§ (" .—(1) The Secretary of State shall, every three years after this Part comes into force in accordance with section 27, undertake a review of the working of this Part.
§ (2) The review shall—
- (a) examine, quantify and report on any savings and other benefits that have resulted from the implementation of this Part;
- (b) examine, quantify and report on any additional costs that have arisen in best value authorities as a result of the implementation of this Part; and
- (c) determine whether the efficiency factors used in the calculation of the Revenue Support Grant each year are still appropriate or require adjustment.
§ (3) Reports under this section shall be placed in the Libraries of both Houses of Parliament.")
§ The noble Lord said: My Lords, I invite the Minister to consider the amendment with great care. Even if I have not come up with the required form of words, perhaps he will at least accept the principle, which could still be subsumed into the Bill as it goes through the remainder of its parliamentary stages.
§ The Minister will recall that early in our proceedings my noble friend Lord Bowness tabled a Question for Written Answer about the costs to be borne by local authorities as a result of the passage of the Bill. He was particularly concerned about how those costs should be met. Best value planning and the auditing consequences that flow from it will impose a considerable administrative and audit load on local authorities, although we know that the Audit Commission will be reimbursed for its share of the additional costs.
§ In his reply to my noble friend Lord Bowness, the Minister said that the Government were not unduly concerned about the costs because they were confident—and I have no reason to doubt that they were right—that the savings arising as a result of the introduction of best value procedures would be greater than the costs imposed. He went on to say that they were sufficiently confident of that to build a 2 per cent 592 efficiency factor into the revenue support grant calculations. All of that might be perfectly reasonable and one cannot quarrel with it.
§ The Bill imposes incentives and procedures on local authorities. Paradoxically—unless I have missed something in the Bill, although I have been through it several times fairly thoroughly—the Bill provides no means of quantifying what happens in total at national level and how that is reported back. That is why I have tabled the amendment.
§ After the Bill is passed local authorities will begin to implement it. Any additional costs that arise will be easy to see. Once they have been put in place we shall have a stable situation. We do not know what economies and benefits there will be. We can be confident that the easy economies will be found first. Authorities that are currently less well managed will find it easier to gain considerable advantages as a result of the passage of the Bill. However, that is only the start. Two or three years down the road the picture may be different. If the system works well it will become increasingly difficult to continue to find economies. More importantly, efficient and innovative authorities will inevitably find it increasingly difficult to continue to hit the 2 per cent target that we all blithely assume is appropriate.
§ The Minister may respond that if that is so the calculations will be adjusted. Parliament has an interest in the outcome of the Bill. Having had a lifelong interest in local government, I have an interest in what will happen. We propose that the Secretary of State should report to Parliament every three years on the consequences of the Bill—the costs that have fallen on local government and the benefits that have accrued to society. That would be a good procedure to include in the Bill and I invite the Minister to consider it carefully. I beg to move.
§ 6.15 p.m.
§ Lord WhittyMy Lords, the amendment would place a requirement on the Secretary of State to produce a review of the workings of best value every three years. It refers mainly to costs and savings. As the noble Lord, Lord Dixon-Smith, said when referring to my correspondence with the noble Lord, Lord Bowness, we are confident of savings. Best value is about more than just financial issues. It is also about improving the quality of services that residents receive. Like the noble Lord, we have a substantial interest in the outcome of the Bill and the incorporation of the best value regime into local government.
However, we already have in place what the noble Lord seeks. The Government are already committed to reporting on the efficiency savings achieved by best value authorities and we expect those savings to outweigh the costs by far. That is recorded in our public service agreement as set out in the document, Public Services for the Future: Modernisation, Reform, Accountability. The indicators that we are committed to go well beyond a narrow consideration of efficiency. They take into account quality indicators and the full range of issues covered by the best value suite of performance measures as well as the measures that are behind the amendment.
593 Indeed, we shall go further than the amendment by reporting on such matters to Parliament and to the public annually rather than every three years. We shall report on all our targets as set out in our public service agreement. Considerations of efficiency measures will also be reflected in future calculations of revenue support grant. I should correct the implication in subsection (2)(c) of the amendment that the Government intend to continue the previous practice of announcing SSA and RSG figures one year at a time.
As noble Lords will recall, this Government have carried out the first ever Comprehensive Spending Review. The results, announced in July 1998, cover a three-year period. Future spending reviews will also cover three-year periods. During those reviews, as in the first one, we shall certainly take account of the efficiency improvements that we think it reasonable to expect local authorities to achieve. That will also reflect the wider best-value experience. So there is a second arena in which the objectives of the amendment will be met.
Furthermore, a major review of revenue grant distribution is currently underway, in partnership with local government. The procedure laid down in the amendment could pre-empt the procedures that would be appropriate to the outcome of that review. Nevertheless, that is not my main point. My main point is that we already provide a substantial degree of reportage in two contexts and that more than meets the amendment tabled by the noble Lord. Therefore, I ask him to withdraw the amendment.
§ Lord Dixon-SmithMy Lords, before the Minister sits down, I apologise for saying "annual" when I should have said "triennial". Old habits die hard. My mind slipped out of gear for a moment.
More importantly, while I accept that there is an amount of reporting that will happen, particularly under the public service agreements, and that to an extent the points that I have raised will be covered by those reports which will appear annually, I would not have tabled the amendment had it not been for that efficiency factor.
A problem arises specifically in relation to costs and savings. If the costs are imposed—we know that they are bound to rise to a degree—and the savings do not arise, but none the less the efficiency factor is still there, local government will find itself in a financial squeeze. However, we hope that local government will have the freedom to respond to that situation in the future. If those costs are genuine and have to be met, but they are not met by the national taxpayers, ultimately, they will be met by the council taxpayers. That is the equation.
I believe that it is necessary to bring those factors out so that they can be related to each other. Perhaps the Minister can assure me that those figures will be sufficiently identifiable for the relevant comparisons to be made.
§ Lord WhittyMy Lords, I can assure the noble Lord that in the PSA context, the efficiency factors will be identified and reported on. They will be reported on 594 explicitly during the course of the RSG process. If the noble Lord is concerned that we have a notional efficiency factor against which we shall never be able to judge reality, I believe our existing reporting systems will give him some comfort that they will be clearly identified in that process. If that efficiency factor is out by much, certain calculations will have to be adjusted.
§ Lord Dixon-SmithMy Lords, I am grateful to the Minister for the assurance that I may have some comfort. I can assure him that if I do not have comfort, neither of us will have comfort in a little while as events, uncomfortably, reveal themselves. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Baroness Hamwee moved Amendment No. 5:
§
Page 18, line 18, at end insert—
("(3) Schedule 1 shall cease to have effect on 1st April 2005 unless previously extended by order made by statutory instrument and laid in draft before, and approved by resolution of, both Houses of Parliament.
(4) An order laid under subsection (3) shall not apply for a period exceeding five years.
(5) If an order laid pursuant to subsection (3) is approved, Schedule 1 shall cease to have effect on the date specified in the order subject to any subsequent order or orders approved by both Houses of Parliament none of which shall extend its effect for more than five years.
(6) Notwithstanding the provisions of subsection (3), if Schedule 1 has ceased to have effect it may at any time be revived by order made by statutory instrument laid in draft before, and approved by resolution of, both Houses of Parliament in which event subsection (3) shall thereafter apply.")
§ The noble Baroness said: My Lords, I move Amendment No. 5, which one may call the sunset clause for capping.
§ The views of these Benches are well known. We believe that the local electorate should take action through the ballot box to control council tax if it is not to its liking. It is not a matter for central government. The converse of that situation is that the local electorate has to rely on the ballot box if it believes that the administration of the local authority is not spending enough on its services so that they are not at the level and range that the electorate wants. I leave aside minimum standards to which we have already obliquely referred today.
§ Schedule 1 to the Bill and Clause 30 which introduces the schedule provide powers for the Secretary of State to cap local authority budgets. The amendment seeks to express what the Government say is the nature of those powers; in other words, they are to be exercised as reserve powers and only in circumstances where it would be clear and generally accepted that they should be used. I hope I do not misrepresent what the Minister said at earlier stages of the Bill. No doubt he will correct me if I have so misrepresented him.
§ The amendment seeks to provide that if the powers are not extended by affirmative resolution of both Houses they will cease to have effect on 1st April 2005. Thereafter, a similar procedure would apply. In an attempt to pre-empt an argument that the Government cannot know when they may need to exercise a reserve 595 power, I have added a paragraph to the amendment which I proposed on Report, namely what would he Clause 36, to provide that the power can be revived by affirmative resolution if it has already lapsed.
§ We regard the capping of local authority budgets as wrong in principle, as I have said, and stultifying in practice. The Government have a programme to modernise local government and we would wish to see that as part of the programme to re-invigorate it. At other stages of the Bill and in the course of the Greater London Authority Bill, we have talked of the need for trust between the different spheres of government. It is no coincidence that the report of a Select Committee of this House, under the chairmanship of the noble Lord. Lord Hunt of Tanworth, three or four years ago, was entitled Rebuilding Trust. We have also talked about the need for freedom on the part of local authorities, including freedom to innovate, to experiment and, inevitably if they have those freedoms, occasionally to make mistakes.
§ In our eyes, the lowest expenditure may not necessarily be the best value for money. We want to see value for money arrived at as the local authority and its electorate see best. The Government are removing crude and universal capping—as they term it—or so they say. However, in our view, the legislation does not do that because it retains certain powers. If the Government regard reserve powers as necessary, we believe that they should be prepared to argue for their retention as the modernising programme proceeds. If they want to use the powers because a particular authority, or group of authorities, has used up its good will when the powers have been out of use, they should argue specifically for their application.
§ The Government are concerned ID protect local taxpayers. Amendment No. 5 would not remove that right, but it would require the Secretary of State, in the circumstances that I have set out, to come to Parliament to justify his plans if he wishes to renew or to revive the powers. I beg to move.
§ Lord Dixon-SmithMy Lords, I rise to support the noble Baroness in moving Amendment No. 5. Everyone directly involved in local government, on whichever side of the House they sit, would welcome the sunset of capping.
It is superfluous for me to repeat the remarks of the noble Baroness. However, in supporting the amendment I want to refer to the whole of Part I of the Bill. With constantly improving efficiency and the provision of better services at lower cost—the two are not locked together—one can achieve a more efficient use of resources. That is best value. However, if we have had that regime in place for five years and if there is any validity in the efficiency factor which we were discussing on a previous amendment, it seems to me that, five years down the road, the whole concept of capping should be redundant, out of date and gone.
I accept that there may be individual authorities that may possibly not reach the performance level of the best performers. That will always be the case; indeed, it is a 596 natural human failing. But if we have any confidence in Part I of the Bill, the need for Part II should disappear. As I said, I support the amendment.
§ 6.30 p.m.
§ Baroness Miller of Chilthorne DomerMy Lords, I should like briefly to support my noble friend, yet not repeat what she said. The Government's willingness to include our amendment would be a statement by them that there is a milestone to be reached in the process of cleaning up local government where it needed it, and improving it where improvement was needed. The Government have been very pro-active. The improvement and development agency is very busy in its efforts to ensure that councils understand exactly what they have to do. We have two local government Bills which will change the attitudes of local government and improve civic leadership. There is also a big drive to forge a link between local councils and their local communities, where those links have been poor in the past.
However, if the Government do not feel after five or six years of this process that they will then be in a position to start to trust local government, in that it has built the links with its local communities and has a very rigorous programme of performance targets and indicators, that is a statement that the programme is; unlikely to work. I would be the last person to say that; indeed, I think that the programme is both good and comprehensive and that five or six years is a reasonable length of time—over one council quadrennium—for it to work.
In Grand Committee, the noble Lord said that we cannot write in that date and leave local people open to the risk of some irresponsible council exceeding what would be a reasonable limit. I felt that that was a statement that all local authority regimes will continue to be driven by one or two irresponsible councils. We know that in the real world there will always be one or two councils which are imperfect, but we should not introduce for all time, and without an end date, a clause that penalises the others and cuts off their links with local communities. I say that because electorate can see what is going on. Indeed, the example of Milton Keynes this year was a good one. The council had made every effort to consult the people on what they wanted the level of their tax to be, but it still received a so-called "yellow card" from the Government.
If councils are going to make the effort to go out, put the best value plans into operation, have their communities fully on board with a very clear and accountable system of leadership and still be subject to government control of this sort, I think that the entire programme will be put on a much slower pace because local councils will not feel that the Government will ever trust them enough. I do not think that that is the kind of statement that central government means to make to local government.
§ Lord WhittyMy Lords, to begin with, let us be quite clear about the position. Once this Bill receives Royal Assent, the system of capping will have had its sunset clause. These are reserve powers, which are to be 597 used in very exceptional circumstances. As both the noble Baroness, Lady Miller, and the noble Lord, Lord Dixon-Smith, said, the accommodation in the first part of the Bill in introducing best value and spreading it through local authorities, should avoid such powers ever being used.
Nevertheless, as I believe even the noble Baroness, Lady Miller, acknowledged, there are occasional improbabilities, exceptional circumstances—for which, in other contexts, the Liberal Democrats always seem to be advocating legislation—that we need to guard against on behalf of both council taxpayers and taxpayers generally; in other words, we need to guard against the unusual authority. Anyone who knows local government knows that change in local government proceeds at different paces in different parts of the sector. We do not know whether five years is a desirable period within which best value could deliver all these objectives; indeed, by no means will they necessarily be delivered. But, even if they have been, certain events, like management failures, and so on, could lead to a situation where it would be overturned.
Obviously we expect all local authorities to be reasonable, responsible and prudent, as well as operating best value to its full effect. However, we indicated in our commitment to avoid universal capping that we would retain a reserve power and also set that out in our manifesto. It is needed for precisely such an unusual eventuality.
I understand that the additional clause that the noble Baroness has now put forward, as compared with what was tabled at the previous stage, would revive the schedule if necessary and seem to provide such a safeguard after the five-year period. However, if we found ourselves in a situation the year after the provision had lapsed where there was a sudden reversion by local authorities to exceptionally bad practice whereby an authority would need to be designated for the financial year that had already started, timing would become very important. We would have to go through a debate in both Houses before we could introduce a designation procedure. That would make it much more difficult for the local authority to adjust to the fact that the designation had taken place and modify its budget during the financial year, if that proved necessary.
Of course, one could argue that if such a situation were envisaged the two Houses of Parliament should have debated the issue much earlier in the procedure. However, that would be before the Secretary of State had received any relevant information, which the local authority wished to draw to his or her attention. Under the existing capping legislation and under these powers, an authority that is designated or nominated may challenge the amount set by the Secretary of State. In doing so, it would provide information to the Secretary of State which, at that stage, might well lead to a revision of that view and a withdrawal from that position. In that case, it would not be appropriate for the Houses of Parliament to discuss the matter at an early stage. Therefore, we would be left with a situation, post-lapsing of these powers, where the requirement to 598 re-introduce them would actually lead to serious delay. It would probably make a rare but difficult situation worse.
If we are concerned with the use of these powers rather than their existence, noble Lords must recognise that, where the Secretary of State decides to issue a restriction on any local authority, such an order would always be subject under these provisions to affirmative resolution in the other place. Therefore, although noble Lords may be objecting to the existence of these powers, their use is already constrained by parliamentary action. In fact, there are considerable restraints on the Secretary of State as regards ever using the powers. We believe that they are potentially necessary. We hope that we will never have to use them. We also believe that the first part of this Bill will create a situation and an ethos where we will not have to use them.
We do not think it sensible to commit ourselves to the automatic lapse of these powers in five years' time, with the presumption that they would lapse at that time. I do not believe that there is a time-scale in which one can say, "Beyond that, we will no longer ever have a totally irresponsible local authority". It is to be hoped that such authorities will be rare, but we need such powers to ensure that we have at least some restriction in that respect. I know that the noble Baroness has not previously accepted these arguments, but I hope that she will not feel it necessary to pursue the amendment tonight.
§ Baroness HamweeMy Lords, the Minister talked about the occasional, particular circumstances where certain local authorities may need to be restrained and about the need to guard against excesses on the part of some authorities by taking the role of guardian of the taxpayer.
He referred to the manifesto commitment—perhaps I am putting it a bit high in calling it a commitment—or certainly to a reference in the manifesto to the retention of reserve powers for capping. I have accepted all that in drawing up this amendment.
I have also accepted the Government's point that there will be differing rates of change among different local authorities and that five years may not see as much progress—I deliberately use the kind of language that I think the Government would wish us to use in this connection—on the part of some local authorities as it will on the part of others.
I believe that our amendment meets the Government's concerns. If the powers have lapsed and just after one of these five-year periods the Government believe that it is necessary to take action in connection with one authority or a group of authorities, then, just as I have said that I would hope that central government could trust local government, I also believe that they should trust Parliament. I propose that there should be an affirmative resolution procedure. I believe that the Secretary of State would be quite properly required in such circumstances to justify his proposed action before both Houses. After all, if the Government believe that these powers are important and necessary, they should be prepared to rely on the persuasive powers of the 599 Secretary of State. I quite simply disagree with the point the Minister made about this being at the wrong stage, but I see that he wishes to speak.
§ Lord WhittyMy Lords, certainly another place at least would be required to be persuaded and the persuasive powers of the Secretary of State would need to be exerted were these powers ever to be used. The point I was making was that if we remove them or if we allow them to lapse, even if they have not been used for five years, and a new situation arises, we would have to go through a whole new procedure when we may need to act quickly for the authority's benefit as well as for the benefit of the council tax payer and that of the taxpayer generally. If the powers remain on the statute book, we already require the Secretary of State to be persuasive before they are used. I should have thought that that was an adequate safeguard and adequate pressure as regards the persuasive powers of a future Secretary of State.
§ Baroness HamweeMy Lords, I do not agree with that because the whole situation will be different. We are talking here about giving the Government the opportunity to use powers when the whole culture of local government finance almost by definition will have shifted quite considerably because of the lapse of time involved. The Minister talked about committing ourselves to certain actions. I also suggest that a future Secretary of State who may be from a different political administration should be committed to using these powers. I believe that the Minister ended by saying that they may be—I think I have his words correctly—potentially necessary. If they are potentially necessary and that potentiality is required to be put into effect—I hope that I am choosing the words correctly; I am not sure that they quite fit together—if the situation arises, we believe that we have given the Government all the armoury that they need. This is a matter of principle. I wish to test the opinion of the House.
§ 6.43 p.m.
§ On Question, Whether the said amendment (No. 5) shall be agreed to?
§ Their Lordships divided: Contents, 81; Not-Contents, 100.
601| Division No. 3 | |
| CONTENTS | |
| Addington, L. | Clark of Kempston, L. |
| Annaly, L. | Clement-Jones, L. |
| Astor, V. | Colwyn, L. |
| Astor of Hever, L. | Cope of Berkeley, L. |
| Beaumont of Whitley, L. | Courtown, E. |
| Berners, B. | Dholakia, L. |
| Biddulph, L. | Dixon-Smith, L. |
| Blyth, L. | Downshire, M. |
| Bowness, L. | Elton, L. |
| Brabazon of Tara, L. | Falkland, V. |
| Burnham, L. | Ferrers, E. |
| Buscombe, B. | Fookes, B. |
| Byford, B. | Freeman, L. |
| Carlisle, E. | Geddes, L. |
| Carnegy of Lour, B. | Geraint, L. |
| Gisborough, L. | Norrie, L. |
| Glentoran, L. | Northbrook, L. |
| Goodhart, L. | Northesk, E. |
| Gray, L. | Pearson of Rannoch, L. |
| Grey, E. | Phillips of Sudbury, L. |
| Hamwee, B. [Teller.] | Rawlings, B. |
| Hanningfield, L. | Razzall, L. |
| Harlech, L. | Redesdale, L. |
| Harris of Greenwich, L. | Rochester, L. |
| Harrowby, E. | Rodgers of Quarry Bank, L. |
| Howe, E. | Russell, E. |
| Hurd of Westwell, L. | Russell-Johnston, L. |
| Lauderdale, E. | Sandberg, L. |
| Lindsey and Abingdon, E. | Seccombe, B. |
| McColl of Dulwich, L. | Sharp of Guildford, B. |
| McNair, L. | Smith of Clifton, L. |
| McNally, L. | Taylor of Warwick, L. |
| Maddock, B. | Thomas of Walliswood, B. |
| Marlesford, L. | Thomson of Monifieth, L. |
| Massereene and Ferrard, V. | Torrington, V. |
| Mersey, V. | Wade of Chorlton, L. |
| Miller of Chilthorne Domer, B. [Teller.] | Warnock, B. |
| Westbury, L. | |
| Miller of Hendon, B. | Wharton, B. |
| Monk Bretton, L. | Williams of Crosby, B. |
| Munster, E. | Wynford, L. |
| NOT-CONTENTS | |
| Acton, L. | Haskel, L. |
| Ahmed, L. | Healey, L. |
| Ailesbury, M. | Hilton of Eggardon, B. |
| Allenby of Megiddo, V. | Hollick, L. |
| Amos, B. | Hollis of Heigham, B. |
| Archer of Sandwell, L. | Howie of Troon, L. |
| Ashley of Stoke, L. | Hughes, L. |
| Bach, L. | Hughes of Woodside, L. |
| Barnett, L. | Hunt of Kings Heath, L. |
| Berkeley, L. | Irvine of Lairg, L. [Lord Chancellor.] |
| Blackstone, B. | |
| Borrie, L. | Janner of Braunstone, L. |
| Bragg, L. | Jay of Paddington, B. [Lord Privy Seal.] |
| Brooke of Alverthorpe, L. | |
| Burlison, L. | Jenkins of Putney, L. |
| Carter, L. [Teller.] | Judd, L. |
| Castle of Blackburn, B. | Kennet, L. |
| Christopher, L. | McIntosh of Haringey, L. [Teller.] |
| Clarke of Hampstead, L. | |
| Clinton-Davis, L. | Mallalieu, B. |
| Cocks of Hartcliffe, L. | Milner of Leeds, L. |
| Crawley, B. | Molloy, L. |
| David, B. | Molyneaux of Killead, L. |
| Davies of Coity, L. | Monkswell, L. |
| Davies of Oldham, L. | Morris of Manchester, L. |
| Desai, L. | Murray of Epping Forest, L. |
| Diamond, L. | Nicol, B. |
| Dixon, L. | Peston, L. |
| Donoughue, L. | Pitkeathley, B. |
| Dormand of Easington, L. | Ponsonby of Shulbrede, L. |
| Evans of Parkside, L. | |
| Evans of Watford, L. | Puttnam, L. |
| Falconer of Thoroton, L. | Ramsay of Cartvale, B. |
| Farrington of Ribbleton, B. | Randall of St. Budeaux, L. |
| Gilbert, L. | Rea, L. |
| Gladwin of Clee, L. | Rendell of Babergh, B. |
| Gordon of Strathblane, L. | Renwick of Clifton, L. |
| Goudie, B. | Richard, L. |
| Gould of Potternewton, B. | Sainsbury of Turville, L. |
| Graham of Edmonton, L. | Sawyer, L. |
| Greenway, L. | Serota, B. |
| Grenfell, L. | Shepherd, L. |
| Hacking, L. | Shore of Stepney, L. |
| Hanworth, V. | Simon, V. |
| Hardie, L. | Simon of Highbury, L. |
| Hardy of Wath, L. | Stoddart of Swindon, L. |
| Harris of Haringey, L. | Symons of Vernham Dean, B. |
| Taylor of Blackburn, L. | Walker of Doncaster, L. |
| Thornton, B. | Watson of Invergowrie, L. |
| Tomlinson, L. | Whitty, L. |
| Turner of Camden, B. | Williams of Elvel, L. |
| Uddin, B. | Young of Old Scone, B. |
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 6.50 p.m.
§ Lord WhittyMy Lords, I beg to move that the Bill do now pass.
§ Moved, That the Bill do now pass.—(Lord Whitty.)
§ On Question, Bill passed, and returned to the Commons with amendments.