Central and Local Government

HL Deb 23 July 1997 vol 581 cc1484-504

6.10 p.m.

Lord Hunt of Tanworth

rose to ask Her Majesty's Government what action they are taking following the report from the Select Committee on Relations between Central and Local Government: Rebuilding Trust (H.L. Paper 97, Session 1995–96).

The noble Lord said: My Lords, I have the honour to be the chairman of the Select Committee on Relations between Central and Local Government, which reported to the House last July. The report was debated on 18th November. However, since the general election there have been a number of developments in this field and I thought that it might be helpful if we could take stock of them and be informed of the further action which the Government propose.

I must begin by declaring an interest because since we produced our report I have been elected an honorary (unpaid) president of the Local Government Association. However, I should like today to concentrate on the Select Committee and to say only a few words at the end of my speech about the LGA.

I shall not go through all the Select Committee's recommendations; suffice it to say that we agreed unanimously among ourselves that relations between central and local government were unsatisfactory and that the piecemeal way in which over a long period powers have been taken away from the local authorities has not only weakened local democracy, but has blurred accountability so that a resident with a problem often does not know, and cannot find out, who is responsible.

Accordingly, our recommendations were made with three objectives in mind. The first was to mark the status and respect owed to a system with a democratic mandate. We suggested a formal concordat on the place and role of local government; signature of the European Charter on Local Self-Government; and the establishment of a standing parliamentary committee to maintain an overview of central/local relations.

Secondly, in order to give local authorities more freedom to play their role as community leaders, we recommended a new but still restricted power of local competence; the right to experiment with different internal management and electoral arrangements and better arrangements in Whitehall to co-ordinate policy on local issues which cut across departmental boundaries.

Thirdly, on the crucial issue of finance, we felt that capping should go as a standard procedure although there should be a reserve power to cap, subject to parliamentary resolution; Treasury control of local authorities' self-financed expenditure should be relaxed and non-domestic rates should be returned to local authority control; the standard spending assessments should be simplified and used only for their original purpose of grant allocation; and consideration should be given to a change in the arrangements for compulsory competitive tendering.

The previous government agreed with much of our diagnosis of the problem and in particular with the need for the relationship between the two tiers to be one of partnership rather than of adversaries. The response in Command Paper 3464 also agreed in principle on the need for a new power of local competence and on legislation to allow experimentation. However, on other matters, and in particular on finance, the response was a disappointment to the committee.

The current Administration has not so far made any formal response to the report, which is the reason for this debate. Many in local government, of all political parties, welcomed the present government's manifesto commitment to reducing the extent of central controls over local authorities while increasing local accountability. Action has been taken (which I can welcome) on a number of issues along the lines suggested in our report. I welcome particularly signature of the Council of Europe's Charter on Local Self-Government, the origin of which, incidentally, I believe owes something to the work of the noble Baroness, Lady Farrington, and the noble Lord, Lord Bowness, in the Council of Europe. In many ways, signature is a symbolic act since it imposes nothing that is not already our practice, but it is surely right to give formal recognition to the importance of local government and to the right of democratic and accountable local authorities to a share in the running of local public affairs in the interests of the local community.

On some other issues, the Government's action so far has, I am afraid, been less encouraging. I refer in particular to the apparent decision that capping in its present form will continue for 1998–99. That seems disappointing. As I said in our report, we recommended that capping should go as a standard procedure. We never recommended that all powers to cap should disappear. However, it would appear—I do not know whether the Minister will be able to confirm this—that the Government intend (at any rate until 1998–99) to continue with capping as a standard procedure.

On a number of other issues, the Government's view is not yet clear and I hope very much that the Minister will be able to draw the threads together this evening and to give us an overall perspective and response from the Government.

I shall not take time by repeating the arguments for our recommendations, but I should like to emphasise one point: if local government is to engage the interests of local people and if local democracy is to be a meaningful concept, local authorities must have the powers to do things differently, to experiment and to respond to local wishes where there is no overriding national interest or need for national standards; otherwise local government risks becoming simply a branch office of central government.

In our deliberations a number of suggestions for experimentation were put to us which might be of value in showing different methods of organisation and in terms of increasing local interest in, and the local turnout at, local elections. I refer, for example, to giving individual councillors decision-making powers; sharpening the role of executive councils; promoting the scrutiny role of back-bench councillors; having directly elected executive mayors; establishing cabinet-style committee systems, and so on. We talked about a number of those suggestions, but we very deliberately did not try to make a recommendation on any of them. However, we felt that local authorities should be able to experiment. If such practices proved of value, they might then be adopted more widely.

Therefore, in our recommendations we propose that there should be greater use of enabling legislation to allow local authorities to experiment with internal working. We urged the Government to find legislative time as a matter of urgency. I understand, following some recent consultations, that pressure of time on the Government's legislative programme makes it extremely unlikely or impossible that time can be found in this Session for such a Bill, but that that is something towards which the Government look kindly and on which they would not oppose a Private Member's Bill if one were introduced. Perhaps the Minister will be able to confirm whether that is the case. The committee felt strongly that this was worth doing.

Finally, in my capacity as honorary president of the Local Government Association I should like to say how much that body welcomes the arrangements that have been established recently for working in partnership on issues that concern both central and local government. As a new voice speaking on behalf of the whole of local government in England and Wales, the LGA aims to enhance the impact of local government but to do so in a positive and constructive way, working in partnership both with central government and other local organisations in tackling some of the pressing problems that we all face.

6.20 p.m.

Lord Prys-Davies

My Lords, councillors, council officials and all those closely concerned with the cause of local government are hugely indebted to the noble Lord, Lord Hunt of Tanworth, for drawing the attention of the Government to the report of the Select Committee on Relations between Central and Local Government which was published a year ago. The Local Government Association has a notable champion in the noble Lord. No reasonable person expects the Government to produce at a stroke a new local government policy that instantly addresses all of the complex issues raised in the report. Nevertheless, I believe it is agreed that the report of the Select Committee identified areas of legitimate critical concern and came up with constructive recommendations to improve the central/local government relationship and serve the cause of local government and democratic government. I also believe that the problems identified by the Select Committee should not be ignored.

I have re-read the debate held last November on the report. I do not wish to change any of the basic points that I then sought to make, except that I welcome some significant steps that the new Government have taken.

I was pleased to hear my noble friend on the Front Bench, Lady Hayman, refer in her winding-up speech on Second Reading of the Local Government Finance (Supplementary Credit Approvals) Bill to the concept of partnership between central and local government. That is a noble concept. The cornerstone of the partnership edifice is mutual trust. The new Government have already provided evidence that reform is on the agenda. I am delighted that they have already signed the European Charter of Local Self-Government, and that that charter will be ratified in the autumn.

It may well be—the noble Lord, Lord Hunt, hinted at it—that "charter" is an excessive term for such a document. However, the Select Committee heard in evidence that that charter was increasingly appealed to on the Continent. The committee recommended unanimously that the signing of that charter would be "an obvious first step". I believe that by signing the charter the Government have sent a clear signal to local authorities that they want a new start in their relationship with them.

Perhaps the House will permit me to refer to the White Paper A Voice for Wales (Cm. 3718) which was published yesterday. In paragraph 3.6 on page 15 of that White Paper it is provided that the Government, expect the Assembly to promote and foster local government in Wales in line with the European charter on local self-government which the Government has signed". In a sentence immediately following that passage it is stated that it will be: necessary to ensure that the Assembly regularly reviews with local government how effectively this commitment is being observed". I believe that that commitment refers back to the signing of the European Charter of Local Self-Government. This leads me to ask whether the Government intend to ensure continuous monitoring of their commitment to the charter.

I welcome the setting up of the new central/local government partnership forum. A week ago there was a meeting chaired by Mr. John Prescott. I have received reports that the Local Government Association speaks of constructive discussions at that meeting.

The Select Committee advised that capping should be discontinued as a standard practice. It also recommended a return to local control of the non-domestic rate. The noble Lord, Lord Hunt, has already referred to that recommendation. We considered these to be important measures in improving the relationship. The Labour Party manifesto said that crude and universal capping should be removed but that the Government would retain a reserve power.

I return to the White Paper A Voice for Wales. In paragraph 3.3 on page 15 reference is made to, the Government's reviews"— in the plural— of council tax capping and non-domestic rates". Can my noble friend on the Front Bench inform the House which department is to take the lead in conducting these two reviews? Is the Welsh Office involved? To what extent is it dominated by the Treasury? Have there been, or will there be, consultations with the Local Government Association? Can my noble friend indicate when the two reviews are likely to be completed?

The committee attached the greatest importance to re-establishing the accountability of local authorities to the local electorate and raising the interest of people at local elections. To that end, the committee recommended that local authorities should be granted a power of local competence subject to certain restrictions. One knows the response of the previous government. Can the Minister indicate the present Government's response to that particular recommendation?

An impression formed by many on the Select Committee was that today local government did not have a good record in attracting men and women of vision and practical capacity to stand as councillors. There are exceptions. The Government's White Paper on the Welsh assembly published yesterday states that it will require people of high calibre to man its committees. I suggest that the same message can be addressed to many local authorities.

I end with the initiative which is within the gift of your Lordships' House. The recommendation that there should be a committee of this House or of Parliament to review central and local relations has been widely supported. The previous government suggested that the case could be met by another ad hoc Select Committee in five years' time. I see no grounds for a five-year delay. Neither do I see that such a committee would in any way empower Parliament to regulate government. I mention that point because it has been made by one critic of the proposal; but in my view that criticism is wide of the mark.

The LGA views such a committee as a powerful guardian of central and local relationships. That is a noble concept. The setting up of a committee is a matter for Parliament. It is one to which I venture to think we shall have to return. I look forward to hearing my noble friend the Minister when she replies to the question asked by the noble Lord, Lord Hunt.

6.31 p.m.

The Earl of Kintore

My Lords, I thank my noble friend Lord Hunt of Tanworth for initiating this important debate. I congratulate him on his new honorary post and on ensuring that his report Rebuilding Trust does not gather dust in some government department. Few Select Committee reports can have been debated by two different governments in less time than it took to compile the report.

Local government finance figured highly in the evidence to the committee. At present, about 25 per cent. of the money required to finance local government is raised locally through the council tax. The remainder comes from central government. There is a distinct danger that central government may have strong views on how their money is to be spent. That is not good for local democracy. A way of raising more money locally could be to return the local business rate to local authorities. I welcome the remarks in the Government's election manifesto that they will consider returning the business rate to local authorities once they have consulted business.

What I hope will not happen is what I read in the Daily Telegraph of today. On page 14 under "Local Government Finances", it states Wealthy face big rises in revision of council tax". When giving evidence to the committee, the Department of the Environment stated that it thought that the maximum amount that the council tax could raise was 25 per cent. of local finance. I declare an interest as an owner of a small big house. I feel that we must be rapidly approaching the 25 per cent. threshold. In the article in the Daily Telegraph, Sir Jeremy Beecham, who gave evidence to the committee and who is now chairman of the LGA in England and Wales states: In my view, we have got to get to a situation where we are 50 per cent. local authority funded and 50 per cent. centrally. And to do this you have to let the council tax take the strain. We could make the banding system fairer and more progressive. It will mean people in higher value houses paying more but I have no problem with that". Well, Sir Jeremy, if you read this, I do have a problem. You may have fallen into the trap of assuming that everyone who lives in a big house is wealthy. That is not so, and indeed by the choices that they make in educating their children, having their own library and their own water and sewerage system, they may well be a much smaller burden on the rates than people living in more modest homes.

I imagine that local authorities realise that money is tight and will remain so for at least two years. So, if no new money is forthcoming, perhaps I may suggest that local authorities ensure that they are making the best use of what they have. I am not talking here of more compulsory competitive tendering but of a war on waste. I do not mean the problems which excite the Audit Commission, but the small wasteful practices which are in every authority. Individually they probably do not amount to much but collectively they amount to enormous sums. Even a 1 per cent. saving of waste in local government spending, forecast to be £74.5 billion for 1996–97, is a considerable sum. I leave your Lordships with a Scottish proverb: Look after the pennies and the pounds will look after themselves".

6.36 p.m.

Lord Plant of Highfield

My Lords, I was pleased to be able to serve on the Select Committee, so ably chaired by the noble Lord, Lord Hunt of Tanworth. I am only sorry that when the report came to be debated in the House the first time my university duties prevented me from taking part. So I am especially pleased to have an opportunity to contribute something today.

It was widely accepted, I think, right across the political spectrum that the appointment of the Select Committee was timely. Indeed, many of the committee's recommendations were welcomed. The report itself raises some fundamental questions about the future role of local government in relation to central government.

One of the first things that the committee recognised was the constitutional importance of local government and the fragility of its place within the UK's constitutional arrangements. It is important constitutionally in at least two respects: first, local government has revenue raising or taxing powers, if one likes, and it is important in terms of the diffusion of power within what is, at least until the Government's devolution proposals go through, still a unified state.

Nevertheless, given those constitutional issues, the committee recognised that in the absence of a comprehensive or systematic written constitution, local government's role was vulnerable to the policies of the governing party in Westminster. Because local government is important in our traditional constitutional arrangements, we need to ensure that the impact of what central government do is properly understood and assessed.

The previous government—I make no comment on the virtues or vices of their policy in this respect—through a whole range of individual (what the noble Lord, Lord Hunt, called piecemeal) policies, and which I might perhaps call incremental policies, produced a profound change at the end point of those incremental changes in the relationship between central and local government. I do not know—I am not in a position to know—whether those incremental changes were part of a grand strategy to change the relationship; but, nevertheless, they did change the relationship. In those circumstances, it is important that we do not lose sight of what I still believe to be one of the most fundamental of the Select Committee's proposals; that is, the establishment of a Standing Committee of this House or of Parliament generally to keep an eye on the relationships between central and local government, because those incremental changes can have a large-scale consequential effect. However, it is an important recommendation. Although I do not expect my noble friend necessarily to address the matter tonight, I hope that the Government keep the proposal firmly in mind.

The proposal is apposite in the light of the Government's devolution proposals. The constitutional arrangements for the United Kingdom will change fundamentally, and devolution for Scotland and Wales is bound to have an impact on local government, as my noble friend Lord Prys-Davies said. Not only would such a Standing Committee reasonably look at the relationships between central and local government, but it might also look at the relationships as they develop between central government, local government and devolved bodies in Scotland and Wales. That is an important issue of which we should not lose sight.

The second important aspect of the report is the emphasis on the fact that the degree of freedom and autonomy of local government depends crucially on its capacity to raise its own revenue. That point was well made by Sir Frank Layfield in his 1976 report. Indeed, the issue goes further than that, as Layfield said. It is not only that freedom and autonomy imply a degree of self-financing but also that responsibility goes with raising one's own revenue. As Layfield stated—and we quote this important point—people feel more responsible for policies for which they have had to raise the resources. That is true of individual life and of corporate and collective bodies, too. If we wish to increase the autonomy and freedom of local authorities, naturally the cry will go up, "Well, they must behave responsibly". So they should, but they are more likely to behave responsibly if they are accountable to their local electorate for money that they must raise rather than relying on grants from central government. That is an important point.

In relation to that, the Committee took the view that capping should be relaxed and that it is far too blunt an instrument in such a context. We made some suggestions about that. It would be fair to say that the committee was not overly impressed with the Treasury argument (which can be found in Chapter 5 at paragraphs 17 and 18) in favour of arguing for retaining capping and government control of local authority financing. It would be tedious for noble Lords to obtain the paper for themselves if they do not already have it, but we tried to rebut the Treasury arguments in our conclusions at paragraph 5.37. Of course, there is also evidence in the volume of evidence.

Perhaps in reply the Minister can comment on the Government's thinking not only about the short-term issue of capping, because we know what is to happen during the next year or so, but about their attitude to the general control of public expenditure in relation to what are undoubtedly their legitimate interests in macro-economic policy and how far local government expenditure affects macro-economic policy. We were rather sceptical about Treasury reviews in that respect.

If we are to increase the responsibility and freedom of local authorities we need to take three steps. First, the power of central government to control local government expenditure should be relaxed over a period. Secondly, more resources for local government should be raised locally. I know that there are different views about how that ultimately might be done, but the first step would be the relocalisation of the non-domestic rate. Thirdly, those two proposals taken together would raise issues of accountability for revenue raising and expenditure.

They could be enhanced in several ways. Obviously, we do not want to give local authorities such a freedom without suggesting what might be put in place to ensure that responsible behaviour ensues. First, we could ensure that more information was available in local authority areas about the aims, purposes and effectiveness of local authority expenditure on services. There could be published performance indicators, targets keeping to Citizen's Charter standards and, of course, public reports from the Audit Commission. All kinds of pressures could be put on local authorities which perhaps did not exist when capping was first introduced. It is not a case of returning to the pre-capping days, because other mechanisms are available to try to ensure the virtuous cycle of local authority revenue raising and spending.

Another aspect which has changed since the introduction of capping is that local councils are now more a part of the mixed economy of service delivery; that is to say, while they may be funders of services, regulators of services and so forth they are not the only providers of services. Such diversity and mixed economy of local authorities will also ensure greater accountability. It is important to note that our proposal does not return to a pre-capping situation because there are all kinds of other mechanisms which the previous government, to their credit, introduced and which could be used to ensure virtuous behaviour. I hope that that does not sound too condescending.

Finally, I wish to stress the importance of local authorities as leading partners in local economic development. The report dealt with partnership generally, and that is likely to emerge as an important role for local government in the foreseeable future. Relations with training and enterprise councils have not been too good and I hope that that situation will change. Indeed, there are signs that it is changing. As I entered the Chamber during the debate on the previous Bill, unfortunately the noble Baroness was concluding her speech. She was talking about the potential role of local authorities in relation to the welfare to work programme, the environmental task force and so forth. Those are excellent examples of how local authorities can enter into partnerships with other bodies and play a central role in local economic development. I look forward to reading her speech in that debate in Hansard.

Overall, the report was most important, but two major issues remain to be resolved. The first is a Standing Committee or some other mechanism for monitoring this important set of relationships and the second is the issue of local authority finance, which is intimately bound up not only with the freedom of local authorities but with their capacity to act responsibly.

6.48 p.m.

Baroness Hamwee

My Lords, I must declare an interest as a serving member of a local authority. I, too, thank the noble Lord, Lord Hunt of Tanworth, not only for introducing the debate but also for his sterling work in pulling together that disparate group of people on the Select Committee. The unanimity was not the lowest common denominator, but it was greatly helped by the noble Lord's chairmanship. He has since become something of a hero in the local government world, which may not have been an outcome that he expected when he became chairman. His election as president of the Local Government Association is not only a token of the personal respect for him but a symbol of the goal of better relations, which he embodies.

The report of the Select Committee was entitled Rebuilding Trust. As other noble Lords have said, trust is the most important ingredient in the relationship. The committee in its report considered that relationships could have been worse, but they still left a lot to be desired. We also left quite a few gaps between the lines. I believe that we expected the informed reader to read something into those gaps.

I approach the debate with a spirit of optimism, tinged with a little concern as a result of events over the past few weeks. However, I feel considerable optimism because of the language being used by the Government. I do not regard it simply as a matter of cosmetics. I say optimism because of the very obvious willingness of Ministers to meet people from local government as well as from other walks of life. The leader of my own council seems to be spending much of his time in meetings at Eland House at present. If it is a device by central government to divert local government from getting on with local tasks, then they might be succeeding better than they expected. However, I do not accuse them of that Machiavellianism. I say optimism also because I do believe that they have real ambitions to show that the old way was not the best way and to change it.

My concern is about some of the events in the past few weeks. I am not suggesting that if I asked the question, "What do you think of it so far?" we would receive the classic answer. My own answer is that I remain to be convinced on all matters, though I welcome a number of steps. I welcome especially the Government's signature to the Council of Europe's Charter of Local Self-Government, which was long overdue and was one of the recommendations from the Select Committee which the previous government rejected.

However, I must wonder aloud whether this country is already straying from that charter. I refer in particular to the article which deals with financial resources of local authorities. Article 9.1 provides that, local authorities shall be entitled within national economic policy to adequate financial resources of their own of which they may dispose freely within the framework of their powers". That is guarded language and has all the hallmarks of negotiation and compromise in the drafting. However, I believe that even the most sceptical would read into it a requirement for quite considerable financial autonomy at local level.

As has already been said this evening, our committee recommended that capping should no longer be general practice. Yet one of the first acts of this Government has been to cap two counties and to give indications, at any rate in the medium term, of their attitude to capping. Capping is not just a desk exercise. Those counties have been quite clear about the possible effects in particular on the education service, as regards the likely sacking of teachers, as well as the less dramatic but very real erosions of good education which can result from restricting expenditure.

Having read on through the charter, I wonder which articles would be selected by the Government when they come to ratify it. It was only on re-reading the document that I realised that Article 12 provides that, each contracting state may select paragraphs", although it is required to select a good number. Is the Minister in a position to share with us this evening the articles which will be selected? I hope that such points on financial autonomy will be ones which the Government will happily ratify.

On the question of finance, I have to say that the harder the last government tried to convince us on the subject of capping, the less convinced we were. I am not sure whether it was Treasury officials of whom the noble Lord, Lord Beloff, was thinking when, in a previous debate, he talked about feeling like an anthropologist in the rain forests of New Guinea because local government was, to him, a whole new world. He referred to local government officers as being "strange creatures" and said: My conclusions were somewhat surprising. In the whole series of oral evidence … those who came out best were the officers of local government. Their evidence was in general clear, to the point and well expressed. Those who came out worst were, without exception, civil servants".—[Official Report, 18/11/96; col. 1119.] As I said, I do not know whether the noble Lord had officials from the Treasury in mind. In the Select Committee we were certainly pretty hard on them and trenchant in our rejection of their arguments in the report. Since then, I have taken great pleasure in quoting on a number of occasions the footnote which we used to describe their arguments; namely, "humpty dumpty arguments"; in other words, When I use a word, 'Humpty Dumpty said in a rather scornful tone', it means just what I choose it to mean—neither more nor less". The committee recommended the use of capping only in extreme cases and stressed that that capping should be subject to parliamentary approval, by which we meant that a parliamentary committee should be established to maintain an overview of central/local relations. Like other noble Lords, I believe that it would be a real indicator of the Government meaning what they say about local democracy and independent local government if they had the confidence to propose to Parliament that such a committee should be established; that is to say, if they were prepared to allow such a committee to maintain and report on that overview.

The remit that we proposed was really quite limited; namely, the health of the relationship. I, for one, would not be prepared to allow for parliamentary supervision of local government in the way that has been understood or misunderstood by some commentators. The point made by the noble Lord, Lord Plant of Highfield, about incremental changes is most important. Guarding against such changes—as regards, for example, the greater effect than any such change might by itself imply—would be just the sort of work that such a committee could do.

While I am dealing with the question of finance, I cannot resist a short response to the noble Earl, Lord Kintore, who I do not believe was prepared to acknowledge this evening the relationship between council tax and other taxes. That relationship was made very clear by the previous government whose last two Budgets led to the inevitable increase in council tax because of the way they dealt with income tax. Coming from a borough which raises something like 45 per cent. of its budget from the council tax, I have to say that the problem is not that percentage; the problem is that that borough is so out of kilter with other boroughs that our residents simply do not understand why the level of tax is such as it is. They rightly feel very unhappy that they are expected to pay at a higher level than in neighbouring boroughs, simply because the boroughs are so differently treated through the grants system.

I have already referred to what I regard as an unhappy centralising tendency in central government, which is not just evident in capping. Indeed, we debated this afternoon the treatment of capital receipts. We have also seen, and will debate in the autumn, plans for regional development agencies. I accept that they will have large numbers of councillors as members, but I wonder why central government see the need to impose yet another structure—instead of allowing the blooming of, though not a thousand, perhaps rather a lot of flowers—on the partnerships between local government, central government, business and the voluntary sectors; and, indeed, applying the odd bit of fertiliser to help those partnerships as those flowers come along.

We are about to see plans for London government. The presidential style mayor which has been so widely trailed seems to me to show that the Government are more comfortable with a centralised, rather top-heavy, top-down approach. One of the issues dealt with by the Select Committee was that of community leadership which plays a most important role. As your Lordships will appreciate, it is hard to act as a leader if one's powers are circumscribed.

I look forward to proposals which may allow local authorities to have greater powers. I speak as one bruised by the provision that local government may do only what it is allowed to do by central government. My authority put forward an apparently perfectly sensible plan to charge developers for planning advice just to recover costs. This House, acting in its judicial capacity, rejected that plan as being ultra vires. I confess that I was the chair of the planning committee which proposed the plan. I proposed the plan in conjunction with my vice-chairman, who is an astute and successful businessman. We felt that we had been harshly treated by the system.

I know that the Government do not want to be seen as a nanny. I hope that they move fast and far from that role model, not least because I believe that the Government's own commitments will, to a large extent, rely on local government for implementation. As the noble Lord, Lord Hunt, said, the report of the Select Committee was unanimous. Central government's friendship towards local government—which local government is keen to reciprocate—must embrace power sharing and power shifting.

I appreciated the comments that the Minister made at the end of the earlier debate which revealed that partnership and flexibility are very much in the mind of the Government. That is the first time I have heard that concept expressed in that way and it was welcome. I look forward to more assurances which I hope the Minister will be able to give us tonight, including some rumoured announcement. I do not know what that may be. However, it is a pity that if the announcement is so important, no other noble Lord may speak after the Minister and therefore none of us will have an opportunity to respond this evening to the news, whatever it may be. The Minister looks puzzled; perhaps we are not to be given the news that is the subject of the rumour. Perhaps the Minister has not even heard the rumour.

7.2 p.m.

Lord Bowness

My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Hunt of Tanworth, for initiating this debate this evening. I am grateful to him not only for discussing the report but for the fact that initiating this debate has enabled me to speak on the report, for unfortunately I was unable to be present when it was debated on a previous occasion. There is no doubt that local government have a powerful advocate in the person of the noble Lord, Lord Hunt of Tanworth, who is president of the new Local Government Association. Local government is particularly fortunate in that regard.

Like the noble Baroness, Lady Hamwee, I have an interest to declare as a member of a local authority. I declare that interest as I am required to do so by standing orders. However, I also hope to convince the House that as a member of local government for nearly 30 years, and as leader of a local authority for some 18 years, I am unashamedly a supporter of local government. I believe that good local authorities have an important role to play as leaders of their communities. Across the country we have seen exciting schemes of regeneration and partnership with the private sector and other bodies. That has been achieved by local authorities of different political persuasions. Therefore I am a supporter of local government.

The problem with being a supporter of local government is that whenever one discusses that subject, everyone agrees that there should be strong local government in the United Kingdom; that it should be accountable; and that it should play a full part in the democratic process. However, the difficulty always seems to concern how one achieves that within the United Kingdom. I welcome unreservedly attempts made by the present Government to improve relations with local government; but I do not think we should forget that the previous administration also made attempts to improve relations with local government. In the previous debate on this report in November, the noble Earl, Lord Ferrers, (who was then the Minister) mentioned a genuine attempt by local government and central government to rediscover the traditional relationship between central and local government which the then government and the great majority of those in local government believe is the right way of proceeding.

The Labour Party when in opposition accused my party of deliberately seeking to destroy local government and their freedoms. I hope that noble Lords opposite will accept my credentials as a local government person when I say that I believe the notion that that was deliberate was more a perception of being in opposition than a reflection of the truth. This evening I do not think it is useful to look backwards. However, I remind noble Lords of the speech of my noble friend Lord Ferrers on the previous occasion we debated this matter when he explained how circumstances had changed and how some in local government had sought to change the traditional balances between local and central government. Certain measures had been taken.

The problem with asserting the rhetoric that one side is trying to destroy local government is that now noble Lords opposite are the Government they will find that the realities of government will inevitably lead them to have to disappoint some friends and colleagues in local government because of the essential tensions which exist between central and local government. I hope that the noble Baroness will not mind if I refer to examples of that from the earlier debate this afternoon. I refer to borrowing powers rather than the release of cash and to the retention of capping. If London government is reorganised how will the powers be devolved as regards the London boroughs? Which powers from central or local government will be devolved to regional development agencies? What are the reserve powers that auditors, or the Audit Commission or the Secretary of State will keep regarding best value? I pose those comments as questions and not particularly as criticisms.

We also need to remember that we often draw invidious comparisons with other countries regarding freedom of action, powers and the financing of local government and local administrations. Yet, often, upon closer examination, United Kingdom local government are found still to enjoy considerable discretion, influence and freedom which compare favourably with what happens elsewhere. It is difficult to read across from one jurisdiction to another if only because of different political traditions and history.

My local authority has had a long association with a local authority in the Netherlands. The Netherlands has always seemed to me to have some splendid aspects to its system of local government. However, I doubt whether a system which enables the appointment of the Burgomaster or of the Queens Commissioners by the Crown would be acceptable if adopted in the United Kingdom with regard to similar appointments. We in this country draw on totally different political traditions.

The difficulty with achieving the increased status that we should all like to see for local government is the perception of the public. If noble Lords wish to consider my following remark as being indicative of a failure on my part with regard to my local authority, I may have to bow to the criticism. The public care about services. They are relatively content with those services, if all the surveys are to be believed. However, I do not believe they mind too much who provides those services. They care even less about the geographical boundaries of the authority that provides the services. They give their loyalty to different communities for different things. For some purposes those communities comprise small units; for others they may be larger than the area of the relevant local authority. In rare cases such as Rutland there is a particular geographical loyalty which corresponded in the past—and now again in the present—to administrative boundaries.

I regret to say that I do not think it is likely that the vast majority of the public would take to the streets to save the administrative unit of their town, county or city. One of the difficulties under which local government has to labour is the perception by the public, perhaps encouraged by ourselves, that Westminster is the all-important forum. Indeed, local election campaigns for the main political parties are fronted by the parties' parliamentary spokesmen; and then we complain that local elections are fought on national grounds and that there is a poor turnout.

This is not so much a criticism as a realisation, I hope, of how much has to be done to achieve a balance between national and local government if it is to have the status that has been spoken about, and indeed the status that many local governments and other forms of local administration have in other countries.

I do not believe that reorganisations change attitudes or give status. The suggestion in the Government's manifesto that there could be regional assemblies only where there is predominantly single tier local government is worrying if that envisages another bruising round of local government reorganisation.

Dare I suggest in this House that we should learn from the French how existing local authorities work together in statutory frameworks which enable them to do so without reorganising themselves? No one contemplates abolishing one of the 36,000 mayors in France. They have legislative frameworks which enable small communities to work together more effectively. In larger communities, the conurbations, the urban communities, the district arrangements bring those communes together with structures which are of, and belong to, the communes, all without the problem of reorganisation.

The issue is a fascinating subject for me, and I am sure for other noble Lords who participated. I am grateful to the noble Lord, Lord Hunt of Tanworth, for bringing the matter forward. I hope that when the Minister replies, the noble Baroness will share with us how she envisages some of the fundamental issues being confronted. I am sure she will not suggest that because there has been a change of government suddenly all will be well.

7.12 p.m.

Baroness Hayman

My Lords, no, I shall not suggest that just because there has been a change of government suddenly all will be well. But I suggest that we shall start assembling the building blocks to make things better than they have been; and that is our responsibility.

I am extremely grateful to the noble Lord, Lord Hunt of Tanworth, for initiating tonight's debate, for his skilful work in chairing the Select Committee and for so lucidly and persuasively introducing the report's theme and conclusions in his opening speech. We are having a speedy second debate on the Select Committee's report, as the noble Earl, Lord Kintore, pointed out. Far from gathering dust on the shelves, the danger of this report is that it will be so well thumbed that it will fall to pieces before we can study it properly. However, I hope that I am in a position tonight to convince the sceptics among your Lordships—perhaps the noble Baroness, Lady Hamwee, will take comfort from this; she expressed her concerns earlier—that we can give a reply from the Government Benches to the report which does not immediately implement all the recommendations; which does not put right overnight some of the things that have gone wrong over the long term; but a reply that is positive not only in tone but also in substance. It is the substance that is often the more challenging task. Perhaps we shall be able not only to agree with the Select Committee on the diagnosis but to start initiating some of the treatment.

Perhaps I may say to the noble Lord, Lord Bowness, that I accept, as I think everyone in the House accepts, his credentials in terms of commitment to local government and his distinguished service within local government. However, although if we are charitable we may accept that the previous administration did not deliberately destroy the relationships and powers of local government, I fear that they carelessly destroyed those relationships and some of those functions. We have to look at the incremental effects over nearly two decades. They have been referred to by my noble friend Lord Plant and others.

The overarching theme of the Select Committee's report was summarised in its title Rebuilding Trust. I believe that the reconstruction of public confidence in public administration is an essential responsibility for this Government in a whole range of areas and on a whole range of issues. Tonight, however, we are focusing on the specific challenge of rebuilding trust between central and local government and of creating that partnership referred to by my noble friend Lord Prys-Davies and other noble Lords.

I stress at the outset that we agree completely with the Select Committee's thesis that the rebuilding of trust is essential. I believe that for too many years local government has been seen as part of the problem, not as an essential factor in the solution. If we are to meet the enormous challenges out there, and to reconcile some of the tensions that the noble Lord, Lord Bowness, rightly pointed out—the tensions are inevitably inherent in the power sharing between different levels of government—the climate of the relationship in which we do that is absolutely central.

The creation of a new climate and the reinvigoration of local democracy were the focus of many of the specific recommendations of the Select Committee and are central equally to the Government's thinking about local government. Encouraging increased democracy, autonomy, accountability and partnership was the key element of the proposals for local government reform set out in our manifesto. Those proposals parallel in striking fashion the recommendations of the Select Committee report. I accept that the challenge for the Government will be in turning the words into reality. However, I believe that in the limited time available we have made significant progress. But in essence we shall have to be judged not on the words or even the deeds of less than 100 days. What we have achieved in this field will have to be judged on the outcome and outputs at the end of, I believe, not one but at least two Parliaments.

On some of the specific recommendations of the Select Committee, perhaps I may deal first with the recommendation of a Bill to enable local authorities to experiment with their internal management arrangements, allowing authorities to pilot the way decisions are taken and accounted for. We in government want to encourage greater public participation in local government and local democracy and democratic innovations in local government. However, as the noble Lord, Lord Hunt, pointed out, finding time for legislation is always a challenge, and time has not been able to be found in the Government's legislative programme for this Session.

I believe that I can see an opportunity for partnership. If the noble Lord, Lord Hunt, could be prevailed upon to introduce such a Bill as a Private Member's measure, I can assure him—it is perhaps the announcement that the noble Baroness, Lady Hamwee, sought—that the Government will provide all the support that we could and wish such a Bill Godspeed. It would mean that councils would be able to try out different management arrangements such as a small executive or an executive mayor accountable to back-bench councillors. What would be appropriate for one authority might not work for another. But it is important that councils should be able to try out those schemes in reality rather than simply float them as ideas. Piloting and experimentation with new ideas is a concept that has our support.

Another aspect of the report dealt with encouraging the leadership role of local authorities by giving them restricted powers of local competence. The Government want to see local authorities develop their roles as leaders and champions of their communities. In our manifesto we said that we would place on councils the duty to promote the economic, social and environmental well-being of their area. We are working closely with the Local Government Association to determine just how such a duty should be framed, to ensure that it achieves what we all intend and addresses the problems of the gaps in the powers that local authorities already have in a sensible and coherent way.

The Select Committee also called for better arrangements across Whitehall to handle local government issues, a point raised in the debate. We have made a start. We held the first meeting of the central/local partnership just a week ago. It was chaired by my right honourable friend the Deputy Prime Minister. At that meeting seven members of the Cabinet, together with seven other Ministers, sat down round the table with leading members of the Local Government Association. I assure the House that the discussions were no mere formality on that occasion. Today, the Deputy Prime Minister and the Chancellor of the Exchequer have both been at the Local Government Association conference. If there is a wicked plot to take the leader of the noble Baroness's council away from duties at local government level, perhaps the same plot is operating to take Ministers in my department away from their duties at departmental level—a lot of people are spending a lot of time on trying to get this matter right.

The remit of the forum initiated by the Deputy Prime Minister is to consider the major issues involving local government, particularly those that cross departmental boundaries and require a government-wide approach. The partnership will provide a new, overarching forum for exchange.

At future meetings we and local government at the highest level can discuss those key issues with which we are both concerned that relate to delivering a better quality of life to all our people. We can also debate seriously those challenges and tensions which we have a responsibility to make creative rather than destructive.

The Select Committee also called for the expansion of existing guidelines for central/local relations into a more formal concordat. We shall be working closely with the Local Government Association on developing a concordat for central/local relations.

Both the noble Lord, Lord Plant, and the noble Baroness, Lady Hamwee, referred to the recommendation that a parliamentary committee should be established to take an overview of central/local relations. As noble Lords will recognise, that is ultimately a matter for Parliament itself. But the central/local partnership meeting that we have put in place creates a forum, albeit a limited one, for Ministers and local councillors to oversee those relations and discuss what other measures are necessary.

I am grateful for the welcome that was given to the signing by this Government on 3rd June of the Council of Europe charter on local self-government. Perhaps I may add my acknowledgement of the role played by both the noble Lord, Lord Bowness, and my noble friend Lady Farrington in piloting, supporting and championing that convention. We have demonstrated central government's recognition of the value and worth of local government and shown our commitment to and belief in democratically elected local government.

We intend to ratify the charter. As the noble Baroness, Lady Hamwee, indicated, there is a question relating to the selection of articles. However, as did the previous Government, we believe that our domestic legislation on local government conforms with the charter as a whole.

The noble Lord, Lord Prys-Davies, asked whether the Government would review their own compliance with the charter as they would expect the Welsh Assembly to do. We take all our international commitments very seriously. Signing the charter is no exception. I can say with confidence that our programme for local government will ensure that local authorities and our relationships with them will have the status and role envisaged within the charter.

A number of the Select Committee's recommendations, and a great deal of the debate this evening, concerned matters that are essentially financial. That is perhaps in some ways the most difficult area in which we shall have to reconcile the aspirations of local government and the responsibilities of national government in terms of economic priorities.

Resources remain tight, and I understand the frustrations within the local government sector. We have done as much as we can within existing public expenditure plans. The Chancellor of the Exchequer announced in his Budget an extra £200 million in this financial year and £700 million next year for housing and housing-related capital investment. At the same time he announced more resources for education—£1.3 billion over the course of this Parliament for upgrading and modernising schools. Earlier this afternoon we discussed the Government's supplementary credit approvals Bill in terms of the added investment that we are giving to local authorities.

The issue of capping has inevitably been raised in the debate tonight. The Select Committee recommended that it should be used only as a reserve power where an authority has set a clearly unreasonable budget. We have said that we intend to abolish crude and universal council tax capping. We have to work out with the local government associations how we can make the change from the situation that exists at the moment, and to which we made clear we were committed for the current year, for the future. My right honourable friend the Deputy Prime Minister has been talking about exactly these issues in Manchester today.

The committee recommended that non-domestic rates should be returned to local control. We said in our manifesto that we would consult business fully about effecting that return.

There are no instant answers on this matter, nor on resolving the dilemmas that were exposed by the noble Baroness, Lady Hamwee. We will be saying more about the comprehensive spending review that has been initiated and the part that local government finance will play in that review. It is absolutely essential that we consider the changes that need to be made in local government finance within the context of the comprehensive spending review so that, together, between local and central government, we can deliver on our manifesto commitments and on the very challenging tasks that we have set ourselves as a government.

I was tempted to follow the noble Earl, Lord Kintore, on the issue of banding and raising local taxation. I am always slightly nervous in this House when someone starts talking about "a small big house". My husband has not recovered from the conversation he overheard one night between two noble Lords, when one asked the other, who had been speaking on countryside measures, whether he had many acres. He replied, "No, no, only a few hundred. In fact, I've got more bedrooms than I've got acres". So the definitions of "a big house" are slightly outside the normal parameters of such. We have to look carefully—this will be one of the issues addressed in the comprehensive spending review—at the balance between locally generated income and income that is generated at national level.

The issue as to how we replace compulsory competitive tendering is part of the whole range of financial issues being dealt with. We are committed through our manifesto to a regime of best value. We will be consulting local government widely about that duty of best value.

I make no apologies for not having come to the House with fully worked out proposals on these issues. It is central to what we are trying to do to create an ownership of the solutions that will eventually be reached between national and local government. I am not trying to hide the fact that difficult issues will arise and there will be difficult judgments to make during that process. What we can do is bring a new spirit and a new climate to the discussions. We can work together towards solutions that will not please all the participants all of the time but will at least, I hope, be accepted as having taken into account the views of those who participated.

The proposals for best value fit very much into our vision of local authorities which have a more complex role today, as my noble friend Lord Plant pointed out, and which are both commissioners and deliverers of services. We also want to see local authorities develop their role as leaders and champions of their communities. We want to encourage democratic innovation in the broadest sense. There is a great deal going on at the moment in the local government world and our approach will not be to be over-prescriptive or to try to enforce a single model. Rather, it will be to enable individual local authorities to tailor and to pilot those arrangements which are best suited to their local circumstances.

Equally, in the regions we have made it clear that we shall not be imposing the single national blueprint. The legislation on regional development agencies will allow for each region to have an agency which best suits its own circumstances.

All that will take time, but we are committed to taking forward our programme of change and are doing so in consultation with local government and after detailed discussions with local government. We want to ensure that its expertise and views are known from the earliest stages of policy development, so that when we take decisions they are soundly thought out and based on local government experience.

The democratic deficit in our society is deep and is perhaps most harshly felt at local government level. It will take both sides, local and central government, working together some time, imagination and commitment to rectify that deficit. But it is one of our essential tasks and a task in which we believe local government is willing and able to play an important part.

I believe that at the end of that process we shall have achieved the aims both of this Government and of the Select Committee in terms of re-invigorating local government, of increasing democracy, autonomy and accountability. We shall not do so simply by making speeches. We shall do so by going away and putting in the hard work on a basis of mutual respect that will be essential to turn those words into reality.