Column 926Spicer, Sir Jim (Dorset W)
Stanley, Rt Hon Sir John
Stewart, Andy (Sherwood)
Stokes, Sir John
Stradling Thomas, Sir John
Tapsell, Sir Peter
Taylor, Ian (Esher)
Taylor, Teddy (S'end E)
Thompson, Patrick (Norwich N)
Townend, John (Bridlington)
Townsend, Cyril D. (B'heath)
Twinn, Dr Ian
Waddington, Rt Hon David
Wakeham, Rt Hon John
Walters, Sir Dennis
Wardle, Charles (Bexhill)
Woodcock, Dr. Mike
Young, Sir George (Acton)
Tellers for the Noes :
Mr. Kenneth Carlisle and
Mr. Michael Fallon.
Question accordingly negatived.
and holds his position within the company, or voting rights in relation to it, by virtue of an appointment by the authority'
and holds his position within the company, or voting rights in relation to it, by virtue of an appointment by the authority.'
Mr. Blunkett : I should like to draw attention to the comments of the Association of British Chambers of Commerce on this part of the Bill. The association has expressed grave anxiety, not about the Government's intention to close what they describe as loopholes-- [Interruption.]
The Association of British Chambers of Commerce is concerned, not about the Government's intention to close loopholes in the ability of local authorities to raise and spend capital outside the restrictions that exist in the form of capital regulations, but about the impact that this and other parts of the Bill relating to companies will have. It believes that one set of restrictions will have a chain reaction in other areas and it is worried that the valuable partnership which has been developing between local authorities and the private sector throughout the country may be damaged. The association believes that the intentions expressed strongly by the Department of Trade and Industry and less strongly by the Department of the Environment to support this partnership may be undermined by regulations that seek to achieve a goal by what the association describes as
"holding up one's trousers by putting on braces, attaching a belt, tying them up with string and then ensuring that the person cannot move his legs."
In terms of the rupture of this partnership, the association might have mentioned applying a truss, too.
As drafted, the Bill ensures that not only is a loophole to be closed, but a plethora of measures are to be used to prevent local authorities and the private sector from getting together to implement perfectly reasonable regeneration policies that provide jobs for men and women in the most deprived areas of our country--an objective
Column 927that I believe all hon. Members would applaud. Partnership arrangements ensure that unity of purpose emerges from the work of local authorities with their local business sectors, in the best interests of their communities. The two go together : market forces and reliance on the private sector alone cannot work ; nor can a wholly socially owned sector of the economy provide for all our needs. We must recognise that this partnership will enhance the living standards and lives of people. We need unity of purpose in social policy--investing in meeting needs, in training and education and in providing infrastructure and economic regeneration, and in the stimulus to the private sector which will result.
We believe that there is a thrust of policy in local areas across the country which mirrors the progressive and useful policies which have been adopted in places such as the Federal Republic of Germany, France and Italy, where the partnership between the local area and the private sector has yielded considerable fruit. That is why we and the chambers of commerce are worried about how the restrictions will apply to local authorities' capital programmes which are involved in joint companies or trusts, and about the chain reaction that will be touched off between one group of people and another. That is simply because, having been drawn into and having served on the board of management committee of a company, they will, by some sort of guilt by association, affect other such companies.
We recognise that the Government amendments go a little way towards accepting that, in the case of influenced companies which I described earlier, it would be right to restrict the knock-on effect. Our amendment asks the Government to accept the principle, which in Government amendments is partially accepted, that in the case of influenced and controlled companies, serving on one company should not in any way have an effect on one's activities in other areas. Later in the debate when I hope to avoid making a speech similar to this one, we shall deal with a group of amendments which attempt to ensure that the restrictions promoted by Government amendments Nos. 31 and 281 can be refined still further. That refinement will mean that development by a local authority of a joint company will not result in the people who serve on it disqualifying themselves from independence from the local authority and will ensure that the companies and trusts with which they are associated escape from influenced or controlled status.
By serving on one company--for example, a combined heat and power scheme which might be adjudged to be influenced--people engaging in their normal practice as managers or employees elsewhere should not be placed in a position where anything else they serve on will automatically be judged to be an influenced or controlled company. That is not acceptable and does not make sense in terms of allowing enterprise and innovation to flourish. As the Association of British Chambers of Commerce rightly says, it will make those who are involved wary of taking part in joint ventures. That means that they will be unable to play a part even in normal community activity about which they previously may have had no qualms. Such activity could create influenced or controlled status for the bodies on which such people serve.
Column 928As a consequence, any expenditure by a local authority on a company, even if the money is raised in the private sector, will be looked upon as part of the capital credit controls in the Bill. Local authorities and many other bodies will find themselves enmeshed in the maze, in the net that is being woven around this area of activity. That is why our amendments also seek to ensure that the 20 per cent. or above limit on those serving on a company or trust is lifted. That will mean that influence will not start to be designated at that level. Just because one fifth of those on a management board or trust of a company happen to be associated with a local authority should not automatically bring that company within the capital restraints and credit limits of the local authority.
Association and the formulae for influence and control should not apply where more than one local authority is involved. Someone taking part in his own time in the activities of a concern and who works at a senior level in a neighbouring local authority could trigger the machanism for influence or control. That is because that person would breach the 20 or 50 per cent. limit on the number of people on the management board or trust. That is extraordinary and during the debate, sooner rather than later, we hope to be able to put it right.
We recognise the Government's ideological obsession with the market economy and their desire to exclude local authorities from as much as possible of the joint activity that is taking place. They also want to ensure that, while the private sector can raise as much as it likes from the market, the public sector cannot. However, even in the Government's terms, these proposals go too far and that is why we seek to amend them.
It would be quite wrong if people who genuinely believed that they were excluded suddenly found themselves included. It is not right that just because a company has a contractual arrangement with a local authority someone who works for that company should be affected in any way by the Bill. For example, a cleaner working for a contracting firm should not suddenly find that his presence on a joint body or company triggers the mechanisms that I have described. That is beyond the bounds of reasonableness. The Government amendments would not deal with such a situation but ours would, and that is why we are arguing that common sense should prevail. No one outside the House engaged in business or commerce or in a local authority of any persuasion is arguing that the restrictions should be as tight as they are or that the levels of direction from the centre should be as great as those that are proposed. Tragically, in the media there is a lack of awareness of what will happen when this part of the Bill becomes law. How many people outside are aware that virtually at a stroke it will destroy the local authority-run public transport sector? It will do that by undermining the ability of local authorities logically to invest in public transport, because any such company that is influenced or controlled will automatically fall within the credit limits. That will wipe out the public expenditure investment in other local authority service areas. We are asking the Government to be reasonable. I know that the House has much to deal with and that we shall deal with major issues that everybody wishes to debate. I wish that as much attention could be directed to the provisions dealing with the impact on partnerships or
Column 929those dealing with the impact on rents and the local authority rented sector as will be directed to dog registration. However, that is the way the House works and the way in which the media view things. I hope that, with the assistance of my hon. Friends, I shall be able to keep my later speeches brief.
Mrs. Virginia Bottomley : The speech by the hon. Member for Sheffield, Brightside (Mr. Blunkett) again shows a great deal of misrepresentation of our proposals. It is absolutely clear that the Government must act when a company has been set up in order to undermine the capital rules. The Government must also act when such a company or a local authority company disregards the propriety and standards that a local authority would apply. We have no wish to undermine or to put in jeopardy a great range of useful and productive companies that are based on partnership between public and private sectors.
Consider just one area of misrepresentation. The hon. Gentleman said that he did not think that where only 20 per cent. of the members of a company board were linked with a local authority the company should be treated as influenced by the authority. Nor do we. We are proposing that that should happen only when both that has occurred and when half or more of the company's business is associated with the same local authority, or where there is some other similar test of a close business relationship with the same authority.
It may not be possible to discuss in detail all the amendments that the hon. Gentleman and his hon. Friends have tabled on this issue. Perhaps we should welcome or feel sad about that. But a number of them reveal a misunderstanding about the detail of what we propose and the way in which they will operate. I assure the hon. Gentleman and those who have expressed concern that there are areas where individuals or categories of companies will be exempted either permanently or temporarily. We have discussed a number of specific cases and in virtually every case a solution has been found. The hon. Member for Barnsley, West and Penistone (Mr. McKay) referred to two companies in his area, the Yorkshire mining museum trust and the Barnsley business innovation centre. I assure him that there have been discussions with both of those companies, which seem satisfied with the outcome. We are prepared to listen. We shall be bringing forward regulations to deal with the detail of many of the proposals.
The hon. Member for Brightside would like to change the association test with a local authority to that of appointment. That may superficially seem attractive, but in many companies which are clearly subject to local authority influence the authority did not appoint anybody to the company.
It is easy for two local authority officers--a chief executive and a treasurer, for example--to form a company with themselves being the two founder members and directors. The articles of association then provide that all future members of the company shall be admitted by the board of directors and that all members of the company shall be directors. The two officers admit a number of councillors, and the two then resign. The membership and board of the company are then composed exclusively of councillors, but the local authority has not
Column 930made any of the appointments. I hope the hon. Gentleman will appreciate how important it is that we take the steps that the Government are proposing.
I am grateful to the hon. Member for Brightside for referring to amendments that we shall be moving to address concerns expressed by the British Chamber of Commerce, an issue raised in Committee by my hon. Friend the Member for Taunton (Mr. Nicholson.) They will ensure that people who provide their services voluntarily as directors and secretaries to local authority control companies will not be regarded as associated with the parent authority by virtue of that connection alone.
I hope I have assured the House that these are important measures, that they are necessary and that statements about adverse effects have in some cases been mischievously circulated and have no justification.
Amendments made : No. 31 in page 67, line 33, after time' insert
both an employee and either'.
No. 32 in page 67, line 34, leave out or subject to the influence'.
No. 281 in page 67, line 38, leave out professional or managerial services' and insert--
(i) advice with regard to the authority's interest in any company (whether existing or proposed to be formed), or
(ii) advice with regard to the management of an undertaking or the development of land by a company (whether existing or proposed to be formed) with which it is proposed that the authority should enter into any lease, licence or other contract or to which it is proposed that the authority should make any grant or loan, or
(iii) services which facilitate the exercise of the authority's rights in any company (whether by acting as the authority's representative at a meeting of the company or as a director appointed by the authority or otherwise)'.
-- [Mrs. Virginia Bottomley.]
Amendment proposed : No. 295 in page 67, line 46, after first in', insert
a branch or constituency section of'.'-- [Mr. Blunkett.]
Question, That the amendment be made, put and negatived. Amendment proposed : No. 296 in page 67, line 46, after body', insert
in the area of the authority'.-- [Mr. Blunkett.]
Question, That the amendment be made, put and negatived.
Amendments made : No. 33 in page 68, line 23, leave out The Secretary of State may by order'
In order to secure compliance, in relation to companies subject to the influence of local authorities, with provisions made by virtue of subsection (1) above, an order under that subsection may'. No. 34 in page 68, line 36, leave out from may' to obtain' in line 37 and insert
make provision requiring a company or local authority to'.-- [Mrs. Virginia Bottomley.]
( ) (1) Each local authority in England and Wales shall receive central Government subsidy to cover the full cost of rent rebates paid out by them in any financial year.
(2) Any rent rebate subsidy payable to a local authority in England and Wales shall be credited to a revenue account which is not the Housing Revenue Account or the Housing Repairs Account.'.-- [Mr. Soley.]
Brought up, and read the First time.
The new clause would guarantee that local authorities received central Government subsidy to cover the full cost of rent rebates. My hon. Friends and I regard this as an important proposal because it is designed to counter a classic example of the Government trying to get the poor to subsidise the poorest.
The new clause deals with two issues. First, it would mean the reimbursement of local authorities in full as opposed to the present 97 per cent. level of the rents they subsidise. Secondly, it would ensure that rent rebate subsidy remained a separate and distinct form of central Government subsidy. It would involve crediting the subsidy separately to the housing revenue account.
When the Government originally told local authorities to take on responsibility for housing benefit, considerable reservations were expressed about that requirement. Indeed, the way in which the instruction was forced on local authorities caused mayhem in the administration of many authorities, and led to difficulties being experienced by some tenants in attempting to get the subsidy due to them, for which many of them had paid over the years through their taxes.
In addition, the Government gave a commitment that the housing benefit subsidy would be paid in full by the Government. The then Minister responsible for social security matters in 1982 said that housing benefit subsidy, although administered by local authorities, would be refunded to them by central Government. That commitment was undermined when the sum was reduced to 97 per cent., although most people took the view that there was no point in complaining about a reduction of 3 per cent. That was the thin edge of the wedge, however, and today local authorities have to pick up much more of the bill. We are here discussing the principle that resonsibility for the relief of poverty should rest with the taxpayer and not be transferred to local people. Otherwise, the person in one house earning an average or even below the average income may, due to the way in which the new system is structured, be subsidising a next door neighbour receiving full housing benefit because he is unemployed. That must be unfair because, as I said at the outset, it means the poorer sections of society subsidising the very poorest.
The Government are deliberately confusing the funding of housing and the funding of income maintenance. There is a strong case for subsidising housing generally by various means, as we have done in the past--funding revenue, capital, and so on--and there is a strong case for funding people through income maintenance. But there is no case for blurring the distinction between the two so that the one becomes confused with the other.
All other countries of which I am aware pay a decent subsidy for housing, enabling people to rent or buy in a
Column 932fairer way than we do in Britain. They do not put the burden on to the poorer sections of society to subsidise the very poorest. Not only does no other country do what the Government propose, but it has not been done here for many years. Indeed, one would probably have to go back to the 19th century to find it being done on a major scale. The story does not end there. What is proposed shows the Government's dislike of council tenants. A bizarre aspect of this provision is that is does not apply to housing associaton tenants or to tenants in the private sector. It applies only to council tenants. Why do the Government expect council tenants to subsidise other council tenants out of their rent payments--as distinct from any taxes that they pay--but do not expect anyone else to do the same? It is all part of the Government's vitriolic campaign against council tenants. They want them to stop being council tenants. They want to push them into the private sector and they are prepared to adopt any measures to achieve that. If that means bullying them, pushing and shoving them and generally making their lives an economic misery, the Government will do it and they have chosen to do it with this particularly nasty legislation.
What would happen if the Government pursued such a policy in other sectors? For example, would they expect the recipients of family credit to fund the benefits of other, less well-off people? That is what would be involved if a similar policy were followed. The Government should discuss with local authorities a fairer system to deal with services, and keep housing benefit separate from other housing subsidies. Let us not underestimate the importance of this subsidy.
Housing benefit is one of the most important sources of income for many people. For example, the average weekly payment for rent rebate in 1988-89 was £15.37. Some 60 per cent. of council tenants are in receipt of housing benefit and about 3.5 million council tenants receive a rent rebate. The majority are pensioners. The Government will recall the mess into which they got themselves a year or so ago when they cut housing benefit for the seventh time. That caused a crisis even in Conservative areas. Pensioners discovered that they were losing £7, £8, £9 or £10 and sometimes even more per week off their incomes. There were desperate scenes, which hon. Members on both sides of the House will remember from their advice surgeries. Elderly people came along and said that they had fought for the country during the war but now could not manage and feared that they might have to go into a hostel. Such scenes make one realise that, although the overall number of people affected is large, it is still a small enough proportion of the population to mean that the Government are prepared to say that they do not care enough to put the problem right.
I brought to the attention of the Minister some time ago a report of a press conference on the effect of the increased rents when housing was transferred from the council sector to a particular organisation. In that case, some pensioners on a joint income of £150 a week with their separate pensions as well as their state pensions were just outside the level at which they would be entitled to housing benefit, but they were being asked to pay a rent of about £40 a week--in other words, 40 per cent. of their net disposable income was going in rent. If any hon. Member were paying 40 per cent. of his net disposable income in housing costs, be it mortgage payments, rent or anything else, it would