§ (" .—(1) For each financial year the London Pensions Fund Authority ("the LPFA") shall prepare—
- (a) a statement containing a draft budget for the LPFA. for that financial year and specifying the amount of any levy which the LPFA proposes to make on any class of authority in respect of that year by virtue of any levying bodies regulations; and
- (b) a statement of the LPFA's strategic plans and objectives for that financial year and the two following financial years;
§ (2) If—
- (a) the Mayor gives the LPFA any comments on a statement submitted in accordance with subsection (1)(a) above, and
- (b) those comments are given on or before 31st January immediately following the submission of the statement,
§ (3) In this section—
- "levying bodies regulations" means regulations (at the passing of this Act, the Levying Bodies (General) Regulations 1992)—
- (a) made under section 74(2) of the Local Government Finance Act 1988; and
- (b) having effect in relation to the LPFA by reason of a levying power which the LPFA would have, apart from section 117 of that Act;
- "levying power" means a power to make a levy conferred by or under any Act other than the Local Government Finance Act 1988 (at the passing of this Act, the power conferred by article 4 of the London Government Reorganisation (Pensions etc.) Order 1989);
- "net expenditure", in relation to the LPFA, means all expenditure and costs incurred by the LPFA less receipts (if any), but excluding—
- (a) any expenditure or costs payable out of, or
- (b) any receipts which fall to be credited to,
§ (4) This section has effect in relation to financial years beginning on or after 1st April 2001.").
§ The noble Lord said: My Lords, this amendment seeks to insert a new clause to complete the framework for fulfilling the commitment in the White Paper to bring the London Pensions Fund Authority (LPFA) under the control of a democratic London-wide authority. Clause 348 already transfers to the mayor the Secretary of State's functions in relation to appointments to the board of the LPFA, remuneration of board members and the provision of annual reports and other information. This new clause gives the mayor a role in commenting each year on the budget and strategic plans drawn up by that body. I regret that some further minor and consequential amendments to Part III of the Bill will need to be introduced at Third Reading in relation to the auditing and accounts of the LPFA. I apologise for the fact that those amendments are not ready today. I ask noble Lords to accept the principal clause set out in this amendment. I beg to move.
§ On Question, amendment agreed to.
§ Clause 351 [Transfers of property, rights or liabilities]:
§
Lord Whitty moved Amendments Nos. 564 to 565:
Page 192, line 26, leave out ("Corporation of London") and insert ("Common Council").
Page 192, line 29, at end insert—
("( ) any Minister of the Crown or government department;").
Page 192, line 35, leave out ("Corporation of London") and insert ("Common Council").
§ On Question, amendments agreed to.
140
§
Lord Whitty moved Amendment No. 565A:
Page 193, line 12, at end insert—
("( ) To the extent that an order under subsection (1) above makes provision for or in connection with the transfer of property, rights or liabilities to the London Development Agency from—
section 38 of the Regional Development Agencies Act 1998 (relief from Corporation Tax) shall apply in relation to the order as if it were a transfer scheme within the meaning of that section.").
§ The noble Lord said: My Lords, in moving Amendment No. 565A I should like to speak also to Amendments Nos. 565B, 570VA, 570WA, 570XA, 575ZA and 577AA. This group of amendments deal with the tax status of the functional bodies and are aimed at ensuring that transfers made under the Bill are tax neutral.
§ Amendment No. 570XA exempts TfL, the Metropolitan Police Authority and the London Fire and Emergency Planning Authority from paying income tax, corporation tax and capital gains tax. Amendments Nos. 565A and 565B make transfers from English Partnerships or the Commission for New Towns to the London Development Agency subject to appropriate relief from corporation tax under Section 38 of the Regional Development Agencies Act 1998. Amendment No. 575ZA provides for tax-neutral transfers between London Transport and TfL, and during any preceding reorganisation of LT, as well as the tax-neutral establishment of arrangements under the PPP. Amendments Nos. 570VA and 570WA exempt transfers undertaken by or under the Bill from stamp duty and stamp duty reserve tax.
§ This group of amendments will ensure that TfL, the Metropolitan Police Authority and the London Fire and Emergency Planning Authority have the same tax regime as local authorities and retain the existing tax status of their predecessor bodies. In the case of TfL, all of the activities that it inherits from its various predecessor bodies will be put in the same tax position as prior to those changes. The changes will also ensure that transfers made as a result of the Bill will not give rise to any tax charge. Any liability to tax arising from transfers made under the Bill will reduce the resources available to the GLA and the functional bodies to provide services. The approach I have set out avoids unnecessary cost to the public purse and tax demands that would be of benefit to no one. I beg to move.
§ Baroness HamweeMy Lords, perhaps I may ask two questions on Amendment No. 570XA. Subsection (2) refers to two sections of the different taxes Acts for the purpose of which the bodies set out will be treated as local authorities. Are there any tax provisions other than Section 519 of the Income and Corporation Taxes Act and Section 271 of the Taxation of Chargeable Gains Act from which local authorities are exempt? Are there any other exemptions for local authorities which do not apply to Transport for London, the MPA and the LFEPA?
Secondly, TfL is treated as a local authority for the purpose of those two enactments. What happens to its subsidiaries? Do the group provisions which apply 141 under the taxes Act mean that subsidiaries of TfL are also exempt; or will they be treated as normal commercial companies?
§ Lord WhittyMy Lords, as I understand the position in relation to subsidiary organisations, the pre-existing situation will not be altered; or in so far as it is altered it will be altered in relation to subsidiaries also. The alteration in the tax status of the Metropolitan Police Authority and the fire authority is not provided for under these clauses. The amendments provide for the two authorities to be exempt from paying tax in the same way that the Metropolitan Police were, and the London Fire and Civil Defence Authority is now. The receiver for the Metropolitan Police and the London Fire and Civil Defence Authority both fall within the ambit of the Income and Corporation Taxes Act and the Taxation of Chargeable Gains Act as major precepting authorities. They therefore do not pay tax in the normal sense of local authority trading accounts.
The subsidiaries would be subject to the normal tax arrangements on trading. But that situation is not altered by the changing status in these clauses. There is no need to change the tax status, for example, of the London Development Agency because the taxes Acts apply to that in the same way as they do to RDAs generally. It is only these two authorities for which we have to make explicit provision. Subsidiaries and everything else remain "as is".
§ Lord Dixon-SmithMy Lords, the issue of subsidiaries is difficult. I envisage developments under the Local Government Act in which best practice suggests that certain functions at present undertaken by one or other of those authorities might be better undertaken by a hived-off management buy-out of that part of the organisation which might then become a proper commercial operation. One needs a careful definition of where that boundary might lie. Can the Minister put my mind at rest so that the whole House can be satisfied that the definition is sufficiently clear and there will not be a problem with it at some point in the future?
§ Lord WhittyMy Lords, I may need to take further advice on this response. However, it seems to me that the additional provisions that the Local Government Act will make to look at the option of hiving off into another body will depend somewhat on the status of the other body. If it were a limited company, for example, either partially or jointly owned between local authorities, whether in London or anywhere else, that limited company would be subject to the normal taxation regimes. Other hybrid organisations which may be at arm's length to the local authority would be subject for most purposes to corporation tax. They would clearly be VAT registered and they would therefore be subject to most tax circumstances.
I do not think, therefore, that the situation in London would be in any sense significantly different from that of local authorities who are operating under the increased flexibility that we have to provide under the local government legislation.
142 The same would, of course, apply to TfL, which is not in quite the same position as other local authorities. If it hives off businesses into separate subsidiaries, it will effectively have to constitute them as separate companies, which will themselves be taxable.
So far as concerns VAT, which is perhaps the other interest here, the Government intend to bring the GLA, the Metropolitan Police, the London Fire and Emergency Planning Authority and TfL within the scope of Section 33 of the VAT Act by regulation. That would mean that those bodies would be able to recover VAT on their non-business activities in the same way as local authorities do more generally. The LDA will not be included and will not be able to recover VAT, which will result in a similar situation as far as concerns the London Development Agency to the provisions in the RDA Act for the other regional development agencies.
I hope that that goes some way towards clarifying a complex tax position. If noble Lords have any further queries, we can no doubt cover them either tonight or in writing.
§ On Question, amendment agreed to.
§ Clause 352 [Transfer Schemes]:
§
Lord Whitty moved Amendment No. 565B:
Page 193, line 37, at end insert—
("( ) To the extent that a scheme under subsection (1) or (2) above makes provision for or in connection with the transfer of property, rights or liabilities to the London Development Agency from—
section 38 of the Regional Development Agencies Act 1998 (relief from Corporation Tax) shall apply in relation to the scheme as if it were a transfer scheme within the meaning of that section.").
§ On Question, amendment agreed to.
§ Clause 354 [Pensions]:
§
Lord Whitty moved Amendments Nos. 566 and 566A:
Page 195, line 25, at end insert—
("( ) the Mayor or an Assembly member,").
Page 195, line 33, at end insert—
("( ) An order under subsection (1) above which makes provision by virtue of subsection (3)(b) above in relation to persons who are or have been employees of the Metropolitan Police Authority shall only be made—
§ On Question, amendments agreed to.
§ Clause 356 [Continuity]:
§
Lord Whitty moved Amendments Nos. 567 to 570:
Page 198, line 8, leave out ("done by") and insert ("made or done by or in relation to").
Page 198, line 12, leave out ("done by") and insert ("made or done by or in relation to").
Page 198, line 18, after ("anything") insert ("made or"). Page 198, line 20, after ("been") insert ("made or").
§ On Question, amendments agreed to.
143
§
Lord Whitty moved Amendment 570VA:
After Clause 356, insert the following new clause—