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7 Jan 2003 : Column 69—continued

Mr. Pickles: Will the hon. Gentleman give way?

Andrew Bennett: I will, although I am reluctant to do so because of the time restrictions.

Mr. Pickles: Will the hon. Gentleman answer the question that the Minister did not want to answer? What is the advantage of an additional band as opposed to adjusting the existing bands or introducing a regional variation?

Andrew Bennett: The advantage of extra bands is that in areas such as mine they would deal with the fact that band A currently covers a wide range of properties. Although redistribution or lowering of the bands might have some impact, the easiest solution would be to increase their number. We should remember how we got into this mess. Some people were keen to get rid of the rates. Then we got the poll tax and we are reaping that harvest in our current problems. I make a strong plea for splitting band A. There is also a case—although it is not so important in my constituency—for increases at the higher end of the scale.

I very much welcome the proposals for business improvement districts although there are some problems to be sorted out, especially between owners

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and tenants. In many business improvement areas, the tenant of the property will make the contribution but if, as we hope, the area succeeds, the owner of the property will receive the greatest benefit. We should try to ensure that everyone in a successful business improvement area where property values increase should have made some contribution. We need to do further work on that.

It is also important that some of the business improvement schemes should be for small areas. In my constituency, there are problems due to competition between the town centre and out-of-town shopping areas, but the hardest-hit places are the small shopping parades which used to have the butcher, the baker—although perhaps not the candlestick maker. They included a small range of shops but they have almost all disappeared. Boarded-up shops give the whole neighbourhood a depressed look so I hope that local authorities can undertake improvements in small business areas as well as in town centres.

I apologise to my right hon. Friend the Minister if I pressed him too hard and too early on clause 28. I thought that he was going to tell us that there would be separate legislation, but I welcome his comments. I hope that we can include those suggestions and that the official Opposition will support them instead of dodging them as they did this afternoon. If we can get all-party support we could get the provision out of the way with very little debate. We have, after all, spent a huge amount of time debating it in the House; it will have a big impact outside but it probably does not need so much debate.

I hope that when the Deputy Prime Minister makes his statement on housing in a few weeks time we can look into the powers for local authorities to regulate landlords. I realise that legislation is proposed in the future, but it would be most helpful if we included a clause that allowed local authorities simply to undertake the preparations for registering and regulating landlords who want to benefit from social security payments.

I commend the Government. The Bill may be only a modest step, but we are moving in the right direction and I very much hope that it will quickly reach the statute book.

6.17 pm

Mr. Edward Davey (Kingston and Surbiton): The House is indebted to the hon. Member for Denton and Reddish (Andrew Bennett) and his Select Committee. Their report on the draft Bill, which, as we have just been reminded, was compiled in only a week, was hard hitting.

Many of the Committee's criticisms of the draft Bill apply to the current measure. The Committee may have been influential in persuading the Government to change a few things—it is especially good that the proposal for one special single formula grant has been dropped—but many of the Committee's other pertinent criticisms still apply to the Bill; the hon. Gentleman held back a little when mentioning them.

The Liberal Democrats will support the Bill for at least three major reasons. First, we support the new prudential capital regime, albeit with reservations. Secondly, we support the proposals on business improvement districts, which are an important step forward, and I shall spend some time discussing them.

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Thirdly, the council tax reforms are extremely welcome, as far as they go, and will help many councils and, more important, council tax payers throughout the country. Those significant prizes should not be lost by opposing the Bill. However, we have serious reservations that we shall press hard in Committee and, indeed, in this debate.

The Government are retaining many reserved powers, especially in respect of capping borrowing powers and minimum reserves. Along with many others, I am concerned about the potential for party political meddling. We are particularly concerned about the pooling arrangements, about which many right hon. and hon. Members have already spoken but which I shall consider in some detail. Furthermore, I have counted at least 38 new regulation-making powers in the Bill, many of which are unnecessary.

I agree with one thing that the hon. Member for Brentwood and Ongar (Mr. Pickles) said. The public have undoubtedly rumbled the Conservative party. When the hon. Gentleman criticised the Government for centralising powers, many Members shook their heads in disbelief. Given its record in local government, the extent of forgetfulness in the Conservative party makes amnesiacs seem like nostalgics. Conservative Front Benchers have a lot to apologise for, and the current weak state of local government is a direct result of many years of centralising measures by the Conservatives.

We shall argue, both on Second Reading tonight and in Committee, that the Government should have a much greater vision. They should put the Conservative years much further behind them than they seem willing to do. They should abolish the Tory council tax—the real reform that the country needs. In many ways, we also want to abolish the Secretary of State. He has far too many powers over local government, and they should be removed from many areas. We need to rebuild local government, and to show that central Government trust local government. The Bill does not provide for that.

I want to make some detailed comments about the prudential capital regime. The regime it is replacing was quite disgraceful. The credit approval regime, with its basic credit approvals and supplementary credit approvals, was not just a complex regime that undermined local democracy and meant that councils and councillors had to go cap in hand to Whitehall; it was also very inefficient, and prevented sensible investment. Credit approvals could not be carried forward to the following year, which made a mockery of the long-term planning necessary for many capital proposals. It also prevented best value and invest-to-save schemes. Indeed, it also reduced local expertise in local finance departments. I am, therefore, very pleased to see it going.

Liberal Democrats have campaigned for a prudential capital regime for many years. I could read out a long list of Liberal Democrat policy papers in which we have proposed such a regime, but I can see that that would be just too popular tonight. I will simply refer to the Liberal

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Democrat LGA group's submission in 1998 to the Government's Green Paper, XModernising Local Government Finance" on capital finance. The group said:

That is a policy that we continue to support.

The problem is that the Government's implementation of that very sensible idea does not go far enough. Reserve powers, especially under clause 4(1), contain the potential for the creation of a universal capping regime for borrowing. The Minister said, in response to various interventions, that that was not his intention and that the reserve powers to limit the borrowing of all local authorities, for Xnational economic reasons", or of individual local authorities would be used very sparingly. I suggest that there is no need for such powers. The prudential regime, which could be worked through with the Chartered Institute of Public Finance and Accountancy and the Local Government Association, would be sufficient. Even if the Government were still worried about national economic conditions, those issues could be dealt with in far less threatening ways than those proposed in clause 4. For example, I am concerned that the provisions in clause 4 for retaining borrowing capping powers do not spell out what the Xnational economic reasons" are. Perhaps the Government intend to do that in the subsequent regulations. It is important that the Chancellor and the Deputy Prime Minister should not suddenly say, XRight, we have decided to use these powers and stop the borrowing." That power is excessive, and needs to go.

Local authorities could take other routes. If an authority wanted to exceed the guidelines for prudential borrowing set by CIPFA, a trip mechanism could be put in place. For example, there could be a local referendum allowing local people to decide what level of borrowing would be appropriate, if it were to exceed CIPFA's recommendation. This is a real weakness in the Government's implementation of a prudential capital regime. As the hon. Member for Mole Valley (Sir Paul Beresford) said, there are great limitations to the new freedoms, particularly in respect of the revenue that would be required to service the debt that would spring from the Government's failure to reform the tax regime and the taxation powers for local government. This problem also applies to the failure to reform the housing subsidy scheme, because borrowing for investment in housing is linked to the rent subsidy scheme that the Government have for housing. That is not being reformed, so, again, there will not be the revenue to support increased debt for investment in housing. The effect of pooling will also restrict the ability of local councils to borrow within the new framework. These are serious weaknesses.

When might reserved powers be used? Would they be used halfway into a project in which a local council had decided to invest? That might deter the investment in the first place. The pooling proposals will bring great instability to the setting of prudential borrowing limits. The Secretary of State's regulations on pooling, which we have not yet seen, could easily be changed in future. A council could therefore find that it had to contribute more to the pool than it had expected, thus reducing its

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prudential limit and its ability to borrow. Of course, the reverse could also be the case. The instability built into the new capital regime will make the regime far less effective. So, while I am happy to give two cheers for the new prudential capital regime, I am afraid that the remaining central powers make it less effective than it could otherwise be.

The remaining centralisations that are retained in the Bill concern me particularly. Clause 26, for example, will allow the Secretary of State to set minimum reserves for each local authority. That is a new power—a new centralisation—and it is unnecessary. The Minister will know that section 114 of the Local Government Finance Act 1988 gives chief finance officers powers to take action if they see overspending during the year. I cannot see what the extra powers in clause 26 add to that system.

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