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Standing Committee Debates
Local Government Bill

Local Government Bill

Column Number: 215

Standing Committee A

Thursday 30 January 2003


[Mr. Derek Conway in the Chair]

Local Government Bill

Clause 16

''Capital expenditure''

Amendment proposed [this day]: No. 43, in

    clause 16, page 6, line 30, leave out 'proper practices' and insert 'Generally Accepted Accounting Practices.'.—[Mr. Clifton-Brown.]

2.30 pm

Question again proposed, That the amendment be made.

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

No. 78, in

    clause 16, page 6, line 31, leave out subsection (2) and add—

    '(2) The Secretary of State may request the Chartered Institute of Public Finance and Accountancy or the Comptroller and Auditor General at any time to provide guidelines and advice on what expenditure of local authorities shall be treated for the purposes of this Chapter as being, or not being, capital expenditure, and shall lay any such guidelines or advice so received before Parliament.

    (3) The Secretary of State may direct a local authority to follow any guidelines and advice laid before Parliament under subsection (1)'.

No. 44, in

    clause 16, page 6, line 35, leave out from beginning to end of line 37.

When we adjourned for lunch the hon. Member for Southport (Dr. Pugh) had the Floor but the Under-Secretary was intervening. Had the hon. Gentleman completed his intervention?

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie): It would not be right to make a long intervention so I shall allow the hon. Gentleman continue. I will follow up my point when he sits down.

Dr. John Pugh (Southport): The Under-Secretary made a case for discretion with regard to capital expenditure and we accept that. However, we are trying to find out whether that discretion is fettered or controlled. I think he said that he will consult before varying definitions of what capital expenditure may or may not be, and that is an option for him. We are pressing him to bind himself to consultation so that when he comes up with a definition of capital expenditure it will command wholesale respect. For example, let us take the case of a local authority that decides to buy shares in its local airport. It defines that as capital expenditure and decides to use headroom under capital expenditure limits in order to accommodate it. Is it an option for the Under-Secretary to say, arbitrarily, that it will not count as capital expenditure but as something else? If it is not an option for him and he cannot act in such an arbitrary way, what in the Bill prevents him doing so? I want to press the Under-Secretary on that point.

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Mr. Leslie: We finished the previous sitting on the concept of whimsicality and whether a Minister was fettered in using his discretion over the issuing of a direction on the definition of capital expenditure. In my earlier intervention I tried to explain that there was a limit to what Ministers can do. Ministers cannot exercise their powers unreasonably under the normal understanding of that concept. It goes back to something called the Wednesbury principle in the 1930s, with which I am sure he is familiar. Ministers must act reasonably or they are subject to a challenge. There will be full consultation in the normal way. Some of these directions are not impositions on the authority concerned; often, they can be requested by the authority concerned in the case of capitalisation. I am not entirely clear about the specific example that the hon. Gentleman posits about what would happen in the case of purchasing shares in an airport, as I do not have the information on such circumstances to hand. However, my understanding is that directions to change would be in exceptional circumstances and I hope that the hon. Gentleman will accept that assurance as sufficient in this case.

Mr. Geoffrey Clifton-Brown (Cotswold): I am pleased to serve under your chairmanship, Mr. Conway. As I explained to your co-Chairman this morning, I have arrived fresh from the Planning and Compulsory Purchase Bill Committee, which is why I have not attended this Committee before.

Before I speak to the amendment I want to raise a matter of housekeeping, Mr. Conway. I arrived this morning to find the Committee embroiled in political controversy over the matter of pooling capital receipts. I was not able to find out what had been said on the matter in a previous Committee because the Hansard report was not ready. I do not attach any blame to the individual Hansard reporters, as it is not a matter for them. However, if the Government are scheduling so many Committees at one time that the Hansard report of the previous sitting is not available in time for the next sitting, how can the Committees do their job properly and scrutinise what the Government say? We needed to check what the Minister said to see whether we needed to query it any further. We have a real difficulty here Mr. Conway. It may not be within your control, but I would be grateful if you could pass on our feelings about this to the relevant House authorities.

The Chairman: I am grateful to the hon. Member for that observation. The Hansard reporters, who serve us extraordinarily diligently and with great accuracy, are manning a number of Committees at the moment. This time of year is always difficult. I will ensure that the hon. Gentleman's observations are drawn to the attention of the Editor of the Official Report to see whether something can be done. Perhaps a draft could be made available, if not the final printed version. The point that the hon. Gentleman makes is clearly a reasonable one for the Official Report to consider.

Mr. Clifton-Brown: If we are in the middle of debating a clause, perhaps that section of Hansard relating to that particular clause could be made available.

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The Chairman: That is not an unreasonable request when the Committee is discussing the same item of business over two sittings that are not on the same day. I shall ensure that that message is conveyed.

Mr. Clifton-Brown: Thank you for your helpful guidance, Mr. Conway.

The Minister has explained that the powers in the clause would be used only sparingly and in exceptional circumstances. While I do not entirely agree with the rather arbitrary nature of these directions, I would rather see more laid out in regulation. We are moving far too far from proper scrutiny in this House, not only of primary legislation, but secondary legislation by regulation. We seem to be getting to a tertiary type of direction that is under nobody's scrutiny except that of the Secretary of State. We will get into some pretty arbitrary territory, which is desirable neither from the individual local authority that has to interpret those directions, nor from the Secretary of State's point of view. He may consider something perfectly reasonable when in practice, because no consultation has taken place, it might turn out to be nonsensical. With those cautionary remarks, I think that we have explored the amendment for the time being. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 ordered to stand part of the Bill.

Clause 17

External funds

Question proposed, That the clause stand part of the Bill.

Mr. Robert Syms (Poole): The explanatory notes make it clear that the clause deals with local authority pension funds, and there is a separate regime for dealing with that. Subsection (1)(b) says that a local authority can borrow from a pension fund on a temporary basis. Could the Minister say a little more about that because I did not appreciate that local authorities could borrow from their pension funds? Could he define ''temporary''? Is it days, weeks or months? For what purpose would a local authority borrow from its pension fund?

Mr. Desmond Swayne (New Forest, West): Before my hon. Friend concludes, may I, through him, ask the Minister to tell us how much this is practised at the moment? What order of funds is borrowed in this way?

Mr. Syms: This is a small point. The Minister may wish to write to members of the Committee to set out the situation. I would be generally interested to see how often it occurs. Is it purely a housekeeping measure or is there a general application? The subsection reads:

    ''the temporary use by a local authority of money forming part of an external fund, if not for a purpose of the fund, shall be treated as borrowing by the authority''.

How often is money borrowed from pension funds and how is ''temporary'' defined?

Dr. Pugh: I should like some clarification about the phrase ''external fund''. I am familiar with arrangements where local authorities act as trustees for organisations working in the regeneration and

Column Number: 218

renewal area. In effect they are not simply trustees but co-funders of a scheme. When I initially read the clause I thought that the phrase ''external fund'' embraced such factors. I now understand that it does not and that it is meant exclusively to embrace pension funds and the like. But the definition of external funds seems inexact, or in fact unformulated, in the legislation. Will the Minister consider the necessity of tightening it to exclude other forms of external finance to local authorities?

Mr. Clifton-Brown: Members of the Committee who have spoken on the matter have raised some reasonable points. As I understand it, the purpose of the clause is to keep local authorities' superannuation funds' capital controls ''as now'', as it says in the explanatory notes. Perhaps the Minister will confirm that there is nothing new in the safeguards, unless in fact there is. My hon. Friend the Member for Poole (Mr. Syms) mentioned the problem of the superannuation fund borrowing from the local authority. I wonder whether he read, at clause 17(1)(c):

    ''entry into a credit arrangement by a local authority''.

It would be useful for the Committee to know whether these are normal arrangements and whether that has ever occurred.

Finally, will the Minister clarify what is meant in subsection (2)(b) by

    ''a trust fund of which the authority is a trustee''?

Is that a normal pension fund arrangement or does the provision envisage other arrangements that may be being used to get around current financial controls?


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