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7 Jan 2003 : Column 62—continued

Mr. Raynsford: I am listening carefully. The hon. Gentleman says that he wants the Government's use of the powers to be transparent. I thought that I had made it clear, not just before the Select Committee but in the Bill itself, that there are two reserves powers. The first is in respect of the national economy and will be used only to protect the overall national interest. Is he seriously suggesting that any responsible Government should not have such a power? The second is in respect of individual authorities whose performance is unsatisfactory. He knows that that applies to only a small number of authorities. Is he suggesting that there should be no scope to intervene to stop an authority such as Hackney

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getting into a position in which it so mismanages its affairs that it creates a large debt that the Government have to bail out?

Mr. Pickles: The Minister may be falling into the same trap as other occupiers of his post. They look at Hackney and think that is local government, but in fact it is an aberration and should be treated as such.

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): What would the Conservatives do?

Mr. Pickles: There is much merit in the Select Committee's recommendations. In its report of July 2002, it suggested an amendment to clause 4 which set out the procedure by which the Government could act. If Ministers want broad consensus, I hope that a similar, if not identical, amendment will be accepted in Committee. If that happens, we can bridge the gap, square the circle, and be happy about the results.

Sir Paul Beresford: Perhaps I could intervene before my hon. Friend becomes too enthusiastic about the freedom to borrow, which rather concerns me. From his background knowledge, he will recognise that any prudent authority will assist the revenue aspect of the capital that it would borrow. He will also know that the people who hold the purse strings for the local authority revenue are, in effect, the Government. So the new borrowing proposal is actually a sham.

Mr. Pickles: My hon. Friend was party to the report; I commend the parts of it saying that without resources these provisions do not achieve much. My hon. Friend is right in his assertion. If that is the point that he is making, I agree with him, and I hope that he has the opportunity to serve on the Committee to ensure that that point is rammed home.

Mr. Bercow: In reflecting on the capital receipts provisions in the Bill, can my hon. Friend tell us what assessment he has made of the effect of the change in the last Parliament on the rules for the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Pickles: No, I am afraid that I cannot. I have not the remotest idea, and if that is my hon. Friend's idea of being helpful, I look forward to his next intervention. However, I will look at the matter and write to him. Let me say to him, XThank you very much."

We oppose the pooling of capital receipts which will penalise well-run authorities, particularly those which are debt free. This matter was raised in interventions on the Minister. For such authorities—there are more than 90—that is the only flexibility they have. The provisions will reward badly run authorities and those which have not acted prudently in the past. The Minister tells us that those which are debt free have, somehow, committed a cardinal sin and that any Member who intervenes will be ticked off. I do not think that this will work—it is double taxation on tenants. Not only have their rents paid off debt, they must now contribute to the national pool.

Mrs. Browning: Does my hon. Friend agree that if there is one thing better than prudential borrowing, it is

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no borrowing at all? The Government borrow nationally and they want to encourage councils to borrow nationally. Not borrowing and not being in debt means not being in new Labour.

Mr. Pickles: I am very pleased with my hon. Friend's intervention for two reasons—I understood it and I agreed with it.

Sir Paul Beresford: When my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) intervened on the Minister, she was upbraided for picking out debt-free authorities. However, in paragraph 27 of the Bill's explanatory notes, the Government have selected debt-free authorities for special and positive treatment related to capital receipts. Would my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) care to comment on that?

Mr. Pickles: Yes, there was more than a hint that the Government were peeved in their response to the Select Committee. They said that they could see no reason why debt-free authorities should not be included in the pooling arrangements. I can think of many reasons. It may well have the perverse effect of working against the Government's intentions. The Royal Institution of Chartered Surveyors believes that it will provide a disincentive in terms of sales. It asked in the brief prepared for this debate why a local authority should sell its housing stock if it loses the money that it gains as a consequence. It said that the proposal may also encourage local authorities from selling some of their property to fund improvements to the remainder. The measure runs contrary to the Government's stated aim of giving more freedom to local authorities.

A similar pattern emerges over the new financial accounting arrangements bringing local authorities in line with modern accounting practices. A code of practice will be drawn up by the Chartered Institute of Public Finance and Accountancy, which will lay down sensible accounting practices. So why is it necessary to lay down the level of local authority balances? Too much statutory regulation runs through the Bill.

We will study the proposals on business improvement districts keenly. The irony that they are contained in a Bill that purports to give additional powers to councils while using the same instruments to pull the rug from under the feet of local authorities will not be lost on the House. There will be a democratic deficit in the management of the districts. They will be, to quote an American critic of the schemes, a Xcity within a city". Given that they are an American invention, it seems perverse to introduce them at a time when they are falling out of favour in the United States.

In Committee we will be paying particular attention to the rights and responsibilities of landlords and property owners and the protection of small business enterprises from undue burdens. The present threshold over which a successful vote must pass is too low and we will seek to make it more reasonable.

We recognise the need periodically to revalue properties for the purpose of council tax. It must be remembered that the tax was introduced partly as a property tax and partly as a reflection of services provided to a wider community. We support the

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revaluation being made on a regular and predictable basis. However, we have grave reservations about the introduction of an additional band. We know from reports in the media that some sections of the Labour party regard this as a way of soaking the rich and punishing the wealthy south.

If the newspaper reports are correct, it is the Government's intention to introduce a new band between bands G and H. That would have a severe effect on those on low to middle incomes in London and the south in general and would in particular affect owner-occupiers on low incomes living in high value homes. This phenomenon can be seen in parts of London, Kent and my county of Essex, but it is particularly noticeable in East Sussex. With levels of deprivation similar to those of the north-east, East Sussex property prices are nevertheless in line with the rest of southern England. These families will be badly hit by this latest Labour stealth tax.

There is also a strong case for saying that changes made to taxation by introducing an additional band should be debated on the Floor of the House and not done by regulation. I asked the Minister about the advantages of an additional band over a change in the composition of the bands, but his answer did not satisfy me. The Government would be very unwise to introduce an additional band. I believe that it would cause unforeseen problems and add considerably to the burden on people with low to medium incomes.

The Select Committee expressed concern about the trading arrangements for councils under the Bill. Its report referred to the tradition of ensuring as far as possible that when local authorities trade with the private sector, they do so on fair and equal terms. It expressed worries about the possibility of cross-subsidising the costs of providing traded services with other areas of councils' activities. I acknowledge that in their response the Government indicated that they were sympathetic to this view and that they would address the matter. Our worries go deeper than that, however. We believe that clause 95 could jeopardise the whole process of competitive tendering by enabling authorities to set up an in-house company for services which, under normal circumstances, would be put out to tender. The industry fears that they would have an enormous competitive advantage over private sector bidders.

We fear that the best value tendering process could be distorted unless there are strict safeguards against such companies receiving favourable or preferential treatment. There is a grave risk that the opportunities for private sector companies to operate services for the more successful best value authorities would simply dry up to the detriment of those authorities and the wider community.

If authorities best value companies are able to cream off successful undertakings, there will be a real danger that private sector companies would find it uneconomic to bid for some less profitable services and best value would simply cease to operate in practice. It would be very helpful if the Minister outlined what safeguards the Government intend to adopt to ensure that there is no preferential treatment. In particular, how will the assessment be made that the same performance criteria are being used for private sector companies?

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All the commentators, the Select Committee and anyone who knows anything about local government agree that it is over-regulated and overburdened. It is a shame that, with the exception of high-performing councils, the Government have not sought to reduce regulation.Talk privately to officials at the Department and they will openly admit that the burden of regulation does little good and is positively damaging, despite its good intentions. Its only purpose now is to act as an incentive to councils for its own removal. It is a sad indictment of the Government that the only carrot for local authorities is the promise to stop hitting them with a stick, but that is indicative of their approach to local authorities, which can be summarised as two bands—trust and understanding. However, the Government neither trust nor understand local authorities, and it shows.

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