Local Government Bill

HL Deb 03 April 2003 vol 646 cc1515-59

5.48 p.m.

The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

My Lords, I beg to move that this Bill be now read a second time.

The main purpose of the Local Government Bill is to deliver those measures in the White Paper Strong Local Leadership—Quality Public Services which require primary legislation. This is of critical importance to local authorities; we are seeking to establish a new partnership between central and local government.

The Bill paves the way for a new form of localism where councils will be given substantial new freedoms to help them improve services. The removal of red tape and unnecessary bureaucracy will allow them to focus their efforts on those things which improve effective service delivery. Other provisions in the Bill will help councils to be more responsive to local needs and pressures and, indeed, to promote closer working between councils and other partners, including local business.

There has been substantial consultation on the contents of the Bill. It deals with various aspects of local government finance. The proposals in this respect were first set out in Modernising Local Government Finance: a Green Paper published in September 2000. These were then amended and further developed in the light of the many consultation responses we received and the outcome was set out in the White Paper.

We then published a draft Bill for consultation. This was considered by a Select Committee of the other House and attracted over 300 responses from local government and other stakeholders. In the light of those responses we made further changes to the content.

Apart from the formal consultation processes, we have also been keen to involve key stakeholders in the detailed development of our proposals. For instance, the detailed work on developing and preparing for the implementation of the new prudential system—which I shall discuss in a moment—in Part 1 of the Bill is being taken forward by a joint working group drawn from central and local government, CIPFA and the Audit Commission. Similarly the arrangements and draft guidance for Business Improvement Districts have been and will continue to be developed in consultation with the local government associations, the CBI and other organisations who represent business, and with town centre management bodies and rating professionals.

I refer at this point to the report published today of the Delegated Powers and Regulatory Reform Committee of your Lordships' House. It has reported on the Bill. I welcome the report and the committee's recognition that the complexity of the Bill is a necessary consequence of dealing with local government finance. We shall, of course, look very carefully at the committee's recommendations. We shall make a serious attempt to accommodate the recommendations in the Bill in due course.

I turn now to the main provisions of the Bill. Most of the content covers both England and Wales. The Welsh Assembly Government support the Bill and have welcomed its introduction.

I shall now seek to devote no more than two or three sentences to each of the eight parts of the Bill. Part 1 concerns capital finance and provides a new framework for local government capital investment. Authorities will have greater freedom to raise finance to buy, build and improve all kinds of property and infrastructure. The long-standing requirement for government borrowing consent will be swept away. Authorities will have power to borrow without government approval if it is prudent to do so. They will simply have to satisfy themselves that they can pay the debt out of their own revenues. There are reserve powers for government to step in, but in the light of consultation, the use of these has been circumscribed so that they can be used only in pre-defined circumstances. The new prudential system is a very substantial freedom, which will be available to all authorities, and local government wants to see the Bill enacted in time for the new system to take effect from the new financial year in April 2004, rather than that which is just about to commence.

Part 2 relates to financial management. The delivery of high quality public services depends on sound financial management. Good authorities already have effective processes in place to manage and monitor their budgets effectively and have adequate provision to deal with unexpected circumstances. Part 2 will enshrine in law some basic processes of sound budgetary management. That will ensure that authorities which experience problems can be assisted.

Part 3 refers to grants. Various mechanisms to make grants are provided for in Part 3. These include a wide-ranging power to give greater flexibility in making grants to local authorities for any purpose. This new power will allow government to pay grants without imposing undue conditions, thereby allowing more grants to be delivered as unring-fenced funding. That does not give Ministers carte blanche to pay out what they want. Ministers can allocate grants only where they have the authority of Parliament to do so.

Part 4 concerns business improvement districts. I reluctantly use the acronym BIDs although I shall try to avoid using jargon. Part 4 will legislate for business improvement districts. BIDs are partnership arrangements through which local business communities and local authorities can take forward schemes which will benefit the local community, subject to the agreement of ratepayers. Projects could involve additional services such as improvements to the quality of the local environment, measures to remove graffiti more quickly or improvements to parks and open spaces among others. There are already good examples of councils and businesses working together to deliver benefits for their areas. Voluntary regeneration and town centre management schemes are thriving and these will provide a strong basis for the new BID schemes to develop once the legislation is in place.

Part 5 concerns business rates. There are various measures in Part 5 that will change the non-domestic rating system. For example, small business rate relief will benefit small firms occupying single premises with a rateable value of under £8,000. This will significantly reduce the overheads of those businesses.

Another provision in Part 5 will enable the Secretary of State to put in place a scheme to allow local retention of an element of non-domestic rates. This will provide a financial incentive for local authorities and business to work in partnership to maximise local economic growth and regeneration.

Part 6 relates to council tax. Part 6 will update council tax —that is not a euphemism—to ensure that local people contribute a fair share towards local public services. A fixed 10-year cycle of revaluation and varying the number of bands will help to do this. I ought to make clear that the Bill does not include any provision for regional council tax banding. That is not necessary as that provision is already included in the Local Government Finance Act 1992. I must make it absolutely clear that we have no plans to use the power in the 1992 Act.

Under Part 6 local authorities will have very wide discretion to grant discounts and exemptions from council tax where they consider this appropriate. Authorities will thus be free to take decisions locally in ways that best reflect the needs and circumstances of their local communities.

Part 7 is a short part dealing with housing finance. In 1999 we announced the introduction of resource accounting into the Housing Revenue Account (HRA). Part 7 of the Bill completes this, as well as removing a perceived obstacle to our social rent reforms.

We are also placing local housing strategies on a statutory footing and giving authorities the freedom to streamline their housing-related plans into a single document.

Finally, Part 8—I am aware that there are nine parts, but the final one does not count as it comprises a technical issue—deals with non-financial provisions. Some people think that local government finance is a wonderful thing but usually their eyes glaze over as they say that. This is only the Second Reading of the Bill and not the time to go into detail in that regard. Some of my colleagues in another place believe that local government finance is the reason for their existence. That does not apply to me, which is why Part 8 is such a joy to behold. Part 8 contains the non-finance provisions and also gives substantial freedoms to local authorities. I shall touch on just a few examples.

Innovation will be encouraged through the power for all best value authorities to charge for discretionary services. Better-performing councils will be empowered to trade across the services they can provide. An express power will be created to give local authorities the freedom to hold advisory polls on the well-being of their communities and any matter relating to the services for which they are responsible. Councils will be allowed to retain proceeds from litter and dog-fouling penalties and spend these on local environmental improvements, and high performers will be able to use the income for any purpose.

Part 8 also includes a provision to repeal Section 19 of the Fire Services Act 1947. The Bill will remove the requirement for fire authorities to seek approval of the Secretary of State before making any reduction, no matter how minor or trivial, in the number of firefighting posts or appliances or before the closure of fire stations. The Bill is about extending freedoms and flexibilities to local authorities, and we believe that in a modern fire service it is not appropriate for the Secretary of State to take these decisions. They are much better taken at local level. I deviate dangerously now. The only fire station that closed in my former constituency was replaced by the first community fire station in the country but it still had to go through the ridiculous process that I mentioned.

Part 8 also deals with what is known as Section 28. During consideration of the Bill in another place, an amendment was made to repeal Section 2A of the Local Government Act 1986, more commonly known as Section 28 because the provision was implemented by Section 28 of the Local Government Act 1988. Those noble Lords who have done their homework will be aware of this, but I have to warn the House that I do not go along with the folklore related to the matter. I say that because I was present on the night that the section was put into the 1988 Local Government Bill. So I know exactly what was said, what was intended and who voted for what, and I have recently refreshed my memory.

Section 28 is a deeply confusing piece of legislation; indeed, it is more confusing today even than it was in 1988. Its aim, of course, is to prohibit the promotion of homosexuality by local authorities. The Government have made their position on Section 28 abundantly clear. It is an unnecessary piece of legislation. However, concerns remain, and I hope that during the course of our deliberations I shall be able to address them. Concerns have been expressed that repeal could somehow have an effect on what is taught to schoolchildren. One point needs to be made crystal clear to the House: the repeal of Section 28 will have no effect whatever on what is taught in schools. I shall repeat that: the repeal of Section 28 will have no effect whatever on what is taught in schools. Let there be no doubt that the Government's position is that children in schools should be protected from inappropriate materials and receive sex and relationships education that recognises the importance of marriage and stable relationships.

Since Section 28 was last debated in your Lordships' House, the Learning and Skills Act 2000 has been passed which gives effect to the Government's policies and establishes a very robust framework for sex and relationships education. In particular, local authorities have no role in determining what is taught in schools. Section 28 plays no part in that framework. The matter is governed by the Education Act 1996 as amended in 2000, and therefore the repeal of Section 28 would not alter the framework in any way.

In the Government's view it is time for repeal. This view received support from all parties in another place. I understand that repeal was endorsed on Report by a majority of five to one.

The Bill as a whole will deliver significant freedoms and flexibilities to local government and will promote and facilitate real improvement in the way that services are delivered to local communities. It is welcomed by local government and business alike, although I accept that noble Lords will want to explore, scrutinise and debate certain areas. It is absolutely right that that should be so. I beg to move.

6.3 p.m.

Baroness Hanham

My Lords, I thank the Minister for being so commendably succinct. I was going to say "brief", but I think the word "succinct" is more appropriate and polite. I cannot promise to be quite as succinct, but I shall certainly try.

While the Regional Assemblies (Referendum) Bill could rightly be described as predicating a mish-mash of government, to which I have referred before, this Bill is a true pot-pourri, even if it is not particularly sweet-smelling. It is a highly technical concoction with some good and some very poor parts. Covering every aspect of local government from financial administration and accountability to council tax discounts and bands, it has wide implications.

Having added a number of clauses on Report in another place, I wonder whether the Government intend to add further to the Bill during its progress through this House. I ask only because suggestions were made in the weekend press that they might seek to include an environmental policy, an initiative from Mr Meacher regarding charging residents who do not conform sufficiently to separating their refuse for recycling. Perhaps the Minister can address this very important matter when he replies.

The Government have trumpeted their belief that the Bill brings greater flexibilities and freedoms for local authorities. Indeed, the Minister has just repeated that. It seeks to reduce red tape and, for high-performing councils, it offers greater scope for innovation. Local government will welcome that, and here I declare an interest as a member of a local authority. However, local government would not wish such opportunities to be available only to the golden few. As time goes on they should be made available to the whole of local government.

What does the Bill amount to? Councils are to be allowed to fund major improvements and developments through the "prudential" borrowing system, so long as they can afford to service the debt. We do not know yet whether that will carry with it a compensating revenue commitment from the Government. Perhaps it is a point we shall be able to clarify with the Minister at an early stage. The principle of the freedom is welcome. But why, having gone that far, do the Government then decide to demand that capital receipts from the sale of council housing—or a high percentage of them—are to be paid to the centre for redistribution? That will create a housing pool which will leave in the Minister's hands the reallocation of those receipts for housing purposes, but against what criteria?

In the sum of things, the £1.6 billion which may be raised annually from this source is minuscule in comparison with the enormous investment that will be required to meet the commitments already made by the Deputy Prime Minister in his White Paper on sustainable communities. Furthermore, it will deplete the independent reserve that any local authority might have built up to support a housing initiative in its own area. It would be fair to say that, in the past, such a policy crippled housing authorities and prevented much-needed capital expenditure on renovation and renewal.

It is ironic that, under these clauses, a council which is debt free as a result of disposing of its housing stock and passing most of the proceeds on to the Government could, under the terms of Clause 41, find itself contributing indirectly to reducing or relieving the debt of other, possibly less prudent councils, by way of the Secretary of State making a payment to the Public Works Loan Commissioners on their behalf from the pool.

The philosophy of redistribution is continued in the proposals to scoop up the surpluses from good, well-run housing revenue accounts and pool those so that they can be transferred to authorities which have a deficit on their accounts. We see it, too, in the measures to enable councils to levy a full rate on empty properties, but not to keep the resulting revenue. Those proposals alone could very well act as a huge disincentive to local authorities considering whether to embark on the policy. We see little evidence of freedom or flexibility and we will wish to consider the proposals in detail in Committee.

We shall want to do the same with the Government's initiative to allow local authorities to retain some or all of the growth in business rate revenue. New Clause 71 received little scrutiny in another place, although it was broadly welcomed by my honourable friend Mr Hammond. But how welcome it is will depend on the chains and shackles which could limit what it may be used for. We shall be seeking much greater clarity on this whole matter. Can the Minister confirm that wide consultation among businesses, local authorities and professional bodies will take place on the policy? Furthermore, will that consultation return to this House and to Parliament?

We shall also wish to probe further the Government's proposals for business improvement districts. It is a welcome sign of interest and commitment when businesses wish to become involved in financing a local initiative for improvement. As the Minister remarked, it is not unknown. Indeed, the White Paper makes it clear that already there are many areas where both landowners and business occupiers have joined together and resolved to contribute to a local authority plan to enhance or renovate their area. But, as the Minister also pointed out, those have been voluntary schemes. Business improvement districts will result from a vote by non-domestic ratepayers, which will become mandatory on all businesses in the area. As the Bill stands at present, that vote will be decided on a simple majority and then weighted for a majority based on the rateable values of the hereditaments.

Concerns have been expressed by small businesses—in particular the Federation of Small Businesses, from whom I have heard on this matter—that a two-thirds majority would be more appropriate to safeguard the interests of small businesses. That point was also referred to in the Select Committee report. We shall press this matter further in Committee.

As only non-domestic ratepayers are to be involved—the occupants of premises—the major landowners will not be involved in the electoral decisions on these schemes. Further consideration needs to be given as to how they become involved, at least by convention if not statutorily. Also, it is not clear how the local community other than the business community will be involved in the development and approval of any plans. The local authority will have to play a major part in any plans and partnerships, but we believe that the Bill should provide for the views of the local community to be sought on any proposals.

I turn briefly to the provisions for rate relief for small businesses. Although the principle is welcomed, there are questions as to whether the threshold of rateable values of under £8,000 is too low. We will wish to consider suggestions that have been made to us that that should be increased to at least £10,000.

There are a number of provisions relating to rates and council tax, not all of which I want to go into now. Subject to understanding the regulations, we would be broadly in favour of those regarding the local retention of non-domestic rates. On the face of it, that would give a local authority a larger local revenue base, as was confirmed by the Minister. However, the desirability of that will depend on the constraints put on it by legislation. It would be helpful if the Minister were able to reassure us that the regulations referred to in the Bill would be available before Committee, so that we might have an opportunity to consider them at the same time.

We are not likely to be so accepting of the power to increase the number of council tax bands. Clause 79 is very wide in allowing the Secretary of State, to make provision for a different number of valuation bands". How many and why? The glorious simplicity of the council tax is that it is partly based on property and partly on individual tax. The value of the property is meant to be only a part of the whole, not the deciding factor.

When the council tax was introduced, it was understood that the bands were a device only to ensure that those in poorer areas of housing did not pay the same as those in more affluent areas. However, it also recognised that those in better-off housing might be impoverished, and those in poorer housing might in fact be quite well off. That is still the situation. The intention was that it should be simple to understand, and in general I believe that the relationship between the limited number of bands is comprehensible. The danger lies in the changing value of properties in various parts of the country. Those in the south-east of England are well in excess of those in the north. for example. Therefore, the burden of council tax could be once again shifted to those in this part of the country.

We can understand the need to update the property values in the interest of accuracy, but the adding of further bands makes that look as though the Government might be intending to turn council tax into a property wealth tax, and without further parliamentary scrutiny. We would resist that approach. We all know that council tax bills have already risen enormously under this Government and that that is well recognised by those paying them. Further rises caused by bureaucratic meddling will surely not be very popular.

One element of the Bill—that relating to attributing performance categories of local authorities—has already been implemented despite the fact that this legislation, which authorises it, has not been passed. Most authorities have now been assessed and placed in one of four categories. That seems to be an inescapable process now to release the best authorities from the plethora of inspection regimes, and to provide at least a modicum of relief from continual government involvement in local government affairs.

That relief, however, does not necessarily apply to other measures relating to financial administration generally considered in local government to be unnecessary, particularly the statutory requirements for the monitoring of budgets and for the Secretary of State to set the level of reserves. I hear what the Minister says about that being intended only for use in councils where there are difficulties, but once legislation is in place it is likely to be used.

There are also some concerns around the general power of the Secretary of State to provide grants to particular local authorities. Although that is suggested as being a mechanism to circumvent the need for specific grants, there is a much greater possibility—it was heavily denied by the Minister—that that could result in the Secretary of State having far too much power of allocation to particular authorities.

There are two further matters. I do not intend to comment in detail on them now, but they may be addressed during the course of the debate and will form part of our deliberations at later stages. They are the provisions on the repeal of Section 28 of the Local Government Act 1986, and the new Clause 120 regarding the Fire Services Act.

With regard to the first, if the Government continue to include Clause 121—it resulted from an amendment in another place—in the Bill to abolish Section 28 of the 1986 Act, I confirm that, if there were to be a vote, on our side it would be a free vote. We recognise that that is a very sensitive issue, and that there are strongly held views on both sides, some of which may well be expressed today. However, Parliament's job must be to ensure that children and young people are protected from unsuitable material and information, either supplied or promoted to them under any educational guise.

We shall therefore press the views put forward by our colleagues in another place. In particular, we will table amendments to ensure that the existing departmental guidelines on sex and relationship education are strengthened and given the force of law, that rights are given to parents to force a ballot on the acceptability to parents of any sex-education material being used, and to give parents the option for their children not to attend sex relationship classes. Over and above that, we will put forward any other matters which in Committee we consider appropriate in that regard.

Clause 120 repeals Section 19 of the Fire Services Act. That arises from the Bain report, as the Minister said. It was drafted before it was considered that the fire Bill, which has just been laid before Parliament and which would undo much of what is being proposed in this Bill in relation to the devolving to local level decisions about the employment of fire and emergency cover resources, might be necessary. In the light of that Bill, it is to be hoped that rational decisions are made by the lire service on the pay deal before it is necessary either to implement it or to consider further the provisions. I imagine that there might have to be changes, subject to the eventual outcome of those decisions.

Clauses 102 and 103 refer to staff' transfer matters. Essentially, they implement the statutory guidance on best value and performance, which is a code of practice on workforce matters in local authority service contracts. As they stand, the clauses effectively undermine the whole rationale of local authorities seeking to externalise any service through a contract. They imply that each contract will have to include that staff must be employed on standard local authority terms and conditions, as the contract must treat them as though TUPE applies. Whether or not local authority staff are transferred, Clause 102(1)(a) makes it clear that directions can be issued to that effect. Under those circumstances, we will probe the clauses much further.

Finally, in another place my honourable friend Philip Hammond put forward an amendment to bring body-piercing establishments under a licensing regime. I understand from him that the Minister, Mr Raynsford, was inclined to accept the principle but felt that the amendment needed some attention to make it legally acceptable and enforceable. Does the Minister have any news on that, so that we can decide whether it will be necessary for us to reintroduce that amendment in Committee, or whether the Government will be willing to do so themselves?

There is much to be done and we look forward to the next stages of this legislation, and the considerable debate it is likely to engender.

6.19 p.m.

Baroness Hamwee

My Lords. during the recent debate on the Regional Assemblies (Preparations) Bill, I referred to local government as being one of the "spheres" rather than one of the "tiers" of government. The noble Earl, Lord Onslow, used a synonym to indicate that he thought that that was rubbish. I will try to maintain the fiction of being ladylike—at any rate, within the Chamber—so I shall not repeat the synonym but I stick by the term and my point. I referred to "spheres" of government because we are not discussing a hierarchy of importance—each level of government and each part of government are important.

I must declare an interest as a Member of the London Assembly and currently its chair. In many ways my years as a London borough councillor were the most satisfying of any of the political jobs that I have done. For a time, at any rate, it was the most hands-on job. There has been much debate about whether the Bill is a centralising or decentralising measure. I start one stage further back: is it likely to increase or decrease participation in the political process?

Civic engagement can take many forms: voting, of course; belonging to a neighbourhood committee; being a school governor and so on. Many have executive and scrutiny components. One means of engagement is as a councillor. That job must carry its own job satisfaction—that of doing, not just of being. I can see increasingly the strains on colleagues—members of a number of authorities—and officers. Because of the controls with which they must battle, those strains are greater than those that applied for some of the time that I was a councillor.

Therefore, to the extent to which the Bill decentralises power, it is welcome. However, beauty being somewhat in the eye of the beholder, we on these Benches do not see all of the provisions as being quite as decentralising as do the Government.

I acknowledge that much of the Bill is about returning autonomy to local authorities. Well, some autonomy is returned to some local authorities. It is extraordinary that our constitutional and legislative history mean that freedom is handed down. "Earned autonomy", as the phrase goes, is a contradiction in terms.

When the Minister introduced the Bill in the Commons on 7th January, he said that there were "two key themes". The first was, the need to devolve power and responsibility to local authorities. The second is the importance of driving up standards of delivery in every local authority area. The two arc inextricably linked".— [Official Report, Commons, 7/1/03: col. 45.] Yes, my Lords, but the Government sometimes seem to apply the second theme as a sine qua non. We believe that autonomy of itself is a driver of good service delivery because it enables services to be designed for local circumstances. Of course things sometimes go wrong, but there must be the freedom to make mistakes.

I must say that I, the Greater London Authority and the Mayor—I do not speak for him that often but I believe that I do so in this regard—remain to be convinced of the need for new statutory provisions in respect of minimum reserves, reports on the robustness of estimates, budgetary monitoring and so on. An authority already has to have regard to statutory budget-setting provisions covering reserves, proper financial administration, relevant chief finance officer advice, CIPFA guidance, external audit reports and so on. Are central government best placed to judge minimum reserves? For instance—I have grappled with this topic over the past three years—central government made no provision for reserves when they set up the Metropolitan Police Authority and Transport for London. In London, we wait to see whether our fears about the reserves that are available to London Underground are confirmed when it is handed over to Transport for London.

The ways in which borrowing is controlled will exercise us in forthcoming stages. Defining long-term liabilities and just what is within the public sector borrowing requirement will not be a dry, technical exercise. I shall certainly try not to let my eyes glaze over about that. I sometimes believe that this is another case of "Through the Looking-Glass" and Humpty-Dumpty; it involves saying, "When I use a word, it means just what I choose it to mean. When I refer to the public sector borrowing requirement, it means what I choose it to mean". I share the concerns that have been expressed that with borrowing controls loosened, there is always the danger that the Treasury (on whose grants so much is dependent for so long) will not adequately support local government.

My noble friend Lady Maddock will deal more extensively with the housing provisions of the Bill. I noticed that the Minister in the Commons referred to authorities with a genuine need to spend on housing investment being able to look forward to a new framework with confidence. Surely every authority has problems housing numbers of people who are in need of decent, affordable housing. In other words, they have problems with numbers and/or—it is often a case of "and"—housing conditions. Is there an authority without genuine need?

Many issues are raised with regard to pooling capital receipts, as the noble Baroness, Lady Hanham, said. Is it realistic to expect local authorities to dispose of assets—to the extent that they have any—and to pool receipts, given that the regimes for local government finance appear to change so fast?

I turn to council tax. There are no euphemisms about that. I noticed that Members in the Commons referred to progressive council tax on the one hand and regressive council tax on the other. Perhaps I may leave that with an exclamation mark!

We will of course consider the issue of banding. Mr Raynsford said that much could happen by 2005. It is important in our view that the rebanding is robust enough for the medium term at least, whatever happens by 2005.

We welcome the powers to trade and charge, but the dependency on CPA performance raises a number of questions in my mind. One of them—it is perhaps too technical for tonight—is about what happens if the performance assessment of an authority changes during the course of the contract. What is the position of the other authority? That involves the whole issue of vires. Some of us lived through the era of the Hammersmith swaps case.

The honourable Member for Denton and Reddish, who is the joint chairman of the Select Committee, talked bluntly at Second Reading in another place about the performance of those assessing performance. He said that some Audit Commission decisions were extremely subjective and that some people from the Audit Commission who went to local authorities did not have a clue about what is going on. That will ring true to many. The most telling approval of the comprehensive performance assessment regime would be if central government departments submitted themselves to it.

We have new statutory provisions, not a tax, in the business improvement district (BID) provisions. I wish that there was more time in which to discuss new forms of taxation generally. I refer for a moment to the desirability of examining the enabling of development, particularly of infrastructure, through new forms of taxation. It is obvious in London that businesses that happen to be on the route of the Jubilee Line extension have benefited significantly. Being able to harness—to tax— those who benefit from, for example, CrossRail—we hope to see that big new development—could enable that scheme to proceed.

On BIDs, I am delighted that the noble Lord, Lord Jenkin of Roding, is involving himself with the Bill, given his hard work on that issue. He has previously raised it in the House. He will want to consider the role of owners as well as occupiers of property. I make it clear that I am an enthusiast for the scheme; I want to make it work. That includes, among other things, wanting to see the possibility of securitising an income stream, enabling capital to be released and invested in local schemes. However, I confess to being slightly troubled by the requirement of only a simple majority—50 per cent plus one—to impose what is, after all, a levy on those who may have voted against. I accept that there is a double lock of those numbers and rateable values.

I am aware of the concern that such a scheme may, taken together with the business rate, appear a "double whammy", especially to small businesses. I thought that the RICS in that very helpful briefing hit the nail on the head, saying that business rates policies, as a category, are simply too complicated to be transparent to the person—in this case, the business—which pays them.

Perhaps I may raise one small financial matter. I hope that we can find time to deal with it and a spot for it in the Bill. I am going very much from a major to a minor issue, but this is something which exercises councillors. I refer to the threshold for registration of gifts and hospitality, which is £25 for councillors as against £125 for MPs. That is almost unworkably low in London and the South East. It is topical for me because yesterday the GLA Standards Committee found itself looking at embarrassingly different assessments by a number of us of the value of a dinner which several of us had attended in the City. More importantly, the independent Member, who is a very senior Member, described the exercise of such a low limit as "time wasting".

Bills such as this are often the repository for disconnected provisions. One of those here is to enable polls for local elections to be combined with those for European parliamentary elections. My personal view is that the convenience of electors overrides other considerations, but whatever the decision I beg the Government to let us have it soon to enable planning to take place.

One other disconnected but hugely important provision is the repeal of the so-called Section 28. I expect that some speakers today will concentrate only on that. As has been said by the Minister, not only is it a sensible deregulation of redundant legislation, but it is much, much more. Honourable Members in another place were careful to base their arguments on the redundancy issue. For me, the repeal of Section 28 is hugely symbolic and I welcome it enormously. The suggestion that I have heard—that repeal of the section is designed to stop councils spending money on gay people—is one which would not, I think, be made about any other group.

We shall examine the Bill not only in its own terms but also in the context of local government structures as they now are. The Government are letting go somewhat. They designed the executive/scrutiny split, and we shall ask what role they now see for the scrutineer in areas which are the subject of the Bill

There is a great deal to do. Tonight I have not even been able to start on the issues as they affect Wales or matters such as the benefits of charities extending to community amateur sports clubs. I promised that I would mention that. There is a great deal to welcome in the Bill but, sadly, not everything.

6.33 p.m.

The Lord Bishop of Guildford

My Lords, first, I welcome the Bill and thank the Minister for his introduction, which was enormously helpful. As I have said before in this House, bishops bring to the House their own immediate experience of local communities. In my own case I and my colleagues have close dealings with two county councils and a number of boroughs and districts. The churches and faith communities have strong and day-to-day relationships with colleagues who represent the political and public needs of our local communities. Whatever we can do in this place to strengthen confidence and pride in the public service offered by all involved in local government, it is our duty to do. So, I welcome the Bill.

The principle of subsidiarity, which is very much rooted in the Bill, is vital to the health of our politics and our service. We should always do all we can as close as we can to local networks and communities, which are the foundation of a healthy and democratic society.

I hope that the Minister will forgive me for not, like the previous speakers, going through every area of the Bill. I want to comment on two issues, on one of which I am sure noble Lords would expect a bishop to comment. Clearly, I need to comment on the repeal of Section 28. But in both the issues that I want to raise we need to hold on to the principle of seeking to resist centralising power and encouraging local trust and responsibility in local authorities.

That is why I believe this is a good moment to address the vexed issue of Section 28. There has been a great deal of debate upon it. As Members of the House will know, I have always found this particular section unhelpful. It is both a confusing piece of law and discriminatory. But others of my colleagues have taken a different view and quite a number of people, even though they have been concerned about the content of this legislation, have felt that to repeal it might be giving all the wrong signals and messages. So there has been a variety of perspectives around this and we need to be sensitive to all of them.

However, all of us on these Benches, and I am sure more widely, welcome what I believe to be an argument that we are beginning to win; that is, that marriage is a public good for the health of our whole society, not just a good for those who enter that institution. It is good for people who are gay or straight, single, married, divorced, or in reconstituted families. Whatever styles of life people find themselves to be in, marriage is an institution that is a public good; we would say a gift of God to the human community. If marriage is not in good repair in our society, the whole community suffers. So we have a collective responsibility.

I was grateful for the Minister's comments on the learning and skills Bill contribution to all of this. My good friend, the right reverend Prelate the Bishop of Blackburn, made a very important contribution chairing the Church of England's Board of Education in encouraging the use of that Bill to provide in this area. Perhaps I may remind the House of the guidance on sex and relationship education from the Secretary of State, which begins: (1)The Secretary of State must issue guidance designed to secure … the following general objectives … (2) The general objectives are that the pupils—

1. (a) learn about the nature of marriage …
2. (b) learn the significance of marriage and stable relationships as key building blocks of community and society;
3. (c) learn to respect themselves and others".

It goes on in that vein.

I am delighted to hear the Minister re-affirm the Government's commitment to that guidance. In terms of people who will be anxious about such matters, without putting things on the face of the Bill it would be good if the Government and all of us kept such matters under review so that the liberties that are given to local authorities are used well and that our gay and lesbian citizens who feel themselves to have been discriminated against in this piece of legislation are rescued from that feeling, which I think we have a public duty to do, and the community as a whole are satisfied that abuse of that new liberty will not take place.

That, to my mind, is the good news. My second issue is a little more troubling. As a bishop in the south of England, I am not at all convinced by the Bill's provision concerning the use of capital receipts from housing sales by local authorities. Clause 11(2)(b) is the one which causes concern. As I understand it—I look forward to the Government's response to this—the effect of this clause is to pool resources from local authority housing sales and redistribute them across the country. I suggest that that is wrong in principle. I shall turn to the practice in a moment. This may be seen as a piece of Government taxation by the backdoor. The Government are taking the resources that thus far have seemed to be the responsibility of local communities and are putting them elsewhere. They purport to tax the rich to meet the needs of the poor. We all support the need to ensure an adequate distribution of resources in our society so that distressed communities across the country are able to meet housing needs, but not by another attack—dare I suggest—on the principle of local accountability for local resources. It seems to me that this provision goes against the spirit of the rest of the Bill.

I suspect that the attack on principle goes further than that, because the people who are to have their resources raided are those who manage the resources particularly efficiently and well. So the measure punishes efficiency improvements in local government and debt-free local authorities will suffer the most. Thirty-two local authorities in the south of England of all political persuasions are debt free and all are at risk under this provision. An analogy put to me was that it is a little like a gardener who, seeking to kill off a few weeds, sprays weed killer across the whole of the flower bed. Flourishing work will suffer.

I turn to the practice. I know that it has not escaped the Government's attention that we have a housing problem in the south of England. It may come as a surprise to some that even in the leafy suburbs of Surrey and north-east. Hampshire, which is my part of the country, we have significant housing and homelessness problems. In the present housing market, in the face of homelessness local authorities have to provide for growing numbers of people who are on their lists.

At present Waverley council, for example—one of those debt-free authorities that has a principled policy of using all its housing receipts for housing provision—has over 1,800 households on its housing needs register, 450 of whom are tenants of the council or housing associations in need of larger accommodation and 134 of whom are homeless households in temporary accommodation, nine of whom are in bed and breakfast accommodation. In 2001–02 the council rehoused 354 such families and households in council properties and 38 in housing association properties. Those figures fell to 271 and 31 the following year.

I understand—the Minister can comment on this—that should this piece of legislation come onto statute law, the Government propose to phase it in over three years and at the end of that period only 25 per cent of receipts will be left in the hands of local authorities. I think that is bad politics and a bad principle. I wonder whether we can encourage the Government to think again about it. Maybe we need a provision to ensure by statute that the moneys received by local authorities from housing sales are used for housing purposes. Maybe there is another way of dealing with the matter.

As I said earlier, there is much that we welcome in the Bill, not least its consistent approach across the face of the Bill in seeking to liberate and to trust local communities with their own affairs. That is vital for the flourishing of local government which has not had a good history in recent years. I look forward to seeing this measure proceed, with some improvements that your Lordships will bring to the Bill. I also look forward to the rest of the debate.

6.44 p.m.

Lord Alli

My Lords, I wish to concentrate my comments on the new freedoms for local councils that will help to deliver improved services, on the new capital finance systems, and on the issues relating to capital receipts. Of course, I jest! Like a moth to a flame, I am drawn to the issue of the repeal of Section 28 contained in Clause 121.

The last time we debated Section 28 I react out a letter from a 15 year-old boy. It said, I am very depressed, and very alone. I used to be a perfect pupil getting high credit marks, but because of the bullying my marks have fallen. I can't tell anyone. I wish I was dead, just to have some peace. I am so tired—tired of living and tired of this so called 'life'. Because of the stress I can hardly eat and I have started taking lots of painkillers. Nobody knows I am gay. I have no-one to turn to and have no support from anyone. My life has been nothing but a bad headache. Some say we are all free people but we must question: are we really free? Is it so wrong being gay? To any caring, loving individual ones natural instinct is to reassure that young man that being gay is not wrong; that he has a fulfilling life ahead of him and that he is valued as an equal member of our society. People ask me why Section 28 is important. Section 28 denies that reassurance to such an individual at a time when he needs it most. It creates confusion across a whole range of services and organisations.

The opponents of the repeal of Section 28 talk about children. Let us face that issue head on because I am tired of this debate being hijacked by people who claim to be serving the interests of children. I say that not just because I believe that Section 28 has always been a law fashioned in bigotry, but also because the wider context in which Section 28 sits and the management of the policies that it was meant to regulate have been changed, updated and are now out of date.

As a result, Section 28 is a law that is now completely redundant. That fact alone should be enough to support its repeal. Opponents to the repeal of Section 28 know as well as I that we already have a substantial structure of protection for our children. They know as well as I that there are guidelines already existing in relation to sex and health education in Section 430 of the 1996 Act. They know as well as I that there are guidelines and procedures built in to the role of school governors and parent governors ensuring that the will of the parents finds its place in the provision of sex education. They know as well as I that there is already a statutory basis in education law to protect children from inappropriate material. They know as well as I that this provision does nothing to protect a child in a school from inappropriate teaching or training materials. And they know as well as I that this is a piece of legislation fashioned out of prejudice and sustained by bigotry.

Section 28 has long lost its place in rational debate. It has become, as the noble Baroness, Lady Hamwee, said, symbolic. Times are a-changing. I know that this House is moving on this issue and I do not want us to change Section 28 because of a threat from another place. It is worth remembering that another place has voted repeatedly on this issue. Its votes inserted Clause 121 into the Bill and those votes were free votes, a most important currency.

To change Section 28 by consent of this House is my objective. I say to the party opposite, it has an opportunity to lead public opinion through this complex area. I want no political capital out of Section 28. The arguments are well rehearsed and I hope that when we finally come to debate whatever amendment emerges to retain Section 28 that noble Lords in all parts of the House, including the party opposite and the Lords spiritual, will find it possible once and for all to repeal a piece of legislation for which the time has passed. I wish the Bill well and I shall return to Clause 121 at a more appropriate stage.

Forgive me for raising this issue when this Bill has so many other important sections that should be addressed. I hope that your Lordships will understand that I felt I had to voice my concerns in this debate. I look forward to what I am sure will be an interesting debate—I hope the last of its kind in relation to Section 28.

6.49 p.m.

Lord Jenkin of Roding

My Lords, I hope that the noble Lord, Lord Alli, will forgive me if I do not follow him into that debate at this stage. I wish to confine my remarks to Part 4 of the Bill which introduces the business improvement districts. The noble Lord, Lord Rooker, called them BIDs; I suspect that most people will do so.

I begin with a brief description of what BIDs are and how they work. The Outline of Proposals states: The Bill provides a statutory scheme enabling local businesses to initiate a process by which, if there is sufficient demand in their locality, a business improvement district ("BID") can be set up. Demand is to be tested by a vote amongst the business ratepayers of the area concerned, overseen by the local authority. The scheme proposed in the Bill does not purport to be a model for all circumstances. Rather, it offers one tool through which some town or industrial improvement projects might be pursued … The business plan will be carried out by a company formed for the purpose. The company will be financed by a charge paid by the business ratepayers within the area of the BID unless the scheme exempts them. That is not a statement on Part 4 of the Bill. It is a statement about the Business Improvement Districts Bill, a Private Member's Bill which I introduced into the House over five years ago. It had its Second reading on 26th November 1997 and after full Committee and Report stages was read a third time and sent to another place on 10th March 1998; and that is where it stopped. So here we are, five years later and—if I may be guilty of a bad pun—it is BID time again. The Government's Bill is not exactly the same as mine but perhaps the House will recognise the present Bill's parentage. The noble Lord, Lord Rooker, can reassure the Deputy Prime Minister that I shall not ask his department for royalties.

Part 4 is not this Government's first attempt to get non-domestic ratepayers to pay more rates for better services. Their original proposal was to legislate for "a supplementary rate" but, as the White Paper, Strong Local Leadership—Quality Public Services described, that found no favour with either local authorities or business. I need not quote paragraph 7.16. It clearly ruled that out. So the Government scrapped the supplementary rate and did what they should have done in the first place—go for BIDs, as now set out in Part 4 of the Bill.

There are many similarities between this Bill and the earlier Bill. That is not surprising since both claim their inspiration from the BIDs system operating in many American cities. I was intrigued to read the department's press release on publishing the guidance notes which states: New York-style schemes aimed at revitalising town centres and other business locations took a step closer today as Local Government Minister, Nick Raynsford, published new draft Government guidance". I shall return to that guidance in a moment. However, unlike the Government's ill-fated supplementary rate, Part 4 now has the support of the main local government associations and of the representative bodies of the business community. Again, I shall not quote what they said but I have the quotes with me if that is challenged.

As my noble friend Lady Hanham said from the Front Bench, Part 4 will need careful scrutiny in Committee. However, today I have time to raise only one problem that the Government still have to resolve. I refer to the role of the owners, lessors, landlords of property—the freeholders who are not themselves ratepayers.

The essence of a BID, as opposed to the voluntary schemes, which the noble Lord, Lord Rooker, mentioned, is that to take effect it must be supported by a majority, both by number and rateable value, of the non-domestic ratepayers occupying property in the defined area covered by the BID. If the majority votes "Yes", all must contribute. That is the point. In a voluntary scheme—and there are a good many in this country—there is no way of dealing with what are often referred to as the "free riders", firms who gain the benefit of the improvements that a BID can bring but cannot be made to pay the levy.

In this country, the lessors of properties let to tenants are not the ratepayers because they are not the occupiers. Under the Bill, therefore, they will have no vote, no participation in the ballot. And there is no power to make them contribute. "So what?", you may say, "Surely the purpose of the scheme is to benefit the occupiers, the shopkeepers, offices, restaurants, cafés and so on which will benefit from the improved services and environment that a BID will bring.". But the Government themselves recognise that the owners, the landlords, have a vital role to play.

I mentioned the BIDs guidance note. It is a valuable document, published earlier this year by the Office of the Deputy Prime Minister. At page 16 the question is asked: Who can set up a Business Improvement District? The answer is instructive. A BID is a partnership. Any one of the partners in a BID may take responsibility for setting it up, including the local authority and any one of the businesses or landlords in an area. We envisage that in the vast majority of cases, local businesses and landlords will take the lead". When schemes operate successfully, it has always been the owners of the property in the area who have taken the lead and started it off. I received recently a description of a scheme in Oxford Street which has had a dramatic effect on improving the environment and reducing crime. The entire initiative came from the freeholders of the properties within the area. But under the Bill they have no vote in the ballot; any freeholder who does not want to contribute cannot be made to do so.

It is difficult to see how that issue should be dealt with. The Bill allows them to contribute. That is right. There is too a great deal in the guidance about early consultation. That is right. But in the end free riders cannot be compelled to contribute. Amendments were moved in another place to put the matter right but they were rejected by the noble Lord's honourable friends on the Government Front Bench.

In America, where BIDs originated, the real estate tax—as it is often called—is paid by the owners of property. It is a tax on the ownership of property. In the UK the non-domestic rate is paid by the occupier and it is a tax on the occupation of the property. As the Government argued in another place, to levy the BID charge in this country on property owners would be to introduce a new tax requiring complex and costly administration. I understand the argument. It was argued at great length in Standing Committee in another place by the mover of the amendment and the Minister. But I do not accept that that has necessarily to be the last word.

The noble Baroness, Lady Hamwee, will remember that five years ago we debated this issue at some length in Committee and at the Report stage of my Bill. The promoters of the Bill envisaged that to gain acceptance by the voting occupiers, lessors would need to agree a fair apportionment of the cost of the BID levy between each landlord and his tenant. Often it is said that if you let under a 999-year lease the landlord has no interest in any BID. However, if the lease is to fall in next year, so that the freeholder will become the owner of the property, of course the answer is that almost the entire benefit of a BID will accrue to him and he should therefore pay the levy. It was said that without such an agreement between landlords and tenants, the scheme would never get off the ground—the ratepayers would not vote for it and it would not receive a majority.

My Bill provided that if a landlord and tenant could not agree what was a fair and equitable apportionment of the burden of the levy, it could be referred to the county court. That is not the only possible solution. I have asked the representatives of the property world, who are anxious to be included in the BIDs scheme, to advance new proposals that might be framed as amendments to the Bill in Committee. As it stands, Part 4 is incomplete and we could do better.

In the meantime, I welcome Part 4 as an old friend and look forward to improving his wardrobe.

7 p.m.

Lord Shutt of Greetland

My Lords, in the debate on corporate governance on 12th March, the noble Lord, Lord Haskel, referred to Halifax town hall. It is one of those flukes that he is presiding over us this evening. Perhaps for the last time, I declare an interest as a member of a local authority. I have been a member of Calderdale Council, which is based in Halifax town hall, for 25 of the past 30 years. But last Tuesday, I did not submit any nomination papers and, therefore, have 28 days left. There has been some comfort in being in that building, being here and knowing that Sir Charles Barry was the one who designed them both.

The noble Lord, Lord Haskel, referred to the inscription above the town hall in Halifax, ''Act wisely". They have plenty to act wisely about. As I have reviewed the past 30 years, I have considered the loss of significance of local government. I thought, "When were the halcyon days? What was it like between the wars?". I have got hold of the minute book of Halifax council for the entire year—three and a half inches; just short of 2000 pages—for 1936–37.

About half of the pages consist of lists of bills that it paid, rather than deep policy. But I then find that they had many committees—30 odd—but were a hit more sparing on sub-committees and working parties. They had committees to deal with health and hospitals; light, heat and power; public assistance; maternity and child welfare; and pensions. Not a PFI or a PPP in sight.

Of course, much of that work was taken over by the state just after the war. But what has happened since? Just as I entered local government, public transport went to a metropolitan county, then to a quango, and was then privatised. The police were delegated to a local government quango—which is now rather less a local government quango. The same happened with the fire service. The ambulance service went with the health service, which was nationalised. Water and sewerage went to a quango and was then privatised.

In my time, the colleges went to a quango. In our case, highways are quasi-regionalised. Housing is now in the hands of a social landlord—because that was how resources could be made available that would not otherwise be available to improve and enhance the housing stock. In education, local authorities have far less to do—I believe that to be a good thing, in that there has been delegation to those in schools with real responsibility.

What is left? We have had the three "E"s of efficiency, economy and effectiveness; with best value we have the four "C"s of compare, challenge, compete and consult. I am glad that the noble Lord, Lord Rooker, said that he is trying to remove the jargon, because we have comprehensive performance assessments and, usually, we must have a strategic partnership somewhere.

My council alone is involved in more than 100 partnerships. It is not alone in that. A multitude of councils is in the same position. It occurs to me that those who are acting wisely, if they saw the need, got on with it. Local government was a major building block of democracy. It is now debilitated and, rather than being a building block, is more like a wrung-out sponge.

What of the Bill? For me, the foregoing puts it into some context. Reading the documents that have been made available to us about the Bill, it is interesting that the Select Committee on Local Government, Transport and the Regions in another place states, referring to local government: Government must be prepared to trust it much more", For me, that is a test for the Bill. Will it help?

I have four points. The first is the borrowing regime. It is suggested that it gives power and responsibility to the local authority; if so, I welcome it. We shall need to read the detail. What are the Minister's powers? Are they a back-stop or a front-stop. If they are a back-stop, so be it. Reference has already been made to business improvement districts. Will the business community wonder why it pays business rates in the first place? When considering what are termed business districts, one could have first, second, third, fourth and fifth-class business districts, depending on whether there is one or how much people want to pay. That may not be too bright an idea when considering our localities—especially the built environment.

Secondly, will that be a reason for local authorities to stop doing what they are doing now because they say, "Perhaps it would be better done by business improvement districts. Then they can pick up some bills".

My third point concerns council tax revision. I note the detailed points made about changing bands and this, that or the other, but the major thing about council tax is that it is to pay. The major feature of council tax that is to pay is that there is rather more to pay this year than last. That keeps happening.

Without tinkering with council tax, we need a system in which people can have confidence. In 28 days' time, votes will be cast by people who are concerned and who will take it out on certain people they believe to have been responsible for the council tax being significantly enhanced. However, those councillors may have felt that they had no option, because of the disposition of resources made available by the Government, about what to do to keep services going for people in their communities.

The Government must grasp the point that it is easy to push responsibility onto councils, so that they must stick up council tax to keep services going while the Government can say, "We are very good and do not raise taxes nationally".

I should like to end on a positive note for the Minister. Vibrant local government needs good people. With one or two colleagues, last week I was asked to meet some bankers. They told us about their social and corporate responsibility. I suggested that they might be certain that their staff are able to serve local and national government to give public service. They said, "We cannot do that because of the Political Parties and Referendums Act. We have decided that we are not making political donations. If we give people time off to do these things, we shall have to declare it and don't want to do that". I am delighted that element is in the Bill so that banks, financial services and big business can be responsible. Often, people who serve as councillors work in some element of the public sector. The private sector will be able to play a better part and people will be given time off to do this important work. Serving as a member of a local authority is a high calling. It is important. It is also important that real opportunity exists, that it is not constrained and debilitated, and that council members can make their localities interesting, enjoyable and exciting places.

7.10 p.m.

Baroness Gale

My Lords, I wish to speak specifically about Clause 76, which will allow English authorities to reduce or remove the 50 per cent discount that applies to dwellings with no residents for classes of dwellings prescribed in regulations made by the Secretary of State.

Local authorities in Wales already have power under the Wales-only provision in Section 12 of the Local Government Finance Act 1992 to reduce to 25 per cent or to remove the current 50 per cent discount for classes of unoccupied dwellings as prescribed by the Welsh Assembly. Clause 76 gives English authorities some additional flexibility that is not included in the existing provision for Wales. Extending Clause 76 to Wales would allow the Welsh Assembly to prescribe classes of dwellings where a Welsh local authority may reduce the discount to amounts other than the 25 per cent or zero permitted under Section 12—and also to decide whether those discounts apply to the whole or part of the local authority's area.

The powers conferred by Clause 76 on English authorities that allows them a degree of flexibility should be extended to Wales. It is absolutely essential for Welsh local authorities to be given those additional powers and I shall be interested to hear the Minister's views on that clause.

7.12 p.m.

Baroness Blatch

My Lords, although I shall be concentrating on one issue, I am delighted by the remarks of the noble Lord, Lord Rooker, in response to the Select Committee on Delegated Powers and Regulatory Reform in respect of criticisms of the Bill. We all welcome what the noble Lord has said. That was a very critical report. It is worth noting that since the committee's inception under the last Conservative Government and subsequently under the present Government, its recommendations have always been agreed. We look forward to that continuing.

Unfortunately, the Water Bill taking place in Grand Committee prevents my noble friend Lady O'Cathain from speaking in this debate. She wishes to contribute at later stages and will. She has asked me to express her concern about the repeal of Clause 28 and also wishes to persuade the Government to consider extending the power to license sex shops—a power that was secured by Westminster City Council via a Private Member's Bill.

In this country, we have freedom of religion and belief. The state upholds the rule of law that provides the basis for freedom and tolerance—but it is right and proper for there to be safeguards against state imposition of belief. Those safeguards and protections are all the more important when the state provides services for children. Parents bear the heaviest responsibility for raising and protecting children. The state should not undermine the beliefs of parents. Nor should the state permit its employees to manipulate or indoctrinate children.

Under current law, local authorities are constrained in three areas that can be the subject of controversy. In those areas, the law acts either to restrict the actions of local authority employees or to restrict expenditure of taxpayers' money. The first area is politics. Section 27 of the Local Government Act 1988 forbids local authorities from incurring expenditure for party political purposes. Education law also requires that when dealing with political issues, schools must give a balanced presentation of opposing views.

The second area is religion, where regulation is extensive. Since 1944, there has been an elaborate procedure for determining the content of religious education in maintained schools. Each local education authority must have its own special advisory council to oversee what is taught. Teachers' unions still have a veto on the content of religious education. Among other safeguards, every pupil has a right of withdrawal from religious education.

The third area of regulation is sex education. If politics and religion are controversial areas of the curriculum, so too is sex education. In 1986 Parliament amended the law to require that sex education was given in such a way as to have due regard to moral considerations and the value of family life. When I was an education Minister, that safeguard was not sufficient to assuage parental concerns. In 1993 I was personally involved in making sex education a discrete subject and delegating responsibility for the content of the subject to the governing bodies of schools. For the first time parents were given a statutory right for their children not to receive sex education.

Subsequently I was involved in drawing up sex education guidance from the department, which was in place until it was revised in 2000 following further amendments to the law agreed by your Lordships. Those government amendments required that schools have regard to the new guidance issued by the Secretary of State.

Many parents are concerned about the use of inappropriate materials in schools, which is why Parliament has regulated sex education. Those who support Clause 121 of the Bill and seek the repeal of Section 28 have failed adequately to grasp that point. They have failed to accept that sexuality—just like politics or religion—is a controversial area where parents have strong concerns that their children be protected.

Opinion polls show that the vast majority of parents do not want homosexuality promoted in schools. In the referendum funded by Brian Souter, 1 million Scots voted to keep Section 28—86.8 per cent of those who voted. A poll carried out in the Prime Minister's own constituency of Sedgefield in 2000 found that 71 per cent of people wanted Section 28 retained.

Parents are also concerned about inappropriate materials that cover heterosexuality as well as homosexuality. Section 28 was introduced for a reason. Some local authorities were actively promoting homosexuality in schools. Three years ago my noble friend the late Lady Young held an exhibition of inappropriate materials in your Lordships' House. Section 28 acts as a restraint for the majority of local authorities. If Section 28 is repealed and nothing is put in its place, what happens in a small number of local authorities could become the norm.

The noble Baroness, Lady Hamwee, referred to Section 28 preventing expenditure by local authorities on gay men. That is not true. Local authorities do have a great influence on what is taught in schools. At the end of the day, they are the employers. They employ teachers and, like any employer, they are ultimately responsible for the conduct of their employees. In repealing Section 28, the Government are asking us to believe that a law that binds an employer has no influence at all over employees. That cannot be true, yet it is being claimed.

The Minister in another place stated: Local authorities have no say over what sex and relationship education is taught in schools".—[Official Report, Commons, 10/3/03; col. 85.] If only it were true that local authorities have no say or influence over sex education in schools. The Minister seems to be referring to the fact that specific duties on local education authorities with regard to sex education were removed in 2000. This followed a government amendment to the learning and skills Bill. Certain duties may have been removed but the important point is that LEAs still have a general supervisory role over schools. Legislation does not prohibit them from publishing and recommending sex education materials or from employing advisory staff.

The Government expect LEAs to exercise this supervisory role with respect to sex education. That is clear from Section 351(6) of the Education Act 1996. That same section requires that whenever LEAs exercise these functions they "must have regard" to government guidance on sex education. But one can "have regard to" guidance without actually following it. One can also claim to be following the guidance when one is not. As the Minister knows, the only challenge is on procedural grounds and not on what the schools actually do.

That is exactly what has happened. Some local authorities are pushing highly unsuitable sex education materials into our schools and they are praying in aid government's guidance. I shall give an example of what is happening in one area; namely, Brighton. Brighton and Hove Council and East Sussex County Council have a joint personal, social and health education advisory team. These PSHE advisors—eight part-timers in total—are using their powers to influence sex education to the full.

In the year 2000 the council's advisory team published its own handbook for teachers. The council claims that the handbook is in accordance with government guidance. So what does the handbook say? It "strongly recommends" that schools buy a particular "essential" resource pack entitled, Taking Sex Seriously. A more unsuitable resource it is difficult to imagine. One lesson suggests that pupils are asked to buy condoms for homework. Another lesson has the aim of getting pupils to think about the full range of sexual activities. Teachers are told to, give a few examples to get the group thinking along the right lines". The suggested examples include dressing up, tying up, sadism and/or masochism, partner swapping, anal intercourse or multiple partner at one time. Those are just the milder examples. Decency prevents me from reading out the rest.

Brighton and Hove also fund a group called Gay & Lesbian Arts and Media—or GLAM for short. With council funding this group published a booklet which states that: School assemblies need to reflect lesbian, gay and bisexual anniversaries like Stonewall as well as birthdays of famous lesbians, gay and bisexual people. That same booklet tells teachers that, having regard to [Government guidance] does not mean 'adhere to"'. Of course, in law, that is absolutely true.

The Government place great faith in their guidance which was issued in 2000 to allay concerns about the repeal of Section 28. Having read the guidance, there is much which is ambiguous and unclear.

David Blunkett was Secretary of State at the time of the last debate on Section 28. There was particular concern around that time about a resource entitled, Beyond A Phase, produced by Avon Health Promotion Service, an NHS body. In January 2000, this hit the headlines. The Sunday Times carried a full-page spread about this teachers' pack and video and widespread coverage followed, including ITV's "Tonight with Trevor McDonald".

Of particular concern was the advice from one contributor—Karl—to the video, that children should, Try experimenting with other boys and girls and see who you feel most comfortable with". David Blunkett said on the BBC that this particular resource was inappropriate for schools. He proposed tightening up the law to address the issue of health authority materials. Yet, over two years after his guidance, Beyond A Phase has been recommended by at least three local authorities. They are Brighton and Hove—no surprise—East Sussex and Gloucestershire.

This resource pack includes an infamous series of "role plays" for pupils to act out. The roles include a married man who was "done" for cottaging, an out lesbian mother, a gay teenager, a married woman who had a "one night stand" with another woman, a bisexual granny, a sado-masochistic heterosexual woman, and a transvestite cabaret artist. Your Lordships, this is for children.

In being all things to all men, the guidance failed to stop local authorities peddling inappropriate materials. The guidance has not stopped the use of Beyond A Phase. It has not stopped Brighton and Hove and East Sussex strongly recommending appalling materials. On the contrary, those authorities say that their advice to teachers complies with the guidance.

Schools are not the only place where local authorities can influence what young people are being taught about sex. There are council-funded youth groups all over the country which have sessional youth workers employed by the local authority. If Section 28 is repealed, this work will be unregulated. The Minister in another place referred to guidance issued by the National Youth Agency. But, again, like Brighton and Hove Council, this guidance also recommends the appalling Taking Sex Seriously pack, which I quoted from a moment ago.

Section 28 has proved to have a very positive influence to curb the worst excesses of council-funded youth groups. It is there for parents to use should they have a grievance about sex education. In 2000 a Glasgow nurse took Glasgow City Council to court under Section 28. She sought judicial review of their decision to fund a youth group, attended by children as young as 12, where a highly pornographic booklet entitled Gay Sex Now was being used. The legal action succeeded in having the booklet withdrawn from circulation. Section 28, in that case, worked. It blocked the distribution of homosexual pornography.

I am particularly concerned that if Section 28 is repealed, there will be nothing to protect young people. Indeed the promotion of "well-being" powers contained in the Local Government Act 2000 seems to give carte blanche to local authorities to spend money on anything that they judge will promote well-being, however that is defined. This will almost certainly include more youth groups.

The repeal of Section 28 is all the more worrying because of the Government's proposals for the Sexual Offences Bill. The Government have decided to give a blanket exemption from facilitating child sex offences for those who claim to be giving sex education. This exemption is in the form of an amendment to Clause 15 of the Sexual Offences Bill currently before your Lordships' House.

Under the amendment a person who gives sex education will, for example, be able to facilitate the showing of pornographic videos to a child or facilitate the commission of sexual acts in front of a child. All this is possible as long as the person who gives sex education says that this was not his intended outcome. That is a perfect defence for someone wishing to corrupt young minds.

A special exemption from the criminal law has never been necessary before. Now it will be. I shudder to think what sort of sex education is envisaged which requires exemption from facilitating a child sex offence.

The noble Lord, Lord Alli, made a comment to which I take offence. I do not just claim to be concerned about protection for children; I do care about the protection of children. The repeal of Section 28 cannot be swapped for government guidance. If protection for young people cannot be put in statute—

Lord Alli

My Lords—

Baroness Blatch

My Lords, I shall not give way. I am just finishing. The noble Lord can speak before I sit down. If protection for young people cannot be put in statute to underpin guidance, Clause 28 should be reinstated. To guard against the worst excesses of those who take advantage of young people by peddling inappropriate sex education, parents, and especially children, need the protection of the law.

Lord Alli

My Lords, I apologise to the noble Baroness. In no way did I wish to cause her any offence. If I implied that, I apologise unreservedly. But my point is that she really must recognise that she does not have a monopoly on concern for children. There are people all around this House that believe so. On Tuesday night, she said in this Chamber, However. I seem to be on my own in the Chamber in seeing protection for children as being absolutely paramount".—[Official Report, 1/4/03; col. 1238.] That is simply not true. We all seek to protect children. We just have a different view. I listen very carefully to what the noble Baroness says. I listen to her arguments all the time. But, please accept that everyone in this Chamber is trying to do the right thing and that no one has a monopoly on the protection of children.

Baroness Blatch

My Lords, I should like to make two points in response. First, if the noble Lord reads on in Hansard he will know that that was brought to my attention. I recognised that everyone in the Chamber was concerned with the protection of children. But I said that I was alone in seeking protection in the particular context in which I was seeking it.

Secondly, the noble Lord said that people who take another view and who "claim" to be concerned about children do not actually concern themselves with the protection of children. I am simply saying that claim, and I am, concerned about protection for children. That is the only rationale for me speaking in this debate.

7.30 p.m.

Earl Russell

My Lords, to begin with, I cannot resist taking up the question posed by my noble friend Lord Shutt of Greetland on, "When were the halcyon days?". I am inclined to suggest that they were, roughly, from 1460 to 1760, which is quite a while ago. However, there were those even then who thought that they came to an end with the beginning of the power of Thomas Cromwell, who continued to load local authorities with what were described expressively as "stacks of statutes". Having picked them up, I can support the description.

I congratulate the noble Baroness, Lady Blatch, on what she said about the Delegated Powers and Regulatory Reform Committee. The noble Baroness has a long and distinguished record in that respect. Both she and I have often worked together on the committee. I have no doubt that we shall do so again with great pleasure and, sometimes, I am very glad to say, to great effect.

I wish to say a few words about Section 28. I shall not go into a lengthy debate it, because it has been debated a good deal. I just want to show that the flag is flying in this quarter, as well as in other parts of the House. I do not know whether the noble Baroness, Lady Blatch, remembers the occasion when Mr Aneurin Bevan described the Conservative Party as "vermin". She may perhaps agree with me that that was not a helpful contribution to the political process—

Lord Jenkin of Roding

My Lords, perhaps the noble Earl will give way. The words used were, "lower than vermin".

Earl Russell

My Lords, I am most grateful for that correction. In that case, it was an even less helpful contribution to the political process. It was simply common abuse. It was not a political argument that could be answered. If, for example, Mr Bevan had said that the Conservative Party "ground the faces of the poor", that would have been a specific assertion that the Conservatives could have set out to refute but you cannot do anything to refute mere abuse. It is not a debating argument; it is not capable of rational discussion. It simply says, "I don't like you". That is no way to conduct political debate.

All of us, both in this House and elsewhere, have our likes and dislikes. We generally find that we conduct our processes in a more civilised way, even if we do not always get up and say so all the time. It seems to me that this is a perfectly fair parallel for Section 28, which forbids local authorities to do something—I genuinely cannot understand what. I do not understand what the word "promote" means in this context. As the legislation has never been taken to court, there is no court case to clarify it. So it forbids local authorities to do something unintelligible, which is genuinely not in their power to do.

The noble Baroness, Lady Blatch, explained that she was responsible for transferring power to the governors. She then quoted a large amount of guidance. I cannot help thinking that she slightly overrates the power of the teaching profession. I know myself that it is very limited indeed. If youngsters were brought up on these guidelines, I suspect that they would come out about the most puritanical grown-ups in the country: they would be bored stiff with it. It is not as easy as the noble Baroness suggests. I do not believe that any of us has these sorts of interests.

The function of Section 28 is simply to say, like Mr Aneurin Bevan, "We don't like you". That is not a useful comment to make to people whom we regularly meet socially, with whom we do business, and with whom we sit in the House. People cannot help having feelings. Some of them dislike the most unexpected people. But if we do not conduct our business with ordinary good manners, we really cannot get on.

I also believe that it is part of the function of education that one should understand, at least very roughly, the outlooks of the sort of people one will meet socially. I have in mind a very wide range of people, an increasingly wide range of people. In conversation, one ought to know roughly when one is dropping a brick and when one is treading on people's toes. One ought to know what is likely to give offence. I speak from experience. I arrived at Eton, having never knowingly met a Conservative. So when I talk about unintentionally giving offence, I know what I am talking about. I do not think that that sort of ignorance was good for me. Similarly, I do not believe that the sort of ignorance promoted by Section 28 is good for people.

7.35 p.m.

Lord Smith of Leigh

My Lords, I shall try to refocus the attention of the House on the rest of the Bill, so, in the words of my noble friend the Minister, perhaps the eyes can glaze over now. I should, first, declare an interest as the leader of a local authority, and as vice-chairman of another association called SIGOMA, to which there was an unfortunate reference last time I declared the interest. I hope that Hansard get it right this time.

In the interests of brevity, I shall try to concentrate on the parts of the Bill with which I have some problems. I apologise to my noble friend the Minister for not supporting much of the Bill on Second Reading. I welcome the thoughts expressed in his introduction about freedoms and flexibilities and the desire for a new approach for local authorities. However, the Bill demonstrates the tensions within government and, in fact, much of it demonstrates exactly the opposite. Part 2 is a clear example of the centralising tendency becoming predominant again.

If I heard him correctly, I believe that my noble friend said that he believes that there is a problem in a few authorities as regards their financial administration, and that the cure for it is the catch-all general legislation that will cover authorities. Good heavens, we may not have thought of budget monitoring, or checking that our reserves are all right, and so on! Of course, we have done so. However, my biggest concern is how all this is to be done. By what process will we check what will happen in local authorities as regards meeting the provisions in Part 2? When shall we receive the volumes of regulations, which, presumably, will tell us how we can decide whether our estimates are robust enough to meet the criteria? Which army of civil servants will be created to come and check us?

What is missing from the whole section—which is surprising because it is in Part 1—is the role of the external auditors. It would seem to me that if we can enhance the role of these people, it would be simpler, more effective, and cheaper. I have a mind a solution that could be sensitive to local conditions. The level of reserves in some authorities may need to be higher than in others. An auditor would understand all that. I ask my noble friend to think about that as an option in these huge catch-all regulations.

I turn to Clauses 78 and 79 on revaluing for council tax. The council tax bills that are going out now are based on valuations that are at least 12 years old. I always wonder about this arcane science that can say for a building that was built last year what its value might have been if it had been built in 1991. It must be wonderful to be able to do that.

I remind your Lordships that in 1991 we did not have a very scientific approach to determining valuations. It was a matter of the famous estate agents going around, making a lot of money out of the previous government, checking on properties, looking at a street and saying "Band C", "Band B" or whatever else they decided. They were largely guesstimates.

With any tax based on a valuation, the longer the period between revaluations, the more discredited the tax becomes. That was one of the problems with the old rating system. It took too long to be revised, and it was replaced by the poll tax—a great idea!

I welcome any revaluation, but I ask my noble friend to consider whether 10 years may be too long for periodic revaluations. These days estate agents tell us what is happening to house prices on a quarterly basis. I am sure that it could be done on an annual basis. We could have a running revaluation programme, which would not involve such huge changes at the end of a 10-year period. We could perhaps use the 10-year revaluation to re-establish a base position, and then move forward again. I hope that my noble friend will also consider that.

I very much support the Government in wishing not only to carry out such a revaluation, but also to revise council tax bands. Some research that I have seen recently shows an unintended consequence of a simple revaluation: the lowest tax bands in all regions do least well out of a revaluation. Even in the areas in the South East that would face an increase in valuation, the lowest levels would pay much more proportionately in increased tax. The lowest levels of tax bands on the whole reflect people's income and ability to pay. We should examine the matter carefully. Even a simple revision of tax bands, by splitting Bands A and H, would eliminate much of this problem.

I wish to speak to Clauses 100 and 101, as leader not only of a council, but of an excellent authority. The noble Baroness, Lady Hanham, was very modest in not saying that hers is also an excellent authority.

Looking at the clauses, one would think that the localist tendency is in the ascendancy and that we are gaining the ability to have more freedoms and flexibility. But looking at it from another perspective one can see that they are very slow to materialise. They are not supported in all parts of government, even in parts of my noble friend's department.

I should like to quote from a letter—it is not about Wigan, so I can quote it—which reads: The Office of the Deputy Prime Minister will take this opportunity to congratulate your authority for its efforts in becoming an excellent authority. Though we acknowledge the flexibility under this scheme, we wish to express to excellent authorities that the purpose for which the grant was awarded should not be ignored". That is a reference to ignoring ring-fencing of grants. If it does not suit government departments, they are not allowing it. If we can have a simple principle—"Invest in the best" —we can move forward the Government's desire to improve public service and provide a model for all local authorities.

Finally, I ask my noble friend to consider an additional clause in the catch-all Part 8. Unlike most organisations, and notably private sector firms, local authorities have no right to sue as corporate bodies, even when they are defamed. I can give an example from my own authority—and my noble friend will understand where it comes from. We are repeatedly accused in writing of moving council tenants to house asylum seekers. Not only is it not true, but it is a highly politically sensitive issue. We have no right—other than trying to correct it in the press—to stop the organisation that continually repeats this untruth. I would not, of course, want a power to limit reasonable criticism of publicly accountable bodies; but there may be occasions when it is necessary to have recourse to the law in the interests of truth. I hope that my noble friend will consider remedying the matter in an additional clause.

7.44 p.m.

Lord Sawyer

My Lords, I welcome the Bill and want to speak on staff issues. I am a member of UNISON, which is an interest in this respect. I want to comment in particular on Clauses 102 and 103. For many years, I have been deeply concerned about the effect which some of the privatisations and contracting out have had on the lowest paid and most vulnerable of local authority employers. I have previously spoken about that in this Chamber. I have urged Members who have listened to my words, or read them in Hansard, to read Polly Toynbee's publication, Hard Work: Life in Low-Pay Britain. That is an excellent documentation of what it is like to be a low-paid worker, providing basic local authority services; cleaning, cooking and care services. Those people have had to suffer dreadful reductions in pay and conditions.

I have also stated that I am ashamed that my Government have introduced many of those changes, but we need to move on. In recent times, discussions between the representatives of low-paid workers and the Government have made improvements. We know that when local authority staff are contracted to a new employer, their local authority terms and conditions of employment transfer with them under TUPE However, I could give experience of staff, for example, in Northern Ireland suffering a 60 per cent cut in their basic pay—a low rate of pay—and a reduction in holiday and sick leave. Concrete examples of that show that the TUPE regulations can provide only temporary protection of terms and conditions, sometimes over a short period of time, depending on how often the contract moves on and how different employers come to provide that service.

Local authority terms and conditions are therefore eroded and are replaced with worse terms and conditions for those involved. Therefore, as the Bill progresses I shall be seeking to persuade the Government and local authorities to secure in their contractual agreements with contractors that the terms and conditions of transferring employees are "the same as" or "no less favourable than" those enjoyed as an employee of the authority. In addition, and most importantly, this contractual clause should apply for the life of the contract and apply to any subsequent employer who takes over the contract. These measures should be specified on the face of the Bill rather than being left to statutory guidance or directions from the Secretary of State.

These standard terms and conditions include pay, annual leave, sick leave, sick pay, maternity leave and maternity pay. I want to make it clear that that would not prevent, or seek to prevent, employers from carrying out reorganisation of work, changing working practices or improving productivity or efficiency.

Clause 103 deals with pensions and is even more difficult. It is a positive step towards statutory protection for pension rights of contracted-out employees. The clause would require local authorities to secure that transferring employees have pension benefits and rights which are, the same as, or … broadly comparable to or better than those they had as an employee of the authority. It is intended to apply to subsequent contractors as well, which is to be welcomed.

However, as one would expect knowing the difficulties as regards pensions, the evidence and experience of contracted-out staff shows that "broadly comparable" pensions in practice can often mean inferior pensions. For a local authority worker, that is £3,800 a year—not a princely sum and we are certainly not talking about the fat-cat syndrome here. It will be difficult to find a way forward, but moving from broadly comparable pensions to pensions which are "no less favourable than" might be a way of ensuring that such staff do not ultimately receive inferior pensions, which can lead to poverty in later life.

In practice, employers do not achieve the bulk transfer of past service from their local authority pensions, as they are led to expect. They often receive a money-purchase scheme rather than a final salary scheme. Changes to the pension scheme detrimental to the transferred employees are often made during the contract. "Broadly comparable" pension schemes are often capped.

I have raised only three issues. The time is late and there is a great deal of detail to examine as regards terms and conditions. I do not want to do so today. I recognise that in particular on pensions the debate will be difficult, but I want to open up a dialogue and ask the Minister to consider how improvements might be made in those two areas.

7.49 p.m.

Baroness Maddock

My Lords, looking around the Chamber, I see that we have a wealth of experience in people who have served in local government. Some of them still do so and some are about to give up. I particularly enjoyed the contribution of my noble friend Lord Shutt of Greetland on its history, which was added to by my noble friend Lord Russell. My noble friend Lady Hamwee outlined the views of those on these Benches, and in principle we support the Bill. It takes us in the right direction, as many noble Lords have commented.

There are three important reasons why we support the Bill. First, it introduces a new prudential capital regime; secondly, it introduces—this awful word—BIDs; and, thirdly, it introduces council tax reforms. I shall refer to these matters in more detail later.

Like other noble Lords, we are not without reservations. Interestingly, the noble Lord, Lord Smith of Leigh, who sits on the government Benches, appears to have more reservations than most noble Lords. We are disappointed that the Government have been rather timid in giving freedom to local councils. They have reserved powers to themselves in regard to capping, borrowing and minimum reserves. Other noble Lords, including my noble friends Lord Shutt and Lady Hamwee, also referred to this issue. Of particular concern is the fact that, despite being sold as containing less regulation, the Bill gives to central government almost 40 new regulatory powers.

As a party, we have promoted the concept of BIDs for a considerable period of time. I was interested in the contribution of the noble Lord, Lord Jenkin of Roding. It will be interesting to pursue some of the points he has made when we come to later stages of the Bill.

I received a map showing the location in Britain of the 22 pilot BIDs. As someone who now lives in the North East of England, I was disappointed that I could not see a single pilot north of Hull. It is to be hoped that that will change if the Bill goes ahead because the economy of the North East needs help.

Like others, we support in principle the changes to the council tax, but we do not agree with some of the detail. In his opening, the Minister pointed out that a draft Bill was published and that there was a great deal of consultation. We welcome that. We sincerely hope that the views expressed during those consultations will find their way into the Bill during its passage through the House.

Like the noble Baroness, Lady Blatch, and my noble friend Lord Russell, I am concerned that the Government should look carefully at the recommendations of the Delegated Powers and Regulatory Reform Committee. The opening comments of the Minister were very promising in this regard.

The Minister referred to the issue of help for small businesses. There is wide concern in the Chamber that that help may not be as great as he indicated. We shall need to pursue that issue.

In his opening remarks, the Minister was fairly straightforward in regard to Clause 28. We have had reasonable debates in the House on this issue. I sincerely hope that, as the Bill passes through its other stages, we shall be able to deal with it in a rational and reasonable way. I have always believed that this is a very controversial issue which appears to have been dealt with in an unnecessary and unworkable way. I do not dismiss people's concerns, but its time has come. We need to look at other ways of dealing with the concerns of people. We should certainly not deal with them through Clause 28.

In her opening remarks the noble Baroness, Lady Hanham, posed a very interesting question. She asked the Minister whether anything further would be added to the Bill as it passed through the House. We shall be interested to see what happens in that regard.

I shall need to go into more detail as regards housing finance, but I agree with some of the points made by the noble Baroness, Lady Hanham, in relation to that issue.

The noble Baroness referred to council tax, as did many other noble Lords, including my noble friend Lord Shutt of Greetland. The real problem with council tax is that it is not related to ability to pay. For a number of years it has been possible for successive Governments to manipulate it in ways which suit whichever party is in power, and its finances. The sooner we can get away from that, the better it will be for all of us.

The right reverend Prelate the Bishop of Guildford talked in his opening comments about the importance of local government for a healthy democratic society. I strongly believe in that, as I have said several times since I have been in this House. I found it particularly interesting to hear, although many of us know it already, about the role of the Church in dealing with many of the issues in the Bill, especially Section 28.

I wish to highlight some of our concerns on housing matters. I declare an interest as vice-president of the National Housing Federation; I am also a patron of the Empty Homes Agency. I wish to dwell for a moment on empty homes. The agency and I welcome the proposals in the Bill to allow councils to change the way they charge for empty properties. However, councils are allowed to use council tax data. Before we get further with the Bill, will the Minister look at that? The Empty Homes Agency is finding worrying evidence that despite the Government's intention that councils should be able to use the data to help them with their empty property strategies they are still coming up against problems. I ask the Government to do a little more work in this area and respond at a later stage of the Bill.

I am also concerned that the money that will be raised from empty homes will not go to the local authorities. If they are to have good empty property strategies, they need finance for it. What will the Government do with the money that is not going to local authorities?

To a certain extent, I am worried about the provisions on discounts for second homes. The noble Baroness, Lady Gale, talked about this. There will be money from this and the Government have said that they intend to plough it back into affordable housing. I would like to hear from them quite how that will happen.

On housing capital receipts, I shall be briefer than I intended because other people have already talked about this, and I associate myself and my colleagues with their comments. We believe that the principle that the Government can remove capital receipts from local authorities and redistribute resources from one authority to another sets a very dangerous precedent. It weakens local accountability and undermines local authorities' ability to manage their assets.

This part of the Bill seems contrary to the intention to provide more flexibility and freedom for local authorities and to reduce central control. We believe that local authorities should have the freedom to develop locally appropriate policies and solutions. This issue is clearly of great importance in Guildford. The right reverend Prelate the Bishop of Guildford talked about this, and my honourable friend the Member for Guildford raised it in another place. It is a serious concern. Although the Government's intention is to find more money for really deprived areas, it has been pointed out that many authorities, which appear to be quite well off still have acute problems with housing, homelessness and, as the right reverend Prelate said, with people who are still in bed-and-breakfast accommodation, which the Government say they want to do away with. I am sure we will return to that issue in Committee.

Clauses 40 and 41 introduce new powers to enable the Secretary of State to reduce or extinguish local authority debt and to pay some or all of the premiums that arise from early redemption. We shall go into that matter in more detail at later stages.

There seemed to be some confusion in another place as to whether the Government intended to encourage local councils to transfer their council housing to registered social landlords. Already the Government are spending much money on overhanging debt yet the projected costs for 2002–03 are £500 million. For the following year the projected cost is something like £800 million. When one considers other sums that are being spent on housing that does not seem a sensible way to proceed if we arc concerned about housing. There will be other opportunities to discuss that matter in more detail at later stages.

Had this been a Liberal Democrat Local Government Bill, we would have moved further in freeing up local government and making clear that local government receives its democratic legitimacy and autonomy through the ballot box and not through the gift of central government. We should like to see councils' rights and duties included in a constitutional settlement. We should like to stop central government chipping away at local government powers. We should like to see local authorities made more accountable by giving them more control over their affairs, particularly their ability to raise funds locally. We would replace council tax with a local income tax. That is a fair tax, levied according to ability to pay. Massive savings would be made in collecting it.

At the end of the day we believe that local councils are accountable to the communities which elect them. It is up to local people to decide whether a council is performing well or badly. Central government—I believe that this point was raised earlier and I have raised it before in this Chamber—have a poor record of delivering services. No external body sets their performance standards or is able to intervene when they fail. People will say that it is up to the electorate to make their views known by the way they vote at a general election. Why should not the same principles apply to local government, which has no less a democratic legitimacy than central government?

As I said, the measure is a long way from our vision but nevertheless it moves towards it. I am sure that we shall discuss the issues in the spirit of this House. I am sure that the Bill will emerge from this House a better Bill. We intend to help to improve it.

8.2 p.m.

Lord Hanningfield

My Lords, it is a privilege to speak at the end of such a stimulating and wide-ranging debate. I should declare an interest. Most noble Lords are probably aware that I am leader of Essex County Council. I speak in support of my noble friend Lady Hanham.

The Bill before us today has well over 100 clauses. It is a long Bill, but it is a Bill that is short on vision and imagination. Will this Bill encourage people to go out and vote in local elections? Will it encourage a new generation of young people to enter politics to represent their local communities? Will it attract entrepreneurial and dynamic individuals into careers in local government? I fear that the answer to all those questions is no.

Although the Bill has some provisions to commend it, which we shall discuss at later stages, it is basically a timid Bill. It is a strings attached Bill. Nothing in this Bill comes free. Virtually every responsibility given to local government in the Bill is hemmed in with caveats, qualifications and constraints.

The Royal Institution of Chartered Surveyors in its evidence to the Select Committee noted that the Bill introduces over 50 regulation or order-making powers for the Secretary of State. In 70 pages of legislation there are 79 references to the Secretary of State's powers. If that is what the Government understand as devolution, they must have their own special dictionary in Whitehall. That point was very much reinforced by several noble Lords, in particular by my noble friend Lady Blatch, the noble Earl, Lord Russell, and the noble Baroness, Lady Maddock. I hope that the Minister will say more about how the Government intend to respond.

The Select Committee report, published in July last year, made the point sharply when it stated: The Government promised to redress the imbalance between central and local government. This Bill fails to achieve that. It makes some small steps in the right direction, but at the same time increases the power of the Secretary of State. Central Government seems to be terrified of trusting local authorities and allowing their independence". I cannot understand that culture of fear. A wide body of evidence now attests to the quality and capacity of local government.

Sir Andrew Foster, the outgoing controller of the Audit Commission, stated in a recent interview for the Local Government Chronicle that perhaps local government should be saying to central government: How well do we run things? How well do you run things? Maybe we could run some of the things you don't run so well". I shall touch on comprehensive performance assessments later, but, as several noble Lords have pointed out, it would be interesting if the Government were to put their own departments through some comprehensive performance testing. We should take note of statements of this kind. If anyone is in a position to judge objectively the current strengths and weaknesses of local government, it is the controller of the Audit Commission.

There is much ground to cover in the Bill. I shall touch on some of the key issues. I apologise in advance if anything I say has already been covered by noble Lords in the debate.

We welcome the scrapping of credit approvals and the freedom to borrow for capital investment, provided that the debt can be serviced. That is a new freedom to be granted to local authorities. But, as is typical of the Bill, what the Government give with one hand, they take with the other.

First, borrowing levels will have to comply with a "prudential" code drawn up by CIPFA. That is sensible and something with which we can agree. What we cannot understand is why, having established the mechanism, the Government feel that it will still be necessary to retain powers to control borrowing by an individual authority. Surely that is the purpose of the code. It would be helpful if the Minister could clarify why this separate power is needed.

Secondly, the Government can control the level of borrowing by individual authorities by imposing an aggregate limit on total local authority borrowing. That power should also be removed from the Bill. The result would be to provide local authorities with a genuine freedom, one that would be moderated by sensible and proportionate statutory controls through the CIPFA code. On that, I believe all noble Lords agree.

As the noble Lord, Lord Smith of Leigh, pointed out, the heavy hand of central government can also be felt in the provisions to do with financial administration. Clause 26 provides the Secretary of State with the power to specify minimum levels of reserves for individual authorities. This power puts local authorities under a degree of legal prescription not applied to any other public body. If it is necessary for the Secretary to intervene in local authorities on the issue, why is it not necessary for similar powers to be exercised in relation to primary care trusts, many of which have larger budgets than local authorities? Similarly, why not target also the host of other non-accountable quangos that deliver services at the local level?

At Second Reading in another place, the Minister, Nick Raynsford, made it clear that this provision was necessary in order to tackle a small number of poorly performing authorities. On 7th January 2003 he stated that, a small number of badly managed and poorly performing authorities tarnish the good reputation of local government. It is in everyone's interests that those authorities turn around their performance and strive to match the standard of the best".— [Official Report, Commons, 7/1/03; col. 51.] He went on to say, at the same column, that is why we make no apology for including the part 2 provisions in the Bill". There are two points of issue here. The first concerns whether adopting sweeping powers for an intervention covering all local authorities is really a proportionate or sensible way of addressing a problem that affects only a tiny minority of authorities. The second is whether such powers will have the effect ascribed to them by the Minister. That was certainly not the view of the Select Committee. The report comments on this matter by saying: We did not receive any evidence that, had these particular measures been in place, they could have prevented financial imprudence". CIPFA has also expressed doubts about the power. It has described the setting of balances as, a very local decision and judgement". I ask the Minister to tell the House how he thinks that the Secretary of State can reach a better judgment about the appropriate level of balances in a local authority than the chief financial officer of that authority, whose duty it is to report on the adequacy of reserves.

Much has been said about the business improvement districts, which I think we can call the sons of my noble friend Lord Jenkin. I would not wish to repeat all the arguments on them, but I ask the Minister to note some of our concerns, which I am sure we are going to discuss in Committee.

Regarding the powers on council tax bands, we support the need for regular revaluation of properties. However, I am told that if the Government go ahead with the revaluation, it will be the first carried out since the war in local government by a Labour government. Every post-war revaluation has been carried out by a Conservative government, so we shall wait and see. We generally welcome it and also the power to change the discount on second homes. But we have reservations about the power to change the number of valuation bands.

In a county such as mine, where average property prices are surging way ahead of rises of income, it will be families of modest resources who will be hit hardest by the introduction of an additional band between G and H. On top of rises in national insurance contributions and the new grant distribution formula that redistributes grant from the South East to the Midlands and the North—we have discussed it several times before— it could be seen as another stealth tax imposed on the south-east of the country.

Clauses 100 and 101 deal with the comprehensive performance assessment. For noble Lords who are not familiar with the process, it may be helpful if I provide some background. Local authorities are already subject to heavy regulation by external inspectorates such as Ofsted for education and the Social Services Inspectorate for social services. We conduct best value reviews which are subject to external scrutiny through the Audit Commission, and the soundness of our finances and corporate governance arrangements is reviewed by external auditors. That is the framework, but I assure noble Lords that there is a great deal more to it. For an authority such as Essex County Council, it adds up to approximately 170 days of inspection every year.

The clauses introduce another scheme of inspection. Under the CPA, the Audit Commission pulls together the information from the various inspectorates to reach a view as to the overall quality of services delivered by an authority. It then comes to the authority to look at the quality of its corporate management—to make a judgment on its corporate capacity. Those two dimensions are married up, put into a black box, and marks out of 48 are produced. I do not need to highlight to noble Lords the painful absurdity of marking out of 48 a democratically elected tier of government such as Essex, serving a population of 1.3 million people and with a budget of £1.2 billion a year.

The corporate capacity element of that exercise is a new part of the inspection process. Last year, when we had our CPA inspection, the team was based in Essex for two weeks. I personally spent 17 hours during that period with the inspectors. The time of senior officers that went into preparing and managing the inspection ran into thousands of hours. I have no doubt that when the inspectors left they were in a pretty good position to judge the strengths and weaknesses of the council, but that is really not the issue. The issue is whether that is the best use of public money, given the limits on resources to which we are all subject.

I would be interested to know why the Minister thinks that the quality of public services delivered by a local authority and attested to by external regulation should not be used as a proxy for judging corporate capacity. He will no doubt say that the CPA will lead to a reduction of inspections. That is something we could welcome. It would be helpful if he explained why the level of reduction for each category of authority is not in the Bill, and also whether the reduction in inspection activity will relate to all inspectorates—to Ofsted and the SSI as well as to the Audit Commission.

We welcome the power set out in Clause 117 to enable local authorities to hold advisory polls. I would be grateful for the Minister's views as to whether he would consider it appropriate to conduct a poll of the people of Essex about whether the county council should invest its resources in preparing for inspections or the delivery of public services. I should be interested to hear his views.

There are, without question, parts of the Bill that can be welcomed. The new clause introduced by the Government on Report to enable local authorities to retain some of the growth in its business rate revenue in our areas is a proposal that we can broadly welcome. We will obviously scrutinise it well in Committee, as my noble friend Lady Hanham said. We also broadly welcome the new powers to charge and trade.

There are a large number of detailed issues that we will explore in Committee. I should like to discuss housing receipts, which received considerable comment from the right reverend Prelate the Bishop of Guildford and the noble Baroness, Lady Maddock. We will explore that in Committee.

In a relatively short debate, we have had three major contributions on one small clause, Clause 121, which involves Section 28. We shall no doubt debate that at considerable length at other stages of the Bill.

Central government say that they are committed to local government. They want to provide local authorities with more freedoms and flexibilities. They want to do that, presumably, because they recognise that step changes in the delivery of public services can be made only by releasing local authorities to respond creatively and dynamically to local needs. They cannot do that if they are fettered at every turn and tied up in red tape.

However, anyone who works in local government will tell you that that attitude towards local government certainly does not permeate the whole of Whitehall. A couple of weeks ago, I received, in my capacity as leader of Essex County Council, a letter from the Secretary of State for Education. He said: I am very disappointed at the level of your proposed schools budget and I have no doubt that the authority's schools will take a similar view. The proposed budget implies I hat the authority proposes to pass on only 99 per cent of the increase in schools funding". I particularly like the phrase, "only 99 per cent".

In our grant settlement from government, we received an increase of only £28 million—the lowest of any county. The amount we were required to pass on to schools was £35 million; that is, £7 million more than our total increase in grant. In other words, simply to fulfil that government exhortation, we had to use all our additional grant—ignoring pressures on social services, roads, waste disposal and other services—and put council tax up by 2 per cent to fund that single requirement.

I do not believe that the Secretary of State for Education and Skills could have understood that when he wrote his letter. A democratically elected body, responsible to local people, would be absolutely deficient in its responsibilities if it did not look hard at whether it could fulfil that sort of requirement at a cost that local people could afford. We hear all sorts of noise about the levels of council tax; this is the sort of thing that causes that. We see the freedoms on one side and the control on the other.

Earl Russell

My Lords, has the noble Lord, Lord Hanningfield, discovered that for the Treasury the proposition that a sum of money is sufficient for the purpose for which it is voted is always a tautology?

Lord Hanningfield

My Lords, we note the comments of the noble Earl, Lord Russell.

A democratically elected body that is responsible to local people must take the level of council tax into account. That demonstrates how far removed Ministers are from the day-to-day realities of real life, which those of us in local government still face, and the lack of respect that exists in some parts of government for genuine democratic accountability. Perhaps the Minister will comment on that.

Since 1997 this Government have introduced over 100 parliamentary Bills and over 2,000 sets of regulations that have a direct bearing on the operations, services and functions of local government. Never can there have been so much activity for so little reward. I am very pleased indeed that this Government are committed to deregulation. I cannot imagine how many Bills and regulations they might have passed if they were not.

8.20 p.m.

Lord Bassam of Brighton

My Lords, my noble friend Lord Rooker tells me that the noble Lord, Lord Hanningfield, has made possibly the longest speech in tonight's debate. As noble Lords know, the noble Lord, Lord Rooker, has an enviable reputation for brevity and being bold and to the point. So my task is to try and ensure that I take no longer than the noble Lord, Lord Hanningfield. I am sure that noble Lords will be delighted to hear that. However, I am set a very difficult task. I have some 50 sheets of notes and associated points of detail on which questions have been asked. I am unlikely to go through those. If I did there would be some rather depressed souls in your Lordships' Chamber.

However, one thing about today's debate which particularly pleases me has been the breadth of contributions from all sides of the House and the great interest in the very many different aspects of what is a wide-ranging Bill. I think that is a commonly agreed point. Important differences have been expressed during the course of the debate. In particular, I suppose that the noble Lord, Lord Hanningfield, was the gloom and doom merchant from the Opposition Benches, but then I would expect that. He made a speech which sounded terribly similar to a speech I made in the Brighton council chamber some 20 years ago when I was arguing fiercely against the ghastly financial constraints that were then being placed on us by the noble Lord, Lord Jenkin of Roding. Recently, I unearthed a press release which was attached to my speech at the time. There are many ironies in your Lordships' Chamber, but that was one that I particularly enjoyed.

I also enjoyed, for very different reasons, the tease from the noble Lord, Lord Alli, in threatening to go through the great minutiae and detail of the Bill. Sadly, I have to do that job, and it gives me great pleasure because for 20 years and more of my life I have been involved in local government and I have enjoyed it greatly, for it is a very beautiful thing.

As I said, the debate has been very wide-ranging. There is no way in which I can cover all the points raised, but many issues have been raised which deserve an answer. We shall write to noble Lords about any points I do not cover and ensure that an explanation is given. We shall have an opportunity in Committee to pick up very many of those issues in considered detail.

Most emphasis was placed on the desire of all of us to reduce red tape and the burdens placed on local government. I think we all share that common commitment. In welcoming the Bill, the noble Baroness, Lady Hanham, seized on that point, as did the noble Baronesses, Lady Hamwee and Lady Maddock, and I believe they welcomed it. The noble Lord, Lord Shutt of Greetland, was rather more questioning as to whether he thought a new golden era was about to dawn. Nevertheless, he welcomed the Bill too. That shows that we are heading generally in the right direction. After all, I am sure many Members of your Lordships' House would agree that there have been many years when perhaps there has been too much of the heavy hand of central government disposed towards local authorities.

We believe that we are reversing that process. We are proud to be associated with that. There are times when it is absolutely right that the centre should take a firm hold. But we also believe strongly in devolution. I believe that the Bill, with its many deregulatory moves, particularly in the field of finance, is right to move in that general direction.

We have also had an interesting debate on Section 28. I suppose that the most discordant voice on that came, as one would expect, from the noble Baroness, Lady Blatch, who speaks with great passion, even if one does not always agree with her on the subject. I shall resist the temptation to retreat to the fiefdom of Brighton and Hove and make responsive references to the point she made on that except to say that my children go to local schools. If she was trying to scare me about sex education in the borough in which I live I am afraid she failed. So far as I can see, sex education in the local authority whose services I enjoy seems on the whole to be very well conducted indeed, as it is in most others.

This debate is not about protecting our children in the terms that the noble Baroness has attempted to set out. Repealing Section 28 is important. It is not just totemic. Many noble Lords said that it was symbolic. In 1988, when it was passed into law, many of us in local government felt a great sense of shame that the government of the day decided to visit it upon us. Representing, as I did then, a local authority with a large lesbian and gay community, I was particularly affected by it. It made running services across the board, particularly for those from that community, difficult indeed. They treated us with a great deal more suspicion than perhaps was right and proper. It made our lives very difficult and it painted local government in a way that was not helpful. I am proud that we are associated with repealing that clause. We need to persuade this House of that. It is long overdue.

I shall go through some of the questions raised on specific points and I shall deal with the issues in turn. The noble Baroness, Lady Hanham, asked some important questions about the prudential borrowing regime. The prudential borrowing system gives authorities freedom to borrow without government consent if they can afford to service the debt without extra government support. We shall continue to support the major part of local authorities' borrowing programmes and shortly we shall consult on future arrangements for that support. In our view the prudential system will allow extra self-financing investment on top of whatever we, as the Government, support.

The noble Baroness also asked whether we would be able to make draft regulations available on the business rates retention and on the growth incentive element of that. We intend to consult—a strong theme of this piece of legislation—all interested parties on many details of the proposed scheme. We cannot make draft regulations available until that consultation has been completed in the autumn. However, I can give the noble Baroness an assurance that we shall produce a detailed memorandum on our objectives for the scheme for consideration by your Lordships' House.

I have dealt with Part 8—the noble Baroness, Lady Hanham, like others, raised that important concern. We shall have the opportunity for greater debate in Committee.

The noble Baroness raised the issue of small 'business rate relief, which has been broadly welcomed. 'We take the view that a balance has to be struck between the small businesses receiving the relief and the larger businesses paying for relief by a supplement on the non-domestic rating multiplier. Under the current scheme the rate bills of larger businesses need to be increased only by less than 2.5 per cent. That would necessarily increase if the threshold of businesses receiving the relief increased. That is a very important consideration. No doubt the noble Baroness will wish to raise those issues when putting forward her own proposition in an amendment.

She also asked a couple of interesting questions on smaller matters. She asked whether it is our intention to raise a new tax on recycling. No, we have no intention of doing that. She asked about body piercing—we have had a wide-ranging debate extending from body piercing to council tax relief. She asked whether we would bring forward an amendment to licence body-piercing establishments. It is important that issues relating to that are addressed in a collective way. Our intention is that there should be further discussion with colleagues to try to achieve the best way forward on that. Parliamentary time may not allow such a measure to be put into the Bill, but we appreciate the point that she raised.

The noble Baroness also raised a key issue—one that the noble Lord, Lord Jenkin of Roding, also raised—about the involvement of local people in the BIDs process and whether we intended to put that on the face of the Bill. We recognise the importance of support for all local stakeholders in that area. We recognise that that will be vital to the success of BIDs. It is important that local communities are consulted. We question whether the mechanism suggested by the noble Lord is right. However, we look forward to further debate on those issues in Committee and to hearing other noble Lords' contributions. BIDs is an important initiative which the Government strongly support and one that I supported from a local government perspective before we came to government.

I recognise that there is concern about pooled capital receipts. Council housing is, of course, a local asset, locally managed, and so on. But it is also a national asset and the benefits, accrued receipts, and so on, need to be considered in a broader national context. Of course, concerns will be expressed locally about the change but we believe that as a redistributive mechanism it is an entirely fair way to proceed.

The noble Baroness, Lady Hanham, and a number of noble Lords raised the issue of council tax bands. She asked whether we agreed that there should be new bands and to consider the relative balance between poor and rich in housing. She asked whether it was a new property wealth tax. As we made clear in our White Paper, we shall listen to local government and taxpayers ahead of revaluation. As the noble Baroness will appreciate, the White Paper recognised that making the tax more progressive—for example, by changing the ratios—could have a regressive impact. We have to take careful account of that.

The noble Baroness, Lady Hamwee, asked whether changes to banding would be robust enough, regardless of house prices. We cannot foresee the property market in 2005, or how it will change by 2007 when the new bands will be implemented. But we shall take every sensible step to ensure that the banding scheme is robust to reflect those changes.

We are grateful to the noble Baroness, Lady Gale, for raising an important issue. She asked whether Welsh local authorities could have the same flexibility as that proposed in Clause 76 for English local authorities on removing or reducing council tax discounts. The matter has been raised with my right honourable friend the Minister for Local Government by the National Assembly for Wales. It is an issue that we shall consider. I give an undertaking today to come back to your Lordships' House at a later stage of the Bill with a decision on whether or not we shall be able to amend the Bill to achieve that objective.

We recognise the important issue raised by the noble Lord, Lord Sawyer, on the transfer of staff. We want to offer assurances to those who may be affected by such changes in the future. I am happy to confirm to the noble Lord that we shall ensure that the provisions covering contracting-out exercises will include the same protection for staff as enjoyed by those in central government and its agencies. They will ensure that if authorities select private or voluntary sector providers, it will be on the basis of their ability to deliver high quality services, not by cutting costs or driving down staff terms and conditions and pensions. I can give that assurance. The Government will be more than happy to continue to have dialogue with the trades unions affected which may have some other outstanding concerns.

I conclude by reiterating that, despite the complex and detailed issues in the Bill, the Bill should be broadly welcomed today not only by your Lordships' House but local government generally. Indeed, the Local Government Association has given the Bill its blessing. In a recent release, I think it said that it believes that the proposals in the Bill represent significant new freedoms for local councils and will help them deliver improved services to their communities. If I were still a local government leader, I should certainly subscribe to that as a commentary. It is also promising that the Confederation of British Industry has put on record its welcome for many aspects of the Bill.

I have enjoyed this afternoon's debate. I have listened with great interest to all that has been said. I apologise to noble Lords to whose questions I have not fully responded. I hope that the House will not just like the Bill but enthusiastically give it a deserved Second Reading. I commend the Bill to the House.

On Question, Bill read a second time.