|Previous Section||Home Page|
Column 797"Schedule 11 (tribunals) shall be amended as follows.
(2) In paragraph 2 (jurisdiction) the following paragraph shall be inserted at the end--
"(c) paragraph 5 of Schedule 4A above,"
Read a Second time.
Amendment made to the Lords amendment : (a), in line 5, leave out 5' and insert 4'.-- [Mr. Chris Patten.]
Lords amendment No. 400, as amended, agreed to.
Lords amendments Nos. 401 to 424 agreed to.
Lords amendment : No. 13, in page 40, line 46, after "available" insert--
"(i) to such bodies as are representative of commercial or industrial undertakings in their area ;
Mr. Hunt : These amendments bring us to part III of the Bill, which is concerned primarily with providing a new economic development power for local authorities and tidying up the scope of their existing discretionary spending power under section 137 of the Local Government Act 1972.
Column 798Amendments Nos. 13 and 14 relate to the consultation required for local authorities which wish to undertake economic development under the new power. The Association of British Chambers of Commerce argued that where there was a chamber of Commerce, it should be consulted. The amendment will ensure that it is the local authority's duty to do so. It will, of course, remain a matter for the local authority's discretion what other persons or organisations should also be consulted.
Amendments Nos. 15 to 17 provide a power by which the Secretary of State will be able to set out in regulations how the relevant population for section 137 is to be calculated.
Amendment No. 18 will raise from £500 to £2,000 the level of grant provided under section 137 below which a local authority is not required to insist on a report from a voluntary organisation on how the grant was used. Spokesmen for voluntary organisations argued that that would be an appropriate figure, and we are happy to accept that advice.
Amendment No. 19 introduces a new power for local authorities to fund advice agencies. We are glad to accept the suggestion of Baroness Strange, speaking in another place for a number of advice organisations, for an amendment to provide a new general power for local authorities to assist advice agencies. This is done by extending the provisions of section 142 of the Local Government Act 1972, which currently only provides for a power for local authorities to make or assist in the
Column 799making of arrangements for the provision of information. The fact that local citizens advice bureaux are no longer just providing information but are giving good advice to local people demonstrates how far they have gone with their expertise and experience.
Mr. Paul Murphy (Torfaen) : The Opposition generally welcome the amendments on economic development, especially in so far as they affect voluntary organisations and advice services. We are worried because all these changes can come into effect only if the Secretary of State does not use all the powers that are enshrined in the Bill. Clause 33 in particular gives the Secretary of State extremely wide powers under which he can cap economic development expenditure. The clause effectively says that areas with unemployment above the national average will be unable to use economic development power for financial assistance purposes. We believe that this obscures local pockets of unemployment.
We hope that the Government will announce that the regulations will be used flexibly in future years and will be subject to the widest possible consultations with local authorities and the private sector. This is especially the case on amendments Nos. 13 and 14 where local commercial interests are to be consulted. I should be grateful for the Minister's comments.
Mr. David Mudd (Falmouth and Camborne) : Although the Bill has gone a long way towards improving answerability to ratepayers about discretionary spending, it still does not seem to cover a worrying anomaly. The Government, in their response to the Widdicombe report, reaffirmed their faith in the local ombudsman system of answerability and referred in paragraph 6.20 to
"exploiting the strengths of the current arrangements rather than making fundamental changes which may weaken the system as a whole." However, one of the weaknesses of the present system is that it can sometimes, by denying ratepayers a chance to argue their complaints, equally deny a local authority the opportunity to clear itself against allegations. In December 1984 and January 1985, Carrick district council passed a minute--No. 1218-- which agreed :
"as a matter of principle the Council support an officer's legal costs in any libellous or slandrous actions taken ; and that the chief excecutive, in consultation with the chairman and vice-chairman of the council, be authorised to approve such actions where the actions arose from the pursuance of an officer of his official duties".
Between this controversial minute being passed by the committee in December 1984 and the whole council in January 1985, the words "the council support an officer's legal costs"
were strengthened to
"the council finance an officer's legal costs".
In effect, a council official could merrily proceed with litigation in the knowledge that the ratepayers would have to foot the bill. This possibility led to the unusually high number of cases which were subsequently initiated and which, the then district auditor noted, clearly gave "cause for concern".
Despite repeated submissions from the ratepayers about the legality of minute 1218, the council maintained its faith in it for four and a half years. I do not know how many times it was triggered, although I am advised that when one Cornish newspaper published a reader's letter which was mildly critical of Carrick district council, both
Column 800the newspaper and the letter writer received letters from the council's legal department suggesting that correspondence should now cease.
In July 1987, a group of ratepayers approached me to complain about certain alleged financial and other irregularities involving the council. I was then asked to request my right hon. Friends the then Home Secretary and the then Secretary of State for the Environment to investigate, as the complainants feared that proceedings would be initiated against them under minute 1218 if they persevered with their complaints by using usual channels.
I established that Devon and Cornwall constabulary was already investigating these matters and that since the creation of the local ombudsman service in 1974 the Secretary of State for the Environment seemingly no longer had powers of independent investigation. In 1987, the complainants, believing that they could present prima facie evidence of malpractice, found themselves in an impotent, nightmarish and frustrating Catch 22 of monumental proportions. There was no way in which they could go public through Ministers or the media due to the existence of minute 1218. As manifestations of alleged maladministration affected all, as opposed to a few, of Carrick's ratepayers, the local ombudsman could not act. As the allegations of financial malpractice were being investigated and processed by the police, they in turn had become sub judice. At Truro Crown court in April 1989, the Crown Prosecution Service offered no evidence when a district council official appeared charged with financial offences. It was not until July 1989--four and a half years after accepting minute 1218-- that Carrick district council sought and accepted the opinion of leading counsel that the minute was ultra vires and should not be invoked further.
It was estimated that this exercise had cost the ratepayers £2,437. However, it is suspected that that item of discretionary spending may refer only to specific legal advice to officers as opposed to the internal administration charges of the council at various stages of pre-litigation.
As it was clearly a matter of discretionary spending, the complainants tried to persuade the Audit Commission to re-examine Carrick's books for the disputed years. But the commission then declined to reopen accounts after an audit had been completed. The so-called strengths of the current system for investigation and remedy, so warmly supported in the Government's response to Widdicombe, are of dubious value when we consider this experience of ratepayers challenging discretionary expenditure. An ultra vires minute kept a council's officers and a critical public on an unequal basis for four and a half years. Members of the public were thus prevented from defending themselves against attack from the council chamber by or on behalf of council officers.
The existence of the minute inhibited certain persons from making statements to the police. The district auditor was unwilling to investigate because of the passage of time since the completion of the most recent financial year. The local ombudsman would not investigate because all, rather than individual, ratepayers were potential sufferers from this action. When matters had dragged on for several years, the Audit Commission found itself unable or unwilling to reinvestigate.
I am aware that an ability to challenge such discretionary expenditure exists under section 22(2) of the
Column 801Local Government Finance Act 1982, under which the Secretary of State may require an extraordinary audit. Perhaps my right hon. Friend will, on this occasion, exceptionally agree to receive and consider a submission from the complainants. In the meantime, under the existing tried, trusted and strong local government ombudsman system, vilification--rather than vindication--will continue to sour the air of Carrick. The complainants will go unheard and, above all, the council will be denied the clearance from the outstanding accusations that it believes it deserves.
Mr. David Hunt : I have always been immensely impressed by the diligence and vigour with which my hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) has represented his constituents' views. I have listened carefully to what he has said, and I am aware that he has raised a number of serious issues. As he has already said, the question whether expenditure is lawfully incurred is a matter for the Audit Commission, and it is not for me to intervene in the commission's decisions. The case that my hon. Friend has cited shows that electors who are concerned about any item of local authority expenditure should act promptly.
I ought to preface my remarks by saying that I am certain that most local authorities are scrupulous about the propriety and legality of their expenditure. Where illegality is suspected, there is a perfectly adequate regulatory system. Electors can draw to the local authority auditor's attention any item of expenditure which, in their opinion, has been incurred unlawfully by their council. The auditor can choose to look at any such item brought to his attention and can rule it to be unlawful expenditure under part II of the Local Government Finance Act 1982. If the expenditure is unlawful, the auditor can seek a declaration from the court to that effect and the court may surcharge the expenditure on those who authorised it. My hon. Friend has raised matters that go back some considerable time. I therefore propose to ask the Audit Commission to let me have a report on the case and if my hon. Friend will agree to it I shall come back to him when I have made further inquiries.
The hon. Member for Torfaen (Mr. Murphy) asked about the capping reserve power. Clause 33 permits the capping of economic development, but we have made it clear that the power to cap such expenditure is very much a reserve power. We have made it absolutely clear that at present there are no cases in which we would regard it as reasonable to use the power. On the question of flexibility, I remind the House that we have issued a consultation paper. We have received many comments and we are now studying them. We have every intention of using the powers conferred in the Bill flexibly within the overall aim of ensuring that resources are concentrated on the areas that most need assistance. I hope that that reassures Opposition Members. Question put and agreed to.
Lords amendments Nos. 14 to 19 agreed to, one with Special Entry. Lords amendments Nos. 309 and 310 agreed to.
Lords amendment : No. 81, in page 70, leave out lines 43 to 45.
Mr. Hunt : These amendments were agreed with the Opposition in another place to improve part V of the Bill which deals with the interests of local authorities in companies. It is our intention to introduce an order setting out the rules for those local authority companies. We have invited responses to the consultation by early December and it is our intention to draft the regulation as soon as possible thereafter.
Mr. O'Brien : As the Minister explained, part V of the Bill deals with companies in which local authorities have an interest. In Committee and in the other place questions were put to Ministers about issues that are not on the face of the Bill. Part V has consequences for the operations of local authorities which are encouraged by the Government to enter into company organisations for economic development, trusts, charitable trusts, housing associations and for recreation and leisure. Many companies are formed through the co-operation of local authorities and private organisations. Part V raises questions which must be answered.
We are worried about the influence of the Secretary of State on part V through regulations. In this House and in the other place the Government did not bring forward any substantial evidence of abuse by local authorities and the companies with which they are involved. According to part V, companies that fall within the control or influence of a local authority will count against a local authority's capital allocations and thereby raise substantial obstacles to working with the private sector to promote economic regeneration and to conserve local employment. We would like to see part V withdrawn. We have noted that the Minister referred to the fact that some agreement has been reached, so I hope that he will be able to respond to some points that I want to make now. In Committee I referred to a company that might be formed in west Yorkshire in relation to the mining museum established by the local authorities in Wakefield, Kirklees and the former South Yorkshire county council and the West Yorkshire county council. We asked how the Bill would affect the company that has been formed to run that mining museum, and the Minister replied :
"Our officials at the Department of the Environment are ready, willing and waiting to give advice on the structure of the trust. At present I do not know what it is. That is nobody's fault. Perhaps the hon. Member for Normanton will ask the secretary of the trust to outline it in a letter to my right hon. Friend the Secretary of State, or to me, and we shall do whatever we can to help. We are also prepared to meet representatives of the trust."-- [Official Report, Standing Committee G, 11 April 1989 ; c. 767.]
The representations were made and we were advised that the trust should move from being an involved company to an arms-length company--or one that would not include local authorities to the extent that it had previously.
In the House of Lords, Lord Hesketh was asked about the difference between a controlled company and an
Column 803influenced company. Officers of the Department advised the trust to which I referred to move from being a controlled company to being an influenced company. What are the benefits of that change? In the House of Lords, the Minister was asked :
"Can the Minister give more information about the difference between a controlled company and an influenced company? The exact difference is not made clear in the Bill. I particularly have in mind the Yorkshire mining museum which at present is a controlled company but has already been advised by the Minister in another place that it might be advisable to consider restructuring. But would restructuring mean for such a company that the restrictions and controls imposed upon it would relate only to the borrowing controls? Would all other financial controls be removed from such an influenced company? Would an influenced company still be eligible for a share of local authority provisions through the European Community? Would such a company be able to continue to take advantage of the services of a local authority such as specialised legal, financial, administrative and personnel services?"--[ Official Report, House of Lords, 24 July 1989 ; Vol. 501, c. 1256.]
Those questions have been asked in this House and in the other place. Lord Hesketh promised that they would be answered in a consultative document which was issued last month. However, only one question was answered. Will the Minister now explain the real consequences of the change from a controlled company to an influenced company? It can affect many companies that are formed and influenced by local authorities. The answers to those questions will help local authorities to decide how to form their interest in certain companies.
I should like to probe many other issues, but, in view of the lateness of the hour, if the Minister is prepared to answer my questions we will at least obtain some satisfaction.
Mr. A. J. Beith (Berwick-upon-Tweed) : I should like the Minister to consider the question of building preservation trusts--an issue which was fully and effectively raised by Lord Montagu of Beaulieu in another place. Building preservation trusts represent valuable self-help in the preservation of our architectural heritage. In my constituency, the Berwick preservation trust is one of the pioneering bodies in this matter. Most are known as revolving trusts, which carry out a project, sell the resultant improved building, and use the capital on another project, thereby ensuring that many historic buildings in historic towns are saved and that capital continues to be used for further restoration work. That is a million miles from the Government's various anxieties to which the Bill is directed. Leaving aside for a moment whether those anxieties are justified--I seriously doubt it--how will the Minister ensure that building preservation trusts' work is not impaired by provisions which were conceived without reference to their problems and which bore no relation to the world in which they operate?
My greatest fear is about borrowing powers. Companies caught by the definition in part V of the Bill will be subject to the regulations in part IV affecting local authority borrowing. Many building preservation trusts have a close association with their local authorities, to which they look for practical help and often like to have a good representation of local authority people on them. The end result of the provisions could be that borrowing by a controlled or influenced preservation trust from any third party, including the architectural heritage fund, would count against the relevant control total for the
Column 804local authority. Therefore, the local authority will have to approve the building preservation trust's borrowing in advance and to have a degree of influence over it that the authority would never have sought in the first place. If the provisions are still in that form, and if the Minister cannot give me some fresh assurances, he will end up with local authorities exercising more influence rather than less and doing so in a way that they would not have sought. In addition, the work of preservation trusts in attracting new funds and capital into the projects will be impaired.
I know that the Minister in another place, Lord Hesketh, gave assurances that the matter should be discussed. Indeed, a meeting was held in August between the Department of the Environment, English Heritage and the various other bodies involved but, as far as I am aware, we are not a lot further forward except that we know that the Minister may make some kind of exemption under the powers that have already been referred to. However, it would have been much more satisfactory to have a class exemption, exempting the whole category of building preservation trusts. Anything less than that, which still leaves the borrowing powers under some threat of involvement with local authority borrowing in general, is not satisfactory. I am sure that the Minister does not want to harm the work of building preservation trusts, and I wish that he would make it absolutely clear that he will disentangle them from the Bill.
Mr. David Hunt : I reassure the hon. Member for Berwick-upon-Tweed (Mr. Beith) that I recognise the important work done by building preservation trusts. We have said that we shall exempt building preservation trusts that are registered with the architectural heritage fund from being influenced companies. I understand that the exemption has been accepted by English Heritage and the architectural heritage fund as removing any such problems for such companies. If the hon. Gentleman would like to raise any other points with me, perhaps he will get in touch with me after the debate.
I can advise the hon. Member for Normanton (Mr. O'Brien) that I have the consultation paper with me. Perhaps the hon. Gentleman missed annex D, which sets out clearly the differences between influenced companies and controlled companies. There are eight points on influenced companies and five points on controlled companies operating at arms length, with a further four points on other controlled companies. If the hon. Gentleman will look at annex D, he will find that the provisions are set out simply. If he has any further queries, perhaps he will let me know. That would be better than my reading out the whole annex and putting it on the record. I understand that my Department's officials had a meeting with the trust about the West Yorkshire mining museum. We understand that the trust is content with the position as explained to it. The Department did not, of course, advise on any particular action because it is for the company to make up its own mind, but the consultation paper that we issued clearly sets out the trust's position. A copy has been sent to the West Yorkshire trust.
I readily accept that these are technical matters. As the hour is late, I shall simply advise the hon. Member for Normanton that, if he would like to raise any further points, I should be glad to hear from him and perhaps we can deal with them at a later stage.
Mr. O'Brien : I am grateful to the Minister for taking the trouble to introduce the consultation document. I appreciate its reference to interpretation. However, two points are not made clear in the document. One is the question of the availability of EEC funds for charitable trusts, and in particular for the West Yorkshire mining museum. Secondly, would such bodies still be able to use the expert knowledge of local authority officials, such as their legal, personnel and financing people, without breaching any of the provisions of the Bill ?
As the consultation document does not make those two points clear, I should be grateful if the Minister or his officials would take the time to consider them and to let me have their observations.
Question put and agreed to.
Lords amendments Nos. 82 to 111 agreed to.
Lords amendment : No. 20, in page 44, line 32, at end insert "(bb) a trust to which, by virtue of an order under section 69 below, the provisions of section 66 below are applicable ; or"
The regulation-making powers concerning the reserved part of capital receipts have been widened. We intend to use them to give exemptions, by regulations, in the new system for what are known as in-and-out schemes in the present system. We are consulting on our proposals. We have also announced proposed exemptions that will help local authorities to dispose of land for subsidised rented housing. We have taken a regulation-making power to allow local authorities that have set aside more than sufficient sums to repay all their debt to use the surplus for specified purposes. We intend to allow debt-free authorities generally to spend all their future receipts, with the exception of receipts from large-scale housing transfers or other housing sales that are not to sitting tenants. We hope to reach a decision on the treatment of such housing transfers shortly. I believe that the new system of capital finance will ensure a much fairer and more rational distribution of capital resources between local authorities.
Column 806I shall concentrate on amendment (a) to the Lords amendment No. 46. The fact that my comments will be short and that we will not press the amendment to a Division does not indicate its significance. The amendment would reduce from 75 per cent. to 50 per cent. the reserved part of capital receipts. As a result, local authorities would be able to spend the money that they were responsible for creating. They built the houses. They provided the initiative and the houses that are being sold. It is clear to any sensible person that receipts from sales of those houses should go back to the local authority areas. The amendment asks the Government, yet again, to consider reducing the amount of capital receipts that is reserved, so that half of the money can be put back into the local authority area which generated it.
District councils in Wales recently highlighted the depressed level of provision for housing in Wales, which is at a very low £80 million net. We must also consider the problems of people who are waiting for houses. Some 70,000 people in Wales alone are waiting to be housed. Only this week it was announced that homelessness in the Principality has risen by some 20 per cent. The possibility of houses being built for the homeless, the disabled, single people and elderly people could be achieved at a stroke if these capital controls were altered.
Local authority associations are pressing the Government to allow them to retain the additional spending power of receipts as a major incentive to themselves. I agree. They also draw attention to the bad effects of restricting the use of receipts.
These arguments were well expressed in Committee, and they were highlighted again in the other place. This is the last time when we can tell the Government that the issue of capital receipts is by no means technical, but one that affects the lives of millions of people.
The Government have said that if the amount of spending power from receipts increases, the amount available for distribution through credit approvals, on the basis of needs, decreases. Thus, high need, low capital receipt authorities will be disadvantaged if the reserved part provisions are relaxed. Ministers have been quick to point out that local authority associations that represent those high need, low resources authorities have not been vociferous in their opposition to the Government's proposals. That is not the case. Local authority associations in general think that the aggregate provision is inadequate to deal with today's housing problems.
We believe that a reduction in the reserve part of housing capital receipts from 75 per cent. to 50 per cent. would generate £900 million spending power in one year. I believe that the Government would change their mind as quickly as possible if they considered what that sum of money could do to alleviate our housing problems. The local government associations have voiced great concern about the timing of the introduction of the new capital control system in 1990-91. The Minister, and all hon. Members who have been involved with local government, would agree that one of the problems in the past has been the inability to plan for housing or any sort of capital provision over a number of years. Unless Parliament and Government give local authorities the opportunity to spend money in a planned programme, well in advance, nothing substantial will be achieved.
The Government should reconsider such changes so that local authorities in Wales and England can plan their housing provision for years to come.
Mr. Tony Banks : The sale of council houses and the way in which local authorities have been effectively conned by the Government is now becoming palpably clear even to the most myopic Conservative Members.
The policy was effectively sold on the ground that the money that local authorities got in capital receipts from the sale of council housing could then be applied to the building of further council housing. There was a certain symmetry in that argument that appealed to Conservative Members and even to some Labour Members. We now realise that that is no longer the case. Gradually the amount of money that can be applied in any given year has been steadily reduced, but, until the most recent changes, at least it still meant that 100 per cent. of capital receipts over a period of time could be used for further capital investment in council housing stock. That is no longer the case and tonight is the final twist in Government policy. Conservative Members used the Government's argument about the sale of council housing to justify accepting it hook, line, and sinker. I hope that they now realise that they have been conned by their Government.
A vigil is now being held outside No. 10 Downing street for homeless people in London. The plight of the homeless in London has now reached a crisis level that one could never have dreamt of in one's worst nightmares five years ago. The Government must realise that the situation in London is so dire that unless local authorities are allowed to go back to the full construction of council housing one trembles to think what London will be like in five years time. Surely the Government must realise that their sale of council housing policy, linked to a refusal to allow local authorities to use capital receipts for further construction, is a disaster. It was a twist and a con from the start ; now it has turned into a tragedy for millions of people who are desperately anxious for improved accommodation.
There are now hundreds of thousands of homeless in London and they will be pointing their fingers at the Government and blaming them for the housing crisis that now afflicts London and the nation.
Mr. David Hunt : It is a question of getting the balance right. Part IV of the Bill is designed to redress the balance between spending from allocations and receipts to ensure not only that needs are met, but that those authorities that generate receipts get a reasonable benefit from doing so.
The hon. Member for Torfaen (Mr. Murphy) pointed out that my predecessors highlighted the fact that similar amendments in the past would have resulted in a cut of £900 million in credit approvals. That means that £900 million less would be targeted on the authorities that need to house the homeless. No doubt the answer would be simple to the hon. Member for Newham, North-West (Mr. Banks)--let local authorities spend the receipts, but do not cut the credit approvals. That may be the Labour party's response, but it is not the response of any party which aspires to responsible control of public expenditure, and it certainly will not be this Government's response.
Column 808We have heard a lot about local authorities being unable to spend their own resources on their own priorities. Let us be plain about what those resources are. They are the proceeds of assets which the local authority has sold, the original purchase of which was mainly financed by borrowing. The cost of that borrowing has been, and often still is, supported by the national tax payer through housing subsidy, Government grant and the like. Why should that continue once the asset has been sold? We are not taking the resources away, but simply saying that it is right that some of them should be used to repay the authority's debt.
It is not as if we are stopping local authorities using any of their receipts for new capital expenditure, because next year local authorities will be able to spend nearly £4 billion from their receipts. That is a huge sum in anybody's terms.
Mr. Soley : Does the Minister realise that all his hon. Friends in the Association of District Councils which are Conservative controlled, as well as Lady Anson, who is a Conservative and chairs that organisation, think that he is totally wrong and that the Government should do what my hon. Friend the Member for Torfaen (Mr. Murphy) suggests? Why does he say that all Conservative-controlled ADCs have got it so badly wrong and he is the only person to have it right?
Mr. Hunt : With due respect to the hon. Gentleman, his analysis is badly wrong. I am saying that the Government believe that what we are proposing represents the right balance between targeting resources on needs and having a proper incentive and reward for generating receipts, which is why I urge the House to resist the Opposition amendment.
Question put and agreed to.
Lords amendments Nos. 82 to 111, 20 to 80 and 311 to 317 agreed to, one with Special Entry.
Further consideration of Lords amendments adjourned.-- [Mr. Sackville.]
To be further considered this day.