, E.	Orr-Ewing, L.
Gainford, L.	Pender, L.
Glenarthur, L.	Peyton of Yeovil, L.
Gray, L.	Reay, L.
Greenway, L.	Renwick, L.
Gridley, L.	Sharples, B.
Halsbury, E.	Skelmersdale, L.
Henley, L.	Strathcona and Mount Royal, L.
Hesketh, L.
Hooper, B.	Strathmore and Kinghorne, E.
Hylton-Foster, B.
Johnston of Rockport, L.	Teviot, L.
Kaberry of Adel, L.	Thomas of Gwydir, L.
Kinloss, Ly.	Trefgarne, L.
Lauderdale, E.	Trumpington, B.
Lawrence, L.	Ullswater, V.
Long, V.	Vaux of Harrowden, L.
Lucas of Chilworth, L.	Whitelaw, V.
Lyell, L.	Wise, L.
Macleod of Borve, B.	Wynford, L.
Margadale, L.

Resolved in the negative, and amendment disagreed to accordingly.

7 p.m.

Lord Reay

My Lords, I beg to move that further consideration on Report be now adjourned until eight o'clock.

Moved accordingly, and, on Question, Motion agreed to.

[The sitting was suspended from 7 to 8 p.m.]

[Amendments Nos. 86B and 86C not moved.]

Lord Graham of Edmonton moved Amendment No. 86D: Page 58, line 23, at end insert— ("(5A) When issuing to an authority its basic credit approval for any given finanacial year the Secretary of State shall specify whether—

1. (a) a provisional total for credit approval of that authority for each of the succeding two financial years together with an indication of the proposed allowance for capital receipts; or
2. (b) provisional totals for the annual capital guidelines and allowances in respect of capital receipts for those years will be issued, and such totals shall be issued within one month of such determination.")

To require one or other of the mechanisms specified by the Minister for provisional credit approvals, within a timetable.").

The noble Lord said: This amendment stands in the name of my noble friend Lord McIntosh. As the House will be aware, his amendment deals with Clause 50 and supplementary credit approvals. The purpose and basis of the amendment is to require the Secretary of State to issue forward planning figures for credit approvals and/or annual capital guidelines and to state what allowance he intends to make for the use of capital receipts.

A similar amendment was moved in Committee. One of the pleasures in preparing for a debate is to look at what the Minister said the last time round. In Committee the noble Lord, Lord Hesketh, said: We have not yet decided whether it would be sensible to give forward indications for credit approvals in total or for the annual capital guidelines and receipts allowances separately. That depends to some extent on how we take account of receipts. It is something we wish to discuss with local authorities".—[Official Report, 26/7/89; col. 1505.] We wonder whether the Minister can tell the House what he meant by the words: It is something we wish to discuss with local authorities". My advice is that since that time there have been no discussions on that point between the department and local authority associations.

Can the Minister tell the House, as I think he should, that the Government are still committed to giving forward planning totals and, specifically, whether in issuing credit approvals or 1990–91 they will announce provisional totals for 1991–92 and 1992–93? The absence of any firm proposals on the form of guidelines for future years casts suspicion on the Government's commitment to forward planning.

I do not raise this matter in any sinister way but the Minister will understand that people outside the House are somewhat concerned to see that the Minister makes what we think is a proper commitment and they are also anxious to see the colour of his money. They want to know precisely what is going on.

The information required of local authorities by some government departments in determining capital resources casts doubt on the usefulness of forward planning totals to authorities. For example, the Department of Health, in inviting bids for personal social services capital expenditure seeks information on expenditure plans on priority areas for one year only; that is, 1990–91. How can the department possibly determine guidelines for future years when they have only partial information on expenditure plans for one year?

Perhaps the Minister can assist the House and, more importantly, the anxious men and women outside the House who are trying to give some credence to the Bill. I beg to move.

Lord Hesketh

My Lords, we have considered this matter further since it was raised in Committee. The noble Lord, Lord Graham, might like me to respond first by saying what we propose to do.

As the noble Lord is aware, basic credit approvals will be calculated for each authority as the sum of annual capital guidelines for that authority less a central amount of receipts taken into account. There will be an annual capital guideline for each service block for which the authority is responsible. These will be distributed between authorities by the relevant service departments. The "receipts taken into account" variable will be a central deduction and will reflect authorities' relative ability to finance expenditure from capital receipts.

We have decided now that we will issue to each authority a provisional total for their annual capital guidelines for each of the two years following that for which they have received their basic credit approval. We would then not expect to issue actual ACGs for these years less than this provisional total. At the same time we will announce ceilings for the national totals in these two years of receipts taken into account. Again, we would not expect the actual receipts taken into account to be greater than this ceiling.

This information will give authorities a good indication of the minmum basic credit approval they can expect to receive in these two years. It delivers the second of the two mechanisms put forward in the amendment, and it is consistent with the proposals we made on this in the consultation paper on the new system last year, which were set out in paragraph A.17 of that paper.

There are two reasons why we do not accept this amendment. The first is technical and is one that I set out in Committee. Annual capital guidelines have no statutory basis in Part IV. They are a stage in the administrative process through which we propose to calculate credit approvals so it would not be possible simply to include them in one provision here without a more substantive amendment.

The second reason is more important. The amendment would not actually do local authorities very much good. It is not as good as the procedure we are proposing. It seems to me the noble Lord is in a dilemma. Does he trust us or does he not? If he does, why does he not accept the proposal included in the consultation paper, which we have stated our intention of meeting ever since, and which I have restated? If, on the other hand, he does not trust us—which is a possibility—why has he proposed this amendment? If he believes we do not want to give these provisional figures—and I do not know why he should—we could simply accept his amendment and render it meaningless by issuing very low figures. Even then we would not have to stick by them.

The noble Lord can trust us. Providing authorities with provisional figures for future years is not a policy that has been forced on an unwilling Government. It is a firm intention that we came forward with ourselves last year in the consultation paper. We have said nothing since to suggest that we do not intend to go through with it. On the contrary, we have reiterated our intention on several occasions and I can assure the noble Lord again that we intend to operate it in the way I have set out today. I hope that the noble Lord can therefore withdraw his amendment.

Lord Graham of Edmonton

If the Minister is saying that local government is safe in his hands there are those outside the House who, from bitter experience, would take issue with that. The Minister was shrewd in saying, "You either trust me or you do not". The Minister knows that we on these Benches convey to this Chamber the substantial anxieties of people outside this House. Therefore, this amendment owes its genesis to those in local government who have suggested the kind of amendment necessary and who are anxious for the Minister to say a little more.

I am certainly prepared to accept that the Minister has said a little bit more, but I drew attention to his statement in July that these matters would be discussed with local authorities. I am told that no such discussions have taken place so the Minister does not need to look beyond his own words to understand why people are uneasy—I will not use the word "suspicious".

The Minister has had his own experience in local government, which I respect. He has many contacts and all the vibes. Being a local government man or woman in 1989 is far from a picnic. Frankly, the Government have created a minefield through which people must pick their way in order to keep out of trouble.

Other than arguing vehemently against the whole philosophy of this Bill, what we have sought to do here is to say what the local authorities want. They want something firmer than they have had until now; namely, some provisional figures to work on. I have listened very carefully to what the Minister said. I believe he said it in good spirit. I do not remotely challenge either his sincerity or his integrity in these matters. My advice to those outside the House would be to trust the Minister, certainly on this issue and on many others. However, he must understand that their concerns are not idly based; they have been through this situation before and they have their own store of information and experience to guide them. Their experiences are not happy ones. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 [Criteria for issuing credit approvals]:

Lord McIntosh of Haringey moved Amendment No. 86E: Page 59, line 4, after ("factors") insert ("expressed in a formula which shall be expressed in papers laid before both Houses of Parliament").

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 86F. These amendments refer to a debate which took place at the Committee stage and rely to some extent on the words of the noble Lord, Lord Hesketh. When this matter was debated in Committee he said he considered that the proper mechanism would be one which set an objective figure for each local authority. He expected to discuss the method with the local authorities before it was adopted. The Minister said that he expected the method to be based in part at least on the use of a formula.

I am sorry, but I have introduced the matter right in the middle. I should have explained the purpose of the amendments before going into the argument. The amendments require the Secretary of State to set out in a formula the factors that he takes into account in determining local authorities' credit approvals and, as regards Amendment No. 86E, to consult local government before deciding on the formula.

Credit approvals are not a simple matter. Nobody is suggesting that the formula can be expressed in an algebraic manner with a very small number of expressions. It is well known that the formula for credit approvals—that is, the amount of money that local authorities are able to raise—will be based in part on capital receipts from the disposal programme and also in part on the needs indicators of deprivation and other elements which differentiate one local authority from another.

Needs indicators have never been simple to decide. Despite valiant attempts to simplify them, they have become more and more complicated as the years have gone by. There was a time in the mid-1970s when I thought I understood them. I certainly do not claim to understand the formulae which are now used for the assessment of needs as between one local authority and another. The amendment requires specifically that the Secretary of State will do what the Minister indicated—in other words, he will spell out in public his assessment of the expected receipts at individual local authority level. That would be one part of the formula. As I have said, the other part would be based on needs.

The Minister went further than saying that he would expect the method to be based on a formula. He continued by stating that it was not really a problem because local authorities are well aware of the criteria of capital allocations. With due respect, I suggest that is not the case. Local authorities are not aware of the criteria for capital allocations. The fact that such allocations are quite frequently underspent means that local authorities do not have an opportunity far enough in advance to anticipate what the credit approvals are likely to be. Therefore, they are unable to undertake the capital programmes which they would need to undertake in order to make full and good use of credit approvals.

In all those respects the requirement for a formula and for some degree of consistency and continuity in establishing credit approvals is one that ought not to be controversial. The second requirement in Amendment No. 86E for consultation with local government is self-explanatory. It is clear that if the formulae are properly set out and are the basis of proper consultation, there is a greater chance that local authorities will be able to contribute to the process of establishing what credit approval shall be; to contribute to the process of seeing that credit approvals are adequate to the needs of the local communities, but not excessive for those purposes; and also to contribute to the ability of local authorities to use credit approvals well and wisely in the course of the municipal year.

These amendments follow closely the observations of Ministers during the Committee stage and I hope they will find the approval of the Government and the House. I beg to move.

8.15 p.m.

Lord Hesketh

My Lords, the question of a statutory requirement for consultation with the local authority associations has been aired at many stages during the passage of this Bill both in your Lordships' House and in another place. I do not propose to go over all the same ground again in detail as I think the Government's views are well known. However, the arguments against a requirement that there should be statutory consultation on a formula in respect of the criteria for issuing credit approvals highlight our case.

Starting with a requirement for a single formula is neither realistic nor practical. We would have to devise it, consult on it, presumably amend it, and then consider applying it before credit approvals could be issued. There is no way that this could be done for the coming financial year, 1990–91, when the new system is due to start. It is not possible to set out a neat formula covering all the relevant factors which might be taken into account in the criteria for issuing credit approvals. First, listing the factors would be an extremely difficult task. One has to bear in mind that the basic credit approval will cover spending on most local authority services. Secondly, the task of evaluating these factors one against another would be immensely complex.

At the moment each service department has a different method of approach in the distribution of resources. That is only right and proper because the way to plan ahead varies from service to service. For example, transport capital allocations are to a considerable extent derived on the basis of the estimated costs of particular road schemes. In no way could such a distribution be achieved by the use of anything that could be described as a formula. Nevertheless, it is a perfectly sensible way of issuing capital allocations and one which I expect will continue in the new sysem.

I can see that there may be disagreements between the Department of Transport and the local authorities about the level of provision for road schemes and the relative priority of individual schemes. But I do not think that the general approach has been seriously questioned. Indeed, the formula approach would in effect prevent local authorities from undertaking big schemes because no formula would produce the abnormally large amounts that would be required in the years in which such schemes were carried out.

It is important to bear in mind that the amendment applies not only to basic credit approvals but also to supplementary credit approvals. Supplementary credit approvals will be used for the purposes for which specific capital allocations are issued now. To take one example, is it really the intention that there should no longer be specific allocations for coast protection schemes? I very much doubt it. If that is the intention—that is to say, to preclude government departments from issuing specific credit approvals covering particular projects—then I have to say that not only the Government but many of the local authorities would be most unhappy. Many of the representations that we receive are to the effect that we are far too ready to distribute resources by means of broadly based formulae and that we are far too reluctant to recognise the merits of individual projects.

That is not to say that it is never appropriate to use formulae. A large part of the resources distributed for housing are in fact distributed in accordance with what is known as the generalised needs index, which has been the subject of extensive consultation with the local authority associations. Equally, much of the resources available in the other services block have been distributed by means of formulae recommended by the local authority associations. But I cannot agree that a formula or several formulae should always be employed. Revenue expenditure is different from capital expenditure. It is more stable from year to year and lends itself to a formula, but a formula could not cope by itself with the peaks and troughs of a capital programme.

I now turn to Amendment No. 86F. Consultation focusing on a formula would concentrate consultation at the wrong level. I have to reiterate that the appropriate level for consultation is with the appropriate service department. That is the level at which the details of expenditure plans are worked out. There is already considerable consultation at this level. The then Minister with responsibility for local government wrote to the chairmen of the local authority associations in July. He said that if they considered there was scope or need for development of the existing opportunities for consultation, he would invite them to discuss this, in the first instance with officials in the relevant service department. Although they have not responded at all to that letter, we believe that that is the way to proceed. We are firmly committed to continuing consultation and building on it.

That said, we do accept, however, that there are some general matters relating to the level of capital expenditure which have a bearing on the level of credit approvals and annual capital guidelines under the new system. We are perfectly ready to discuss this with the associations at the Consultative Council on Local Government Finance or in the appropriate office subgroup. But we do not think that it is appropriate for this to become the main vehicle for detailed discussion. I suggest that the amendment is not the way to proceed, which is why the Government resist it.

Lord Dormand of Easington

My Lords, I understand that I can speak at this stage to seek elucidation. I have not followed what the Minister said. I wonder whether he would like to comment on my view of the clause itself and of the amendment. There is a basic difference here. The clause says: the Secretary of State or other Minister may have regard, subject to the following provisions of this section, to such factors". The amendment seeks to insert the words, expressed in a formula which shall be expressed in papers laid before both Houses of Parliament". Is the difference simply that the Minister knows the answer—he knows it all—as distinct from both Houses of Parliament having a contribution to make to what would be an important formula? In both Houses there is a wealth of experience in this kind of work. Unless there is some other factor which the Minister has not mentioned in his reply, if the formula is expressed in papers laid before both Houses of Parliament (which presumably would be debatable) we are more likely to come to a better answer than we would under the clause as it stands.

Lord Hesketh

My Lords, I fully understand what the noble Lord is saying. The difficulty is that he makes the assumption that the formula will be there in order to be discussed in front of both Houses of Parliament.

Lord McIntosh of Haringey

My Lords, I listened carefully to the Minister. There were times when he almost convinced me—I shall not say that he convinced me of the argument—that a respectable attempt was being made by the Government to give adequate guidance both to local government and to the community as a whole. However, as soon as he referred to the willingness of the Government to discuss these matters at the Central Consultative Committee on Local Government Finance, he lost me. He knows as well as I do that the consultative committee has increasingly become a dead letter under this Government. It used to be a serious negotiating forum. It used to be a conference at which papers, properly prepared, were issued in advance so that sensible discussion could take place on important matters. More recently it has been used by Ministers as an opportunity to harangue local government rather than to discuss matters with it. Any idea that the Central Consultative Committee will be a forum for a sensible two-way discussion of financial aspects of local government is frankly laughable.

The Minister resists the idea of formulae and resists the idea of exposing publicly the Government's thinking on local authority finance. I quite understand why the Government should resist the idea of exposing the thinking, because very often there is no thinking. Secretaries of State decide for political rather than social or financial reasons the way in which they will distribute the largesse of central government grants to local government. When the Minister referred in his response to the happy example and to the success as he called it of formulae in housing finance, I fear that he exposed the bankruptcy of Government thinking in this respect as well. The housing finance formulae have become more and more complicated and have moved further and further from reality. They have enabled the Secretary of State to increase or decrease grant support to individual local authorities as he thinks fit on the basis of reward or blame for political conformity or otherwise.

The same is clearly true, and will be seen to be true on Wednesday, about the poll tax. In the amendments on the poll tax put down for Report stage the Government have given up any pretence that there will be a rational or consistent approach to the setting of the tax. It will be done on a basis of political favouritism. The formulae that are used—they can barely be dignified by the name of "formulae"—are devised for that purpose. It is blatantly so. The negotiations are taking place not with local authorities which know what is happening. They are taking place with Sir Rhodes Boyson who knows what the political effect of any determination will be. The political effect is dominant in all these matters.

It is not surprising therefore that the Government, who are determined to use local finance not for social or economic purposes but for political purposes, should resist the simple idea put forward in the amendments. It is what we used to call in arithmetic at school "show working"—show the way in which the conclusion was reached. They are resistant to the idea of showing the way in which they reach a conclusion because they cannot admit in public that the way in which they reach a conclusion is political and not financial, social or economic. It is a poor display of secret government as opposed to open government. I am not in the least surprised by the Minister's response but that cannot lessen my disappointment in it and my dissatisfaction with the conclusion that he reaches. It is only because of the hour of night that I seek leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 86F not moved.]

Clause 55 [Capital receipts]:

Lord Hesketh moved Amendment No. 87: Page 62, line 28, leave out ("(a)").

The noble Lord said: My Lords, I should like to speak also to Amendments Nos. 88 to 90. Under the existing capital control system capital receipts are defined at Section 75 of the Local Government, Planning and Land Act 1980. In very broad terms these are sums received for the disposal of land and other tangible assets. My right honourable friend the Secretary of State has a power to provide that specified classes of sums received which would otherwise be receipts should not be treated as receipts for the purposes of the capital control system. He can do this through a regulation-making power at Section 75(5) of the 1980 Act.

That power has been exercised. It has been used to exclude the proceeds of disposals of land and other tangible assets held for the purposes of or in connection with the police, probation and after care and magistrates' court services and the Central Criminal Court. These exclusions were made because expenditure on these services is at present controlled separately from the existing capital control system.

In contrast, the new system of capital finance will cover expenditure on all local authority services, including police, probation and after-care and magistrates' courts services. From 1st April 1990 these services along with other local government services will be subject to the new system of capital finance. The new system requires authorities to set aside on 1st April 1990 the appropriate part of their accumulated capital receipts as provision for credit liabilities. The amendment allows the Secretary of State to provide by regulations that accumulated receipts on the law and order services are treated the same way as other receipts in this respect. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendments Nos. 88 to 90: Page 62, line 28, at end insert ("either"). Page 62, line 29, leave out ("(b)") and insert ("(a)"). Page 62, line 30, at end insert ("or (b) did not constitute such receipts by virtue of regulations under section 75(5) of that Act but are specified for the purposes of this subsection by regulations made by the Secretary of State").

On Question, amendments agreed to.

8.30 p.m.

The Deputy Speaker (Lord Strabolgi)

My Lords, I must inform the House that if Amendment No. 90A is agreed to, I cannot call Amendment No. 90B.

Clause 56 [The reserved part of capital receipts]:

Lord Dean of Beswick moved Amendment No. 90A: Page 63, leave out from beginning of line 39 to ("50") in line 42.

The noble Lord said: My Lords, the purpose of this amendment is to reduce the reserved part of housing capital receipts—for example, that part to be used to repay debt—from 75 per cent. to 50 per cent. More generally, the amendment is intended to allow a debate on central government constraints on local authority housing capital expenditure.

In responding to similar amendments during earlier stages of the Bill, the Government highlighted the trade-off between spending power from capital receipts and from credit approvals. The argument is being put forward that the higher the level of spending power from usable capital receipts, the lower the level of credit approvals within a predetermined—by the Government—spending ceiling.

I see that the noble Earl, Lord Caithness, is now sitting in his seat. I suspect that he will probably deal with this amendment. He exemplified that argument in Committee in the following terms: let us assume the Government consider that £6 billion is an appropriate level of capital expenditure. If we allow £2 billion to be spent from receipts, then we can issue £4 billion worth of credit approvals. If we allow £4 billion to be spent from receipts, then we can only issue £2 billion of credit approvals".—[Official Report, 26/7/89; col. 1528.] If the total of credit approval is reduced, it becomes more difficult for the Government to allocate resources to high need/low resource authorities.

During the debate on the reserved parts of capital receipts in Committee in another place the former Minister, Mr. Trippier, estimated that a reduction in the reserved part of housing capital receipts from 75 per cent. to 50 per cent. would reduce credit approvals by £900 million. That does not allow individual authorities to gauge the likely level of spending power from capital receipts and credit approvals.

Local authorities are concerned that the new capital expenditure control system will result in an overall reduction in capital resources available to them. That is why they are opposed to the restrictions on the amount of capital receipts which can be used to finance additional capital expenditure. That is understandable because the capital receipts they hold are the only certain source of capital finance.

The concerns of authorities could have been allayed by the Government giving forecasts of lighter levels of credit approvals so that authorities might have an indication of overall capital resources next year. Even at this late stage the Government appear unwilling to give any illustrative figures based upon reasonable assumptions.

This amendment also has the support of the National Federation of Housing Associations. There have been many references during the debates on various amendments today to responses such as, "Leave it to the Secretary of State to deal with by regulation". I was taught in another place that unless a provision appeared on the face of the Bill it could not really be taken as the Bible and indeed it may not happen.

Over the past two or three months we have seen a dramatic change in some respects in the attitude of the present Secretary of State for the Environment as compared with that of his predecessor. In fact, the new Secretary of State has reversed in a number of fields very important decisions which were taken by his predecessor.

I believe that we are mainly talking about the fact that there are capital receipts from the sale of various properties, land, and so on, which local government sells. I think that I am right in saying that the largest sum is that which is collected from the sale of council houses—or it must represent a large chunk of what we are discussing here.

The right-to-buy policy was introduced by a previous Conservative Government but it really concerns the present Government. It was almost written in tablets of stone by the then Secretary of State (who is now a Member of this House but is not present this evening and I make no comment about that) that the main reason for the introduction of the Bill and why people should accept the proposal was as follows. The total financial resources gathered would be made fully available to local authorities which were being forced to sell off the assets to fund other building programmes of local authority housing.

We must all now accept that only last week the Government declared themselves against that policy and against any increased dimension therein. The Minister's answer from the Dispatch Box was that the Government no longer see local authorities as being involved in substantial local authority building contracts. If the Government have their way that is to be the future role of housing associations. Indeed the Minister said that to me a week ago last Monday. It seems that we must now forget local authorities in terms of building houses in volume.

What an absolute fraud has taken place on local authorities if the same Government can now say that to such local authorities after having pushed the Bill through both Houses of Parliament. The Secretary of State and Ministers had given guarantees that local authorities could be absolutely sure of a copper-bottomed guarantee that that was their money and they could use it to build council houses.

There was a calculation at the time that in order to build one council house from the proceeds of the sale of council houses local authorities would have to sell two such houses. I am not a mathematical genius but if you take the discounts over which the Government have consistently moved the goalposts as sales tapered off so as to bribe more people to buy council houses—by increasing the percentages—I suspect that, with the present cost of house-building local authorities must carry out, they would now need to sell three to four local authority houses because of the massive discount. However, even then, they are on a twist by this Government, because the Government have not kept their word. They funked out of a guarantee which was given.

I am sorry if Ministers think we are being a little abrasive in the matter, but when we are told by Ministers today what this really means, I do not believe one word of it. I say that even if the Minister says that he is 100 per cent. sincere. This Government have proved their capacity more than any previous government to rat on undertakings which have been given.

The amendment is an attempt to write into the Bill some guarantees of increased resources for local authorities that have been treated outrageously. When we challenge Ministers in another place and this place as to why they have suddenly ratted on their promises to return all the receipts from the sale of council houses to the local authorities, they say that the market has changed and that they have collected more money than they expected. Debate after debate has taken place in the past three years on this subject. Those debates were not motivated by political bodies although they had a political context. There was a report from the Duke of Edinburgh's committee and also Faith in the City, to name but two. They called for more funding from a government who had done a Dick Turpin on local authorities.

The local authorities are asking only to have more of their own money made available. They are not asking for additional money from the Government. They are asking for the right to use some of their own money. I do not think that that is unreasonable. I await the Minister's reply with interest. I shall not accept his reply if he says that if we give the Secretary of State the power, he will be sympathetic to this and that. The Government's track record in keeping undertakings, which they have given in both Houses but which have not been written on to the face of the Bill, has proved to be completely fraudulent, and local authorities no longer trust them.

Lord Ross of Newport

My Lords, I support the amendment. The Minister who is to reply is unfortunately wearing a Treasury rather than his former housing hat. It might have been better if he were still in his former role. It is not just local authority housing which we know the Government wish to phase out; housing association housing will be hit if we do not allow local authorities to spend more of their capital receipts.

Wandsworth is supposed to be the feather in the cap of the present Administration. The Conservative Party did well the other day to hold its seat in a crucial by-election. Wandsworth supports housing association schemes by some £8 million of a housing investment programme of £16.6 million out of some £30 million of capital receipts. If we restrict the help that is going on in Wandsworth—I support what is happening there in the way of building housing for housing associations—the programme will collapse.

We understand that it is the Government's policy to switch social housing to those who need it and who cannot afford to buy. God knows, it is hard enough to buy now! If that essential housing provision is to be made, the Government must be more sensible about the way in which local authority capital receipts are used. They must be a bit more generous than they have been up to now. I believe that the whole amount should be made available; but I shall support the amendment as a better alternative than what we have at present.

8.45 p.m.

The Paymaster General (The Earl of Caithness)

My Lords, as the noble Lord, Lord Dean of Beswick, has explained, the main purpose of the amendment is to reduce the deserved part of capital receipts from council house sales from the 75 per cent. proposed in the Bill to 50 per cent.

Lord McIntosh of Haringey

My Lords, I assume that when the noble Earl says "deserved" he means "reserved".

The Earl of Caithness

My Lords, I have been told that I did say "reserved". I am sorry that the noble Lord, Lord McIntosh of Haringey, did not hear me clearly.

This is a more modest reduction than the noble Lord suggested in Committee or has been suggested in another place. I am afraid that it is still a significant change and is not acceptable to the Government for the same reason as the previous amendments were not. That reason is simple—the need to get a sensible distribution of capital spending power. The growth in local authority capital receipts in recent years has been phenomenal. They have more than doubled in the space of three years. The effect on the distribution of capital spending power has been equally dramatic. We have heard a lot in discussion of Part IV about "cuts" in capital spending. The noble Lord, Lord Dean of Beswick, referred this evening to the overall reduction. It is worth reminding your Lordships that between 1985–86 and the present year, local authority capital spending power has increased from £5.7 billion to £8.1 billion, an increase of 44 per cent.

Lord Dean of Beswick

My Lords—

The Earl of Caithness

My Lords, I cannot agree with the noble Lord, Lord Dean of Beswick, that local authorities have been treated shabbily, and I am not giving way to him. Within that total, capital allocations have fallen from £3 billion to £2.5 billion.

So local authorities can spend more, and they have been spending more. Capital expenditure this year is 46 per cent. up on 1985–86. It is not the authorities that need to spend more that are able to spend more, because while spending power is rising, allocations have been falling. That is where the cuts have been. That is not something that we can ignore. If the noble Lord is honest—and I hope he will be—it is not something he would want us to ignore.

With the percentages that we have chosen, the total for credit approvals and capital grants next year will be significantly higher than capital allocations this year. I cannot say how much higher. That will have to await the Chancellor's Autumn Statement. The amendment would reduce the total for credit approvals by £900 million because of the extra spending it would produce from receipts. That is not something we can accept. I cannot recommend that to the House.

In the second part of his speech the noble Lord, Lord Dean, was a little intemperate. Some of his remarks were unnecessary, particularly in view of the fact that my noble friend Lord Jenkin of Roding was not present. I made the situation clear in Committee. I do not wish to weary your Lordships now with a further reply to the noble Lord.

Lord Dean of Beswick

My Lords, I understand the Minister rising to the defence of the noble Lord, Lord Jenkin of Roding. If he thinks that I took a mean advantage, I have to say that I only repeated what I have said more than once in your Lordships' House. At this time of the year the Government are in consultation—I shall not say negotiating—with authorities. I was always led to believe that consultations meant consultations on the basis of forming a decision or of consultations being taken into consideration when a decision was being arrived at. One was to be consulted about a decision whether or not it was in one's favour.

The Government have stood that procedure on its head. They make decisions and then say to local authorities, "We have done that, and that is your consultation". There are no consultations beforehand. Local authorities are faced with a coup d'état and then the consultation takes place.

The Minister has the advantage over me of being provided with figures by his civil servants. They appear to put most circus jugglers in the shade by the way in which they mislead people. The information that came to me after the Question I put to the noble Lord, Lord Reay, last Monday, was that his reply, given to him by his civil servants, was an appalling sleight of hand. If it was examined in detail, it could have been blown sky-high. I am not too sure that the noble Earl, Lord Caithness is not doing the same thing. He talks about the "substantial increases" being made available to local authorities. What are the local authorities spending it on? They are not building houses. Is he saying that they are receiving more money now than under Lord Stockton? They were building 300,000 houses a year then. The noble Lord, Lord Reay, was boasting that last year they built 140,000 houses and that the building programme had increased. I remember when the annual figure for houses built under any government was over 300,000. All the figures from people dealing with housing, not just the local authorities, show us that we need a target in excess of that if we are to deal with the housing situation.

So I do not accept Ministers blithely trawling figures out which they have been given by the civil servants or the Treasury. Whose figures are they? Nigel Lawson's or the Prime Minister's financial adviser's at Number 10? Which figures concern capital assets, which concern what should be spent, and what effect do they have?

We are not talking about the Government's money, but other people's money which belongs to those who have elected the Government. I find it strange. If the Minister is saying that they have received enough money, with what they have been allowed to spend of their own money, to build 200,000 houses a year, I wish to know why they have not done that. But I am told this by political people, not only from my own party—voices are now being raised in the rural areas, by the Association of County Councils. I have received correspondence, not from the Labour areas, the Labour cities, but from the hinterland. People say that they cannot build houses, and that they have no houses left because of the Government's policy. I do not accept for one moment what the Minister says to me: that the Government have allowed local authorities enough funds to build a lot of houses. Let the Minister tell me where it has been used.

Perhaps I may put my last question to him. It might pre-empt an Answer or a Statement in the House in a few months' time. What considerations are the Government giving to the bids of the local authorities for next year in the housing investment programme? I know from my own experience as a former chairman of housing, and from when I was in another place as an MP, that authorities made bids and received roughly 50 per cent, across the board, irrespective of need. There was no machinery to determine between individual local authorities, so we made our bid. If Manchester bid for £80 million, they received £40 million. If Leeds (which historically bid lower) bid for £60 million, they received £30 million.

However, the situation now, as I understand it, is that last year people received a third or less than a third of what they wanted. So where are all these assets and capital spending which the Minister tells me local authorities have had? I think he is falling for a sleight of hand from his civil servants. Local authorities do not accept one iota of it. All they know—whether they are Conservative, SDP, Liberal, Labour or whatever their political colour—is that they can no longer build houses. They have sold public assets on the Government's instructions under government legislation in order to raise money which is now being denied to them.

If the Minister wishes to retain credibility—I do not know whether he is speaking on behalf of housing or in his job in the Treasury—he will have to do better than he has. He may accuse me of being intemperate. I shall tell him why I am becoming intemperate. I have been persistently questioning Ministers over the past three years in the most temperate way on a variety of matters to do with housing, with homelessness, with single-parent families, and with repairs. You name it, my Lords, we have done it. We are always fobbed off with a mass of statistics which have been produced by the Minister's civil servants. I am getting a little fed up with it, to the point where it is becoming almost an exercise. I have to say this with the utmost sincerity to the Minister: is it worth asking a Question on housing? Will we receive a reasonable Answer? Will the Government tell the truth? I am getting a little sick of it, whether that is intemperate or not. I am not the only Member of this House who has arrived at that position. The Government and the Ministers will have to do a little better than the hogwash and the whitewash that we have heard tonight.

On the basis of that, and knowing the number of people present and what will take place if I press the amendment, I beg leave to withdraw it. However, what I have said needed saying.

The Earl of Caithness

My Lords, before the noble Lord withdraws his amendment, perhaps I might say something. I think that what I have heard is a most unfortunate expression. I hope that the noble Lord will withdraw it on further consideration.

Lord Dean of Beswick

My Lords, I have no intention of withdrawing anything because I believe that what I have said represents the overwhelming view of local authorities in this country. Not only that, people like myself who have been involved in housing over a number of years feel this. In my opinion, the Government will have to start being less economical with the truth at the Dispatch Box when they talk about housing.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 90B: Page 63, line 41, after ("per cent.") insert ("(aa) in the case of a receipt from the disposal of dwelling houses built for sale, 0 per cent.")

The noble Lord said; My Lords, this amendment may not generate the same heat as the last one. I hope it will not. It is a probing amendment designed to establish whether the prescribed proportions applying to receipts from the disposal of dwelling houses built for sale under the present system will be carried through to the new system.

Under the present capital control system, receipts from the disposal of dwelling houses built for sale have a prescribed proportion of 100 per cent. That is, they are available in full for reinvestment in the year in which they arise. However it is not clear whether under the proposed system they will have a reserve power of zero—that is be available in full for additional capital expenditure without a proportion having to be set aside to repay debt.

The recent consultation paper issued by the DoE, covering the reserved part of capital receipts does not appear to address this issue. If the Government do not intend to replicate the treatment of these receipts in the new system, I think it only fair that we should ask them to justify that decision. I beg to move.

The Earl of Caithness

My Lords, I spoke earlier to the noble Lord, Lord Lloyd of Kilgerran. His amendment is to follow that of the noble Lord, Lord McIntosh of Haringey, which has just been spoken to. My answer to the amendments of both noble Lords, will be the same since I have to refer to later government amendments starting with Amendment No. 91. I wonder whether the noble Lord, Lord Ross of Newport, would like to comment.

Lord Ross of Newport

My Lords, perhaps I may wait until the amendment arises. I promise to do the right thing.

The Earl of Caithness

My Lords, I shall therefore cover many of the points on the amendment of the noble Lord, Lord Lloyd of Kilgerran.

Lord Ross of Newport

My Lords, the noble Lord, Lord Lloyd, apologises for his absence. He has been unavoidably called away. It was not my intention to move Amendment No. 90C, since I was going to withdraw it in favour of later amendments. I do not know whether the Minister wishes to wait for that or respond now. I promise not to use the wrong procedure.

9 p.m.

The Earl of Caithness

My Lords, what I wish to do is, in answering the amendment which has been moved, to speak to the Government's amendments because they cover the points of concern. As I have just said, I do so because of the government amendments standing in the name of my noble friend Lord Hesketh, Amendments Nos. 91 to 94, 96 to 99, 102 to 104 and 106. Those amendments concern the powers in the Bill to vary the reserved part of capital receipts. The reserved part of a receipt is the part that has to be set aside for debt redemption.

Some of the amendments are technical, but there are two changes of substance. First, Amendments Nos. 91, 93 and 94 enable the reserved part to be set as an amount rather than as a percentage of the capital receipt. Secondly, Amendments Nos. 99 and 102 enable different provision to be made for non-monetary consideration from that made for normal cash receipts.

The amendments result to a large extent from the consideration which I promised we would give to the amendment to Clause 58 which the noble Lord, Lord Graham of Edmonton, moved at Committee stage. I should remind your Lordships that the broad principle behind Clause 58 is that when a local authority sells something in return for non-monetary consideration—in other words sells it for some benefit in kind—then it should make the same provision for debt redemption as it would have to make if it received the benefit in cash. The intention of the noble Lord's amendment was that Clause 58 should not apply to disposals made to registered housing associations. Thus when a local authority provides land to housing associations at reduced prices—or at zero price—for the provision of subsidised rented housing, it would not have to provide for debt redemption on the land, even if it received non-monetary consideration in the form of nomination rights to the housing.

We have thought about that carefully, and I am pleased to tell your Lordships that in this case we agree that an exception to the principle underlying Clause 58 is warranted. Indeed we should go further than the noble Lord, Lord Graham of Edmonton. He proposed that the exemption should apply only to disposals to housing associations. We see no reason why it should not apply to any case where the authority disposes of land for the provision of subsidised rented housing. So we intend to use those powers to prescribe that where a local authority receives nomination rights in return for the disposal of land, there should be no debt redemption in respect of those nomination rights. We intend to make a similar provision in respect of non-monetary consideration received before 1st April 1990, through the regulation-making power we are taking at Schedule 3. So transactions which have already taken place, or which take place before the end of the financial year will also benefit.

We are also considering urgently whether those powers should be used to assist certain other low-cost home ownership initiatives for which there is some help in the present system. Those include build under licence, build for sale and shared ownership schemes.

There are already some exemptions for such schemes in the present capital control system. They cover several low cost home initiatives. The need for an exemption arises in the case of build for sale because the local authority incurs expenditure on the building of the houses and then generates a receipt on the sale. The prescribed proportion rules in the present system, or the debt redemption rules in the new system, would normally mean that build for sale schemes would have a cost in terms of the authority's capital resources.

I am pleased to tell the House that we have decided that in the case of build for sale that cost would be an undesirable disincentive for such schemes. Therefore we propose to give an exemption by regulations to ensure that it does not arise. I hope that the noble Lord, Lord McIntosh of Haringey, and in due course, the noble Lord Lloyd of Kilgerran, will be happy to withdraw their amendments.

We have not yet reached a decision on the other low-cost home ownership exemptions, but I hope that we shall be able to announce decisions on all of them shortly. I hope that your Lordships will agree with me that the announcement of how we intend to use the powers will be welcome news to local authorities and will encourage them to make use of their surplus land to facilitate the provision of subsidised rented housing.

Lord Hylton

My Lords, before the noble Earl sits down perhaps he could help me on the question of debt redemption. No doubt I ought to know the answer, but I do not. I dare say that a number of your Lordships also do not know the answer. Is he talking about debt redemption on a debt attaching to the particular site sold or about the total pooled debt of the particular local authority?

The reason I ask is that, if a local authority sells a site which it owns and which is free of debt, it seems extraordinarily unfair that the authority should not be allowed to use the proceeds for whatever it sees to be its most urgent need in terms of capital expenditure.

The Earl of Caithness

My Lords, as I understand it, it is the global debt, because a great many local authorities cannot define what part of debt refers to which site.

Lord McIntosh of Haringey

My Lords, we have departed to some extent from the rules of procedure at Report. Although my noble friend Lord Dean moved only one amendment the Minister has taken the opportunity to respond not only to that amendment but also to the amendment in the name of the noble Lord, Lord Lloyd of Kilgerran, and a whole series of his own amendments which appear to be significant. We shall have to read very carefully what he said, because it appears that he has signalled significant changes in government policy on debt redemption and reserved amounts.

Under the circumstances it is virtually impossible to debate the announcement effectively. Since the changes will presumably be in the form of regulations, perhaps the Minister will make sure that we see at least a draft of the regulations in good time before Third Reading so that we can return to the matter at that stage.

The Earl of Caithness

My Lords, I do not know the answer to that question. I shall try to find out and let the noble Lord know. We shall try to get the regulations to him.

Lord Dean of Beswick

My Lords, on the basis of the exchange that has just taken place I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ross of Newport had given notice of his intention to move Amendment No. 90C: Page 63, line 42, at end insert ("with the exception that, where land is being disposed of to enable low cost housing provision for rent or shared ownership the reserved part of the capital receipt shall be nil.").

The noble Lord said: My Lords, in view of the statement which the Minister has just made to the House, which I very much welcome, I shall not move Amendment No. 90C standing in the name of my noble friend Lord Lloyd of Kilgerran.

[Amendment No. 90C not moved.]

The Earl of Caithness moved Amendments Nos. 91 to 94: Page 63,line 45, after ("receipt") insert ("or provide that the amount which is the reserved part of any capital receipt shall be determined in accordance with the regulations"). Page 64, line 2, leave out from first ("and") to ("100") and insert ("where the regulations specify a percentage, it may be any percentage from nil to"). Page 64, line 22, leave out from beginning to ("subsection"). Page 64, line 23, leave out from ("if") to ("the") in line 26 and insert ("it provided that the reserved part of the receipt were a percentage thereof specified in the direction or, according as the direction provides, an amount determined in accordance with").

On Question, amendments agreed to.

Clause 57 [The usable balance of capital receipts.]

The Earl of Caithness moved Amendment No. 95: Page 65, line 14, leave out from ("falls") to ("section") in line 15 and insert ("within").

The noble Earl said: This is a consequential amendment to an amendment moved in Committee. I beg to move.

On Question, amendment agreed to.

Clause 58 [Directions and guidance]:

The Earl of Caithness moved Amendment No. 96: Page 66, line 4, leave out ("is either") and insert ("either is").

On Question, amendment agreed to.

Lord Graham of Edmonton moved Amendment No. 96A: Page 66, line 16, at end insert— ("and; (d) the disposal is not to a registered housing association.").

The noble Lord said: The Minister paid warm tribute to the amendment and to the happy exchange of views which led to his announcement five minutes ago. Do I take it from what he said, which I followed carefully and found helpful, that the Government accept Amendment No. 96A, or that, if it were withdrawn, something else would be substituted in its place? Amendment No. 96A deals with the exemption from the capital provision for housing associations. Perhaps the Minister will help me. I shall certainly move and speak to the amendment and perhaps, in the light of his reply, withdraw it.

As he reminded the House earlier in responding to a comparable amendment, the Minister convinced me and many people outside the House that he understood our arguments. Perhaps I may tell the House that Mr. Alan Kilburn, chief officer of the North Housing Association, invited me to Epping to look at one of the developments for which his housing association had been responsible. I was taken round the housing development, which—I speak as one who knows the work of the North Housing Association—was well planned and had a very nice atmosphere. However, as Mr. Kilburn told me, what was so crucial to the association being able to charge affordable rents was the fact that Epping Council had been willing—on the basis of a substantial weighting of nominations in favour of the council, but leaving some to the housing association—to make a satisfactory deal under which the land was made available, if not free, certainly very cheaply. As a consequence, the council was discharging some of its responsibilities by providing affordable rents and the housing association was doing its job and had a number of places that it could make available.

The North Housing Association is not the only such example. I am told that such authorities as Bournemouth, Bromsgrove and Wychavon, which are not Labour controlled, and other authorities such as South Buckinghamshire, Three Rivers and Arun are anxiously waiting for the Minister to tell them that they can proceed in their wish to work closely with a housing association. If the kind of easement that we are seeking here is not carried out—in other words, if Clause 58 is not amended—the choice will not be between doing a cheap deal with a housing association or selling the land to a developer; the alternative will be that the council will leave the land sterile. It knows that it cannot house local people at affordable rents if it sells the land to a developer because the developer will pay the proper market price and the cost, whether of renting or buying, will be beyond people's means.

I hope that I have given the Minister a peg upon which to hang his hat and, as I believe he wanted to do earlier, accept the amendment. I am delighted if it is a straightforward amendment. However, if the Minister wishes me to withdraw it in order for a better procedure to be substituted, I shall be happy to do so. I am grateful for the sense of the Minister's words, which, as my noble friend Lord McIntosh said, genuinely represent an easement. Common sense has prevailed. Housing associations have a major part to play in ensuring that people are housed where they want to be housed at affordable rents and are left to occupy their houses sensibly. I beg to move.

The Earl of Caithness

My Lords, I am grateful to the noble Lord, Lord Graham of Edmonton. I should perhaps have said that I wanted to cover this amendment in what I said earlier, because the matter is related. I cannot accept his amendment because it does not go far enough, in our view. That was the burden of what I said earlier. We shall accept the principle of the amendment. We fully understand the point that the noble Lord has made. It is very helpful and I am grateful to him for having made it. We shall make it wider by means of regulations.

Lord Graham of Edmonton

My Lords, am I to understand that the amendment is accepted but that, in interpreting it, the Government will go further by way of regulations?

The Earl of Caithness

My Lords, we shall extend the scope of the amendment because the noble Lord's amendment is confined, as I understand it, to housing associations. We do not see why it should not be extended to any subsidised rented housing. We shall take all that into account under regulations. The principle of what the noble Lord wants is agreed. I believe that he will find that in Amendment No. 99.

Lord Graham of Edmonton

My Lords, I am grateful and will take the advice of the Minister on this occasion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Speaker (Lord Ampthill)

My Lords, the noble Earl, Lord Caithness, has already spoken to Amendments Nos. 97, 98 and 99. Does he wish to move them en bloc?

The Earl of Caithness: moved Amendments Nos. 97 to 99: Page 66, line 24, after ("paid") insert ("or is payable"). Page 66, line 26, at end insert ("or will actually apply when the payment is received"). Page 66, line 31, after ("amount") insert ("which, except in so far as regulations made or directions given by the Secretary of State otherwise provide, shall be").

On Question, amendments agreed to.

9.15 p.m.

Lord Northfield moved Amendment No. 100: Page 66, line 47, at end insert— ("(7) In making regulations under subsection (6) above, the Secretary of State shall take into account the amount and nature of capital development that will be undertaken as a result of the terms of any proposed disposal.").

The noble Lord said: My Lords, I begin by declaring an interest. The company of which I am chairman, Consortium Developments, is not in fact involved in the kind of arrangements with local authorities that are mentioned in this clause. However the individual members of my consortium—the 10 biggest housebuilders—individually are concerned. My interest is therefore only an indirect one.

As background to this amendment, it seems from what is happening at the moment that the Government's action in the inner cities is beginning to flag; indeed, it is so obviously losing momentum that it has aroused a certain amount of public comment. That comment is summarised by a paragraph in The Times last Tuesday which read: After a great fanfare and initial action with the help of the private sector, the Government's programme for aid seems to have run out of steam". That is about the inner cities. It is my impression also. But my impression and the picture of the general background that I want to paint goes a good deal further. As I shall show in a moment. I am not alone in trying to formulate a sense of dismay.

Some years ago there was a White Paper called Lifting the Burden in which the private sector was asked to produce all kinds of initiatives to take off government the burden of activity and expenditure in the public sector. The private sector responded in many ways. There have been initiatives of all kinds. Indeed, in the inner cities today in most cases it is the private sector that has taken on voluntarily the refurbishment of rundown public sector housing, tower blocks and the rearrangement of very badly rundown areas generally.

The Minister takes pride in the fact that 10,000 acres have been put on the register of public land and that 6,000 acres have already been used. It is the private sector that is buying that land, using it and building houses on it. It was the private sector that demanded the public register in the first place. There is no doubt about the commitment of the private sector to helping the inner cities. Beyond that the private sector has tried to formulate ideas for such things as toll roads and new towns (in my own case) at no cost to the public purse. However, it has proved the case that in nearly every instance these initiatives have been stultified.

The Government seem to have lost the courage of their convictions as set out in the White Paper, Lifting the Burden. There are bureaucratic rules; there is a total lack of imagination in responding to many of the initiatives. I must tell the Minister quite bluntly that my colleagues in the private sector are bruised, disillusioned and angry about the way that the Government are not responding to the urgent needs of the inner cities and breaking through a lot of bureaucracy to get things moving.

We expend enormous sums of money to set up schemes only to find that they are turned down or run into a mass of bureaucracy and never get moving. Indeed, I have with me the correspondence that took place between the Government and a scheme called the Lewisham Phoenix. If there were a prize for the Minister who most frequently misses the essential point of a scheme, there are about six Ministers at the DoE who deal with this matter who would win the prize out of hand. I am astonished that they have put so many obstacles in the way of that essential scheme, which I shall come on to in a moment.

I have made those comments as a member of the private sector. I am not alone. Perhaps the Minister will consider what the Audit Commission, an independent body, said in September last: Government support programmes"— for the inner cities— are seen as a patchwork quilt of complexity and idiosyncrasy … They baffle local authorities and business alike. The rules of the game encourage compartmentalised policy approaches rather than a coherent strategy. Key organisational structures have fallen into disrepair". Those are the words of the independent Audit Commission, not mine; they are not the words of a politician. The commission comprises individual people who watch over government spending. The words echo those of the CBI over a year ago: One of the clearest messages to emerge is that the efforts to turn around Britain's cities will be shackled so long as the present uneasy relations between central and local government persist".

It is interesting to see the contrast highlighted in the article in The Times. There is a whole page about the flagging of the Government's initiatives in the inner cities and an interesting contrast is drawn with what is happening in Wales, where one has the Welsh Development Agency. The noble Baroness, Lady Seear, will remember that her committee recommended such a body in 1980. If one had such a body in England the position would be similar. However, through bureaucracy and lack of imagination the opportunity has been lost and time has gone by.

The proposal for Lewisham is a good peg on which to hang the amendment, which I shall explain in due course. A body called the Phoenix initiative was set up by the private sector in order to develop inner city areas by co-operation between the local authorities and the private sector. With regard to Lewisham there was a proposal for the borough to hand to a private sector-led development body or corporation parcels of land that are difficult or impossible to redevelop in isolation but useful when they are added to plans for adjoining land in a time-consuming, complex regeneration package. The proposal attempted to incorporate pieces of local authority land inside a private sector-led initiative for the regeneration of parts of Lewisham.

The gearing—the favourite word of the Government—is 1:15. For every £1 of possible value of public investment through this land the private sector was willing to spend £15. That is much better than the gearing which applies in Docklands today and in most of the other areas where these schemes occur. It is a very good initiative indeed.

Secondly, in setting up the Lewisham Phoenix scheme, the private sector made it quite clear that it did not want the normal government grants. It does not want City grants or expenses. It does not want the expenditure that the Government would normally offer to such an area. There was therefore a saving for the Treasury.

Thirdly, any profits of the complex redevelopment process, would be spent on urban regeneration projects inside Lewisham. In the end, therefore, the private sector would be setting up a regeneration process in which money that was made by upgrading, increasing land values—exactly as we have done in the statutory new towns—would be ploughed back into the community in urban regeneration projects of great value.

We now come to the DoE ruling set out in the correspondence that I have here, and to Clause 58. Clause 58 states that in cases where, as a result of barter or handing over of land, no payment is received by the local authority, 50 per cent. of the notional value has to be paid by the local authority under the proposals for the Government to redeem public sector debt.

In the case of Lewisham, if it goes into the scheme, the local authority will have to pay a penalty from other projects, other parts of its activity, or its reserves. It has to find 50 per cent. of the notional value of that land in order to free it for the private sector-led consortium. The authority has to find the money elsewhere. If it has to do so, I am sure that the whole package will fall. It will say that it is not worth it. It does not have the reserves to find the money.

What will my amendment provide? It states that, in these circumstances, in making regulations for the application of Clause 58—which I presume could mean that he could make regulations reducing that 50 per cent. to 40 per cent., 30 per cent., 10 per cent. or nil—the Minister "shall take into account" the gearing, the amount of desirable capital investment, that will take place as a result of the terms of the proposed disposal. That seems to me to be a fair suggestion to put before the Minister.

What, then, do I want? I want first to say this to the noble Earl. There should be a pledge tonight that in the case of schemes such as Lewisham a way will be found, instead of the foul-up and the snarl-up of correspondence into which the whole thing is jammed at this stage—as I said, the private sector is bruised and disillussioned—by someone of imagination to break through and say that these schemes must not run into the ground. A way forward must be found.

Secondly, if Ministers stick to their idea that some payment must be made in the future—a deferred payment is the idea that they have been putting up; it does not attract the local authorities because, as I said, they are scared of having to find the money from somewhere else—the figure will be very low indeed. Instead of 50 per cent. it will be 10 per cent. or some figure that will not frighten anybody, which might be found in the process of regeneration in this scheme as a whole. Some way of eking out some cash to go to the Treasury might be found in the whole process of renegerating this part of Lewisham.

The Government have to become a partner in all this. Instead of sitting on the edge of it, picking bureaucratic points about it and being unable to give it the go-ahead, they should be entering into the spirit of saying, "Yes, we are all in partnership to regenerate the inner cities—the Government, too—and we are not prepared to have bureaucratic restraints of this kind which are stopping the whole process from starting".

Thirdly, I hope that in order to start this process the Government will at last begin to state some faith in local government and in projects of this kind. I was not at all surprised when my noble friend Lord Dean of Beswick exploded this evening. My goodness, the noble Earl has had it coming for years with the amount of knocking, criticising and confining of local government that has gone on. Somebody was bound to explode at some time, and the noble Earl must accept that. But now we understand there has been a change of heart and local authorities will be loved again. Let us hear it. I shall believe it when I see it, not when I hear it. It will be very helpful if the Government say, "Yes, we believe in these schemes and they will get going. We believe in the faith of local authorities in starting inside them and making them a success".

Lastly, I hope the noble Earl will say that some mechanism will be set up inside the Department of the Environment to stop this kind of bureaucracy and stalemate. The private sector will not much longer go on putting up initiatives if all we find at every stage is that ideas of taking these things off the public purse and starting regeneration going are stultified by rules that there is an unwillingness to bend and make flexible in order to allow the process to get going. I warn the noble Earl. The private sector is running out of patience in these matters and will no longer offer these initiatives if they are continuously turned down. I beg to move.

Lord McIntosh of Haringey

My Lords, my noble friend has a powerful case to make and he has made it powerfully. There will have to be some very good answers to the horrific experience that he has described in Lewisham. He approaches the matter from a slightly different point of view from mine, in that his interest in this is that of the private sector collaborating with local authorities, whereas mine tends to be that of local authorities collaborating with the private sector. But from the point of view of what they are concerned with, it comes to the same thing.

We are all concerned that where there is good will on both sides for effective development and capital development—I nearly said consortium development, but that could have been misunderstood—between local authorities and the public sector there should be no bureaucratic barriers to it. I very much hope that the Minister either has a more effective reply than I can imagine to my noble friend's amendment or that he finds it possible to accept it.

Lord Hylton

My Lords, I was recently taken round the Salford Docks regeneration. There you have an ancient industrial inland dock which I understand was totally derelict a few years ago. Now you find beautiful yuppie houses right up to the waterfront, with the water cleaned and purified and everything looking lovely. Nearby are office buildings and other very recent private sector developments. I will bet any amount of money that any other noble Lord wants to wager that this would not have happened if at the time there had been this idea of a notional capital receipt, which I feel must have been dreamt up by some very strange Treasury mandarin. I strongly support the amendment.

9.30 p.m.

The Earl of Caithness

My Lords, I appreciate the objectives behind this amendment, which the noble Lord, Lord Northfield, has expressed with his usual clarity. I shall of course want to read carefully what he has said when the Official Report is printed.

I should like to start by saying that we have no intention of using the regulation-making powers in subsection (6). We envisage that the power in this subsection would be used only if changes in the definition of capital receipts in Clause 56 were made. The power would allow us to make the corresponding changes for Clause 58. However, I think the noble Lord is referring to regulation-making powers generally. In framing regulations we have always intended to use the terms of this amendment to take account of the amount and nature of the capital development to be undertaken as a result of the terms of any proposed disposal. One of the factors to which we shall have regard is the question of whether or not there could be a disincentive to certain capital development. I can illustrate this point through some examples of our intended use of the regulation-making powers in Part IV.

First, I remind your Lordships that I have already indicated that we would use the appropriate regulation-making power to exempt non-monetary consideration in the form of nomination rights from debt redemption. We are doing this because we accept that if we do not there could be a disincentive to local authorities to provide social rented housing.

Secondly, we shall operate an in-and-out scheme under the new system of capital finance. I should explain that the in-and-out scheme will relax or extinguish debt redemption requirements for certain types of transaction. I shall not go into the technicalities now. We intend to operate the new scheme through regulations. In formulating those regulations, one of our objectives will be to mitigate any disincentive to property rationalisation. For example, one category of transaction which may come within in-and-out is the replacement of an existing asset. Thus, if a local authority contracts to sell a library, say, because of a town centre redevelopment it may be able to use part or all of the receipt to finance the construction of a replacement library; but it must replace like with like. It cannot replace a library with a swimming pool or vice versa; otherwise the whole debt redemption regime would be undermined. In addition, the amount of expenditure on the replacement asset would have a bearing on how much has to be set aside for debt redemption by the local authority.

Another category of transaction which may come within in-and-out is resale. Again, this class of transaction is included because we recognise the clear benefits it can have, particularly in helping local authorities in their role as enablers. Resale will facilitate private sector investment. Indeed, that is why we propose to include it in in-and-out. We envisage it applying where local authorities use their planning or slum clearance powers to assemble sites which will be redeveloped by the private sector. In such a case land will pass in and out of local authority ownership and debt redemption will only apply to any fortuitous profit the authority made in the transaction.

I should add that we are at present consulting the local authority associations on the use of the regulation-making powers in Part IV. We have proposed an in-and-out scheme along the lines I have indicated. So I would say to the noble Lord, Lord Northfield, that it is not as black a picture as he painted, and we are fully aware of the need to do something in this area. I have already announced something along positive lines this evening.

I turn to the specific case of Lewisham Phoenix mentioned by the noble Lord. I understand that the London Borough of Lewisham wished to transfer land to Lewisham Phoenix for no consideration. Although I have not read it I believe 1hat the article in The Times is inaccurate. It states that Clause 58 inhibits local authorities in the disposing of land with nil or negative value. I find it hard to agree with that. If the land has no value I should not expect the authority to receive anything in return for it. In that case Clause 58 would not apply. It is not true that 50 per cent. of the notional value must be set aside; it is 50 per cent. of the non-monetary consideration received, if any. Therefore, if it receives nothing it sets nothing aside.

If the land has a positive value such a disposal as proposed by Lewisham would require the consent of the Secretary of State. A request for such consent has not been made so I cannot prejudge his decision. However, it appears to me to be a clear subsidy from the council to Phoenix. We have no objections to such a subsidy but we see no reason why it should not pass through the capital finance system. It would thus seem preferable for Lewisham to sell the land at its proper price and make whatever subsidy it wishes. Officials at the Department of the Environment have had discussions with Lewisham Phoenix and have suggested alternative ways forward. I hope that Lewisham Phoenix will consider those carefully.

I have also seen the Salford Quays development, as has the noble Lord, Lord Hylton. It has proved to be particularly successful and has depended a great deal on derelict land grant from the public sector.

Although I understand the point being made by the noble Lord, Lord Northfield, I hope that he will see that we have gone a long way towards recognising the problem. I shall draw his remarks to the attention of my right honourable friend the Secretary of State for the Environment.

Lord Northfield

My Lords, I am grateful to the noble Earl for the care that he has taken in responding to my remarks. However, I could make many comments. First, he says that he cannot comment totally on the Lewisham proposal because it has not been received in final form. No, of course it has not because in correspondence representatives have been trying to iron out the lack of agreement with the department before formally submitting the proposal. To say that he cannot comment because it has not been formally received is no answer at all. The essentials of the scheme are known to the department and should have been commented upon.

I am disappointed that the noble Earl has not said—and I hope that he will say—that he personally will ensure that a meeting is arranged to make sure that the scheme in an appropriate form gets off the ground. It will be a precedent for others. I repeat my warning that if it does not get off the ground the private sector will not continue to proffer similar schemes in order to help inner city regeneration. It is a most important test case and, if the department fails by engaging in many more reams of letters, correspondence and bureacracy, the blame will be on the head of the Government and, in particular, on Ministers in the Department of the Environment.

I hope that the noble Earl will take back the message that a great deal depends on finding a way to ensure that the scheme goes ahead. A great deal more than the prospects for Lewisham depends on it.

Secondly, I wish to read carefully the noble Earl's remarks about the general use of the regulatory powers. He will correct me if I am wrong but I understood him to say that the Government will be taking account of gearing the amount of capital investment which will be provoked by the terms of any proposed disposal. I should like to know what that means. Does it mean that in similar cases there will be a possibility of an agreement with the local authority on the transfer of land at nil value?

As the noble Earl has already spoken I do not expect him to reply to my final point tonight. It is that it is no good the Minister saying that he expects the local authority to dispose of this land. I went to great lengths to explain to him—I am afraid that Phoenix is despairing, having said it six times in letters—that this land has no value in isolation. It has value only if it is redeveloped in conjunction with adjoining land, which then gives it value and, as we have done in the statutory new towns, begins to raise land values generally by a programme of total regeneration. Therefore, there is no point in saying, "Sell it to the private sector" because the private sector will say, "What are we supposed to do with it?" A body like Phoenix is necessary to take on the land at nil value, negotiate with the adjoining owners, set up a total plan for regeneration and start the process going.

On top of that, as I tried to explain to the noble Earl, the saving for the Government is that Phoenix will not ask for grants that would otherwise be payable. As with the city grants, it will do it all through the private sector and the creation of value by that process of regeneration. As I said, I am not a member of Phoenix. I have only just come across this problem. I hope the noble Earl will say to Ministers and officials in the Department of the Environment that in view of all that I have said and in view of the half pledges—I do not mean that patronisingly—which the noble Earl has tried to give me this evening, something must be done to get this scheme off the ground. If the noble Earl can assure me on that point I shall be pleased to withdraw the amendment.

Baroness Blatch

My Lords, I have some sympathy with the case put forward by the noble Lord, but to say that the land has no value is frankly a nonsense. The marriage value of that land to whoever owns it when the adjoining land is negotiated is considerable. The value will be vast. I understand the case that has been made, but no land in this country has nil value. The marriage values of land—one pocket to another—are extremely high.

Lord Northfield

My Lords, it is not possible to assess the value because no one except Phoenix is prepared to try to get a scheme moving. That is the point. There can be no value until someone is willing to set up marriage schemes or put forward total regeneration proposals. That is the basis of the whole project. As I keep saying, none of this will be lost in the end because whatever profits are made from the process will all be put back into regeneration; so I do not know why the Government are being difficult about this.

The Earl of Caithness

My Lords, as the noble Lord, Lord Northfield, specifically asked me to reply, with the leave of the House I shall do so. Clearly I cannot give him the assurance that he seeks because I am not in a position to do so. I do not know enough about the scheme at the moment, but I assure the noble Lord and the House that I shall draw the attention of my right honourable friend to what the noble Lord said and in fact the whole of the debate.

Lord Northfield

My Lords, I am obliged to the noble Earl. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 59 [Aggregate credit limit]:

The Earl of Caithness moved Amendment No. 101: Page 68, line 11, leave out ("defrayed") and insert ("met").

On Question, amendment agreed to.

Clause 60 [Duty to set certain amounts aside as provision to meet credit liabilities]:

Lord Graham of Edmonton moved Amendment No. 101A: Page 68, line 32, leave out from ("authority") to end of line 34 and insert ("in accordance with proper practice").

The noble Lord said: My Lords, this amendment is in the name of my noble friend Lord McIntosh. It refers to Clause 60 and its purpose is to allow local authorities to determine their own provisions for debt redemption in their revenue accounts in accordance with proper practices. We are seeking to strike out the words on page 68: being not less than the minimum revenue provisions for that year referred to in Part IV of Schedule 3 to this Act". We are suggesting that proper practices should be observed.

The amendment is familiar because it has been before the House at a previous stage and the Government have now issued proposals on what the minimum revenue provision should be. I understand that this is set out in a paper to be considered next week by the capital programme working party.

In the light of the response of the noble Lord, Lord Hesketh, in Committee and the department's latest proposals I am bound to say that there are a number of issues I must raise.

On 26th July at col. 1544 of the Official Report the noble Lord, Lord Hesketh, referred to the method of debt redemption set out in Schedule 13 of the Local Government Act 1972; namely, the annuity method. If the annuity method was good enough in 1972 why are the Government now proposing what is known as the reducing balance method? In any event the method provided for in that Act did not prevent other methods of debt redemption being used. For instance, there was the sinking fund or equal instalments of principal. These methods were consistent with good accounting practice.

The noble Lord, Lord Hesketh, also referred to authorities changing the method of providing for debt redemption from year to year: so as artificially to defer or bring forward expenditure". He forgot the role of the authorities' external auditors and the Audit Commission in highlighting bad accounting practice. Whatever nefarious schemes the Government believe are in the minds of local authorities, the policemen and monitors from outside, like the Audit Commission and external auditors, will ensure that the bodies concerned do not get away with it.

One issue that was not addressed during the debate in Committee was the likely effect of the Government's proposals on the revenue account and ultimately on poll tax and council house rent levels. Some authorities will be required to increase their debt redemption provision in order to meet the Government's minimum requirements. Others may reduce it if the current provision is above the minimum requirement. That is a further example of poll tax levels being driven not by local authorities' own expenditure decisions but by those imposed through central government.

When the Government's proposals for the reducing balance method were first issued the department stated in a letter to the local authority associations dated 2nd December 1988: To secure that loan charges in aggregate would be roughly the same as we are now, it would be necessary to set the percentage for the housing revenue account at between 1½% and 2% and the percentage for other liabilities at between 3½% and 4½%". The percentages now proposed are 2 per cent. for the the housing revenue account and 4 per cent. for other liabilities. As these are minimum requirements and because authorities which are currently providing for debt redemption at a higher level will probably continue to do so for reasons of prudence, it can be seen that the Government's proposals will result in authorities making a higher provision for debt redemption in aggregate than they currently do. In the light of the Government's policy of forcing authorities to repay debt out of capital receipts it is difficult to accept that the consequences of the debt redemption proposals are unintended.

Bearing in mind this marginal impact on the Government's macro-economic policy as it affects housing and local government, I hope that the Government will reflect on what the local authority associations are saying. They are saying, "Trust us". The noble Lord, Lord Hesketh, earlier said that we have to make up our minds. In speaking to me he said that you either trust us or you do not.

I say to the noble Earl that he has to make up his mind whether to trust local authorities. If he trusts them the Government will accept the amendment, but if not then the Government will reject it. I beg to move.

9.45 p.m.

The Earl of Caithness

My Lords, as the noble Lord, Lord Graham of Edmonton, has said, this amendment would allow local authorities to choose what minimum provision they should make from a revenue account each year to meet debt redemption, provided that accorded with proper practices. I believe it was the noble Lord, Lord McIntosh of Haringey, who said in Committee that this was an area where we are likely to remain in disagreement.

We believe that we cannot simply leave matters to be decided entirely in this way. Indeed, in so far as the noble Lord's amendment refers to existing proper practices within the interpretation at Clause 63(4), then these are practices which local authorities have been required to follow under legislation which this Bill repeals. The CIPFA draft code on local authority capital accounting recognises that the method for determining the level of debt repayments would be in accordance with statutory provision.

We believe that it is right in the interests of accountability that central government should seek to ensure that authorities' borrowing and other forms of credit are reflected in revenue accounts on a consistent basis and that we should set out minimum requirements. It is for authorities to choose whether they make provision at this minimum level or at a higher level. This practice is not a new departure. There is, as I have said, a method of debt redemption set out in existing legislation together with prescribed maximum loan periods. We are repealing that legislation in this Bill and replacing it with the provisions in Clause 60.

The reasons we believe the reducing balance method is the right way for the Government to set a minimum figure for debt redemption should now be familiar to all noble Lords. But perhaps I may remind the House of what I think is the crucial one. The Government will pay needs grant on the basis of the reducing balance method. They always have done so, and indeed unless they are to collect data on every single loan of each authority, which even the noble Lord, Lord Graham, may consider to be a rather centralist approach, it is the only practical way they can pay grant. Surely, therefore, the noble Lord must accept that the Government have a right to ensure that local authorities provide for debt redemption at a rate at least as fast as is assumed in the needs grant we are paying. That is what we are saying. They are free to choose whatever proper practices they wish for individual loans but in total they must pay as a minimum at least as much as we are providing in grant.

We are currently consulting the associations on proposals for regulations on minimum revenue provision. As the noble Lord said, we have suggested that authorities be required to set aside each year 2 per cent. in respect of principal on outstanding liabilities relating to the housing revenue account and 4 per cent. in respect of other liabilities. We believe that those percentages are within the ranges which we put forward with the reducing balance method proposal last year and which would secure average loan charges roughly in line with those that have obtained under the present system. As long as authorities met those minimum provisions they could, if they wished, continue to operate different methods for individual loans.

We have responded to the wishes of local authorities in prescribing a method for calculating minimum revenue provision different from the equal instalments of principal originally proposed. We shall of course be most interested to hear their response to our proposals for the detailed regulations in this area. However, we remain firmly of the belief that it is right for minimum requirements to be set out in legislation so that no one can be in any doubt where the baseline lies.

Lord Graham of Edmonton

My Lords, the Minister has made out a case to show why the amendment is unacceptable to him. It disappoints me but I know that those outside the House respect his integrity in these matters. There will be a further opportunity to debate the issue at the meeting next week. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 101B: Page 68, line 47, leave out subsection (4).

The noble Lord said: My Lords, with this amendment we return to a matter which was debated in Committee and on which the Government gave a certain undertaking. When my noble friend Lord Dormand raised the matter of European regional development fund grants, the Government responded that they would make an announcement shortly. Indeed, they have done so. The Government's proposals were discussed at the capital programmes working party on 5th October. This amendment is produced in response to that government announcement. But in order to cover the ground properly, I have to go a little further back and also discuss the nature of the Government's announcement.

I have to go back as far as the consultation paper on capital expenditure and finance in July 1988. In that document the Government said that they had an open mind about the issue of additionality of European Community funds—in this case, regional development funds. By additionality I mean whether they are to treated as a genuine addition to public expenditure or whether they are simply to be in effect cancelled out by a reduction in other forms of capital approval.

The Government, having received the responses to the July 1988 consultation paper, admitted that the consultees—that is the horrible word used by the department; fancy being addressed "Dear Consultee" in a letter—generally favoured additionality and favoured the principle that when a grant is obtained from the European Community it is presumably on some basis of whether the project is worth while. Otherwise the development fund does not have a great deal of purpose.

When my noble friend Lord Dormand of Easington raised the matter in Committee he received a stalling answer about the announcement which the Minister said would be made shortly or, in any case, before the next stage of the Bill's proceedings. The capital programmes working party met on 5th October and heard the results of this thinking. The result of such thinking is that the amount of money from the other services' block—in other words, the block other than housing, transport and education services—would be earmarked for the expected distribution of the ERDF grant receipts in determining individual authorities' capital spending guidelines. The money was to be fed in through additional credit approvals. That sounds all right, except that the amount of money to be provided is only of the order of £25 million which in turn is only 25 per cent. of the expected European regional development fund grant receipts. Therefore what we have is not additionality; we have 25 per cent. of additionality. In other words, we have a very poor response to what I thought was a very powerful case put forward by my noble friend and one which I think received widespread recognition.

I must remind the House that the European Commission has firm views about additionality and quite firm views about the way in which public expenditure should be adjusted, or not adjusted as the case may be, when European regional development fund grants are made. In a letter dated 7th December 1988 to Mr. Tom Megahy, MEP, Mr. Henning Christopherson the Vice-President of the Commission of the European Communities said: I would draw your attention in this connection"— I hope your Lordships will forgive me; this is the most bureaucratic part of it all— to Article 9(2) of the Commission's proposals for a Council regulation laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the co-ordination of the activities of the different structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, which reads as follows"— that is, presumably Article 9(2)— In establishing and implementing the Community support frameworks, the Commission and the Member States concerned shall ensure that the annual increase appropriations for the Funds provided for in Article 12(2) of Regulation (EEC) No 2052/88 has a genuine additional economic impact in the regions concerned and results in corresponding increases in total public expenditure, in particular on investment. The Member States shall transmit to the Commission the information necessary for this purpose, in accordance with arrangements to be determined by the Commission". It is nice to see the Secretary of State being treated in the way that he treats local authorities. I refer especially to the words, The Member States shall transmit to the Commission … in accordance with arrangements to be determined by the Commission". That is the way the Secretary of State always treats local government; in other words, that they shall give him information in accordance with directions which he will set out as to how what is proposed is to be done.

The impact of this is very clear. The European Regional Development Fund grants are to be treated as additional to other public expenditure. They are to be used for the purpose for which they have been allocated, and the local authorities concerned will not have to cut other schemes if they receive a grant.

The Government's proposals which were made on 5th October indicate that only 25 per cent. of the grant will be available as additional expenditure, and that the remainder of what they receive will have to be used, as they say, to reduce credit liabilities. In other words, it will have to be used to pay off the long-term debt of local authorities. That is not additionality; that is a sham. The Government ought not to be allowed to get away with it both from the point of view of the local authorities concerned and from the point of view of the prospect of receiving future European regional development fund grants.

Why should the European regional development fund give grants to Britain if they are merely going to be absorbed by the Treasury and taken away from the credit approvals of the local authorities which produce the schemes that are presumably thought to be worthy? The Government's delayed response to the Commission on that matter is unsatisfactory and they should not be allowed to get away with it. I beg to move.

10 p.m.

The Earl of Caithness

My Lords, the effect of the amendment would be to remove from Clause 60 the requirement for any grant received from the EC to be set aside as provision for debt redemption. It is, of course, aimed at providing that the grant can be used directly by that authority to supplement its capital programme.

Doing that would have two effects. First, it would achieve what I believe those proposing this amendment are after. It would mean that the capital programmes of individual authorities were enhanced by the amount of grant. Secondly, it would make life much less certain for those authorities that had applied for grant. I know that a number of authorities are in the position at the moment where, because of delays in the system of approvals for schemes for Europe, schemes for which they have applied for grant have had to be started even though it is far from certain whether grant will eventually be given. Imagine the difficulties if that grant which was sought was not just a cash benefit to the authority but in fact was what it was depending on to have authority to capitalise a major capital expenditure scheme.

When we consulted on those proposals, respondents drew attention to such fears, and to the fact that since grant was often paid substantially in arrears, they could have difficulty financing the expenditure while they were waiting for the grant to arrive. It is to meet those difficulties that the Bill provides that such capital grants should not permit the capitalisation of the expenditure which the grant reimburses. Instead, the expenditure will need to be capitalised under the authority of a credit approval.

I know that your Lordships are concerned about whether individual authorities should get extra spending authority to match their ERDF. The proposal that has been put forward by the noble Lord, Lord McIntosh, is not as attractive as it may seem at first sight. As the Government have explained on a number of occasions, the estimated level of ERDF receipts is used to enhance the national total of allocations (or credit approvals) available. So ERDF has already enhanced the total available for spending. If ERDF grant were to convey spending power directly, the result would be that less would be available for distribution to local authorities in the form of credit approvals. It would be a reduction in the credit approvals that we should otherwise issue to authorities for their general purposes. The effect would be a considerable restriction upon local authorities' discretion to decide their own spending priorities.

The Government have considered carefully whether any allowance should be made in the distribution of credit approvals for the expected likely distribution of ERDF receipts. They have considered carefully the representations made to them. They have, however, decided that it is best to continue the present approach; that is, in general, that capital allocations should be given to local authorities based on overall assessments of their need. That approach does not take explicit account of whether expenditure which needs to be incurred may be financed through ERDF grant. Instead, the national total available for credit approvals is enhanced.

As the noble Lord, Lord McIntosh of Haringey, said, it is only in the case of resources for local environmental services that we intend to tie some £25 million of allocations to expected ERDF grant for individual authorities. The reason for that is that resources for local environmental services are distributed on a formulaic basis at the recommendation of the local authority associations. There is therefore nothing in the local environmental services distribution which takes account of individual project needs. The treatment here is intended to rectify that. Our proposals ensure more certainty for local authorities seeking to plan their capital programmes. They ensure more local authority discretion to decide locally on their spending priorities and they provide a firm financial incentive to authorities to apply for an ERDF grant.

Lord McIntosh of Haringey

My Lords, I found a large part of that answer only peripherally related to the thrust of the amendment. The noble Lord closed by saying that his proposals would provide more certainty for local authorities. Oh, yes, they certainly provide certainty—the certainty that there will not be any real increase in capital approval if a local authority uses its initiative and applies for and obtains a European Regional Development Fund grant. That is a certainty, but it is the certainty of the damned rather than any prospect that there could be any genuine benefit from the European Regional Development Fund.

If, as the Minister says, there is a prolonged period of uncertainty between applying for a grant and notification of obtaining the grant, it is not for us to devalue the grant. It is for us to make effective representations at Brussels to reduce that period. If, as the Minister says, there is often a delay in payment after the grant has been approved, before the finance is received, then it would not be too difficult for the Government, when a grant is approved, to provide short-term finance to make up the gap.

In other words, these are really peripheral, trivial objections to the amendment, rather than serious answers to the problem. We come away from the issue, after the Minister's reply, in the same position as we started. Only 25 per cent. of the European Regional Development Fund grant will be reflected as a genuine addition to public expenditure. At some stage the European Commission will rumble this and will not put up with it. Mr.Christophersen's statement on this seems to me perfectly clear. The Government are simply not abiding by it.

It is too late at night to divide the Committee on the amendment, but I am completely dissatisfied with the response made. This may be a matter to which we have to return at the later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Speaker (Lord Ampthill)

My Lords, Amendments Nos. 102 to 104 have been spoken to. Does the noble Earl wish to move them en bloc?

The Earl of Caithness moved Amendments Nos. 102 to 104: Page 175, line 31, at beginning insert ("Except in so far as regulations made or directions given by the Secretary of State otherwise provide"). Page 175, line 32, after ("which") insert ("(a)"). Page 175, line 33, at end insert ("and (b) is received in respect of a disposal or a right to a repayment or payment of the description in question").

On Question, amendments agreed to.

The Earl of Caithness moved Amendment No. 105: Page 176, line 47, at end insert— ("12A. If, at any time on or after 1st April 1990 a local authority apply or transfer under subsection (2) of section 61 of this Act an amount set aside as mentioned in subsection (1) of that section, the authority's credit ceiling shall at that time be increased by an amount equal to the amount so applied or transferred.").

The noble Earl said: My Lords, I beg to move Amendment No. 105 and, with the leave of the House, speak to Amendments Nos. 107 and 112. These amendments address the position of local authorities which have become debt free. Not many authorities will be in this happy state at the start of the new system, but we expect there to be a few. More may join them in future, particularly those authorities which go down the road that some are now taking and dispose of their entire housing stock.

I will briefly explain the amendment and then go on to say a bit about our policy on how authorities which have no debt should be treated in the new system. As your Lordships are aware, local authorities will be required to set aside various amounts for debt redemption—or, in the language of Part IV, as provision for credit liabilities. Debt-free authorities may have money set aside in this way but will have no debt to repay. This amendment will enable us to prescribe through regulations additional ways in which such surplus money may be used. They may specify purposes for which the surplus may be applied or they may specify bodies to which it may be transferred. So it would be possible to allow the authorities to spend the money in particular ways. Or, for example, it would be possible to allow a shire district to transfer surplus money to a shire county to be spent on schools in their area.

I turn now to our policy. I should first remind your Lordships of the two reasons for the debt redemption provisions in the new system. The first is that they ensure that prudent provision is made for debt redemption when assets are sold. The second is that they allow the total for credit approvals to be increased and so ensure that resources can be targeted in accordance with need.

The first reason obviously no longer applies once an authority has repaid all its debt. But the second one still does, and very much so. However, the impact of debt-free authorities on our ability to target depends very much on the number of those authorities and their significance in rational terms.

Our policy has to be framed in that light. The likely number of debt-free authorities in the medium term is very uncertain. In particular the trend for authorities to dispose voluntarily of their entire housing stock—to which I referred earlier—is still in its infancy. In those circumstances it is sensible for the Government to maintain a flexible approach. It is also necessary to keep that approach under review. That is why we have taken a regulation-making power.

Having said that, let me tell the House what we propose for the start of the system. Once an authority has become debt free it should generally be free to spend 100 per cent. of its future receipts. By "debt free" we mean, in the terms of the Bill, that at the end of the previous financial year the authority had a negative credit ceiling and no long-term borrowing.

There may be some minor technical exceptions to that but there is one exception of substance that I should mention here. It concerns the large-scale housing transfers to which I have already referred. Those could result in an authority receiving very large amounts of money, over and above that required to repay its debt. That would occur at a time when it was relinquishing the function which had been responsible for the major part of its capital programme, although I fully appreciate that even local authorities without housing will continue to play an important role in catering for housing needs in that area. Because of the potential size of the sums in relation to individual authorities, we are looking separately at the policy we should apply in those cases.

For that reason, the freedom to spend 100 per cent. of future receipts will not apply to receipts from sales of housing to people who are not sitting tenants. We are still considering how such receipts should be treated. It will be possible to use the regulation-making power provided by the amendments to allow the receipts to be applied in various ways. We hope to make a further announcement on the subject soon.

We believe that those proposals represent a sensible response to the concerns that have been expressed by authorities that expect to be debt free in the new system. I beg to move.

Lord McIntosh of Haringey

My Lords, with all the charity in the world, that sounds to me like a half baked policy, half presented. Of course we are glad to know that in principle 100 per cent. of the receipts from the disposal of capital assets will be available to local authorities for their own uses. However, I note that the amendments say that the Secretary of State shall, by regulations, specify what those uses shall be. The Minister did not volunteer any indication of what the regulations might say. Perhaps he could help us on that score.

The news that local authorities will be discriminated against by losing a significant part of their capital receipts may help to discourage them from opting out of housing provision by voluntarily disposing of their housing stock. Since we are opposed to the wholesale disposal by local authorities of their housing stock, that could be regarded as a good thing.

In policy terms the Government are leading themselves by the nose. They cannot see further than the next expedient to deal with the embarrassment resulting from their initial policy initiatives. The Chancellor has had a similar problem in the sense that he suddenly found himself with huge surpluses which he could not spend by increasing public expenditure without increasing inflation. Therefore he invented the neat wheeze of repaying the National Debt—presumably over tens, dozens or hundreds of years. It was a nonsensical idea in the first place. The National Debt has been a great advantage to us in inflationary times over the past 200 years. Successful economies are increasing their national debt much faster than we are. I refer in particular to Germany and Japan.

When applied to local government the idea of reducing the local version of the National Debt is even more daft. As the Minister is now forced to admit, it is not a suitable solution to the problems of capital receipts because many local authorities will run out of debt to be redeemed. The Government do not have even the glimmer of an idea what to do about that and why there should be a difference between those who have redeemed their debts and those who have not redeemed their debts.

In business you borrow money when you need money and when you can do something with the money you borrow, which adds value to it; and you can do better than you would by investing in gilts. Otherwise most people would not be in business at all. That sort of business consideration is completely foreign to the Government's mind. They do not consider for a moment whether it is desirable for a local authority to borrow money because it can do something better with the money than the banks which lend it to the local authority. Such business considerations do not come anywhere near the Government's thinking.

We are therefore left with the Government's pathetic statement: "We know that we are now faced with local authorities which will redeem all their debts. In principle, except for very important reservations, we shall leave them free to spend 100 per cent. of it. However, we shall lay down regulations which restrict the uses, but we shall not tell you what is in the regulations". That is a pretty feeble excuse for policy-making.

On Question, amendment agreed to.

10.15 p.m.

The Earl of Caithness moved Amendment No. 106: Page 177, line 41, leave out ("between nil and") and insert ("from nil to").

On Question, amendment agreed to.

Clause 61 [Use of amounts set aside to meet credit liabilities]:

The Earl of Caithness moved Amendments Nos. 107 and 108: Page 69, line 6, after ("may") insert ("subject to subsection (2) below"). Page 69, line 8, leave out ("defray") and insert ("meet").

The noble Earl said: My Lords, these amendments have already been spoken to. I beg to move Amendments Nos. 107 and 108 en bloc.

On Question, amendments agreed to.

The Earl of Caithness moved Amendment No. 109: Page 69, line 9, after ("borrowed") insert ("by the authority").

The noble Earl said: My Lords, in moving this amendment, I shall speak also to Amendment No. 113. These are technical amendments. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendments Nos. 110 to 112: Page 69, line 10, leave out ("defray") and insert ("meet"). Page 69, line 14, leave out ("defray") and insert ("meet"). Page 69, line 15, at end insert— ("(2) Subject to the following provisions of this section if, on the date which is the relevant date for any financial year, a local authority's credit ceiling, as determined under Part III of Schedule 3 to this Act, is a negative amount, any such amount as is referred to in subsection (1) above may in that financial year—

1. (a) be applied for purposes specified by regulations made by the Secretary of State; or
2. (b) be transferred to a body so specified.

(3) The aggregate of the amounts which may be applied by a local authority in accordance with subsection (2) above in any financial year shall not exceed the amount by which the authority's credit ceiling on the relevant date is less than nil. (4) References in subsections (2) and (3) above to the relevant date shall be construed as follows—

1. (a) for the financial year beginning on 1st April 1990, the relevant date is that date; and
2. (b) for any subsequent financial year, the relevant date is the last day of the preceding financial year.

(5) Regulations under subsection (2) above may specify conditions with which a local authority must comply in applying or transferring any amount as mentioned in that subsection and with respect to any amount so applied or transferred; and an amount shall not be taken to be applied or transferred under that subsection unless any such conditions are complied with.").

The noble Earl said: My Lords, these amendments have already been spoken to. I beg to move Amendments Nos. 110 to 112 en bloc.

On Question, amendments agreed to.

Clause 62 [Information]:

Lord McIntosh of Haringey moved Amendment No. 112A: Page 69, line 23, leave out from ("Part") to end of line 25.

The noble Lord said: My Lords in Clause 62 we come to a very jolly little provision. According to the clause, the Secretary of State has the power to require from local authorities information in such a form that he shall specify. That includes: for the purpose of deciding whether to exercise his powers … under this Part" or "for the purpose of ascertaining whether an authority have acted, or are likely to act, in accordance with this Part" or —this is the jolly bit— for the purpose of assisting the formulation of government economic policies". Apart from the initial absurdity of talking as if there were government economic policies, which economic policies will they assist—the Lawson policies, the Walters policies, the policies of Sir Alfred Sherman or any other policies in between? We can take our pick. Any member of the Cabinet will give us a set of economic policies and someone will no doubt claim that they are government policies.

But the Government should have an economic policy before they require local authorities to give them assistance in the formulation. At the moment, local authorities have considerable obligations in terms of the information that they must give to central government. They must give their level of capital receipts at the end of the financial year; their annual capital estimates including capital receipts; capital payments on receipts on a quarterly basis; and capital expenditure and receipts on an annual outturn basis.

We can imagine all sorts of things the Government might require from local authorites, some of which might be rather difficult to collect. Will they want indications of land and property values? That is a substantial asset for economic policies. Will they require an assessment of the stock of the local authority assets? That would be very helpful for the national income and expenditure accounts. Will they require information on the projected exercise of the right to buy? I am simply picking out examples. There may be many more items which the Government might wish local authorities to require.

In a debate in Committee on how in future years capital receipts might be taken into account in determining credit approvals, the noble Lord, Lord Hesketh, talked of a formula which might include all those different aspects. Are the Government saying that such things as land and property values, stock of assets and so on and the propensity of tenants to increase the right to buy are to be demanded from local authorities?

The concept of demanding information for the Government's purpose from local authorities is somewhat at variance with the way in which the Government approach private business. I am in the survey business and am very well aware of the restrictions that government, in my view quite properly, impose on themselves as to what they demand as statutory information from private business. There are, for example, the demands for census information and the demands for what is required for Customs and Excise. All those things are deliberately, and in my view rightly, kept to a minimum. Yet here are the Government arrogating to themselves the power to demand from local authorities anything they like for themselves in the way of information, which is not for the benefit of local authorities but for the benefit of central government.

The only charitable explanation is that central government intend to involve local authorities in decision-making about economic policy. I hope that my interpretation is correct and that it is the only interpretation to be given to this provision in the Bill. Unless the Government are to show us, for example, that high interest rates are caused by high local authority capital expenditure—and they would have some difficulty in proving that case—then what is happening is that local authorities are not only being kicked hither and thither but are being required to run for sticks on behalf of central government. It is not a proper use of central government powers. It ought to be deleted. I beg to move.

The Earl of Caithness

My Lords, I am a much happier man now than I have been for the past four or five weeks when I thought that I was not going to continue to debate with the noble Lord, Lord McIntosh of Haringey. I am glad to see that he has joined the long list of speakers on the Opposition Benches who want to speak on Treasury matters. I feel sure that we shall be discussing these matters ad nauseam far into the future. It makes me a much happier man.

I hope that the following two propositions are sufficiently straightforward to be uncontroversial in your Lordships' House. The first is that it is the responsibility of central government to manage the national economy, and the second is that local authority capital expenditure is sufficiently large in aggregate to be a factor which must be taken into account in managing the national economy. I should say in passing that local authority capital expenditure in England and Wales is likely to be nearly £8 billion in the current financial year.

It has accordingly been the practice for many years for the Department of the Environment and the Welsh Office to collect from local authorities information about their capital expenditure and receipts and their borrowing and investments. Information from those returns is used for several purposes. Let me mention two of those purposes in particular. First, such information is aggregated and then included in the Treasury's database of all public expenditure. It can then be taken into account by my right honourable friend the Chancellor of the Exchequer in his management of the economy. Secondly, the information is used to determine what overall scope there is for allocating resources to local authorities. In the present capital finance system, this takes the form of capital allocations; in the new system it will take the form of credit approvals.

It is to the advantage of local authorities that accurate and timely information should be received. If the Government do not have the facts, then decisions will have to be based on estimates. If estimates are used, they will have to allow a margin for uncertainty. It will not surprise noble Lords if I say that those margins would not work to the advantage of local authorities. Indeed, I recall the noble Lord, Lord McIntosh of Haringey, asking us many times in your Lordships' House to work on facts, not estimates. We are taking the opportunity to fulfil what he desires.

The amendment proposed would in effect prevent information being collected except in the context of particular decisions. That is not a way to run an economy or indeed local authority capital programmes. The noble Lord has argued at earlier stages that local authorities should be given the information by forward indications of annual capital guidelines. The Government accept that that is desirable. By the same token it is reasonable for the Government to plan ahead and to obtain the information necessary to do so effectively.

Lord McIntosh of Haringey

My Lords, the Minister is suitably modest about the role of the Treasury in the formulation of government economic policy. He knows that economic policy is made only in part in the Treasury. It is made in part in the advisers' offices of No. 10 Downing Street. I had not noticed any adequate provision being made for the demands of Sir Alan Walters for information from local government. Perhaps there will be an amendment at Third Reading to ensure that this excessive favouritism to No. 11 Downing Street is corrected.

The Minister has quite properly indicated that local authorities play an important part in the economy. That part is reflected only in having to provide information to central government. There is no suggestion that their help should be sought, or their co-operation obtained by central government, or that they should be participants in economic policy. It is centralist government gone mad. It ought not to be reflected on the face of the Bill. It is only because of the time that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 63 [Interpretation of Part IV]:

The Earl of Caithness moved Amendment No. 113: Page 71, line 6, at end insert— ("(5A) If, under or by virtue of any enactment, all or any of the liabilities of an authority (in this subsection referred to as "the original authority") in respect of a loan to or borrowing money (or money borrowed) by the authority have become liabilities of another local authority (in this subsection referred to as "the current authority") then in so far as regulations made by the Secretary of State so provide:—

1. (a) in relation to the current authority, any reference in this Part to a loan to or borrowing (or money borrowed) by that authority includes a reference to the loan to or borrowing (or money borrowed) by the original authority; and
2. (b) if the original authority is a local authority for the purposes of this Part, any reference to a loan to or borrowing (or money borrowed) by that authority excludes a reference to the loan, borrowing (or money borrowed) in respect of which the liabilities have become those of the current authority.").

On Question, amendment agreed to.

Lord Reay

My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

House adjourned at twenty-nine minutes past ten o'clock.