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Standing Committee Debates
Local Government Bill

Local Government Bill

Column Number: 127

Standing Committee A

Tuesday 28 January 2003


[Mr. Win Griffiths in the Chair]

Local Government Bill

2.30 pm

The Chairman: Before we continue our proceedings I have an official announcement to make. Several of the amendments that appear starred on today's Notice Paper appear in the name of the official Opposition, when they were in fact tabled by the Liberal Democrats, who no doubt aspire to that position. The Clerk has sent the appropriate corrections to the printers, but in order that everyone knows precisely who has tabled what, a full blue marshalled list will be produced for tomorrow. I appeal to hon. Members to check that list and to draw the Clerk's attention to any further corrections. We hope that none will be necessary, but one never knows.

Clause 8

Control of Credit Arrangements

Amendment proposed [this day]: No. 33, in

    clause 8, page 4, line 3, leave out 'cost of' and insert

    'capital value of the assets made available under.'.—[Mr. Hammond.]

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking the following amendments:

No. 34, in

    clause 8, page 4, line 5, leave out 'cost of' and insert

    'capital value of any additional assets made available under the arrangement as a result of'.

No. 35, in

    clause 8, page 4, line 7, leave out from second 'the' to 'and' in line 8 and insert

    'capital value of an asset'.

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): As I recall, I was addressing the remaining issues raised by the hon. Member for Runnymede and Weybridge (Mr. Hammond). He asked whether the word ''cost'', as the term used in clause 8(2), includes the financing costs of the arrangement, and as I said, it will not.

Accounting practices require assets to be recognised in the balance sheet initially at cost. For an asset acquired under a credit arrangement they will require the cost to be set at a value roughly equal to the amount that would have been paid up front. That may not be the same as the capital value, because the authority may have ownership of the asset only for a limited period, such as a lease. The wording in the clause follows accounting practices and ensures that financing costs are not included in the opening cost figure. The effect is that, in the case of traditional borrowing, interest costs do not score as part of the

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cost, and in the case of a lease, service costs do not score either. In other words, there is a level playing field, which, I think, is the assurance that the hon. Gentleman sought.

What is captured in credit agreements will be basically the same as under the present system, except that it will rely largely on accounting definitions, rather than achieving the same effect through complex statutory definitions, as under the present system. I hope that that explanation is helpful, and I urge the hon. Gentleman to withdraw the amendment.

Mr. Philip Hammond (Runnymede and Weybridge): That is exactly what I intend to do. The Under-Secretary has gone some way to reassure me that the Bill, combined with the regulations and the codes of proper accounting practices, will deliver the desired result.

As I have said in Standing Committees many hundreds of times, and will no doubt say many more hundreds of times, we would always prefer the Bill to be more explicit about such provisions. However, we all agree that it is best, wherever possible, to following standard accounting practices and to have the minimum number of departures from them. My interpretation of the Bill would have given more scope for such departures, but the Under-Secretary reassures me. I shall read his remarks carefully and allow others, who know much more about these matters than I do, to do so too. We want to make sure that we are satisfied, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Hammond: I beg to move amendment No. 36, in

    clause 8, page 4, line 10, leave out subsection (4).

The Chairman: With this it will be convenient to discuss the following amendments:

No. 57, in

    clause 8, page 4, line 11, at end insert—

    '(5) Before making any regulations under subsection (3) or (4), the Secretary of State must consult the Chartered Institute of Public Finance and Accountancy and the Comptroller and Auditor General.'.

No. 58, in

    clause 9, page 4, line 32, at end add—

    '(5) Before making any regulations under subsection (3), the Secretary of State must consult the Chartered Institute of Public Finance and Accountancy and the Comptroller and Auditor General.'.

Mr. Hammond: I shall speak briefly to amendment No. 36. Amendments Nos. 57 and 58 stand in the name of the Liberal Democrats, and no doubt the hon. Member for Kingston and Surbiton (Mr. Davey) will say something about them.

Subsection (4) is the antithesis of freedom and flexibility—we find such subsections in many clauses—saying that after everything else has been settled:

    ''The Secretary of State may by regulations impose additional restrictions on the power of a local authority to enter into or vary credit arrangements.''

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A lot of hard work has gone into determining how credit arrangements will be regulated, but at the end of the clause a subsection tells us that the whole thing was a waste of time because, whatever is in the Bill, the Secretary of State retains total and unfettered power to make additional regulations to undo or add to those arrangements. That means that the Government will effectively have the power to steer local authorities, by regulation, between different types of transaction.

More insidious than the Government's ability to make regulations or to use the provisions in the Bill is their implied power to exert their will to determine the behaviour of local authorities. There is no transparency in that. At least if the Government make a regulation, we will have the opportunity in this place to discuss it and, to some extent, to scrutinise it, and the world will be aware of it. However, if the Government merely contact local authorities, as they quite properly do all the time in their day-to-day dealings with them, to draw their attention to the fact that something that they propose to do would be frowned upon in Whitehall and that the Secretary of State has the reserve power under subsection (4), they will be able to influence, in a way that is not transparent, the behaviour of bodies that should be publicly accountable. As a matter of general principle, we should prefer such catch-all powers not to be included in a clause such as this.

This issue is not merely theoretical; the Under-Secretary has already circulated draft regulation 7, which is to be laid under the powers given in subsection (4). The effect of that regulation is highly controversial and significant because it will exclude public finance initiative contracts from the prohibition on the use of credit for services, which will be dealt with in secondary legislation. Whatever we think about that regulation is not the point; the point is that the power could be used to do something equally significant by secondary legislation, so I should prefer subsection (4) to be removed from the Bill.

For some strange reason, it says in my notes that the Liberal Democrats would also like that to happen. It is because they have signed the amendment, which is always a pretty fair indication of support. [Interruption.] As the Minister for Local Government and the Regions observes, perhaps that is not so apparent in the case of the Liberal Democrats. On this occasion, we will take them at face value, and I look forward to hearing what the hon. Member for Kingston and Surbiton has to say about amendments Nos. 57 and 58.

Mr. Edward Davey (Kingston and Surbiton): I signed my name to the amendment tabled by the hon. Gentleman because it is right, as he demonstrated in his remarks. In this Bill and many others the Government legislate in detail, setting out all the powers that they want to give themselves, and we have long, detailed debates about them. Then we get to the end of a clause, a part or the whole Bill, and we find that the Government have a catch-all, get-out clause that enables them to do anything that they want, thus negating all the time and effort that we have spent

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scrutinising the legislation. It is bad practice. Other Governments have done it, but that does not make it right. If the Government want to ensure that the powers that they take are properly scrutinised by a democratic body, they should not allow such catch-all provisions to be inserted into legislation.

If the Government set out for the Committee why they want the powers, perhaps we can judge them in detail. Then, on Report, rather than have a catch-all subsection, we could put the Government's intentions on the face of the Bill. Perhaps they already have in mind some instances when they would need more regulatory powers for credit arrangements. Let us have those in the Bill; let us not make local authorities second-guess what new regulation the Minister will next come up with.

On amendments Nos. 57 and 58, the Government often take the power to regulate, saying that they are not sure how the regulations will turn out. The Bill should place a statutory requirement on the Government to consult other people outside this place. The Chartered Institute of Public Finance and Accountancy is already mentioned in regulations and would be a sensible organisation to consult on the regulations under discussion. We also want to add that the Comptroller and Auditor General must be consulted.

This morning, the Minister suggested that our proposal was rather odd and asked why we did not include the Audit Commission, and I can understand why he made that suggestion. I mean no disregard to Sir Andrew Foster and his team at the commission, but the CAG is used to dealing with such definitions with respect to central Government accounting, and is therefore the correct person. If the Minister accepts the principle, but is against the inclusion of the CAG, we will be more than happy for him to table an amendment to ensure consultation with CIPFA and the Audit Commission. That is not the issue of principle for us; the key issue is consultation.

My hon. Friend the Member for Southport (Dr. Pugh) wishes to make some additional remarks on the subject, so I will not take any more of the Committee's time save to say that in this clause and clause 9, to which we have tabled amendment No. 58, it is right that the Government should not have unfettered powers and that they should have to consult.


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Prepared 28 January 2003