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I wonder whether the Minister can also help on another short matter. Clearly, the orders are quite wide ranging and can make provision for a large number of matters, but is it envisaged that this change in the clauses, and what is on the face of it a significant extension of powers, will have any impact on the scrutiny of any of these arm’s length organisations? The definitions refer to the entity’s position in accounting terms, but nothing is said about scrutiny. It may be that it is not intended that there should be any change, to follow up the point made by my hon. Friend the Member for
North-East Bedfordshire (Alistair Burt). If part of the justification relates to the operation of these organisations in the past, has failure or difficulty of scrutiny been any part of that? Can the Minister assure us that none of the changes would diminish scrutiny of any organisations in which significant sums of public money may be invested, in whatever fashion?
Mr. Woolas: I think that there is unanimity is that the House will remember the contribution by my hon. Friend the Member for Wigan (Mr. Turner) long after they have forgotten the details of these new clauses.
Tom Levitt: Does my hon. Friend think it appropriate, given that it was an intervention by my hon. Friend the Member for Wigan (Mr. Turner), that “You Ain’t Seen Nothing Yet” was also a song by Bachman-Turner Overdrive in the 1970s?
Madam Deputy Speaker: Order. We have had some levity, but I think that we had better get back to the amendments before the House.
Mr. Woolas: Thank you, Madam Deputy Speaker.
I congratulate the hon. Member for North-East Bedfordshire (Alistair Burt) on his questions. As ever, he has clearly done his research, and he has given me the opportunity to allay the fears that the Local Government Association expressed to him. He asked whether these powers were too wide ranging and what prompted the change. As you would expect, Madam Deputy Speaker, there is a history to this. The commitment to review part V of the 1989 Act was indeed trailed, as hon. Members know, through the White Paper “Modern local government: in touch with the people” published in July 1998, and in the “Modernising Local Government Finance” Green Paper in September 2000. The Government have, with their partners, a capital programmes working party technical sub-group. In 2003, at that sub-group, the LGA expressed a desire to move local authority companies to be defined according to accounting practices. This Bill provides an opportunity to do that, now that there have been adequate discussions. If I may, I shall explain that.
We intend, of course, to consult on the content of the proposed order. The hon. Member for North-East Bedfordshire asked whether there had been problems or whether we were tidying up. Essentially, we are tidying up because of the change in the architecture of local government provision of services. For the record, I am informed that the power has been used only twice since 1989, although I am not aware of the details of those two occasions. The hon. Gentleman implied that the Chancellor has moved the golden rules. I reject that charge, which is not backed up by evidence. Local government borrowing is an important part of the PSBR. The answer to his question about inspection and audit is, yes, they are subject to the same provisions. I am grateful for the caveat that he gave with his question about dormant companies or entities because he is absolutely right—the matter is too detailed for me to attempt an answer now.
To answer the question of the hon. Member for Lichfield (Michael Fabricant) about “control”, “controlling”, “ownership” and “connected with”, the point at issue is what the potential liability is. A local
authority could control an entity and, through that control, it could incur a liability that was, or was not, dependent on the local authority. The question of ownership and control relates to that. I made reference to that in the eighth point of my opening speech. I know that the hon. Gentleman followed my remarks closely, so I shall not repeat them, but I congratulate him on his vigilance in probing the point.
Michael Fabricant: I thank the Minister for that. He is talking about cases in which there could be liability. Let me give for my example an organisation that is not controlled or owned by a council, but is, for some reason, underwritten and guaranteed by a council—
Michael Fabricant: Such as a theatre, as my hon. Friend suggests, although the Lichfield Garrick is not that type of organisation. If the council would be liable if anything were to happen to that organisation, would that be covered by the “connected with” definition?
Mr. Woolas: That would depend on the nature of the contract between the local authority and the body. That is an extremely important point and it is why we propose to bring in the CIPFA regulations on accounting practice. Local authority treasurers must abide by accounting practice and they get their guidance from CIPFA. Annex 1 to the regulations—“Definitions in relation to group accounts”—is very specific on the points that the hon. Gentleman raised. I congratulate him on spotting the essence of the argument, which centres on where liability and control lie. The definition in annex 1 is:
“An entity other than a subsidiary or joint venture in which the reporting authority has a participating interest and over whose operating and financial policies the reporting authority is able to exercise significant influence.”
He will be familiar with the fact that the definition of “control”, “ownership” and “connected with” depends on the degree of control, whether it be through ownership, part ownership or control through contract or other such arrangements. The provision is designed to stop local authorities overreaching and thereby to protect the public purse.
The hon. Member for Bromley and Chislehurst (Robert Neill) asked about scrutiny. The definitions provided by accounting practice will translate into the definitions of scrutiny. He will remember that under the part of the Bill that deals with overview and scrutiny, it can be the contract that is scrutinised rather than the body itself.
The provisions relate to what I have described as proprietary controls. The financial controls are covered not only by this part of the Bill, but by the Local Government Act 2003, which defines the new prudential borrowing arrangements. I hope that the House has not fallen asleep. These are important matters for local authorities.
Clause read a Second time, and added to the Bill.
‘(1) In this section a “relevant trust” means a trust connected with a local authority.
(2) An order under section (Entities controlled etc by local authorities) may include provision which requires, prohibits or regulates—
(a) the taking of specified actions by the trustees of a relevant trust;
(b) the taking of specified actions by a local authority in relation to the trustees of trusts connected with that local authority;
(c) the taking of specified actions by a member or officer of a local authority who is a trustee of a trust connected with that local authority.
(3) Provision included in an order by virtue of this section may relate to—
(a) the trustees of every relevant trust;
(b) the trustees of relevant trusts of a particular description.
(4) Where by virtue of this section an order makes provision in relation to the trustees of trusts of a particular description, it may provide for any expression used in identifying that description of trust to have the meaning for the time being given by—
(a) any document identified by the order; or
(b) any re-issue of such a document.
(5) For the purposes of this section a trust (“T”) is “connected with” a local authority at any time if, according to proper practices in force at that time, financial information about T must be included in the local authority’s statement of accounts for the financial year in which that time falls.
(6) In this section the following have the same meaning as in section (Entities controlled etc by local authorities)—
Brought up, read the First and Second time, and added to the Bill.
‘(1) An order under section (Entities controlled etc by local authorities) may make provision requiring an entity, a local authority or trustees to obtain the consent of the appropriate person before taking any particular actions.
(2) In subsection (1) “the appropriate person” means—
(a) in relation to an order made by the Secretary of State, the Audit Commission;
(b) in relation to an order made by the Welsh Ministers, the Auditor General for Wales.
(3) The provision that may be included in an order by virtue of section (Entities controlled etc by local authorities)(4)(a) includes in particular provision—
(a) requiring a local authority to make arrangements for enabling questions about an entity’s activities to be put to members or officers of the authority who are qualifying persons;
(b) prohibiting a local authority from taking action (including refraining from exercising a right) which would have the result that a person of a specified description becomes a qualifying person;
(c) requiring a local authority to ensure so far as practicable that entities comply with provisions of the order applicable to them.
(4) The provision that may be included in an order by virtue of section (Trusts)(2)(b) includes in particular provision—
(a) requiring a local authority to make arrangements for enabling questions about a trust connected with the authority to be put to members or officers of the
authority who are trustees;
(b) prohibiting a local authority from taking action (including refraining from exercising a right) which would have the result that a person of a specified description becomes a trustee of a trust connected with the authority;
(c) requiring a local authority to ensure so far as practicable that trustees comply with provisions of the order applicable to them.
(5) Nothing in subsections (1) to (4) affects the generality of section (Entities controlled etc by local authorities)(1) or (4) or (Trusts)(2).
(6) An order under section (Entities controlled etc by local authorities) may include incidental, consequential, transitional or supplementary provision.
(7) In this section the following have the same meaning as in section (Entities controlled etc by local authorities)—
“entity connected with a local authority”;
(8) In this section “the Audit Commission” means the Audit Commission for Local Authorities and the National Health Service in England.’.— [Mr. Woolas.]
Brought up, read the First and Second time, and added to the Bill.
‘(1) The appropriate authority may give a direction exempting—
(a) a particular entity, or entities of a particular description, or
(b) the trustees of a particular trust, or of trusts of a particular description,
from an order under section (Entities controlled etc by local authorities) or specified provisions of such an order.
(2) A direction under this section may provide for an exemption to have effect—
(a) for a specified period; or
(b) subject to specified conditions.
(3) A direction under this section may be varied or revoked by a subsequent direction of the appropriate authority.
(4) In this section “the appropriate authority” means—
(a) in relation to an order made by the Secretary of State, the Secretary of State;
(b) in relation to an order made by the Welsh Ministers, the Welsh Ministers.
“entity” has the same meaning as in section (Entities controlled etc by local authorities);
“specified” means specified by the direction.’.— [Mr. Woolas.]
Brought up, read the First and Second time, and added to the Bill.
‘(1) The Secretary of State may by order under this section—
(a) define an “entity under the control of a local authority” and an “entity jointly controlled by bodies that include a local authority” for the purposes of section 4(2) of
the Prevention of Corruption Act 1916 (c. 64);
(b) define for the purposes of section 80(1)(aa) of the Local Government Act 1972 (c. 70) the reference in that provision to “an entity under the control of” the authority mentioned there;
(c) define, for the purposes of sections 98(8)(d) and 100(1)(a) of the Local Government, Planning and Land Act 1980 (c. 65), the references in each of those provisions to—
(i) “an entity under the control of” the body mentioned there;
(ii) “an entity subject to the influence of” that body; and
(iii) “an entity jointly controlled by” that body and one or more other bodies;
(d) define for the purposes of paragraph 7(2) of Schedule 7 to the Environment Act 1995 (c. 25) the reference in that provision to “an entity under the control of” the authority mentioned there;
(e) define for the purposes of section 18(2)(b) of the Local Government Act 2003 (c. 26) the references in that provision to—
(i) “an entity under the control of” and “a trust under the control of” an authority or Executive mentioned there;
(ii) “an entity subject to the influence of” and “a trust subject to the influence of” such an authority or Executive; and
(iii) “an entity jointly controlled by bodies that include” and “a trust jointly controlled by bodies that include” such an authority or Executive.
(2) Any reference in subsection (1) to the purposes of a provision of—
the Local Government Act 1972 (c. 70),
the Local Government, Planning and Land Act 1980 (c. 65),
the Environment Act 1995 (c. 25), or
the Local Government Act 2003 (c. 26),
is a reference to the purposes of that provision as it applies in relation to England.
(3) An order under this section may provide for any expression used by it to have the meaning for the time being given by—
(a) any document identified by the order;
(b) any re-issue of such a document.’.— [Mr. Woolas.]
Brought up, read the First and Second time, and added to the Bill.
‘(1) The Welsh Ministers may by order under this section—
(a) define for the purposes of section 80(1)(aa) of the Local Government Act 1972 (c. 70) the reference in that provision to “an entity under the control of” the authority mentioned there;
(b) define, for the purposes of sections 98(8)(d) and 100(1)(a) of the Local Government, Planning and Land Act 1980 (c. 65), the references in each of those provisions to—
(i) “an entity under the control of” the body mentioned there;
(ii) “an entity subject to the influence of” that body; and
(iii) “an entity jointly controlled by” that body and one or more other bodies;
(c) define for the purposes of paragraph 7(2) of Schedule 7 to the Environment Act 1995 (c. 25) the reference in that provision to “an entity under the control of” the
authority mentioned there;
(d) define for the purposes of section 18(2)(b) of the Local Government Act 2003 (c. 26) the references in that provision to—
(i) “an entity under the control of” and “a trust under the control of” an authority mentioned there;
(ii) “an entity subject to the influence of” and “a trust subject to the influence of” such an authority; and
(iii) “an entity jointly controlled by bodies that include” and “a trust jointly controlled by bodies that include” such an authority;
(e) define “an entity under the control of a local authority” for the purposes of section 48(3) of the Public Audit (Wales) Act 2004 (c. 23).
(2) Any reference in subsection (1) to the purposes of a provision of—
the Local Government Act 1972 (c. 70),
the Local Government, Planning and Land Act 1980 (c. 65),
the Environment Act 1995 (c. 25), or
the Local Government Act 2003 (c. 26),
is a reference to the purposes of that provision as it applies in relation to Wales.
(3) An order under this section may provide for any expression used by it to have the meaning for the time being given by—
(a) any document identified by the order;
(b) any re-issue of such a document.’.— [Mr. Woolas.]
Brought up, read the First and Second time, and added to the Bill.
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