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Schedule 3

Provisions Supplementing Part IV

Amendments made : No. 159, in page 139, line 49, leave out (d)' and insert (e)'.

No. 78, in page 140, line 43, leave out first sum' and insert amount'.

No. 79, in line 43, leave out second sum' and insert amount'. No. 80, in line 46, leave out sum' and insert amount'. No. 160, in page 141, line 3, at beginning insert--

(1) Subject to any prescribed modifications'.

No. 161, in line 14, at end insert--

(2) In sub-paragraph (1) above "prescribed" means prescribed by regulations made by the Secretary of State.'.

No. 162, in line 27, at end insert--

9A.--(1) At any time on or after 1st April 1990, a local authority's credit ceiling shall be determined, subject to any prescribed modifications, in accordance with the following provisions of this Part of this Schedule.

(2) In sub-paragraph (1) above "prescribed" means prescribed by regulations made by the Secretary of State.'.

No. 81, in line 37, leave out any sum' and insert an amount'. No. 82, in line 39, leave out sum' and insert amount'. No. 83, in line 40, after paragraph', insert that ceiling'. No. 84, in line 49, leave out a sum' and insert an amount'. No. 85, in page 142, line 2, leave out a sum' and insert an amount'.

No. 86, in line 4, leave out from year' to end of line 9. No. 118, in line 9, at end add--

11A.--(1) If, at any time on or after 1st April 1990, any debt of a local authority is reduced or extinguished by virtue of such a payment as is referred to in section 134(1)(b) of this Act, the authority's credit ceiling shall at that time be reduced by an amount equal to the reduction in the debt or, as the case may be, to the amount of the extinguished debt (and, by virtue of this paragraph, the credit ceiling may, accordingly, be a negative amount). (2) If, at any time on or after 1st April 1990, a local authority are required under section 134(7)(b) of this Act to repay or pay any sum to the Secretary of State, the authority's credit ceiling shall at the time that sum is repaid or paid be increased by an amount equal to that sum.'.-- [Mr. Gummer.]

Clause 55

Use of sums set aside to meet credit liabilities

Amendments made : No. 75, in page 61, line 14, leave out Where a local authority set aside any sums'

and insert

Amounts for the time being set aside by a local authority'. No. 76, in page 61, line 16, leave out those sums'.

No. 77, in page 61, leave out lines 26 to 28.-- [Mr. Gummer.]

Clause 58

Application of, and orders under, Part V

Mr. O'Brien : I beg to move amendment No. 288, in page 64, line 20, at end insert--

(3A) Nothing in this Part shall apply to a company in receipt of funds from the European Regional Development Fund on behalf of the relevant local authority'.

This is a very important amendment for many local authorities. Part V deals with companies in which local authorities have an interest. Many local authorities have been working hard to attract European regional

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development fund assistance. The Government should place on record the practical implications of this part of the Bill in terms of European grant aid to Britain.

There is concern that ERDF moneys could be lost if the Government do not accept the need for joint ventures. ERDF requirements stipulate that in order to gain assistance the body should be a public authority, or should act as though it were a public authority. It excludes applications from individuals and private sector organisations. A minority interest is unlikely to be sufficient to satisfy European conditions of assistance because public money is not regarded as secure.

My authority, Wakefield, is involved in this exercise. If ERDF money is not made available to it, it could have traumatic consequences. The implications of the legislation affecting companies will force local authorities to relinquish control of or influence over a company when existing or future capital requirements take the authority beyond its stated control total. That will lead to a dilution of the public interest to 20 per cent. or less and therefore to a substantial reduction in local authority activity if provision is not made for ERDF money to be paid to companies over which local authorities exercise influence.

An example is the National Exhibition Centre in Birmingham. An example from the NEC agreement illustrates the point that I am making. Article 5 of that agreement states in paragraph (a) that until 1 July 2019

"the Commission's approval shall be obtained before any application is made to the Treasury for consent to any new issue of shares in the NEC Ltd., or to any disposal of existing shares in NEC Ltd., to any person or body other than the Secretary of State or a local authority for the purpose of the Local Government Act 1972 ;"

Paragraph (b) is extremely important. It states :

"Birmingham City Council shall not, without the prior approval of the Commission, transfer any part of its share holding to the Birmingham Chamber of Commerce ;"

Paragraph (c) states :

"NEC Ltd., shall not, without prior approval of the Commission, dispose or offer to dispose of all or any of its interests in the Birmingham Convention Centre."

It is clear that if the Bill does not make provision to protect the payment of European regional development fund moneys to local authorities, local authorities could lose a great deal of support. I ask the Minister to consider the amendment extremely carefully.

Mr. Pike : If the Government do not accept the amendment, will the project being undertaken by Lancashire Enterprises in conjunction with Lancashire county council and the borough councils to revitalise the Leeds- Liverpool canal corridor be put in jeopardy? The project is bringing in considerable European funding and is vital to Lancashire.

Mr. O'Brien : My hon. Friend gives a further example of the importance of the amendment. I quoted the National Exhibition Centre in Birmingham. My hon. Friend has said what could happen in Lancashire and other colleagues could give further examples as to what could happen in their regions. The evidence before the House tonight makes it clear that the Government ought to give the amendment careful consideration. I urge the Government to accept the amendment in the best interests of local authorities throughout the regions as it will affect the economic wellbeing of local authorities.

Mrs. Virginia Bottomley : In general terms, ERDF grants for infrastructure investments are intended to

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support public-sector investments. In May 1987 the European Commission confirmed that local authority controlled companies were eligible for ERDF grants. In addition, the Commission confirmed that other companies would also be eligible if they had sufficiently close links with the public sector. The proposals in part V are precisely to provide a statutory framework for local authorities' interests in companies.

At present, when local authorities become involved in companies, all too often they are absolutely free of the statutory regulations governing financing propriety and accountability. When it comes to ERDF moneys in particular, it is difficult to argue that the relationship with the local authority should be anything other than extremely close.

The eligibility for ERDF grants of companies in which local authorities have interests stems from their links with the local authorities concerned.

The amendment seeks to ignore that and proposes that any company in receipt of an ERDF grant should be exempt from the provisions contained in part V of the Bill. That is quite unacceptable as a company could enjoy the benefit of grants payable to public sector bodies by virtue of its connections with local authorities but would not be subject to public sector disciplines. For example, a local authority could set up a company which it wholly owns to carry out an infrastructure project. The company could then claim ERDF grants for the project. Under the terms of amendment No. 288 that company would then be free to borrow unlimited amounts, possibly guaranteed by the local authority concerned and generally conduct its business in any manner it or, more appropriately, the local authority wished. I am afraid that the amendment would create a simple and obvious method for avoiding the controls that should properly be applied to local authority business. I hope that I have won the argument.

The hon. Member for Normanton (Mr. O'Brien) referred to two particular areas of concern. The position of the National Exhibition Centre is being considered carefully at the moment. The Lancashire Enterprise project, which I have had the pleasure of visiting, is not in any jeopardy. The amendment would seriously undermine what we are trying to achieve, and I strongly urge the House to reject it. 1 am

Mr. O'Brien : The Minister is trying to face both ways. She is saying-- [Interruption.] I can understand that hon. Members do not believe that, but it is true. She is saying that local authorities that receive EC money and form companies should conform to Government disciplines. That can be achieved without the legislation we are considering. She referred also to the two examples that I gave and has admitted that they must be looked at in detail, because there are certain provisions that are relevant. Those examples are mirrored in local authorities throughout Britain.

The Minister should examine carefully the points she has made. What she has said does not ring true when one considers what is happening in local authorities. The Government should reconsider their proposal.

Amendment negatived.

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Clause 59

Companies controlled by local authorities and arm's length companies

Amendments made : No. 22, in page 65, line 8, leave out by nominees of the local authority or'

and insert

in any one or more of the following ways, namely, by the local authority, by nominees of the local authority and'.

No. 23, in page 65, line 12, leave out either' and insert in any one or more of the following ways, namely, by the local authority'.

No. 24, in page 65, line 14, leave out or' and insert and'. No. 25, in page 65, line 19, leave out applies' and insert and subsections (4) and (5) of that section as they have effect in relation to subsection (3) apply'.

No. 26, in page 65, line 34, leave out from to' to applied' in line 36 and insert

any financial year if, at a time before the beginning of that year, the authority resolved that the company should be an arm's length company and, at all times from the passing of that resolution up to the end of the financial year in question, the following conditions have'.

No. 27, in page 65, line 38, leave out is' and insert was'. No. 28, in page 65, line 43, leave out are' and insert have been'.

No. 29, in page 66, line 16, at end insert

for other than commercial reasons'.-- [Mr. Gummer.]

Clause 60

Companies subject to local authority influence

Mr. O'Brien : I beg to move amendment No. 289, in page 66, line 50, after aggregate', insert

within any period of twelve months'.

Mr. Deputy Speaker (Mr. Harold Walker) : With this it will be convenient to consider the following amendments :

No. 290, in page 67, line 1, after made' insert

that period of twelve months'.

No. 291, in page 67, line 4, after guaranteed', insert in that period of twelve months'.

No. 292, in page 67, line 8, after owned', insert

at any time within that period of twelve months'.

Mr. O'Brien : The four amendments all refer to the same principle. We request that after the word "aggregate", the words

"within any period of twelve months"

should be inserted. The purpose of the amendments is to fix a time limit for calculating business association when the local authority has made a grant or loan, or holds stocks or shares in a company. Amendment No. 289 is in line with the 12-month period specified in clause 60(3)(a), where the relationship of payment to turnover is defined.

Clause 26(3) specifically permits local authorities to invest in commercial, industrial or public undertakings and to acquire shares or loan capital in such companies. We consider that the private sector often wishes to see and values a degree of local authority involvement, especially because of the expertise that the local authority can offer.

I want to refer to the question of a company whose principal business is the disposal of waste. Obviously, local authorities, especially the metropolitan authorities, are involved in the question of waste disposal and the production of heat or electricity from waste.

We suggest that, where there is a particular involvement, the time limit for calculating business

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association should be 12 months, as referred to in other parts of the Bill. Indeed, as was made clear in Committee, a significant amount of concern about that could be found among Conservative Back-Benchers. The hon. Member for Ealing, Acton (Sir G. Young) referred to personal associations in local authorities and to local government influence.

There is a substantial need for the Government to consider the amendment and our suggestion that references to a six-month period should be amended to read "12-month period" in order to give local authorities better opportunities for accountancy in that area of business association.

Mrs. Virginia Bottomley : It is important to make a distinction between everyday transactions between local authorities and influence companies and capital grants. For everyday transactions, the test in clause 60(3)(a) is only satisfied within a perod of 12 months if such payments account for at least half the company's turnover. However, the test in clause 60(3)(c) relates specifically to a company's capital base and the proportion of that which has been supported by grants, loans or other forms of support from a local authority. It would not be appropriate to qualify that to apply only to grants, etcetera, provided within a specific period as proposed in the amendments. The test must be an absolute one because a company that has relied on a local authority's support for at least half its capital base would almost certainly be subject to that authority's influence, irrespective of when the support was provided. When that is coupled with a 20 per cent. or higher personnel link, the company would undoubtedly be subject to the dominant influence of the authority.

I strongly urge the House to reject the amendment.

Amendment negatived.

Amendments made : No. 30, in page 67, line 17, leave out or subject to the influence'.

No. 32, in page 67, line 34, leave out

or subject to the influence'.-- [Mrs. Virginia Bottomley.] Further consideration of the Bill adjourned.-- [Mr. Kenneth Carlisle.]

Bill, as amended, (in the Standing Committee), to be further considered this day.

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Mr. Teddy Taylor (Southend, East) : On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Mr. Harold Walker) : Perhaps I may anticipate the hon. Gentleman's point of order. I should have announced to the House that Mr. Speaker has selected the amendment in the name of the hon. Member for Thanet, South (Mr. Aitken). Was that the point of order?

Mr. Taylor : No, it is a different point of order. I think that you, Mr. Deputy Speaker, will be aware that this is a desperately important proposal. May I appeal to the Government and ask them to consider whether it makes sense to debate at 1 o'clock in the morning the first-ever measure to give the non-elected Commission controls over British broadcasting? As it is such a desperately important issue, I appeal to the Government not to move the motion at this crazy hour.

Mr. Deputy Speaker : Order. That is not a matter for the Chair. 1.8 am

The Minister of State, Home Office (Mr. Tim Renton) : I beg to move,

That this House takes note of European Community Document No. 5574/88 and the Supplemenary Explanatory Memorandum submitted by the Home Office on 30th March 1989 and the proposals described in the unnumbered Explanatory Memorandum submitted by the Home Office on 7th June 1989 relating to broadcasting activities ; and endorses the Government's view that since these provisions now follow closely those of the Council of Europe's Convention on Transfrontier Television, they should be welcomed as contributing to the reduction of barriers to trade and the maintenance of the internationally-held principles of free-flow of information.

Before going any further, I advise my hon. Friend the Member for Southend, East (Mr. Taylor), who I know will be speaking to the amendment, that one reason why we are debating the motion tonight is that the matter will be discussed at the Internal Market Council later today and it was thought appropriate that the House should have the opportunity to air its views on the draft directive before the Internal Market Council meets. I shall deal with that point at greater length in a moment.

Even at this late hour, it is a fortunate coincidence that we are debating the draft directive on what, for Hansard purposes at least, is the same day as that on which my right hon. Friend the Home Secretary announced a range of exciting and far-reaching decisions that will affect British commercial television in the 1990s. The same spirit of preparing in some measure for a new broadcasting world permeates the draft European Community directive that we are discussing. More and more television broadcasts in Europe will become transnational, on satellite or cable. They will stretch across borders and they will ignore frontiers. So there are needs for a minimal set of international rules in Europe on such matters as advertising and sponsorship to make certain that what one country is broadcasting does not cause offence or break all the traditions or standards of another country in Europe that is receiving that broadcast. It is against that background that I ask the House to examine the directive.

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I am aware of the desire of the Select Committee on European Legislation to debate the matter and I am sorry if some hon. Members feel that the debate should have taken place earlier, although my hon. Friend the Member for Southend, East suggested that it should have taken place at a later stage. The Government felt that it would be appropriate to await any possible changes to the Community's proposals which might be suggested by the European Parliament before arranging a debate so that such changes could be taken into account. In the event, changes were suggested by the European Parliament following its second reading of the Community's proposals on 24 May, and this is the first opportunity that we have been able to find since then to hold the debate.

Mr. William Cash (Stafford) : Will my hon. Friend explain to me, a member of the Select Committee on European Legislation, why we could not debate this issue before a common position was adopted, despite the fact that a recommendation to that effect was put forward by the Select Committee in its report some time before a common position was arrived at?

Mr. Renton : I cannot add to what I said. We took the view that it was sensible, as the draft directive had been changed many times--there have been four explanatory memoranda from the Home Office to the Select Committee on European Legislation detailing the various changes that have been arrived at--that the debate should not take place until the European Parliament had had an opportunity to suggest any changes. Those were not made until 24 May, and this is the first opportunity since then, given the Whitsun break, to debate the matter.

I am pleased to tell the House that we have made substantial progress on this subject--

Mr. Jonathan Aitken (Thanet, South) : Come off it.

Mr. Renton : There is no question of coming off it. I shall go in considerable detail into the matter and I suggest that my hon. Friend listens carefully to the details of the progress that we have made, on the basis of which we are now able to recommend the House to endorse the attitude to the directive as set forth in the motion. We have made such progress that the Community proposals are now fundamentally different and much more acceptable than those which the House debated on 20 January 1987. At that time the Government and the House were concerned, and rightly so, over a draft directive which appeared to introduce more restrictions on free trade than it would have removed. It had been drafted in such a way that it would have created more obstacles to the free flow of television programmes than it would have eliminated.

We had, for example, serious reservations about the Commission's approach on copyright, which depended ultimately on the imposition of a statutory licence. Nor did we believe that there was a case for fixed numerical quotas imposed on everyone from Brussels. Rather than the establishment of general principles to provide flexible regulation to meet the domestic needs of individual countries, the draft directive then contained such a fine level of detail that it was likely to lead to more rather than less restriction.

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On that basis we were attracted to the idea of regulating European broadcasting by a Council of Europe instrument. At the Vienna conference of broadcasting Ministers in 1986, we were instrumental in securing agreement for the preparation of a Council of Europe convention on transfrontier broadcasting. We regarded the Council of Europe as a more appropriate forum for regulating these matters because its approach is more flexible and because it provides a much larger grouping of European states, 22 countries rather than the 12 represented by the Community. As the House knows, our emphasis was on the Council of Europe convention. Thereafter, in late 1987 and throughout 1988 and 1989 it has made significantly speedier progress than the directive.

At the Council of Europe conference of broadcasting Ministers in Stockholm last November, which I had the great pleasure to attend, it was clear that there was a collective political will to reach agreement on the outstanding points in the convention as quickly as possible. It also marked, and I emphasise this, a major turning point on the draft directive. Once the final shape of the convention became clear, we devoted much effort to securing amendments to the draft directive to bring it into line with the convention. Our approach was supported by the conclusion of the European Council in Rhodes last December that the future work of the Community in relation to broadcasting should be based on that of the Council of Europe and that the directive should be adopted in the light of that convention.

The agreement reached by the European Council was very satisfactory because it meant that, in general, the directive would follow closely the provisions of the convention. We had worked hard in negotiations on the convention to arrive at provisions that would not adversely affect United Kingdom broadcasting and advertising interests. Those provisions substantially met all the points about which we had reservations in the draft directive--I shall list them later--and they were, therefore, in our judgment an acceptable basis for European legislation.

Mr. Teddy Taylor : I have with me the Hansard for the debate on 20 January 1987, during which this very issue was discussed. The point made by the then Minister was that while the negotiations were taking place the Commission was bent on establishing competence in that area. He said that, despite the Commission's endeavour to take over the Council of Europe's proposals, it was a part of the argument that the Government would not fall for. Can my hon. Friend the Minister tell us why the Government fell for it?

Mr. Renton : With the greatest respect to my hon. Friend, he is trying to see booby traps and plots where none exist. He should be fair in his quotations. I shall quote remarks made by my predecessor in that debate. He said :

"The fact of the matter is that Community competence exists."--[ Official Report, 20 January 1987 ; Vol. 108, c. 843.]

The fact that the Community has competence in broadcasting has been argued not only by the Commission a great many times, but it has been upheld in the European Court on a number of occasions.

Mr. Taylor rose --

Mr. Renton : I shall give way to my hon. Friend for the last time. He will have his opportunity to make his points.

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Mr. Taylor : During the debate on 20 January 1987, the then Minister was asked whether the Government's view was that the Community should have competence in this issue, to which he replied "No".

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