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7 Jan 2003 : Column 88—continued

7.27 pm

Sir Paul Beresford (Mole Valley): There is nothing wrong with my eyesight, and if the hon. Member for Stevenage (Barbara Follett) is ageing, she is ageing a darned sight better than I am—even when I pull my jacket in.

I have great sympathy for the hon. Lady's point about the pooling of capital receipts. In fact, as she knows the Select Committee felt exactly the same way, but we did not restrict the argument to the new towns. Indeed, many of the points that she made apply to local authorities throughout the country. Capital receipts are assets that they wish to use for various facilities in their own areas. They paid for them, so why should they not use them? For those that have not made use of that opportunity, the pooling of those receipts is not a good idea.

The Minister spoke at length—both today and before the Select Committee—about how superb and positive the Bill is, and how it will introduce huge freedoms, and so on. However, as he is probably aware, the Committee was underwhelmed by it, and in this regard he seems to be on his own. It is perhaps worth quoting from the first paragraph of the list of conclusions in the Committee's report on the draft Bill. It states:


It is probably worth touching on that particular aspect in the short time available. This is yet another classic example of Government spin. They talk of freedom and of greater democracy, but in fact they are providing exactly the opposite. At best, the Bill redefines the methods of restrictions, and at worst it actually increases bureaucracy and regulation.

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Most of the Minister's spin has concerned authorities having much greater freedom to borrow for capital expenditure, but his own Department's explanatory notes point out that this applies only


It is clear that any local authority has to estimate the availability of revenue to cover that aspect of any capital borrowing. Particularly following the announcement of the grant regime for next year, with central Government direction on levels of expenditure in many areas, coupled with target grants and ring-fenced grants, the Government's hold on local government revenue expenditure is tighter than ever.

There is no doubt that, for ordinary capital spending, local authorities are heavily dependent on annual Government support. No prudent local authority will assess that long-term borrowing as affordable in any ordinary sense of the word unless there is a good expectation of full Government support. Such an expectation is the basis on which local authorities have borrowed for many years, as credit approvals have automatically generated additional annual grant under the standing spending assessment.

I understand that local authorities are still awaiting the Government's proposals—which were promised last summer—for future grant arrangements to support capital spending. The natural expectation for many local authorities, following the Government's deeply entrenched centralisation techniques, is that the current controls, though credit approvals, will be replaced by an equally restrictive regime of conditional grant approvals. To back their claim of further freedom, the Government are relying on the Chartered Institute of Public Finance and Accountancy to develop what is called a prudential code to define what borrowing is affordable, and what is not.

I understand that the institute has prepared a draft code that will impose more performance yardsticks and more bureaucratic procedures on local authorities—as if they did not have enough already. I further understand that the draft code focuses only on the first three years, and that it therefore cannot address the fundamental problem that local authorities are not in a position to assess affordability for many years ahead—in other words, over the whole period of the standard time of local authority debt.

In essence, the overall effect of these proposals will be an increase in bureaucracy, with little or no worthwhile gain of freedom from Government controls. Is all the pain worth the bother, given that there will be such little gain?

Clause 11 has been touched on already. It gives a general power to the Secretary of State to confiscate the housing capital receipts of local authorities. I suppose that few people will be surprised about that, given the political machinations relating to the formula for distribution of revenue grant. Here again, the Government are intervening by giving to themselves the powers to confiscate housing capital receipts and consign them to a central pool. Although I guess that that procedure may be the Deputy Prime Minister's way of killing dead the right to buy—a constant blind spot in his tunnel vision—this manoeuvre, on local practical grounds, will destroy any interest in maintaining incentives for the good management of public assets.

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The Minister assured the Select Committee that that confiscation would not be allowed to have a retrospective effect. That was very welcome. It is therefore with great concern that, according to my quick reading of the explanatory notes to the Bill, the effect of the assurance applies only to debt-free authorities. I hope that, when he winds up the debate, the Minister will reassure the House on that matter.

This Government, and in particular the Minister of State and his predecessor, constantly say that they trust local government and wish to give it more freedoms. If that were really so, clauses 25 to 28 could be deleted. They contain a high-handed and unnecessary range of procedures and prescriptions about local authority reserves and budgetary controls. The absolutely irresponsible behaviour of a few authorities in the late 1980s, and especially of some Labour authorities in that period, is no longer evident. Small changes made since then now protect public expenditure and, as a consequence, we do not need all the proposed restrictions. Indeed, no other public bodies are subject to this degree of legal prescription. In essence, all local authorities are being treated as if they were less capable of running their finances than colleges and housing associations.

As I have already said, legal safeguards currently exist. They require the appointment of properly qualified officers to take charge of financial administration, the adoption of proper accounting practices, and internal and external audit. Furthermore, there is a requirement that each local authority must review its reserves before it decides the level of council tax. Even if the Minister can point to any cases where these legal safeguards have proved inadequate—and he mentioned one—methods already exist that make it possible to alter one local authority's approach without imposing extra burdens on other authorities, as clauses 25 to 28 do.

The cost and delay caused by the restrictions imposed by these further bureaucratic burdens will tend to degrade overall performance and increase financial costs.

Mr. Raynsford: Earlier, I asked the right hon. Member for North-West Hampshire (Sir George Young) a question to which he did not make a complete response, so perhaps I can ask the hon. Gentleman the same question. Why, if the measures are so objectionable to Conservative Members, did the previous Conservative Government impose rather more stringent controls on local authority housing revenue accounts? The controls were designed on exactly the same lines as those proposed in the Bill, in that they required minimum balances and reserves, and very specific observation of budgeting rules. Why was that acceptable under a Conservative Government, but not under this one?

Sir Paul Beresford: It is an interesting question. I do not want to dodge it, but I must point out that I was not here at the time. Did the Minister support the Conservative proposals, or vote against them? Moreover, the Conservative proposals applied to only

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one element of a local authority's budget, whereas this Government's proposals apply to the whole budget of every authority.

Mr. McWalter: Does the hon. Gentleman agree that the previous Conservative Government had a highly centralising approach to local government, whereas this Bill purports to be liberating and devolving?

Mr. Curry: The verb Xpurports" is an interesting one to use.

Sir Paul Beresford: As my right hon. Friend notes, the verb Xpurports" is interesting in this context. If the hon. Gentleman reads the Bill carefully and talks to his local authority's finance officers quietly behind closed doors, he may find that he supports many of the concerns expressed by Conservative Members. The Bill purports to be decentralising, but in reality is not.

The draft Bill included references to the general formula grant. Presumably, those references related to the ministerial speeches and papers that preceded the Bill, when Ministers explained that the Government's intention was to improve the general grant system, giving more predictability and stability in order to support long-term planning and strengthen local authority accountability. The proposals have since been dropped and replaced by clause 31, which proposes an unrestricted power to enable Ministers to


Furthermore, clause 32, contains an Xancillary" power to require a local authority to formulate policies in relation to any matter and to supply such information as the Minister may require.

That is an absolute monstrosity. The power is much more wide ranging than any that I know, and it will allow direct opportunity for funding by ministerial whim. There are no safeguards, as the hon. Member for Kingston and Surbiton (Mr. Davey) noted. There is no requirement for prior consultation with local government, nor even for a statement to be made—for instance, within six months of the end of each financial year—showing all the grants paid to each individual local authority in exercising this power. The proposal is yet another example of central direction that will enable Ministers to provide grants to local authorities as they see fit. In other words, it is the specific, targeted grants system taken just a little further.


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