Local Government Bill

HL Deb 17 June 1999 vol 602 cc483-532

6.29 p.m.

Report received.

Clause 1 [Best value authorities]:

Baroness Hamwee moved Amendment No. 1:

Page 2, line 18, at end insert— ("() No authority or body which budgets in any year to spend a sum not exceeding £500,000 or such higher sum as the Secretary of State may by order specify shall be regarded as a best value authority.").

The noble Baroness said: My Lords, Amendment No. 1 seeks to amend Clause 1. That clause is concerned with those authorities that are to be regarded as best value authorities. We had a debate at the previous stage on a de minimis provision. It appears to be generally accepted that a budget threshold of £500,000 a year is about the right sum. The Minister at that stage said that the Government were still considering the figure, although he informed the Committee that discussions with the National Association of Local Councils (town and parish) indicated that £500,000 was the right figure.

I have tabled this amendment in part to ask the Government whether further progress has been made in those discussions and in part because at the previous stage there was some little concern that the amendment as drawn—the noble Lord, Lord Dixon-Smith, moved the amendment and we supported it—did not allow flexibility. If that was the objection—I suspect that it was not the only one, but doubtless we shall hear from the Minister—I hope that I have dealt with it in the present drafting. If the Minister tells the House that he wants to allow for a lower limit than£500,000 we shall happily return to this matter yet again at the next stage. My point is as brief as that. Given the lateness in starting these proceedings, I shall not expand on the background to the amendment. I beg to move.

Lord Dixon-Smith

My Lords, when we debated this issue in Grand Committee the Minister in his response indicated that it would not be normal practice to put into legislation figures that might require subsequent adjustment in the light of inflation. I accept that that is a reasonable argument, but that was never the intended basis on which I moved the amendment. If I did not then make the matter sufficiently clear, or press it hard enough, I am in error. I always envisaged that it might he possible, in the light of experience in a year or two, that the limit now proposed—I believe that we should put as much on to the face of the Bill as possible, whatever may have been the custom and practice—would be unreasonably low.

The decision might be taken in the light of practice that £1 million was a perfectly acceptable figure, and that would have nothing to do with an inflationary increase. It seems to me that if we are considering the matter on that scale it is not unreasonable to see that on the face of the Bill. At that level a greater number of authorities would undoubtedly come within the exempt category, but in overall expenditure terms that would be very small beer in relation to the totality of local government expenditure. That would still be controlled by Part I of the Bill, which is concerned with best value authorities. I support the amendment.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)

My Lords, the Government have recognised throughout that the best value duties could be extremely onerous for smaller parish and town councils. The Bill therefore enables us to exempt them. This subsection gives the necessary powers. "Specified description" in this context may refer, for example, to parish councils with budgeted income of a particular amount. As the noble Baroness said, officials have met the National Association of Local Councils and the Audit Commission to discuss how best value can be applied. I confirm that it is the intention of the Government to set a de minimis level of £500,000, as indicated in the White Paper last year. On that basis, approximately 70 or 80 parish and town councils out of a total of 8,000 would be covered by that regime. Any parish council with a lower income would be entirely exempt, although we would like it to follow the spirit of best value.

For those few parishes above the threshold we can use the powers provided in the Bill to ensure that the duties are applied sensibly with regard to a parish's ability to fulfil those duties. We do not wish to impose excessive burdens on those best value parish councils. We shall be consulting on that matter.

We do not think that it is sensible to put a figure on the de minimis level on the face of the Bill because that will remove the capacity to alter the level up or down in the light of changing circumstances and seeing how it applies. Setting a figure by order provides us with the flexibility that we need. The amendment gives us the flexibility to raise the threshold but it would not provide the flexibility to lower it. Were we to take the noble Lord's advice and go to £1 million, next year or the year after we might find that that turned out to be too high and we wished to lower it.

There is an additional problem. The amendment as drafted does not achieve our intention as discussed with parish councils, since we propose to set the threshold with reference to budgeted income in line with existing audit thresholds rather than budgeted expenditure as the amendment provides. With that reaffirmation of our intention and the reason why we seek this flexibility, I ask the noble Baroness to withdraw the amendment.

Baroness Hamwee

My Lords, I am grateful to the Minister for the information with which he has provided the House. If the discussions with the parish councils have been related to budget income rather than expenditure I do not wish this amendment to be applied. I do not want to upset those discussions. The Minister referred to lowering the threshold. I do not believe that my amendment would preclude coming back to £500,000 or a slightly higher figure had it gone by order to, say, £1 million. It certainly would preclude coming back to £300,000. I said that if the Government suggested they might want to lower the limit we could be tempted to return to the matter at Third Reading. We shall wait and see. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 [The general duty]:

Baroness Hamwee moved Amendment No. 2:

Page 3, line 6. leave out ("and").

The noble Baroness said: My Lords, in moving Amendment No. 2 I should like to speak also to Amendments Nos. 3, 11 and 12. These amendments deal with the criteria that apply both to the best value duty in Clause 3 and the performance indicators and standards in Clause 4. The clauses explain that the criteria to which authorities are to have regard are, in combination, economy, efficiency and effectiveness. "Economy" probably speaks for itself, as do the other two. However, it may be worth pausing for a moment to reflect on their precise meaning. I believe that "efficiency" is about producing the desired result with the minimum wasted effort, and "effectiveness" is about bringing about a result. Neither of those is entirely original. I looked them up in the Oxford English Dictionary last night.

We do not believe that those are adequate criteria. We do not challenge their inclusion but seek to add to them. This group of amendments seeks to add the criterion of fairness. At Committee stage we spent a little time on whether the term used then—"equity"—was the right one. The Minister volunteered that he preferred "fairness", perhaps simply as a matter of elegance of language; I am not sure. I noted his criticism about switching between "equity" and "equality" in a rather seamless fashion, and I accept that there are differences. I believe that fairness is a good. plain and straightforward term. It embodies concepts of being just and equitable and of providing an equal chance of success. There was quite a lot of support in the Grand Committee for the concept of equity, as it was referred to then. It was regarded as being integral to the best value duty. The Minister argued then that there were difficulties in writing equity or fairness into the criteria as distinct from ensuring the concept of the criterion under the effectiveness banner.

On 10th May the Minister said that the Government, have not thought it appropriate to write in wellbeing provisions. [The Bill] is primarily about the way in which local government conducts its management and delivers its services and, to some extent, its financial control rather than the broader objectives of local government". He went on to say, The Government consider it essential that as a result of introducing best value, our local authorities concentrate on service outputs and outcomes".—[Official Report, 10/5/99; col. CWH 22.] Our concern is that effectiveness may not be interpreted as being capable of including fairness. If fairness is outside economy, efficiency and effectiveness, then guidance, which it was suggested would deal with fairness, cannot bring fairness within it. I accept that there are a number of occasions where guidance can be used to expand on a matter, but if the primary legislation does not allow for it then I would be worried that guidance could not properly provide for it.

We on these Benches are not alone in believing that the promotion of the well-being of one's community in which fairness is absolutely central is the most important part of local government. I believe that the noble Lord, Lord Dixon-Smith, said that promoting the well-being of one's community was the only reason for being involved in a local authority in the first place. I am sure that at a personal level there are a number of noble Lords in the Chamber at the moment who have been—and some still are—in local government. I believe that most of us would identify with that.

I mentioned the Minister's point about outcomes rather than process. But we do not believe that it is possible to separate process and outcome quite as easily as the noble Lord's speech suggested. However, even if one accepts that best value is only about outcomes, we say that fairness is an outcome that a local authority should seek to achieve. We are not arguing that it should take priority over the criteria set out in the Bill, but we believe that it should have at least equality with them.

The anxieties about fairness are dealt with in other constitutional legislation. Understandably it is extensively dealt with in the Northern Ireland legislation. It is also dealt with in the recent Welsh legislation. Therefore, I do not believe that it would be out of place in this Bill.

Economy, efficiency and effectiveness are terms with which local government has lived for quite some time now. I believe that they carry the baggage of referring fairly narrowly to financial concerns. The reports that one sees from the Audit Commission are substantially concerned with financial matters. Looking at performance indicators where the Audit Commission is involved, they certainly have a distinct financial flavour.

The Minister may tell me tonight that this amendment is not necessary. Perhaps the rather trite response to that is to ask what is the harm in it. I believe that there is a message that one wants to give as regards the whole modernisation programme for local government concerning fairness being very important and absolutely central. Sadly, it is a current issue. I have not described the different areas of gender equality, social justice and so on that come within it, but I would like to mention one point, which is racial equality. The Macpherson Report concerning the inquiry into the death of Stephen Lawrence and what happened afterwards recommended that the police service, local government and the relevant agencies should specifically consider implementing community and local initiatives aimed at promoting cultural diversity and addressing racism. There is also a need for focused, consistent support for such initiatives. This and the other amendments within the group are squarely within that spirit.

Notions of economy, efficiency and effectiveness have now been applied in local government and elsewhere for more than a decade and a half. As I have said, I believe that they are generally regarded as being financial. If the Minister can assure me that they are wider than that I shall listen to that with care. But I am particularly concerned as to how local authorities, those scrutinising them, the wider community and if necessary the courts interpret the term "effectiveness" and whether fairness can be encompassed by what we have on the face of the Bill. I beg to move.

6.45 p.m.

Baroness Miller of Chilthorne Domer

My Lords, my noble friend has put so well why we are trying to move away, as the Government are, from the ethos of CCT and develop a way of thinking which is removed from that. After the Grand Committee stage I spent some time mulling over the point of outcomes, process and so on. I went back to the fact that the aim of this Bill is to promote improvement in the way that functions are exercised. The Minister's statement during the Grand Committee was that fair access to services could be regarded as being equity under another name.

Having researched the matter a little more, without including fairness—I agree that we should decide on one term that is going to be used and fairness seems to be a good one—on the face of the Bill we shall have continual misunderstanding about it not only from the local authorities involved but also from those who are supposed to measure outcomes, such as the Audit Commission, and those who are supposed to give guidance.

I would like to give a brief example. It comes from development control, which is usually one of the most contentious areas. I believe that the example shows that it is riot just a question of fairness as to whether people feel able to take up that service or have access to it, but about the very design of the service. The example comes from a letter from the Department of the Environment, Transport and the Regions dated 19th February. It was checking on how people felt about the various indicators. The letter states: Under the fair access indicators this category of indicator is concerned with the ease of gaining access to particular services both physically and by having readily comprehensible and usable procedures. We are not required to have a best value indicator under all five headings. Our initial view is that this aspect of the planning service may not warrant a whole indicator. Instead we suggest that fair access be addressed within the proposed quality check list. I believe that as that is one of the most contentious of services it deserves the most scrutiny. If that is the feeling about fair access for that service, I do not believe that it augurs well for the rest.

It is not just a question of whether people can understand the notices about development control, or feel able to put their cases well at meetings. It is also a question of the way the service is designed within the authority and its ethos of fairness. If one is articulate, it is easy to put one's case well. Unless we include "fairness" within the Bill, specific services will suffer.

I do not believe that community planning will be the answer overall. By their nature, communities have articulate people as well as those individuals who do not know how to use the system and are inarticulate. Sometimes that inability to express oneself may be exploited by an authority should it not wish to hear the other side of the argument.

I support my noble friend. I hope that the Minister will reconsider the view that it is unnecessary to write "fairness" into the Bill. The situation cannot be addressed simply by indicators.

Lord Whitty

My Lords, as the noble Baronesses have indicated, we have had some discussion that "equity" and "fairness" raised similar issues. I have some sympathy with the aim of the noble Baronesses. But I do not believe that writing "fairness" into the Bill in that form would achieve their aim.

It is important that we have clear duties and that those duties are put in a new context. The best value regime is designed to achieve that. It is also important that those duties are not so diffuse that they mean different things to different people. The noble Baroness is correct to say that the three Es are familiar to local government; and that there is a downside in that they have been familiar in the context of tight budgetary controls and CCT provision. But they are also clear within a regime which intends to take into account broader matters under the best value regime. Those are the guiding principles of delivery of services under the new regime. In so far as there is a downside, we are changing the whole context in which the regime operates, but we retain a degree of clarity.

We tend to go into semantics in these debates! However, fairness can relate to method and outcome. Does one treat people fairly in trying to achieve an objective; or is the objective fair? Those are two different concepts. They are perceived by different groups as being two different things. That is why we believe that fairness must be one aspect of effectiveness. An effective service must meet its objectives and satisfy the various groups' requirements. If services are good for one section of the community and poor for another, common sense dictates that, all other matters being equal, that would be unfair and the service cannot claim to be effective. On the other hand, in some instances all other things are not equal. Therefore if we allocate action and resources on the basis of need, those who receive on the basis of need may consider the system fair; those who have less need may consider the outcome unfair. To introduce "fairness" in this context is a somewhat confusing concept, although the ethos of fairness underlies the whole structure of best value.

The noble Baroness says that one cannot achieve these aims by guidance. But in reality the statutory guidance can relate the operation of those powers to specific outcomes and performance management structures. It also requires people to consult and deal with those groups which are judging whether or not these matters are fair. It is important that the guidance lays down that authorities consult not only the articulate but all those who have an interest whether or not they are represented by articulate spokespeople.

Best value indicators will include indices of fair access and customer satisfaction. All authorities will need to set clear targets in respect of both those dimensions in key service areas and will be held to account in achieving them by their annual best value performance plans. Detailed guidance will ensure that explicit consideration of fairness is placed at the heart of best value. We shall consult shortly on the draft indicators.

The noble Baroness related this concept to that of well-being. Fairness is one aspect of well-being. Well-being is a wider concept. I indicated in earlier discussions that the overall concept of well-being is not primarily for this legislation, which is about the management of local authorities, but may well arise in subsequent consideration of reform of local authorities. As noble Lords know, we shall have a debate next week to discuss the issue of well-being.

I believe that we have provided a flexible approach to the way in which the performance reviews will be conducted. We have given local authorities the ability to set priorities locally. But we have also made clear that we expect poor performance to be confronted promptly; and the performance framework is designed to assess authorities against common goals in a consistent way. That in itself is an element of assessing fairness.

Best value authorities which fail to apply that concept in a reasonable and fair way would be susceptible to challenge if they did so fail. Indeed, best value auditors and inspectors will be challenging authorities to comply with both the letter and the spirit of the legislation as part of their scrutiny of best value performance plans.

I hope, therefore, that the noble Baroness is reassured that the concept of fairness is central to the issue of best value. But its inclusion as one of the objectives in this clause, as she suggests, would confuse and could give rise to conflict in this area rather than helping to clarify how the best value regime should be delivered.

Again, one aspect of fairness is equality. It is our intention that all these matters should be subject to equality legislation, both current and potential, and that equality issues, whether of gender or race, will be part of the best value regime as well. However, that is not easily written into the Bill at this stage. It is clear that all best value authorities will be subject to those criteria as well.

I hope that our intentions are clear. I hope I have indicated enough to say that adding fairness to the criteria of the three Es would be more confusing than helpful. I hope that my indications of the Government's intention in this area are sufficient to enable the noble Baroness to withdraw the amendment.

Baroness Hamwee

My Lords, I thank the Minister for the care he has taken over the reply. I hope that I may pick up the points he made. In doing so, I hope that I shall not sideline any issue of importance.

The noble Lord suggested that the term may be somewhat diffuse, and referred to "well-being". I do not suggest importing well-being. He mentioned that the three Es are familiar in financial regimes and argued that because the regime is changing the application of the three Es will also change. That is my problem. I am concerned that the three Es will not be seen or understood to be changing.

The noble Lord spoke of fairness being within effectiveness: that local authorities would be expected to achieve fairness, and that therefore effectiveness would cover fairness.

I do not believe that unless an authority articulates one of its objectives as being fairness the term "effectiveness" can apply. In other words, I do not think you can argue backwards from being effective to saying what the objectives should be: you have to sort out the objectives first. My concern is that if an authority does not particularly address itself to fairness it could be effective in achieving its own objectives, with that issue not featuring very highly. That is why I am concerned that one may not get as far as guidance and the performance indicators in the way the Minister mentioned.

He said, too, that sometimes what local authorities do is not equal in the way that different groups of people are treated. I accept that, but I would say that, for instance, it would not be fair if wealthy groups were treated in precisely the same way in certain matters as poorer groups of people. I do not think one would argue that the spread of council tax through bands was not fair. One could argue about the detail of it, but one would not say it was not fair that people who live in band H houses are paying more than those who live in band A houses. I do not accept that point from the Minister. I agree with him that fairness is, to use his words, "central to best value." I accept also that we are very close on the point of principle but I do not agree that including the term would lead to conflict and confusion.

The Minister said that the Government's intentions are clear. I would not wish, having moved this amendment—and I shall in a moment test the opinion of the House—to suggest that the Government do not believe in the importance of the concept. My concern is to get it into legislation and on the face of the Bill. I therefore seek the view of the House on this amendment.

7.2 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 29; Not-Contents, 90.

Division No. 1
CONTENTS
Addington, L.	Hamwee, B.
Carlisle, E.	Harris of Greenwich, L.
Dahrendorf, L.	Leigh, L
Dholakia, L.	Liverpool, E.
Glenarthur, L.	McNair, L.

Maddock, B.	Shrewsbury, E.
Marlesford, L.	Stewartby, L
Miller of Chilthorne Domer, B.	Taylor of Warwick, L.
Milverton, L.	Thomas of Gresford, L.
Norrie, L.	Thomas of Walliswood, B [Teller.]
Pearson of Rannoch, L.
Redesdale, L. [Teller.]	Thurso, V.
Rodgers of Quarry Bank, L.	Tordoff, L.
St. John of Bletso, L.	Torrington, V.
Sharp of Guildford, B.	Willoughby de Broke, L.

NOT-CONTENTS
Acton, L.	Hollick, L.
Ailesbury, M.	Hollis of Heigham, B.
Allenby of Megiddo, V.	Hughes, L.
Alli, L.	Hughes of Woodside, L.
Amos, B.	Hunt of Kings Heath, L.
Ampthill, L.	Janner of Braunstone, L.
Archer of Sandwell, L.	Jay of Paddington, B. [Lord Privy Seal.]
Ashley of Stoke, L.
Bach, L.	Jeger, B.
Bassam of Brighton, L.	Jenkins of Putney, L.
Berkeley, L.	Kirkhill, L.
Blackstone, B.	Lovell-Davis, L.
Bragg, L.	Macdonald of Tradeston, L.
Brooke of Alverthorpe, L.	McIntosh of Haringey, L. [Teller.]
Brookman, L.
Burlison, L.	Mackenzie of Framwellgate, L.
Carter, L. [Teller.]	Mallalieu, B.
Clarke of Hampstead, L.	Merlyn-Rees, L.
Cledwyn of Penrhos, L.	Molloy, L.
Clinton-Davis, L.	Monkswell, L.
Crawley, B.	Morris of Castle Morris, L.
Currie of Marylebone, L.	Nicol, B.
David, B.	Peston, L.
Davies of Coity, L.	Pitkeathley, B.
Davies of Oldham, L.	Ponsonby of Shulbrede, L.
Dean of Thornton-le-Fylde, B.	Ramsay of Cartvale, B.
Desai, L.	Randall of St. Budeaux, L.
Donoughue, L.	Rendell of Babergh, B.
Dubs, L.	Renwick of Clifton, L.
Evans of Parkside, L.	Richard, L.
Falconer of Thoroton, L.	Rogers of Riverside, L.
Farrington of Ribbleton, B.	Sainsbury of Turville, L.
Fitt, L.	Sawyer, L.
Gladwin of Clee, L.	Scotland of Asthal, B.
Goudie, B.	Sewel, L.
Gould of Potternewton, B.	Shepherd, L.
Graham of Edmonton, L.	Simon, V.
Green way, L.	Stoddart of Swindon, L.
Grenfell, L.	Symons of Vernham Dean, B.
Hacking, L.	Thornton, B.
Hanworth, V.	Uddin, B.
Hardie, L.	Whitty, L.
Harris of Haringey, L.	Wllliams of Elvel, L.
Haskel, L.	Williams of Mostyn, L.
Hayman, B.	Winston, L
Hilton of Eggardon, B.	Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 3 not moved.]

Baroness Miller of Chilthorne Domer moved Amendment No. 4:

Page 3, line 6, at end insert ("and sustainability").

The noble Baroness said: My Lords, in moving this amendment I shall speak also to Amendment No. 4. These amendments seek to provide that we should include "sustainability" as a prime part of the Bill immediately after "economy, efficiency and effectiveness" and also as one of the main indicators.

Your Lordships may think that the arguments in relation to sustainability will be a rerun of those in relation to fairness. Indeed, some, but not all, are similar. I start by pointing out one of the main differences, which I hope will cause the result of any Division to be rather different. Sustainability is a long-term issue. Economy, efficiency and effectiveness are seen as fairly short-term issues, both by councillors and council officials. Councillors have a duty to look beyond their term of office but, to be frank, they find it difficult to do that and certainly find it difficult to look at matters in the extremely long term. Sustainability is certainly not a short-term issue.

During the debate on fairness we touched on why we should move away from the ethos of CCT and the way in which councils have conducted themselves in the past; indeed, the way that they have been made to conduct themselves. What has been striking about councils in the past 20 years has been their short-termism. Sustainability is very much about how we pass on our environment to future generations.

Between the start of the Bill's passage through this House and now, the Government have published the very impressive A Better Quality of Life: a Strategy for Sustainable Development for the United Kingdom. In a very good introduction, the Prime Minister said: We have failed to see how our economy, our environment and our society are all one and that delivering the best quality of life for us all means more than concentrating solely on economic growth".

I believe that that could have been adapted—although I expect the Minister will give me reasons why it could not have been—to say that sustainability is equally applicable to local government services and that concentrating simply on economy. efficiency and effectiveness will not deliver sustainability.

I said that it is not an add-on. If those services are to reflect the sort of society and environment that we wish to see in 20, 30 or 40 years' time, sustainability must be on the face of the Bill.

In Committee, we discussed the Local Agenda 21 mainstreaming of sustainable development. The Minister said the Government expect local authorities to give expression to those principles primarily through the process of community planning. I believe that we need to do something different. We should go beyond expecting. We should require those principles. The way to achieve that is by including sustainability in the Bill.

I turn now to indicators of sustainability. Because sustainability must be considered in the long term, it needs indicators which measure in the long term. So far, those indicators have not been developed. Being of a fairly cynical frame of mind, I wonder whether sustainability indicators have not been included in the Bill because they are extremely difficult to develop. Those who have worked in local government trying to develop those sustainability indicators would agree with that. That is so even in relation to fairly simple issues; for example, how one measures how local authorities are doing in terms of sustainability.

The indicators referred to in Opportunities for Change are extremely basic. The first is in relation to how many local authorities have LA21 plans in place. On the face of it, that is an indicator. However, having those plans in place is not the key issue. The key issue is how many authorities have started to implement those plans and how many are doing so effectively. Therefore, I agree that effectiveness is one measure but without the sustainable angle, it does not add up to much action.

The other two factors mentioned are community spirit and voluntary activity. Rather touchingly, after both of them, in brackets it says, "to be developed". I am not sure whether it is the indicator that is to be developed or the community spirit. The paucity of indicators in that section indicates to me that those who are developing the indicators are finding it very difficult. They must be extremely sophisticated and I am not surprised that those who must draft them have balked at including them in the Bill.

If the Government are as committed to sustainable development as this document suggests they really need measurable targets which have sustainability at their heart. I should try to explain that in different words. I see best value as a mirror into which local authorities look to see how they are performing. The local authority may be dressed up in certain indicators and may be wearing certain standards. But if the mirror into which it is looking is distorted—and I believe it is distorted without sustainability being included—the reflection will not be accurate.

That may be a slightly difficult analogy but that is the nearest that I can come to explaining why not having sustainability and sustainable indicators in the Bill will distort the way that local authorities think about themselves and the ethos that drives them. New councillors will be directed to a new way of working which has at its heart economy, efficiency and effectiveness. As I mentioned before, they are already struggling with short-term issues. They find the long-term view difficult. They need something to indicate to them that sustainability is a long-term aim for which they must strive. Having it tacked on in guidance and performance indicators is not sufficient. I beg to move.

Baroness Young of Old Scone

My Lords, I urge the Minister to consider the amendment with some seriousness. Perhaps, first, we can get some semantics out of the way because those of the previous amendment were enough to last us for the entire evening. The amendment refers to sustainability. I intend to talk about sustainable development and I hope that the Minister will accept that they are intended to be the same thing and we do not argue about whether they are different.

The point I wish to make was made by the noble Baroness, Lady Miller. The ink on the Government's sustainable development strategy, which has only recently been published, is barely dry. The Deputy Prime Minister launched it with a great, if brief, flourish. It stresses the importance of the integration of sustainable development into the roles of a whole range of bodies, particularly statutory bodies, and is an excellent example of joined-up thinking and joined-up government.

Best-value authorities are among the most important for the delivery of sustainable development in this country and this Bill provides the key opportunity to build the sustainable development requirement into the roles of the best-value authorities. In legislative terms, this is probably the only opportunity we have in the near future. The only other local government Bill that is likely to come forward in the immediate future in its current draft form appears not to take the opportunity to build in sustainable development duties.

There are of course other examples of sustainable development duties being laid on public authorities on the face of their Bills that have not brought them crashing to their knees with the weight of over-statutory requirement. Indeed, the Environment Agency has operated perfectly satisfactorily with a sustainable development duty which was on the face of the Bill establishing that agency for a number of years and doing perfectly well.

If the amendment were to be accepted, it would not lay any more onerous requirements on best-value authorities than I hope they would morally and spiritually feel was laid upon them by the sustainable development strategy. However, it sends an important signal about how seriously the Government are taking the sustainable development strategy. Therefore, I urge the Minister to encourage us all about the Government's commitment to sustainable development so that we can believe that the drying ink of the sustainable development strategy is not simply ink and is not drying too rapidly.

Baroness Hamwee

My Lords, I support my noble friend and thank the noble Baroness, Lady Young, for her comments, with which I heartily agree. As my noble friend said, sustainability, or sustainable development, is about the long term. It is also the big issue for now and for the start of the next century. I regard it as the sine qua non not only for local authorities but for all authorities and bodies which are within the Bill as best-value authorities.

I do not pretend that dealing with sustainable development issues is easy. It is very much about reconciling interests and finding the right balances. The point my noble friend made about the performance indicator referring to Local Agenda 21 was most telling. An indicator asking whether LA21 is in place supports my arguments that the term "effectiveness" is insufficient to promote everything that we would like to see promoted by the Bill. I endorse what the noble Baroness, Lady Young, said about the importance of the signals that the Government give, using this opportunity, which may well be the only one for a while. It is important to have legislation in place which, bearing in mind how the debate on sustainability is going, is fit for the purpose in the sense of being the right legislation for the developing debate concentrating on the importance of the issue.

Lord Bassam of Brighton

My Lords, I had not intended to enter the debate, but having heard the arguments previously and not being entirely convinced, I, like any other council leader, have a great deal of sympathy for ensuring that we place sustainability at the forefront of our thinking in the way in which we procure, run and operate our services. I believe that the movers of the amendment are missing an essential point. The point about sustainability is to make it a practical and effective tool with which to service procurement in local government. While I have some sympathy with the amendment, it does not take us any further along that path.

For that reason, I believe that the issue should be dealt with in the form of guidance. I say that as the leader of an authority which has a best-value pilot status. During the past 18 months we have systematically worked through our services and through the process of review—to a degree, screening—beginning to look at ways in which we can train procurement processes and acquire new and different services by putting sustainability into our thinking.

It did not require legislation for us to do that. Perhaps it required a nudge and a wink from central government that that was what they wanted. But we got there before and earlier in any event. I believe that that is the most practical way to deal with the matter and we can take the issue further when the Government construct guidance and talk to the Local Government Association and other external expert bodies. We shall therefore get the guidance, support and back-up right so that sustainability begins to have a practical effect rather than being seen as a token gesture or motion described on the face of the legislation.

On those terms, I am unable to support an amendment with which in a more practical form I would perhaps have greater sympathy.

Lord Whitty

My Lords, I expect that Members on the Liberal Democrat Benches are inured to the fact that I shall say that I have considerable sympathy with what they are intending to do but I cannot believe that the legislation is appropriate to their sustainability argument.

Clearly, local authorities must put sustainability as part of their strategy, but they must also turn it into reality in relation to particular policies, projects and service delivery. We have emphasised that the Bill is about how local authorities are managed and not about the outcome of that management. It is clear from government policy, and the policy of most local authorities, that sustainability is not only increasingly important but probably the most important aspect of their activity. An authority is neither effective nor efficient if it conducts policies which do not deliver sustainability. Actually, sustainability is a bigger issue than how and to what outcome one delivers. Any best-value authority which failed to take into account sustainability could not be said to be meeting the best value criteria.

On the other hand, it is important that we turn sustainability into something clearer than merely writing it as an additional criterion in the Bill in a list of aspects which are well understood. We need to make sustainability understood at various different levels. There are many points at which best value and sustainability come together and are pursued on different fronts. As I indicated in Grand Committee, our whole approach and quality-of-life indicators and the department's sustainability, which runs across government and is much wider than my own department, are part of a new approach to sustainability. But we need to develop those quality-of-life indicators in a fashion which can be used effectively by local government.

We are urging best value authorities to draw up Local Agenda 21 strategies which. as the noble Baroness said, have sustainability at their heart. We are altering the planning system in order that sustainability is more maintained in that area. We are working with the Audit Commission and others to identify clear performance indicators which tackle this cost-cutting issue of sustainability and which can be included explicitly in the best value suite.

So we are taking all kinds of measures to put the practical indicators and measures of sustainability into the best value regime. In terms of the legislation, we believe that the principles are best dealt with through the promotion of economical, social and environmental well-being at the local level in recognition of local authorities' community leadership role.

We have done this with the Greater London Authority Bill where contributing towards sustainable development is contained within the principal purpose of the GLA to promote social and economic development and environmental improvement for London. We are considering how best to apply similar provisions to local authorities in England and Wales. That relates to the point raised by my noble friend Lord Bassam; namely, that it is our intention to bring forward legislation as parliamentary time permits. as they say, and to ensure that that does happen, but not in a Bill which is primarily about the management systems of local authorities. As I have already mentioned, we also have the opportunity to discuss well-being in your Lordships' House next week.

We therefore concur with the remarks of a number of noble Lords in relation to sustainability. However, we do not believe it is appropriate to write it in this way into the Bill. We already have in train a number of developments in association with local authorities which will give meaning and reality to sustainability criteria, sustainability indicators and measures which will help to make a reality of this dimension of best value. Introducing this new element at this stage would dilute the focus of the management systems. However, the Government are certainly committed to introducing it as an overall concept. We are trying to develop the tools to turn it into a reality. I therefore hope the noble Baroness will not consider it necessary to pursue her amendment in this context.

7.30 p.m.

Baroness Miller of Chilthorne Domer

My Lords, I thank the Minister for his reply. I am fairly new to your Lordships' House and as yet I am not inured to the disappointment of never seeing anything go through. I hope that I shall always continue to live in hope.

The Minister referred to the duty to promote social, economic and environmental well-being as that upon which we should pin our hopes to see sustainability duties introduced in a different form. However, as he indicated, it does not seem as if parliamentary time will allow for that either this year or next. Much as we may debate it next week, and I am sure the debate will be interesting, that does not mean that it will be on the statute book in the near future. I am sure the Minister knows more about that than I do. I would not wish to depend upon that to see a greater promotion of environmental well-being.

The noble Lord, Lord Bassam, referred to the fact that in tune with government thinking, the best authorities—of which, of course, his is one—are piloting best value. The Minister also referred to that. I remind the House that best value is intended to address the problems of the worst authorities; those which are not able to address the issues of sustainability or virtually anything else. It is to those authorities that we should be sending a message to put it at the heart of their delivery, not to the splendid authorities which have been chosen as best value pilots.

The Minister said that sustainability was a most important aspect of local authority service. I thoroughly agree. However, when we go out to our communities and involve them in community planning, how seriously can we ask them to take the question of sustainability? How seriously can we expect them to regard that as a duty to put first if local authorities do not have it as one of their basic duties?

I disagree with the Minister when he states that the Bill is fundamentally about how local authorities are managed; it is about more than that. It is about how their policies are developed and their priorities driven. If it was only a question of management, we would leave it mostly to the officers. We would not have councillors undergoing a massive training exercise with the Improvement and Development Agency making every effort to make councillors better at developing policy and priorities. I do not accept that the Bill is only about management. If we do not put sustainability on to the face of the Bill we shall be guilty of not thinking that it is fundamentally the most important aspect of local authority service. With all due regard for the wish of the Minister that we do not pursue the matter further, I should like to seek the opinion of the House.

7.35 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 18; Not-Contents, 85.

Division No. 2
CONTENTS
Addington, L.	Goodhart, L.
Carlisle, E.	Hamwee, B.
Dholakia, L.	Harris of Greenwich, L
Glenarthur, L.	Hooper, B.

McNair, L.	Redesdale, L. [Teller.]
Maddock, B.	Sharp of Guildford, B.
	Thomas of Gresford, L.
Meston, L.	Thomas of Walliswood, B
Miller of Chilthorne Domer, B.[Teller.]	Thurso, V.
	Tordoff, L.

NOT-CONTENTS
Acton, L.	Hughes, L.
Alli, L.	Hughes of Woodside, L.
Amos, B.	Hunt of Kings Heath, L.
Archer of Sandwell, L.	Janner of Braunstone, L.
Bach, L.	Jay of Paddington, B. [Lord Privy Seal.]
Bassam of Brighton, L.
Berkeley, L.	Jeger, B.
Blackstone, B.	Jenkins of Putney, L.
Bragg, L.	Kirkhill, L.
Brooke of Alverthorpe, L.	Leathers, V.
Brookman, L.	Lovell-Davis, L.
Burlison, L.	Macdonald of Tradeston, L.
Carter, L. [Teller.]	McIntosh of Haringey, L. [Teller.]
Chandos, V.	Mackenzie of Framwellgate, L.
Clarke of Hampstead, L.	Mallalieu, B.
Clinton-Davis, L.	Merlyn-Rees, L.
Crawley, B.	Milner of Leeds, L.
Currie of Marylebone, L.	Molloy, L.
Davies of Coity, L.	Monkswell, L.
Davies of Oldham, L.	Morris of Castle Morris, L.
Dean of Thornton-le-Fylde, B.	Nicol, B.
Desai, L.	Peston, L.
Donoughue, L.	Pitkeathley, B.
Dubs, L.	Ponsonby of Shulbrede, L.
Evans of Parkside, L.	Ramsay of Cartvale, B.
Falconer of Thoroton, L.	Randall of St. Budeaux, L.
Farrington of Ribbleton, B.	Rendell of Babergh, B.
Gilbert, L.	Renwick of Clifton, L.
Gladwin of Clee, L.	Richard, L.
Goudie, B.	Rogers of Riverside, L.
Gould of Potternewton, B.	Sainsbury of Turville, L.
Graham of Edmonton, L.	Sawyer, L.
Greenway, L.	Scotland of Asthal, B.
Grenfell, L.	Sewel, L.
Hacking, L.	Shepherd, L.
Hanworth, V.	Simon, V.
Hardie, L.	Stoddart of Swindon, L.
Harris of Haringey, L.	Symons of Vernham Dean, B.
Haskel, L.	Thornton, B.
Hayman, B.	Warner, L.
Hilton of Eggardon, B.	Whitty, L.
Hollis of Heigham, B.	Williams of Mostyn, L.
Howie of Troon, L.	Winston, L.

Resolved in the negative, and amendment disagreed to accordingly.

7.43 p.m.

Baroness Hamwee moved Amendment No. 5:

Page 3, line 6, at end insert— () The duty arising under subsection (1) shall not apply to a best value authority when working in partnership with another public body unless that body is under a similar duty.")

The noble Baroness said: My Lords, I shall speak to Amendment No. 5 and my noble friend Lady Miller of Chilthorne Domer will speak to Amendments Nos. 6 and 10.

Amendment No. 5 seeks to provide that the best value duty will not apply to an authority, when working in partnership with another public body unless that body is under a similar duty".

We moved a rather different clause in Committee in connection with partnerships when we proposed that public authorities working in partnership with best value authorities should themselves be subject to the duty of best value. This amendment disapplies the duty when the authority is working with another public body unless that body is under a similar duty.

The Minister explained in Grand Committee what the Government are doing in various sectors to apply best value or something like it, but there will not necessarily be blanket coverage of the duty. The noble Lord, Lord Harris of Haringey, in Grand Committee made some interesting points in relation to partnership working which increasingly local government is undertaking. He said that he could, envisage all kinds of anomalies as to whether the principles of best value have to operate under those various sets or circumstances".— [Official Report, 10/5/99; col. CWH28.]

The noble Lord used examples of health provision; increasingly health trusts working jointly with social services, sometimes notionally under the aegis of the health trust, sometimes under that of the local authority which, as he rightly said, is often simply a matter of convenience. What prompted me to table the amendment at this stage was his comment that he would hate to see the structures determining which authority became the lead authority rather than what made sense for practical reasons in the subject area.

If the Minister can help us a little further in this area I would be very interested. I beg to move.

Baroness Miller of Chilthorne Domer

My Lords, first, shall speak to Amendment No. 6 which addresses the question of formally constituted groups. It seeks to define who should be consulted under subsection (2).

Obviously the duty of best value depends on authorities consulting with their residents and the Bill defines those people who should be consulted. I have to make the point again that best value seeks to address in particular those authorities which are not performing well. We tabled this amendment because we fear that it could be easy for an authority which is not particularly keen to consult, to consult in a minimal way. As we know., it is much quicker and easier, and likely to produce more predictable results if consultation is confined to formally constituted groups. It is often known what those groups will say and who makes them up and therefore it is popular to stay within the parameters of groups whose make-up is known and whose representatives have the same view. In fact, in many councils, when representatives come from those groups, the mutter goes round, "It's the same old suspects".

Even with the advent of such things as public opinion panels, focus groups and citizens juries, all of which have a very worthy place, they still can become a "formally constituted group". I believe that public opinion panels are a very good thing. However, such people will be consulted year after year. Even if you roll on different people over time, they will, after they have been consulted a few times, become very familiar with the way that the council works. They will probably take a greater interest in what it does, arid so on.

Therefore, councils should have a requirement to consult those who are of no group—in other words, a very random selection of the population. For that reason, this amendment seeks to ensure that the temptation to take a quick and easy route of consulting only formally constituted groups would not be allowed under this Bill. Otherwise, as the Bill is drafted, a council could get away with only ever consulting formally constituted groups, which I believe would be most unfortunate arid not really in the spirit of the legislation.

I turn now to Amendment No. 10, which seeks to include representatives of best value authorities when the Secretary of State wants to consult on what the performance indicators should be. Indeed, it is possible that it could be claimed that there were certain time constraints. Therefore, the differences of opinion between government and local authorities could lead to a disinclination on the part of the Secretary of State to consult.

Further, I can imagine the scenario, although perhaps not at the moment, where the Government would not want to consult on performance indicators. Perhaps I may draw on history for a moment. I am not sure that I could have imagined the government of the time consulting on performance indicators, for example, for poll tax collection, or on how to measure client views on the efficiency of the enforcement procedure for that tax.

Therefore, for all of those reasons, it is absolutely essential that the Secretary of State is required to meet and take the opinions of representative best value authorities. After all, they are the practitioners. There is no likelihood that their views would not be forthcoming in terms of much practical experience of what has happened on the ground. I believe that the fact that they are not included in the Bill might be an oversight. They are the obvious people to consult first; indeed, best value authorities are those which are already carrying out best practice. It is not as though representatives of local authorities which may not be practising best value would be consulted.

Baroness Thomas of Walliswood

My Lords, once again, I should like to lend support to Amendment No. 5. I spoke to this in Committee and I also included it in my original speech on Second Reading. My concern all along has been that there are difficulties in partnerships anyway because different authorities approach their work in different ways. The different accounting, reporting and planning systems and the whole paraphernalia of best value that we see in Clauses 4, 5 and 6 could, if they were rigidly applied, have the effect of rendering some of the work which best value authorities do with their partners open to criticism by, for example, the Audit Commission. That was behind my support for our original amendment in Committee.

The phraseology of the current amendment is better. It is more practical in its approach and it would enable local authorities in particular, but also other best value authorities, to go into partnership with external authorities or external groups which are not liable to the same laws and audit processes.

I am looking for some indication that the Minister understands the subtlety of the problem and that the Government have thought of ways, either through guidance or in some other way, of ensuring that this possible conflict does not arise. Alternatively, I should like an assurance that best value authorities acting in good faith in partnership with others cannot be criticised on the grounds that they have not in every detail followed best value codes in what is always a compromise arrangement.

Baroness Farrington of Ribbleton

My Lords, the noble Baroness, Lady Hamwee, will not be surprised to learn that we are not attracted to Amendment No. 5. However, I am grateful to her for identifying some very important practical issues. The Government have consistently said that the duty of best value will be all-embracing. It will apply to all of the functions which best value authorities carry out.

Perhaps I may now correct what may have been a misunderstanding on my part as regards a point made by the noble Baroness, Lady Miller. Best value applies to all authorities and not just the worst, as I understood the noble Baroness to say. There were pilots from 1997, but the duty of best value is not merely for the worst authorities. It will apply to all of the functions which best value authorities carry out. Nevertheless, I appreciate that the noble Baroness may wish to probe further about how the duty of best value will apply in situations in which only one of the partners is subject to the formal duty of best value in delivering the function.

One of the fundamental questions which the best value authority in question will need to determine before entering into the partnership arrangement will be: will this arrangement deliver best value for local people? If the answer to the question is yes, and there is no alternative arrangement which offers better results, clearly the authority will be free to enter into the partnership and bound to meet the duty of best value while doing so.

Although the Government wish to encourage best value authorities to think innovatively about such partnerships, it makes no sense to exempt the best value authority partner from its statutory duties when it enters into a partnership. Local people are still entitled to expect excellence in the quality of services, regardless of which particular vehicle is used to deliver them. In the light of that explanation, I hope that the noble Baroness will feel able to withdraw the amendment.

I turn from the issue of partnerships to that of consultation. The statutory duty of consultation is clearly an integral part of best value. I am grateful to the noble Baroness for this opportunity to explain the Government's approach. I am sympathetic to what I believe to be the thrust of Amendment No. 6, although I do not believe it to be necessary.

The noble Baroness, Lady Miller, made the very fair point in Committee that we needed to ensure that all voices were heard during consultations, and not just those of persons or bodies who were the best organised, most articulate or who had access to the best technology. These are sentiments which I am pleased to embrace and endorse. I am confident that the approach that we are taking is most likely to ensure that consultation is all-inclusive. In our view, the requirement in the Bill that the authority should consult with those who are representative of a group is not merely confined to those who speak on behalf of others but will include those who are representative of a group in the sense that they are a good example or are typical of that particular group. Therefore, I am confident that the Bill already achieves the practical effect which the noble Baroness seeks.

However, Amendment No. 6 would place conditions upon the way in which best value authorities confronted a task which calls—and I believe the noble Baroness's contribution recognised this fact—for the maximum variety in terms of approach. Further, such conditions may well be inappropriate in some cases. Although I understand the thinking behind it, the amendment is viewed by us as being unnecessary. I hope, therefore, that the noble Baroness will not move it.

I am sympathetic to Amendment No. 10. I have given your Lordships assurances in Grand Committee about whom the consultation will include. I have said that it will include those known to the Secretary of State as representatives of best value authorities and specifically the LGA and WLGA.

However, my concern here is that placing this amendment on the face of the Bill will place the onus on the Secretary of State to identify all those bodies who claim to be representative of best value authorities. The wording of the amendment is concise; namely, that the Secretary of State shall consult with representatives of best value authorities. But the term "representatives" can be drawn widely. How will the Secretary of State know if he has included all ad hoc groups that claim to be representative?

I understand the intention behind this amendment and indeed support the principle, but the wording of the amendment could have the undesirable side effects which I have discussed. In the light of the noble Baroness's comment about not yet having become cynical as regards having any point that is raised accepted, I hope that she will not move the amendment on the understanding that we shall produce a suitably drafted amendment on Third Reading that will both meet the noble Baroness's wishes and address my current concerns.

8.00 p.m.

Baroness Hamwee

My Lords, perhaps we had better not divide the House on any more amendments as the result of not doing so is far more satisfactory! We thank the Minister for those remarks. As an amendment is to be produced for Third Reading I shall not make the comments that I intended to make in response to what the Minister had to say on Amendment No. 10, and on Amendment No. 6, the thrust of which is similar if not absolutely the same.

My noble friend Lady Thomas of Walliswood made the important point about the detail of the best value obligations in speaking to Amendment No. 5. Her concern—which is also my concern—is that the best value duty and programme could become too formalised, too cumbersome and too difficult to apply. The various public authorities which are the subject of the best value duty—and which may work in partnership with other authorities—have over the past few years adopted a partnership approach with increasing enthusiasm. I do not believe that any of us disagree about the value of that.

The Minister said that people are entitled to expect that their authorities will always be excellent. That is to be aimed at and to be hoped for but politics are about priorities. As my noble friend said, partnerships often have to embody compromise. That is why we wished to pursue the amendment. We shall consider what the Government had to say on this matter. I believe that they understand our concerns. We shall want to be sure that we have not made the situation rather worse—as one sometimes does—by exploring it in detail. For the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

Clause 4 [Performance indicators and standards]:

Lord Dixon-Smith moved Amendment No. 7:

Page 3, line 31, leave out ("different")

The noble Lord said: My Lords, this amendment is grouped with Amendments Nos. 8, 9 and 15. With the leave of the House, I shall speak to Amendments Nos. 7, 8 and 9 together. I shall then speak to Amendment No. 15 as although it addresses a related point it is slightly separate.

We have now reached a rather fundamental issue in the Bill, small though these amendments may appear to be. Whatever the errors of my party when it was in government—before noble Lords opposite begin to crow about the possible errors that my party may have committed while in government, they would do well to remember that it will only be a matter of time before much that they do is likely to be seen as erroneous—there are now clear signs that my party is moving towards a situation in which it begins to treat local authorities as grown up and responsible rather than as babes to be wrapped in the swaddling clothes of regulation. That is a rather important point of principle.

Clause 4 as drafted gives the Secretary of State immense power over individual local authorities at any and all times. We are not here discussing whether the Secretary of State should have power to intervene in emergency situations, or where services might be perceived to be breaking down, or indeed where there has been some tragic disaster perhaps in the social services field—the kind of thing which we have heard so often. Clause 4 of the Bill gives the Secretary of State power, by order, to specify performance indicators and, more significantly, performance standards for local authorities; different performance indicators or standards for different functions for different authorities to apply at different times. If the Secretary of State chooses to exercise the power, he can set a performance standard for an individual authority to apply tomorrow morning. The Minister may say that he would never do such a thing and of course it is wholly unreasonable, but it is not impossible under the Bill. I know that the Secretary of State will act under conventions. However, even the most reasonable people sometimes behave unreasonably for what appear to them to be good reasons.

Amendments Nos. 7, 8 and 9 set out simply to restrict somewhat—it is only to restrict somewhat—the power of the Secretary of State to specify different performance indicators and standards for different: functions and so on. If the amendment were accepted. individual local authorities would have less to fear from the possibility of irrational action from, say, a Secretary of State who happened to get out of bed on the wrong side one morning. That concept may be completely foreign to government but in my experience we are all human and occasionally we are susceptible to error.

Amendment No. 15 seeks to give an individual local authority the right to appeal against the application of a standard if it feels that the standard as specified by the Secretary of State in an order is unreasonable in its particular circumstances. This amendment is slightly different from the other three amendments in the group. I ask the Minister to consider this matter extremely carefully. It would of course be a gross exaggeration to say that a local authority's circumstances were infinitely variable. When all is said and done there are some 400 local authorities and there are probably another 400 authorities that might be considered to be best value authorities of one kind or another. The numbers are not significant in themselves and therefore to claim infinite variability would be, as I say, a gross exaggeration.

However, their circumstances are all different; their histories are different; their locations are different; their development over the years has been different; their patterns of investment in infrastructure, in buildings, in schools and so on are different; and so their financial circumstances are different. While I have a great deal of confidence in Secretaries of State, they are not omniscient and they cannot know every circumstance. I can conceive of circumstances in which a local authority feels that the application of a particular standard is unjust, even though the standard was set in good faith and in the light of the best information that the Secretary of State's civil servants could produce for him. I see that some of them are sitting in the Box; it is good to see them there. Amendment No. 15 seeks to give a local authority which finds itself in that situation the opportunity to go to the Secretary of State and say, "Please, in our particular circumstances this is unreasonable. Can we do something about it?" I beg to move.

Baroness Hamwee

My Lords, we explored in Grand Committee the question of different responses for different authorities. I had been concerned initially about the provisions in the Bill and I was very glad to have the Minister's assurance that the Secretary of State does not retain powers to discriminate. He specifically said that the Secretary of State does not have the open-ended power to pick and choose. As I say, although we were initially bothered about that matter, we were pleased to have that assurance.

As far as concerns Amendment No. 8, we support it in principle. I have more difficulty with Amendment No. 9, which would leave out paragraphs (a), (b) and (c) of Clause 4(2). The subsection would then simply remain, An order may specify different performance indicators or standards". As far as concerns Amendment No. 15, quite apart from the practicalities, we would rather keep the Secretary of State out of the workings of local authorities. We would not want to bring him in by way of appeal. We cannot support the noble Lord on Amendment No. 15.

8.15 p.m.

Lord Whitty

My Lords, the noble Lord, Lord Dixon-Smith, will know that I do not hold him personally responsible for any of the policies of the previous regime. I am not one to crow over sinners that repenteth. The problem with his enunciation of the current position of the Conservative Party is that it has repented a little too much; it has moved away from the kind of Napoleonic centralisation of the previous regime to outflanking the Liberal Democrats in terms of local authority autonomy. Several noble Lords on this side of the House find that bewildering.

The Secretary of State needs subtle powers for the reason, in a sense, to which the noble Lord referred. Some mistakes will be made; we need therefore the powers to put such mistakes right. There will be some broad categorisations which will prove to be inappropriate; we will need to judge that. Hopefully we can judge it in advance, but if we do not have the flexibility to adjust we will not be able to tailor the whole framework to the delivery of best value. We need the powers and we need the flexibility.

These distinctions are not arbitrary. Distinctions could be made between authorities by different category—unitary authorities, district authorities and so on; by the various functional activities of the local authorities; or by different circumstances, such as sparse populations, island authorities and so on. Perhaps I should say to the noble Baroness, Lady Hamwee, that this is not discrimination or cherry picking but sensible flexibility. It is important to help the Secretary of State tailor the performance measurement to the needs of best value authorities and their electorates. Taken as a whole, the amendments would completely remove the Secretary of State's ability to tailor a performance framework to take account of those different situations. They would take a major subtlety out of the best value regime we are trying to introduce.

I appreciate that the Conservative Party in its new mode would rather not have the powers at all. However, we consider that we need the powers, which should be operated with a degree of sophistication which past financial regimes of all parties have not had.

Amendment No. 15 refers to a formal appeals process, which, so far as I am aware, has not existed under any prior financial regime. It would bring the Secretary of State into making judgements in areas where that may not always be appropriate. It would give him a quasi-judicial function in what is supposed to be an administrative system. Moreover, the iteration between the individual authorities, plus the flexibility of the powers, means that the Secretary of State has the flexibility to recognise particular situations. He is required under Clause 4(3) to consult before specifying performance indicators. That regime should give best value authorities and others the opportunity to comment before the proposed standard is laid down.

With that kind of partnership between the Government and local authorities, I do not believe that we need a formal appeals procedure. Allied to this, the flexibility provided under Clause 4(2)(a), (b) and (c), would mean that in exceptional circumstances the Secretary of State could specify a standard for only certain types of authority. That would meet the exceptional circumstances with which the appeal procedure was intended to deal. Introducing a formal appeal system into the Bill as distinct from an on-going partnership between local authorities and central government is unnecessarily bureaucratic and legalistic in an area where we are trying to introduce a new ethos. I hope that the noble Lord will not press his amendments.

Lord Dixon-Smith

My Lords, I am grateful to the Minister for his reply. I will study it with considerable care. I think he has probably answered me in a way which will satisfy me. The House will be pleased to hear that I may not therefore bring the matter back at Third Reading.

The Minister should beware that he is appearing now to be the Conservative in this matter. Time and thinking are moving on. Earlier today or yesterday there was a question on the Floor of the House in which the subject of subsidiarity arose. As is usually the case, it arose in relation to Scotland and Wales, but subsidiarity was always a relevant issue between Brussels and London. The noble Baroness, Lady Farrington, will recognise that a very long, unending and never satisfied debate existed between Westminster and local government. It was to address that particular subsidiarity that I brought forward the amendment. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendments Nos. 8 to 15 not moved.]

Clause 5 [Best value reviews]:

Lord Dixon-Smith moved Amendment No. 16:

Page 4, line 5, at end insert— ("() Any additional costs falling on an authority as a consequence of this section shall be included as an addition to the authority's Standard Spending Assessment in the subsequent financial year.")

The n oble Lord said: My Lords, Amendment No. 16 seeks to ensure that the costs of the best value system incurred by local authorities are recognised for the purposes of calculating their revenue support grant through their standard spending assessment. We have pressed the Minister on the issue of the cost of the best value system. I accept that from the point of view of public expenditure overall there is not a problem. We can be reasonably confident that the savings which accrue as a result of the best value system will in fact be greater than the costs. Therefore, from the point of public expenditure as a whole the sum of expenditure will not increase. That is fine when one calculates at the national level. But I am concerned about what will happen at the local authority level. There is no doubt that when best value is introduced in every authority costs will increase.

In a Written Answer, the Minister said that it was not a matter of concern. However, at the individual authority level it should be a matter of concern. The Minister also said in the Written Answer that the Government expected that as a result of the onset of the best value system they would he able to build in to the revenue support grant system a 2 per cent efficiency factor. We have all been used to efficiency factors in the past. They have been built in for a long time and, by golly, we have complained about them too. They do in fact drive efficiency. But a 2 per cent efficiency factor built in as a result of best value, which one has to assume might be in addition to other efficiency factors that are already in existence, implies a 2 per cent reduction annually in government funding. That is one adverse result at the local authority level. But the authority might experience a 1 per cent increase in costs as well because it has to administer the whole of this system. That would have a 3 per cent effect on the local authority's budget at the local level, and so would cause a great deal of difficulty.

From the public expenditure point of view, the system can do nothing but good. If one looks at the issue of local! government expenditure in overall] terms, again the system can do nothing but good. But at the individual authority level the effect might be perverse unless all these costs are properly taken into account in the revenue support grant system. The Minister could answer my point quite easily by giving me a sufficient assurance that that is what will happen. I beg to move.

Baroness Hamwee

My Lords, I too am concerned about the assumption that efficiency savings will be adequate to fund the best value work. Earlier today we dealt with the best value criteria. They cover not only economy and efficiency. We have talked about effectiveness meaning each authority achieving its objectives. Achieving certain of its objectives, though they may be worthy and be what the community would support, may carry a cost. The best value duty in Clause 3 recognises the different criteria. I shall be interested to hear what the Minister has to say on this amendment.

Lord Whitty

My Lords, I understand the concern in local government circles that the best value system will introduce costs, at least initially. However, it is not our assessment—I do not think it is local government's assessment either—that the costs would be disproportionate to the efficiency savings or that special provisions in the financial regime, which in general we are trying to move to a non-earmarked system, should be specifically earmarked for best value reviews and the introduction of best value systems.

The kind of efficiency gains that we are looking for—it does not have a direct read-across to the level of central government finance but is nevertheless 2 per cent—offers more than enough scope for any up-front costs that are needed to introduce the best value regime. After that the regime should, as well as delivering non-financial benefits, be more than paid for by that. It is true that some costs will be entirely within the control of the individual authority. However, as I explained at an earlier stage, we are already taking steps to ensure that resources are made available to meet the costs of audit and inspection. My colleagues in another place have given a number of assurances that we intend to ensure that authorities are not financially penalised by that aspect of the best value framework. For instance, we have already explained that additional funding to meet the cost of inspections will come from the revenue support grant or from a direct grant to the Audit Commission to meet those costs. In so far as there is a differential impact between local authorities on costs over which they have no control, noble Lords already have that assurance.

As for reviews, reviews should be conducted in any case as part of the management system. What matters is that they produce the plans to deliver the continuous improvements so that we have a more efficient delivery of the objectives. Therefore, I do not think there is a need for a specific new grant to cover the cost of those reviews.

In many ways this amendment runs counter to the spirit of the best value ethos. I hope that on reflection the noble lord will not pursue it.

Lord Dixon-Smith

My Lords, I am grateful to the Minister for that reply which goes some way towards meeting the points that I raised. I shall study with great care exactly what he said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwe moved Amendment No. 17:

page 4, line 10, at end insert— ("() Nothing in such an order shall restrict the term of any contract let by an authority to perform any of its functions.")

The noble Baroness said: My Lords, Amendment No. 17 proposes that nothing in an order made under Clause 5 covering best value reviews, shall restrict the term of any contract let by an authority to perform any of its functions".

I have tabled the amendment in order to seek an assurance from the Minister. Can he confirm that the five-yearly reviews will not mean that contracts cannot be let by authorities for more than five years if an authority considers that to be appropriate in the case of a particular contract. Some functions of an authority require considerable investment, both by the authority and by the contractors. For instance, dealing with waste and waste disposal are capital intensive functions. Contracts need to be structured on a fairly long-term basis.

A particular authority has drawn to my attention its concern about the continuing inherent tension between the Bill's requirement for regular periodic reviews of an authority's functions, and the benefits in some circumstances of letting contracts over a significant period of time in order to attain wider policy objectives. Waste collection, as I mentioned, is one area that concerns the authority. IT procurement is another, where letting a contract for a longer period improves value for money. Contracts are usually let for at least five years and, I understand, in the case of this particular authority possibly much longer.

I am assured that most of the contracts in question include a requirement for a year-on-year quality improvement. In that sense, these services have in effect been "best valued" as part of the letting of the contract. If they have to be re-let under the terms of a best value review, as the Minister will well understand, the council will be likely to incur a heavy financial penalty for breaking the contract.

Those who have raised the point with me are not clear as to who would be responsible for paying the compensation claim. I am fairly clear that it would be the authority. I am not concerned only about contracts that may be in existence or which may be brought into existence in the future, but about each authority's ability to plan for the long term. I beg to move.

8.30 p.m.

Baroness Farrington of Ribbleton

My Lords, I hope that I can reassure the noble Baroness, Lady Hamwee, that the amendment is unnecessary. As I have explained on previous occasions, our intention is that best value authorities should fundamentally review all functions over a five-year period to ensure that continuous improvements to all services are made. Reviews will involve challenging the way in which, and the level at which, the function is being exercised, comparing performance with other authorities and bodies, consulting local communities and assessing competitiveness.

The noble Baroness also raised an important issue relating to the review of service contracts. Whether a service is reviewed every year or every five years should not affect the term of the contract. Authorities are well aware of the need to build in appropriate flexibility to ensure that their arrangements secure continuous improvement and can be adapted to meet changing local and national priorities. To do otherwise would not achieve best value.

Orders made under Clause (5)(2) allow the Secretary of State to specify the time period within which best value authorities have to review all their functions. Such orders cannot in themselves restrict the term of any contract let by an authority. I do not believe that the amendment would work in quite the way that the noble Baroness intends; but I can in any case assure her that it is unnecessary, and I urge her to withdraw it.

Baroness Hamwee

My Lords, I shall certainly withdraw the amendment at this stage because I want to read carefully what the Minister has said. In drawing attention to subsection (2) of Clause 5, she alerts me to the fact that an order can make different provision for different authorities and can require specified functions to be reviewed in specified financial years; but the subsection does not—although one might be able to read the point across from other provisions, a point that we shall have to examine—state that the order may make different provision for different functions. We shall want to consider the point carefully. I believe that the Minister takes the point that I have been making. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 [Inspections]:

Lord Dixon-Smith moved Amendment No. 18:

Page 8, line 25, at end insert ("and inform the authority concerned")

The noble Lord said: My Lords, Clause 10 gives the Secretary of State power to order a best value inspection by the Audit Commission under what might be described as emergency circumstances. In establishing such an emergency inspection, the Secretary of State "shall consult the Commission" before giving a direction. I believe that the Secretary of State should also inform the authority concerned.

In reality, it is probably inconceivable that one would arrive at this situation without the authority knowing that it was in trouble. I do not think it would be surprised. I suspect that such a direction would arise at the end of a year or two, or even as many as five years, of descent in satisfaction with the administration of a service. But as the Secretary of State is obliged to consult the commission before establishing a special review, it would not be unreasonable to require him at the same time to inform the authority concerned formally that that was going on. I beg to move.

Baroness Farrington of Ribbleton

My Lords, as we discussed in Committee, I recognise that generally speaking it is important for authorities to know when they are to be inspected. However, we believe Amendment No. 8 to be unnecessary and undesirable, as it would constrain the Secretary of State's ability to act swiftly to investigate a seriously poor-performing authority.

For routine planned inspections as provided for in Clause (1)(1), it would be sensible working practice for the authority about to be subjected to inspection not only to be informed but also to be consulted about timing. That will help to prevent duplication of effort by inspectors and will avoid authorities being subject to too many inspection visits at a time, and will ensure that key personnel are on hand to assist in the process.

In most instances, in the interests of inspector and inspected alike, authorities will also be notified in good time of inspections directed by the Secretary of State. Sometimes, however, where serious failure has occurred, inspectors may be asked to act swiftly to gather evidence in order to establish facts and identify problems. If vulnerable members of the community may be at risk, we need to ensure that the system can work effectively to uncover the problem so that it can be addressed as a matter of urgency.

Placing a requirement on the face of the Bill that a notification be given before a directed inspection is ordered would therefore place an unnecessary restriction on the flexibility of the Secretary of State to respond quickly where such urgent investigation is needed.

In addition, the Bill already provides under Clause 11 that inspectors themselves should give authorities three days' working notice of the actual inspection. That should be sufficient to ensure that, even in the most urgent of cases, a proper balance is struck between the need to achieve prompt scrutiny in the interests of people who may be vulnerable and the need properly to protect the interests of the authority and its employees. I hope that that reassurance will encourage the noble Lord to withdraw his amendment.

Lord Dixon-Smith

My Lords, I am grateful to the Minister for that reply. It gives me some solace. I shall need to study it with care. I find it somewhat fascinating that informing the local authority—which, after all, takes no more than a telephone call—might actually constrain the powers of the Secretary of State. If that is all it takes to constrain the powers of the Secretary of State—which were the words of the noble Baroness—I must phone him more often. I believe that that would be an excellent thing to do.

When one considers vulnerable people in particular, certainly nothing that I say is intended to reduce the power to carry out such investigations, properly examine the position and put right whatever is wrong. But where there are really urgent cases—it must be faced that in the past some have arisen—almost invariably they are likely to give rise to criminal investigations, which are probably already under way by the time we get to this procedure. I find that reason for rejecting this particular amendment somewhat strange. However, I undertake to study carefully what has been said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Inspectors' powers and duties]

Baroness Hamwee moved Amendment No. 19:

Page 9, line 1, at beginning insert ("Subject to subsection (4A),")

The noble Baroness said: My Lords, in moving Amendment No. 19 I should like to speak also to Amendments Nos. 20 and 21. Amendment No. 19 is a paving amendment. Amendment No. 20 provides that normally notice of at least 28 days will be given before an inspector goes in. Amendment No. 21 provides for extraordinary inspections where shorter notice of not less than three days, which is the notice provided in the Bill, will be given.

We were assured in Committee that the provision giving three days' notice would be used very rarely. The Minister said it was, anticipated that the period of such notice will normally be greater not only than the three days set out in Clause 11 but also than the 10 days proposed by Amendment No. 61 ".—[Official Report, 5/99; col. CWH 63.]

That was the amendment I then moved. She went on to say that the provision in Clause 11 mirrored the conditions for extraordinary audit in Section 25(4) of the Audit Commission Act 1998. That tempted me to look up the section. As the Minister said, the section provides for three days' notice but explicitly where the Secretary of State considers it desirable that, essentially, short notice should be given.

The provisions that I seek to include in the Bill now mean that normally at least 28 days' notice will be given. That picks up the point that more than my previously suggested 10 days' notice would be given. The new subsection (4A) in Amendment No. 21 mirrors Section 25(2) of the 1998 Act, which provides: If it appears to the Secretary of State that it is desirable in the public interest that there should be an extraordinary audit of the accounts of a body subject to audit he may require the Commission to direct such an audit by an auditor or auditors appointed by it".

The section contains particular provisions that apply to an extraordinary audit. I have attempted to reflect that approach in these amendments. I believe that it would be appropriate for the meaning of the Bill to he more detailed rather than allow for very draconian powers to be used which, by common consent, will not be applied in ordinary circumstances. I beg to move.

Baroness Farrington of Ribbleton

My Lords, as I explained in discussing the previous amendment, we consider that the minimum notice period of three days currently set out in Clause 11 will ensure that a proper balance is struck between the need to achieve prompt scrutiny and the need properly to protect the interest of best value authorities and their employees.

It may help to reassure the noble Baroness if I explain that the intention of subsection (4) is not to fix the amount of notice at three days—I believe that that has become clear at Report stage—but merely to specify the minimum period which can be given. We anticipate that significantly more than the 28 days' notice specified in Amendments Nos. 19, 20 and 21 will normally be given to the authority being inspected.

However, we believe that the question of a standard period of notice to inspect authorities is an important one. The Audit Commission is currently looking at the question of notice periods as part of the process of setting up the new best value inspectorate. It will be taking into account the current practice of existing inspectorates and opinions such as those expressed in the recent Work of Ofsted report issued by the Education and Employment Committee in another place. This report also suggested a notice period of 28 days. The noble Baroness will be aware that existing inspectorates have quite different notice periods, from the Benefit Fraud Inspectorate at three months through to Her Majesty's Inspectorate of Constabulary at six months and the Fire Service inspectorate at 12 weeks.

We envisage that very short periods of notice will be needed only in extreme cases, for example, those where there is serious failure or where an authority has not responded to a normal notice of inspection. In such cases, the ability to move quickly will be invaluable. Clause 11 as drafted provides an appropriate mechanism to achieve this. I hope that, reassured by these comments, the noble Baroness will not feel it necessary to press her amendments.

8.45 p.m.

Baroness Hamwee

My Lords, I am not entirely sure that the Minister's response has taken the matter a great deal further. The noble Baroness spoke of the importance of a standard period of notice. It seems to me that if the legislation provides for three clear days' notice—I accept that that is a minimum and that generally, in normal circumstances, much longer notice will be given—and it is known that very often it will be far longer than that, that goes against providing a standard.

The Minister spoke of the need to deal with extreme cases. I believe that that is precisely what Amendment No. 21 does. I have followed as closely as I can the language of the Audit Commission Act. I shall not press the point further; it would be tedious to do so now. However, while I am reassured by the thrust of the Minister's response, I am not satisfied that best value authorities have the protection that they are entitled to see on the face of this legislation as to what the normal situation will be. Only the abnormal and extreme appears to be catered for. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 20 and 21 not moved.]

Lord Whitty moved Amendment No. 22: After Clause 13, insert the following new clause—

INSPECTIONS: HOUSING BENEFIT AND COUNCIL TAX BENEFIT

(" .—(1) The following shall be substituted for section 139A(1) and (2) of the Social Security Administration Act 1992 (reports on administration of housing benefit and council tax benefit)—

"(1) The Secretary of State may authorise persons to consider and report to him on the administration by authorities of housing benefit and council tax benefit.

2) The Secretary of State may ask persons authorised under subsection (1) to consider in particular—

1. (a) authorities' performance in the prevention and detection of fraud relating to housing benefit and council tax benefit;
2. (b) authorities' compliance with the requirements of Part I of the Local Government Act 1999 (best value).

(2A) A person may be authorised under subsection (1)—

1. (a) on such terms and for such period as the Secretary of State thinks fit;
2. (b) to act generally or in relation to a specified authority or authorities;
3. (c) to report on administration generally or on specified matters."

(2) In section 139C(1) of that Act (reports) for the words from "in particular" to the end there shall be substituted "in particular—

1. (a) in the prevention and detection of fraud relating to benefit, or
2. (b) for the purposes of complying with the requirements of Part I of the Local Government Act 1999 (best value)."").

The noble Lord said: My Lords, the amendments in this group are technical and clarify the position. The new clause in government Amendment No. 22 is designed to put the Benefit Fraud Inspectorate's powers on a clear statutory footing. The inspectorate's work on the administration of housing benefit and council tax benefit is very much in keeping with the whole ethos of best value. But the existing powers are described in very specific, rather than general, terms. By the new clause we wish to make absolutely sure that this very important area of local authority work is subject to the same best value scrutiny as will exist elsewhere.

Amendment No. 30 provides an opportunity to commence certain provisions promptly where it is sensible or helpful to do so. They will ensure that there can be, if necessary, early commencement of provisions relating to police and fire authorities in both England and Wales.

Amendment No. 33 will ensure that Clause 28(2)(b) correctly identifies those provisions which confer powers which have been reserved to the Secretary of State and which will not be exercisable by the National Assembly for Wales. It therefore adds two new references to Clause 28(2)(b). The first makes provision for inspection and other arrangements in respect of police authorities. The second reflects the new clause included in Amendment No. 22 as regards inspection of council tax benefit administration and housing benefit administration. I beg to move.

On Question, amendment agreed to.

Clause 14 [Secretary of State's powers]:

Lord Whitty moved Amendment No. 23:

Page 10, line 16, leave out paragraph (d).

The noble Lord said: My Lords, in moving this amendment I shall also speak to Amendment No. 24, among others. They have been introduced to make a technical change to Clause 14. They would have the effect of making what was Clause 14(2)(d) a free-standing section. Your Lordships will note that the wording of the new provision remains identical to the original and does not extend the powers of the Secretary of State or the National Assembly for Wales in any way. The amendment has been brought forward simply to clarify the scope of the existing provisions.

Amendment No. 26 is also in this group and it is a slightly more complex matter. I mentioned at Committee stage that we had identified a number of situations where the exercise of Clause 14(5) powers by the Secretary of State or the National Assembly for Wales might cause difficulties in cases where there was a right of recourse to the Secretary of State or where he had an existing role or power in relation to a best value authority.

Amendment No. 26 is designed to clarify the operation of the clause in those situations and addresses this problem by introducing two new subsections to Clause 14.

I would like to emphasise that the circumstances to which this provision would apply are exceedingly rare. We have always maintained that intervention under Clause 14(5), where the Secretary of State takes over responsibility for a function, would be the exception and not the norm and that it would be to address the very worst failure in service delivery. In the handful of cases where a direction is issued under Clause 14(5) we envisage that in most cases the Secretary of State would not exercise the function himself but would appoint an independent person to carry out that function. Where a nominee was appointed that nominee would in most cases be considered independent from the Secretary of State and the difficulties outlined above in relation to the Secretary of State's powers would not arise.

However, although the circumstances in which these provisions would be necessary are very rare, this amendment is essential for ensuring the proper functioning of this clause in al] circumstances. Amendment No. 26 is not about increasing the powers of the Secretary of State or of the National Assembly. It is about ensuring that existing powers and roles can continue to be exercised in a sensible way. When the Secretary of State takes over a function he is doing so on behalf of local people to ensure that a higher standard of service is delivered. Local people's rights of appeal, therefore, and other such entitlements should not be compromised to enable that to happen.

Amendment No. 35 is also in this group. It is a technical amendment to ensure that the new regulatory powers we have proposed to introduce at subsection 14(5A)(a) can be used effectively in Wales. Amendment No. 31 is another technical amendment. Subsection 27(2.) lists those order-making and regulatory powers which, in England, should be subject to the negative resolution procedure in either House of Parliament. Amendment No. 31 adds the new regulatory power in Amendment No. 26 to the list about which I have just spoken. I beg to move.

On Question, amendment agreed to.

Lord Whitty moved Amendment No. 24:

Page 10, line 25, at end insert — ("() Where this section applies in relation to an authority the Secretary of State may direct the authority to take any action which he considers necessary or expedient to secure its compliance with the requirements of this Part.").

On Question, amendment agreed to.

Baroness Hamwee moved Amendment No. 25:

Page 10. line 26, leave out subsection (5).

The noble Baroness said: My Lords, in moving this amendment I shall speak also to Amendment No. 27. These amendments deal with the powers of intervention of the Secretary of State in Clause 14. We made no secret at Committee of our distaste for that and particular elements of it.

The first of the amendments leaves out subsection (5), which is the provision allowing the Secretary of State to put in a nominee to exercise certain functions or to take them over himself, which I guess is a less likely scenario. If that were so, trying to get the Secretary of State on the telephone would become well nigh impossible. It also provides that the authority will comply with the Secretary of State's instructions or those of his nominee, in relation to the exercise of certain functions.

We protested about that provision at Committee stage and it is appropriate to do so on the Floor of the House. We were told then by the Minister that the powers would be exercised sparingly, but that in a sense this provision is the teeth of the Bill because of its deterrent powers. We protest again because of the principle of democratic accountability. We deplore the trend which became increasingly apparent under the previous government—sadly, we see similar tendencies now——to centralise or at any rate to provide very substantial reserve powers to central government to the detriment of the powers and autonomy of democratically elected local authorities.

We accept that there may be some very particular occasions when things go so badly wrong at local level that on any view matters need to be taken out of the hands of the local authority. An example is when abuse comes to light in a children's home. I believe that such matters are dealt with by other legislation particularly by criminal legislation.

Clause 14(1) applies this provision when the Secretary of State is satisfied that the best value authority is failing to comply with the Act. Reference was made at the previous stage to the protocol. I do not know whether there is a draft of it as yet which does so, but it will set out the step by step application of increasingly vigorous measures to deal with an authority. It will begin with the not so tough measures before moving up to direct intervention. As I say, I do not believe there is a draft yet providing a hierarchy. The Minister may correct me on that.

The draft protocol has been published. Its appendix provides for failure of process and of substance, which are examples of triggers which would allow intervention powers. It seems to us that the failures which are listed are capable of being so minor that for the Bill to allow them to be triggered with such major powers seems quite unbalanced. I shall refer to just a couple in the failures of substance. There is the failure to improve service standards or deterioration. Failure to improve could be a very minor failure and barely deserve such a term in normal parlance. Under the list of failures of process, there is the failure to set performance targets which, in the opinion of the external auditor, are sufficiently challenging. It seems inappropriate to permit these extreme powers. Clearly, there will be differences of opinion as to whether the performance targets are sufficiently challenging. One may say that the degree of challenge within the targets is outside legislation.

We believe that it is for the electorate to respond to an authority not being quite as good as it should be—which is what some of the failures amount to. The Government have proposals for annual elections. Those opportunities for the electorate to express its views may leave some of us feeling that we have barely recovered from one election before being faced with the next. In summary, that is our objection to Clause 14(5).

Amendment No. 27 deals with the urgency provisions. Under Clause 14(8) the Secretary of State is able to give directions without complying with the provisions which require him to give the authority opportunities to make representations. There is no requirement to have regard to an authority's statement if he considers the direction is "sufficiently urgent." We are concerned about the lack of criteria on the face of the Bill and in the draft protocol as drafted as to what constitutes urgency.

When we discussed the matter in Grand Committee, the Minister was not satisfied that the amendment was appropriate. It referred to immediate danger of substantial harm or substantial financial loss. He made the point that financial loss could be long term. He believed that the provision was over rigid and wanted to be more flexible. I take issue on that. If the Secretary of State can set aside the provisions in Clause 14(6) and (7), it suggests to me and my noble friends that the criteria should not be flexible. To suggest that they could be flexible or variable is wrong.

For their own reputation, as well as for other more principled matters, the Government must spell out "sufficiently urgent." To leave the matter to the Secretary of State's discretion without the words being put on paper to describe what is sufficiently urgent does not achieve what the Government and those of us who provide constructive criticism of this part of the Bill should achieve. To that extent, I align myself with the Government because, if we have to have this provision, I want to get it right. I beg to move.

9 p.m.

Lord Whitty

My Lords, I appreciate the way in which the noble Baroness proposes the amendment. However, there is a fundamental disagreement between us on the first part. We believe that the full effect of the best value regime will be available only if there are ultimately some deterrent powers. The noble Baroness refers to my colleague's earlier commitments that those powers will be used only in proportion to the failure established and that the more extreme powers will be used only after attempting to deal with it in a different way and only in the very worst circumstances. The powers would rarely be used and only after other options had been fully explored.

There is a difficulty. The noble Baroness does not accept that we need these powers. However, we believe that we do. There may be evidence in future of serious and long term systemic failure where an authority has conspicuously failed to act despite having been given several opportunities to do so and following other forms of intervention. I am sure that the ultimate power would be relevant to only a handful of cases, but if we do not have it those cases may persistently obstruct other forms of assistance. In those cases, we shall need to take the difficult decision, including the decision to intervene with the direct provision of that service. However, as our White Paper indicated, in those circumstances we should need to have the power for, responsibility to be transferred to another authority or third party". The provisions contained in Clause 14(5) may never be necessary. I hope that they will never need to be used. However, to remove them from the face of the Bill would undermine the best value concept and take away the ultimate means of ensuring that it is enforced in all cases. I believe that in practice the Secretary of State or the National Assembly for Wales would have a range of options available to it before it reached that stage. It is to be hoped that the local authorities would respond to those other interventions. But at the end of the day the Secretary of State and the National Assembly for Wales have to have these powers. I cannot, therefore, accept the amendment and I ask the noble Baroness to withdraw it.

Amendment No. 27 deals with intervention powers in cases of urgency. The noble Baroness recognises that there may be such situations and we need some provision to deal with these wholly exceptional circumstances. As she indicated, we are in the process of producing a protocol on intervention in conjunction with the LGA which will set out the principles underpinning intervention and the broad procedures to be followed. It will clarify the provisions contained in the Bill and will contain, as the noble Baroness asks, an agreed definition of the circumstances in which we envisage the fast track procedures would be used. We consider that it is better to lay out what she has said is desirable in terms of definition of circumstances in a protocol because we are in a rapidly changing situation and in a new form of regime. We do not believe it is necessary, or indeed that we are able, to lay that out on the face of the Bill which introduces that regime. The protocol will state clearly that the fast-track procedures would be used only in exceptional circumstances where the severity, the urgency or the persistency of failure or the continuing risk of harm or financial loss show that urgent intervention is necessary.

It is noteworthy that the wording of the noble Baronesses' amendment does not include the whole of the wording that is in the protocol. It would exclude the situation where the Secretary of State could use the fast-track procedures to address persistent and systemic failure where the local authority has failed to take action. I would not regard that as a helpful restriction on what we have already agreed, or almost agreed, with the Local Government Association in the protocol context. I think it takes away a power to intervene in continuous defiance of the whole objectives of "best value" from the Secretary of State or from the national assembly.

Therefore I would hope that the noble Baroness would recognise the desirability of proceeding via the protocol, an approach which meets many of the objectives she has spelt out in relation to the fast-track procedure, rather than attempting to lay down provisions on the face of the Bill. She should also recognise that the exact words she is suggesting do not meet the range of circumstances which are already envisaged, in partnership with the local authorities, as being included in the protocol still in draft.

Baroness Hamwee

My Lords, with regard to Clause 14(5), I accept that the Government believe they need the powers. As for Clause 14(8), one of the criticisms is that my amendment does not allow the Secretary of State to address systemic failure. Since this is the fast-track procedure and systemic failure, by definition, is not something which springs up overnight and becomes suddenly and obviously urgent, I think it is entirely right that the Secretary of State should not be able to apply the urgency provisions in such a case. The only reason he might want to take urgent action in the case of systemic failure would be if he noticed at a rather late stage that the failure existed.

With regard to the protocol—and I am glad to note the Minister's assurance—I wonder whether, with the leave of the House, he could tell us when the further draft will be available with the definition for the fast-track procedure. It would be helpful to the House if we could know tonight if the draft might be available soon——and at any rate in connection with this point—before Third Reading. This is a matter with which we on these Benches are particularly concerned. If the Minister is not able to tell me tonight, may I ask him to write to me?

Lord Whitty

My Lords, I am not immediately able to give an indication about the draft tonight. It is already widely available in local government circles, but I am not able to give a date for the final version. I will write to the noble Baroness.

Baroness Hamwee

My Lords, I thank the Minister for that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 26:

Page 10, line 35, at end insert ("(5A) The Secretary of State may by regulations make provision which—

1. (a) relates to an enactment which confers a function on him in respect of a function of a best value authority, and
2. (b) he considers necessary or expedient for the purposes of cases in which he makes a direction under subsection (51(a).

(5B) Regulations under subsection (5A) may, in relation to the cases mentioned in subsection (5A)(b)—

1. (a) disapply or modify an enactment of the kind mentioned in subsection (5A)(a);
2. (b) have an effect similar to the effect of an enactment of that kind.")

The noble Lord said: My Lords, I beg to move Amendment No. 26 formally.

On Question, amendment agreed to.

[Amendment No. 27 not moved.]

Clause 15 [Power to modify enactments and confer new powers]:

Lord Dixon-Smith moved Amendment No. 28:

Page 11, line 13, after ("enactment") insert ("made before the passage of this Act")

The noble Lord: My Lords, Clause 15 of the Bill begins: If the Secretary of State thinks that an enactment prevents or obstructs compliance by best value authorities with the requirements of this Part he may by order make provision modifying or excluding the application of the enactment in relation to those authorities".

It goes on: The Secretary of State may by order make provision conferring on best value authorities any power which he considers necessary or expedient to permit or facilitate compliance with the requirements of this Part". Those are very sweeping powers indeed over all legislation. The first amendment that I have put down in relation to this clause, Amendment No. 28, is grouped with Amendment No. 29, which I will come to in a moment. It puts a minor restriction on this particular power in that the Secretary of State would only be able to apply the power to legislation which is presently in place. In other words, new legislation coming in the future will not be able to have this power applied to it. That is a perfectly reasonable proposition. There may well be existing circumstances and laws which could rightly require to be set aside for best value to work well. Anyone who has been involved in local government will know of individual circumstances which already exist here and there, where the ability to make use of this power will indeed be welcome. To that extent it is good, but the power is so wide in its present application that some restriction on it would perhaps be desirable.

That is why I also tabled Amendment No. 29. which limits the application of this particular clause to five years. If we have not found out what the problems are and where the shoe pinches within five years of passing this Bill, it will be remarkable. It will be even more remarkable if some ambitious Secretary of State's department as it presently exists, or whatever its successor department may be, has not by then decided to pass some other local government Bill which then might supersede this one. That being so, it is not unreasonable to put a time limit on the application of this clause. In any event, it will have the wholly beneficial effect of concentrating people's minds so that, should there be issues which they feel are worth exploring because the shoe of existing legislation pinches too tightly, they will raise them within a reasonable timescale.

It is with those thoughts in mind that these amendments were put down on the Marshalled List. I beg to move.

9.15 p.m.

Baroness Farrington of Ribbleton

My Lords, Amendment No. 28 will prevent the Secretary of State from amending local authorities' powers in respect of future legislation. We recognise that this amendment reflects a concern about how far we intend to amend existing legislation so as to enable local authorities to deliver best value. The paper produced by the department on possible uses of this clause indicates to some extent the sort of legislative changes that may be necessary. We are now developing that thinking and will be consulting on our proposals later this summer.

We recognise that we are in a changing world, and despite our best efforts it will not always be possible to forecast those changes. We feel that future Secretaries of State must have powers to tackle changing circumstances. Amendment No. 28 would unduly fetter their hands. Therefore I hope that the noble Lord, Lord Dixon-Smith, will feel able to withdraw that amendment.

The noble Lord also moved Amendment No. 29 which reflects concern about the use of Clause 15 powers. He may consider a five-year period a sufficient time to change legislation, and that within that period it will quickly become clear which changes are necessary.

However, his argument does not take account of the sort of regime which we expect to emerge for delivering best value to local communities. We expect best value authorities to develop new forms of service delivery with others, including the private and voluntary sectors. Such new ways of working will not spring up immediately after local authorities have their new duty of best value from 1st April 2000. Indeed, they may not become apparent for some years; for example, advances in information technology will not suddenly stop in 2005. There will be an incremental process as many partner organisations implement new ways of working. The time limit proposed by the noble Lord would create unnecessary pressure. A finite period may not allow us to identify current as well as future barriers. It could also encourage authorities and others to seek immediate legislative solutions to perceived problems. Amendment No. 29 could prevent partnerships from evolving naturally at a time during which difficulties could emerge and hopefully be resolved without the need for legislative changes.

We believe that it is better to have sufficient time to identify correctly the problems and to develop effective administrative or legislative solutions over the full lifetime of best value. When the power under Clause 15 is needed, it will be used to improve authorities' ability to achieve best value. That may be at any point when this duty is in force. I therefore hope that the noble Lord will not press this amendment.

Lord Dixon-Smith

My Lords, I listened with great interest to the Minister's response and she made some interesting points. However, I am afraid that I can envisage a situation in which one might conclude that the most efficient way of delivering best value might be to remove all legal constraints from local authorities and let them get on with it. But I suppose that it would be a little too idealistic to conceive that any government would give local authorities that degree of freedom.

However, the Greater London Authority Bill is going through this House and it has within it the power of general competence. It is possible to conceive that in the not too distant future we shall be passing a Bill through this House, which I and the noble Baroness would welcome, giving local authorities the power of general competence. If that were to occur the need for Clause 15 might disappear. It is not impossible to conceive of such a situation, but I shall study the Minister's response with great interest and in the meantime beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 29 not moved.]

Clause 26 [Commencement]:

Lord Whitty moved Amendment No. 30:

Page 16, line 23, leave out subsections (2) and (3) and insert— ("(2) The Secretary of State may by order provide for—

1. (a) any of sections 1 to 13, 14, 18, 19, 21, 22. 24 and 25 to be brought into force in relation to England before the time appointed by subsection (1);
2. (b) any of those sections, in so far as it relates to an authority falling within section 1(1)(d) or (e), to be brought into force in relation to Wales before that time;
3. (c) any of sections (Inspections: housing benefit and council tax benefit), 15 to 17 and 23 to be brought into force before that time.

(3) The National Assembly for Wales may by order provide for any of the sections mentioned in subsection (2)(a), except in so far as it relates to an authority falling within section 1(1)(d) or (e), to be brought into force in relation to Wales before the time appointed by subsection (1).")

On Question, amendment agreed to.

Clause 27 [Orders]:

Lord Whitty moved Amendment No. 31:

Page 16, line 35, at end insert ("14 or").

On Question, amendment agreed to.

Clause 28 [Modifications for Wales]:

Lord Thomas of Gresford moved Amendment No. 32:

Page 17, line 1, after ("2(6),") insert ("15(4),").

The noble Lord said: My Lords, your Lordships may recall that during the Grand Committee's considerations of this Bill I expressed my concern about the obscure way in which the provisions relating to Wales were drafted in Clause 28. I was pleased to see in the Health Bill, which was debated today, that in Clause 59 progress had been made and a greater degree of clarification obtained. There is a long way to go, but the parliamentary draftsmen are working along the right lines.

Clause 28 excludes the National Assembly for Wales from exercising any powers under Clauses 15 and 16. Your Lordships will recall that those clauses give to the Secretary of State the power to amend primary legislation by order by means of secondary legislation, which is subject to the affirmative procedures in this Parliament. What is the purpose of giving these extensive powers to the Secretary of State? It is said to be flexibility. In an article written in Public Finance on 5th March, the Local Government Housing Minister, Miss Hilary Armstrong, stated: No one can claim to know or even understand all the ways in which Best Value might be achieved and developed over the coming years. For example, significant developments in technology, in customer preferences and in business methods are likely to transform the way services are provided and delivered in future years. There will be new ways of working, new forms of partnership and new standards to meet as public services continue to modernise. The last thing councils need is primary legislation written now in a way that would need further primary legislation to update it year after year. Also, the numerous small-scale measures that will be appropriate locally would never be appropriate for a national legislative programme. It is only by providing flexibility of legislative response that we can assure flexibility in local delivery".

I ask the Government to pause and consider that that flexibility, that legislative response, is one of the reasons that has caused this Government to introduce the Government of Wales Bill to set up the National Assembly for Wales. It is right for the National Assembly to consider these changes which are hardly the subject matter for primary legislation in the Westminster Parliament.

What is the reason for excluding the National Assembly from exercising these powers? I strongly suspect that it was because there was a fear that Ministers should not grant any primary legislative powers to Wales. The whole ethos of the National Assembly for Wales as opposed to that of Scotland is that its powers are limited to the passing of secondary legislation.

If we look at the National Assembly for Wales Transfer of Functions Order, which comes into force on 1st July, and with which I was concerned in its passage through this House, there are no less than 100 functions passed to the National Assembly for Wales to amend, repeal or modify primary legislation. It is already within the power of the National Assembly to modify primary legislation so why not within the circumstances of this Bill?

The Government have been asked this question and have given no reason. Miss Armstrong said, in Standing Committee B in another place on 11th February: The power to make orders which have an effect in relation to Wales will be exercised by the Secretary of State for Wales. That is because we do not think it appropriate to confer these powers on the National Assembly for Wales. Of course, where the Secretary of Stale for Wales exercises his powers under Clause 15 there will be full consultation with the Assembly".

The only reason that the Government have given for withholding these important and extensive powers from the National Assembly is, "We do not think it appropriate". I should like to know why it is not appropriate.

Let us pursue that a little further. Why is it that the Secretary of State for Wales alone is to exercise these powers? This was a matter I raised in Grand Committee. In a very courteous reply to me, the noble Lord, Lord Whiny, pointed out that the precise identity of the Secretary of State who operates powers under this legislation in practice will vary from case to case according to circumstances. As nobody envisages how this legislation is to be changed, I cannot see why the Secretary of State for Wales should be designated as the person to exercise powers under Clauses 15 and 16 as opposed to the many other ministers who may be concerned in the various points that arise from time to time.

There is confusion, a lack of clarity and, I suspect, simply a lack of thought as to the function of the National Assembly, as to why the powers are withheld and how they are to be operated.

I turn to the amendments. I shall speak also to Amendments Nos. 34 and 36. Amendment No. 34 gives the Assembly the powers of the Secretary of State in relation to Clauses 15 and 16. Amendment No. 32 removes the parliamentary procedures for Assembly orders under Clause 15. Amendment No. 36 sets out what is proposed as alternative assembly procedures, how the National Assembly for Wales would exercise these powers to amend legislation if the best value provisions are found to need that sort of amendment.

I do not propose to seek a vote on this issue tonight but I ask the Government to consider carefully the points that I have made. I beg to move.

9.30 p.m.

Baroness Farrington of Ribbleton

My Lords, the noble Lord raises an important and complex issue, because of his breadth of knowledge of the subject. As a Whip, I am aware of the depth of detail he followed during the passage of the Bill establishing the National Assembly. Should I fail to answer any of the details he raised, I shall write to him and send copies to all noble Lords who have been present and taken part in the debate. I know it is unusual to start with that, but in the light of the depth of knowledge of the noble Lord, I felt safer doing so.

Clause 28 makes provision for the application of Part I of the Bill in Wales. It provides generally for powers in Part I of the Bill to be exercised by the National Assembly rather than the Secretary of State. However, the clause gives some powers to the Secretary of State rather than to the Assembly. These include the powers to modify primary legislation contained within Clauses 15 and 16 which are the subject of Amendments Nos. 32, 34 and 36. These amendments would give the order-making powers in Clauses 15 and 16 to the National Assembly rather than to the Secretary of State in relation to their application in Wales. They would also provide for these orders to be subject to the Assembly's procedures for making secondary legislation rather than to parliamentary procedures.

Clauses 15 and 16 provide for potentially wide-ranging powers to modify primary legislation and for orders made under these powers to be subject to rigorous scrutiny procedures. This Government feel strongly that the order-making powers in Clause 15 should be exercised by Ministers accountable to Parliament and that it would not be appropriate for these powers to be given to the National Assembly. We also consider that orders under Clause 15 should be subject to affirmative resolution by both Houses of Parliament in relation to their application in England and Wales. Clause 15 provides for this and we do not believe that these procedures, which are set out in Clause 16, should be different for Wales.

While we recognise that the Assembly's procedures for making secondary legislation are rigorous, the Government are strongly of the view that all orders made under Clause 15 should be subject to the stringent scrutiny provided for by Clause 16. However, the Bill builds in safeguards for the National Assembly. Clause 28 provides that the Secretary of State must consult the Welsh Assembly about using his powers under Clause 15 to modify primary legislation which has effect in relation to Wales. It also provides that the Secretary of State may not use his powers under Clause 15 to modify secondary legislation made by the Assembly itself without its explicit agreement.

The provisions in Clauses 15 and 16 are consistent with the principles of devolution in that the powers to modify primary legislation are retained by the Secretary of State and are subject to parliamentary procedures, while recognising and protecting the position of the National Assembly. I hope therefore that the noble Lord will not feel it necessary to press these amendments.

Lord Thomas of Gresford

My Lords, I have already indicated that it is not necessary to take this matter to a vote. But let me state this as a matter of principle. The National Assembly in relation to Welsh matters is a far better instrument for scrutiny provided by the Government of the day, with the grateful thanks of the Welsh nation, than the affirmative or negative resolutions of Westminster. Anybody who sits in this House knows just what sort of safeguard those procedures actually are in practice. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Speaker (Lord Ampthill)

My Lords, if Amendment No. 33 is agreed to, I shall not be able to call Amendment No. 34; it will have been pre-empted.

Lord Whitty moved Amendment No. 33:

Page 17, line 4, leave out ("sections 15 to 17 or section 26") and insert ("any of sections (Inspections: housing benefit and council tax benefit), 15 to 17. 23 and 26")

On Question, amendment agreed to.

[Amendment No. 34 not moved.]

Lord Whitty moved Amendment No. 35:

Page 17, line 10, at end insert — ("() Section 14(5A)(a) shall apply to Wales as if the reference to a function conferred on the Secretary of State were a reference to a function conferred on the National Assembly for ales or the Secretary of State; but the Assembly may not make regulations under section I4(5A) which relate to a function conferred on the Secretary of State without his approval.")

On Question, amendment agreed to.

[Amendment No. 36 not moved.]

Clause 29 [Limitation of council tax and precepts]:

Baroness Hamwee moved Amendment No. 37:

Page 17, line 16, at end insert— ("(2A) Schedule I 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. (2B) An order laid under subsection (2A) shall not apply for a period exceeding five years. (2C) If an order laid pursuant to subsection (2A) is approved, Schedule I 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.")

The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 38 and 40, which are tabled in my name and that of my noble friend Lady Miller. This grouping also contains Amendment No. 39 in the name of the noble Lord, Lord Dixon-Smith. With these amendments we move to the question of council tax capping and the substantive amendment in this group, although the Minister may think that knocking out Clauses 29 and Schedule 1 is pretty substantive. However, the point I want to address in particular is what one might call the sunset clause which, at this time of night, is perhaps appropriate.

We have received assurances that the capping powers retained by the Secretary of State in respect of local authority expenditure are very much reserve powers, but we have made no secret of the fact that we are against capping. If any powers are to be retained, we want to test how necessary they are. We are moving into a regime for local authorities of best value and increasingly, as I have said several times this evening, of partnership. It is possible that there may well be new experiences over the next few years.

At the last stage of the proceedings, the Government said that they were not confident that their modernisation programme would be completed by the year 2005, which was when we proposed that the provisions for capping should sink without trace and with no possibility of being continued. On reading that comment, it seems to me that that may imply that local authorities are dependent on central government to modernise. I do not think that that is so; indeed, we all know of examples where local authorities are very much making the running and are doing some very admirable things. Although the extent to which we admit it may vary, we all know that the concern is about a limited number of rather old-fashioned authorities. I have said before in another context that I think it is a matter for the electorate to decide the way that it responds to such authorities.

In Amendment No. 37 we propose that the capping provisions should cease to have effect after 2005 unless they have been extended by affirmative resolution of both Houses; in other words, the testing of whether the reserve powers are necessary will be a matter for Parliament. The proposed subsections (2B) and (2C) would provide for a rolling five-yearly extension, if necessary. It seems to me that it would be illogical in the year 2005 to allow the powers to be extended without limit. Therefore, I have simply sought to replicate the five-year provision.

I believe that the existence of the capping powers itself constrains what local authorities want to do and not in a positive or helpful fashion. The very impact of the threat of a cap can constrain innovation and good practice. I think we are all agreed that best value is not necessarily cheapest value. We all seek good value for money but that may not be achieved by the expenditure of the lowest amount. I beg to move.

Lord Dixon-Smith

My Lords, Amendment No. 39, which is included in this grouping, would of course be a trifle unnecessary if the House were to take a decision at some point to accept Amendment No. 40. However, having said that, my amendment was tabled to give me the opportunity, so to speak, to explore the mind of the Secretary of State through the words of the Minister sitting opposite on one or two matters.

The first and most simple one is the issue of whose view is the most important as regards local expenditure and the budget of local authorities. Is it the view of the Secretary of State, or should it not rather be that of the local electorate, provided always, of course, that they have no power to commit the Secretary of State's expenditure? That is an important proviso.

Recently, it was drawn to our attention that a local referendum was held in, I believe, Milton Keynes. The local community voted for a particular level of precept increase. Nonetheless they were issued with a "yellow card" warning by the Secretary of State; they were told in effect that they might be going too far and that any further misbehaviour might result in a "red card." That may be the way the system works but I wish to explore why that is so. In the great, wide macro-economic world I have long held the view that current expenditure is current expenditure whether it is undertaken by a local authority or by private individuals. If the council tax rises, all that happens to the volume of current expenditure is that private individuals spend less and the public authority spends more. The impact on macro-economic expenditure is neutral.

That has been a belief for which I have not had supporting evidence in the past. However, I now have in my hands a paper which supports that view. The paper is written by Mr Peter Watt, senior lecturer in economics at the Department of Local Government Studies, University of Birmingham, and by Mr John Fender, professor of economics at the same university. The study was commissioned by the Local Government Management Board.

I shall not bore the House with all the details of the report as that would take an interminably long time. It would be unbearably rude to do so at this hour of the night. However, it may be worthwhile drawing attention to the beginning and the end of the document. It starts by saying that there is a tension with regard to local expenditure, between a desire to remove control and a desire to retain it". The study states that that, is evident in the drafting of the Comprehensive Spending Review". That is a well-established and well-known document. The study continues, Crude and universal capping will no longer constrain local government finance. But…the Government will protect people from excessive council tax increases…Given this strong desire to retain controls over expenditure, it might be expected that there are strong macroeconomic arguments to support such controls. However, this briefing paper argues that this is not the case". As one would expect of a good academic paper, the study describes the arguments for, and the arguments against the measure. The study concludes: We have surveyed a range of arguments for central control of locally financed local government expenditure put forward by the Treasury firstly to the Layfield Committee and in subsequent years. The overall conclusion from this paper is that the government has not established sound macroeconomic arguments for the control it has imposed over many years on local government self-financed expenditure". That is an interesting paper to read in view of my prejudice. Therefore I would like to explore with the Minister why he believes that the Secretary of State—I understand entirely why he should wish to support him—has right on his side in feeling that his opinion in these matters has greater validity than that of the locals who will have to pay the bill.

9.45 p.m.

Baroness Miller of Chilthorne Domer

My Lords, we on these Benches share the sentiments of the noble Lord, Lord Dixon-Smith. In the light of all that has been said about public consultation and how best value will move authorities much further towards delivering the kind of things their communities wish, and for all the reasons that the noble Lord has said, this amendment is very much in line with that objective.

Lord Whitty

My Lords, some interesting matters have been raised in the debate. As to the Liberal amendments—the Liberal Democrat amendments—Amendment No. 37 is a sunset clause which would end the powers in 2005. One could probably term Amendments Nos. 38 and 40 as total eclipse clauses; they wipe out the powers entirely.

It is probably too late at night for me to discuss principles of public finance and macro economics with the noble Lord, Lord Dixon-Smith, much as I would like to do so. At one level he makes an arguable point; no doubt the papers will illuminate that.

Both financially and politically it is very important to recognise that even locally financed expenditure by local government has an impact on the national taxpayer and that the national government have a responsibility to protect the local taxpayer. We take both responsibilities seriously. We believe therefore that we must have reserve powers in that regard. We do not believe that, in extreme circumstances, national government should be without powers to constrain an increase in the local taxpayers' burden. We obviously expect and hope that all local authorities will behave sensibly and prudently; that is why we have removed crude capping measures and why we did not use this year the powers that we have under the existing legislation.

We believe that we need some reserve powers. We are making clear that we wish to change the system of financial control of local authority expenditure and to give more freedom to local authorities. We said quite explicitly in our manifesto that we needed reserve powers for precisely such an eventuality. If local authorities act responsibly and reasonably the powers will not be used.

Amendment No. 37 would require us to have a kind of abstract debate every five years as to whether we needed the powers. Under the provisions of the Bill, in every instance when the Secretary of State invokes these powers—and we hope that such instances will be extremely rare—the affirmative procedure will ensure that we have a debate on the particular circumstances in which the Secretary of State decides to set a cap on a local authority.

At the beginning of the debate I was deeply in sympathy with what the Liberals were after—the Liberal Democrats, I beg your pardon—even if I could not accept the way they were going about it. In this they are pushing too far the issue of local authority autonomy. These are powers we do not wish to use but, nevertheless, they are powers that any responsible government must maintain.

As to the amendment of the noble Lord, Lord Dixon-Smith—Amendment No. 39—it effectively says that where there is a referendum supporting what would otherwise be seen as an excessive council tax, that should exempt the local authority concerned from that provision. Milton Keynes was under the old regime, but under the new regime the Secretary of State will very strongly take into account the outcome of such a referendum.

But of course a referendum is not the only kind of consultation with local people; there may be other kinds. As your Lordships will know from other debates, all kinds of issues arise as to how a referendum is put—the questions, the options, the turn out and so on—before a decision is taken that will always result in non-intervention by the Secretary of State. However, I can assure the noble Lord that a referendum result would be taken very strongly into account, as would the results of other kinds of consultation with local people. We recognise that in most circumstances local people are best able to judge the precise level at which the tax would be raised and at which they would continue to elect their existing authority. However, we need those powers in extreme circumstances. The result of a referendum is only one aspect of how such extreme circumstances would be judged by the Secretary of State.

With that assurance that we would take such a result into account, I hope that the noble Lord will not pursue his amendment. I hope also that the noble Baroness will see fit not to pursue her amendment, although I understand her commitment to this dramatic change in local authority financial regimes.

Baroness Hamwee

My Lords, the Minister need not apologise for referring to my noble friends as Liberals, because we are, and, as it happens, the amendment is about democracy. The Minister said that central government have an obligation to protect the local taxpayer. Our response is to ask why, to what extent, and when. At this late hour I will not pursue the matter further. However, with regard to the referendum amendment, I think I am right in saying that the turnout in the Milton Keynes referendum was rather high. These powers are referred to as reserve powers. Yet again, the problem we are faced with is that there is nothing to say, "Oh, but the Secretary of State will use these powers only in the most extreme circumstances". We accept that they have not been used this year. There are very good political reasons for their not being used this year. This is somewhat the equivalent of Mandy Rice-Davies—he wouldn't, would he, not this year.

We may wish to come back to this point, knowing that there are fundamental differences between us which I do not think we will resolve. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 38 not moved.]

Schedule 1 [Limitation of Council Tax and Precepts]:

[Amendments Nos. 39 and 40 not moved.]

Clause 30 [Major precepting authorities: further regulation]:

Lord Dixon-Smith moved Amendment No. 41:

Page 17, line 17, after ("applies") insert ("for the purpose of eliminating any liability of a billing authority as a consequence of the limitation of council tax benefit subsidy resulting from a decision taken by a precepting authority").

The noble Lord said: My Lords, I have tabled Amendment No. 41 because in my view Clause 30 is outwith the Long Title of the Bill. Therefore, some explanation as to why it is here should appear within the Bill. The Long Title states:

"Make provision imposing on local and certain other authorities requirements relating to economy, efficiency and effectiveness; and to make provision for the regulation of council tax and precepts".

Clause 30 has nothing to do with economy, efficiency and effectiveness; nor does it have anything to do with the regulation of council tax precepts. It is in the Bill to put right a wrong. It is necessary because the Government have acted in haste and have thereby created an anomaly.

Until the Government introduced changes that have made Clause 30 necessary, all social security benefits were paid exclusively by the Exchequer. That is no longer the case. Council tax benefit, which 6.5 million people receive in England, Scotland and Wales, is dependent on the level of a locally determined tax. Because of that fact, the Government decided that they would pay council tax benefit only up to limits that they decided to determine. After that, if the council tax rises to a greater degree, that national benefit falls on the local taxpayer. That is a major change in the way in which the country does its business.

There may be plausible arguments as to why that change should have been made. But in making it, the Government have found that they have created an anomaly. Council tax benefit subsidy is paid to council tax billing authorities, which pass it on to the recipients. But council tax rises not exclusively at the behest of the decisions of the billing authorities. There are precepting authorities which precept on the billing authorities. If their precept rises too far, the power exists and can be used to hold up the subsidy. But because the subsidy is paid to the billing authority, that leaves the billing authority with a hole in its finances. Under the existing law there is no power under which the precepting authority can pay that deficit—it does not have the legal power to do so—when it has actually caused the problem. That is the reason why Clause 30 is in the Bill. This is a convenient place to put it. It is relevant in that it is a local government matter in part.

I am grateful to the Minister for meeting me earlier this week, during what has been a very busy time for him. We had some fruitful discussions. The noble Baroness, Lady Hamwee, was also present. I was grateful for the time and consideration that were given. I do not know whether we can come to a satisfactory conclusion to this matter, but I have still not seen a better one than the amendment that I have proposed.

There were suggestions that the matter might be dealt with by some clear explanation in the Explanatory Notes to the Bill. But having examined them further, I do not think that that would be satisfactory. Paragraph 1 carries with it a government health warning in the final sentence; namely, that the notes, do not form part of the Bill and have not been endorsed by Parliament". So to attempt to go down that route would not be satisfactory.

I am therefore looking for some provision, not merely by way of assurance but on the face of the Bill, that gives a sufficient explanation as to why this particular clause should be here. As I have said, it is my view that it is outwith the Long Title of the Bill. I beg to move.

Lord Whitty

My Lords, the noble Lord correctly describes the anomaly which required this clause to be included and the reasons behind it. Therefore, I believe that he recognises the need for this provision. His concern is that the legislation is not clear. I fear that much of our legislation may not be particularly clear and that lawyers need legal encyclopaedias, let alone the innovation of our Explanatory Notes to explain what was intended. The noble Lord dismisses the role of Explanatory Notes. However, it is important to recognise that this innovation was brought in in order to help the reader of new legislation. The notes will not alter the purport of the legislation but they will clarify what it is about. Since the noble Lord seeks to clarify the position rather than change the effect of what is already in the legislation. I would have thought that the Explanatory Notes met his objective.

At present paragraph 12 of the existing version of the Explanatory Notes seeks to explain that any shortfall in council tax benefit arising from large increases in council tax falls on the authority responsible rather than— if we do not have this change—solely on the billing authority. Any reader who needs clarification of Clause 30 can therefore look at the notes. I take the noble Lord's point that perhaps that explanation is not sufficient. However, I do not accept his point about the status of the notes. If he is concerned that the status of the notes is not sufficiently clear, or that the disavowal makes them inappropriate for the purposes of clarification, as distinct from the purposes of substantive powers or functions, there is a longstanding tradition that Hansard has some effect in clarifying the intent of the provision. Therefore, for the record we intend to revise paragraph 12 which, subject to minor drafting changes, would read along the following lines: In addition, the Bill will contain provisions to require major precepting authorities to make payments to their billing authorities. Under the Council Tax Benefit Subsidy Limitation Scheme, local authorities which make increases in council tax above a guideline set by the Secretary of State are required to make a contribution to the council tax benefit costs. Clause 30 is needed to ensure that, where a major precepting authority exceeds the guideline, it pays the contribution to its billing authority since they are responsible for the administration of council tax benefit".

I believe that that extends the explanation. It is now in Hansard and I hope, therefore, that if clarification is all that the noble Lord seeks—he has never said that he seeks anything else—that is extant and he will not pursue the amendment.

Lord Dixon-Smith

My Lords, I am most grateful to the Minister for his explanation, which I shall study carefully. He may well have answered every point that is of concern to me; if so. he will hear no more of the matter. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.