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Mr. Llwyd: Surely the point is that the subcontractor would have delivered materials to the site, used employees to build a building and done everything that he could, up to a point. The subcontractor would not be able to recover all that, so they would be in a very weak position-far weaker than any normal party to any normal contract. That is the point, with respect.
Ms Winterton: As I have said, the case that the hon. Gentleman highlights would put other creditors in a weaker position. Other trading partners of the contractor would be able to request such security during the normal course of business, but they would not be able to demand it, which is why the new clause would not be the right approach. In addition and practically, compelling the payer to provide security would be expensive-perhaps prohibitively so. For example, a bank would charge for a guarantee, and, if the nature of any security were such that funds had to be ring-fenced so that the payer was unable to use them for day-to-day operations, the payer would be more likely to fail anyway.
New clause 5 would repeal section 113 of the Housing Grants, Construction and Regeneration Act 1996. The new clause would, it appears, allow the parties to a construction contract to rely on all types of pay-when-paid clause. However, amendments 5, 6, 7 and 16 would continue to prevent the parties from relying on pay-when-paid clauses, and because of that new clause 5 would remove the insolvency exceptions. We need to be careful that we do not create a situation for construction insolvencies different from those involving other businesses, and preventing construction firms from using pay-when-paid clauses in insolvency cases would clearly do that.
I thank the Opposition for their support for the Government amendments. I again emphasise that the Bill must provide a balance between the needs of all parts of the construction industry. For that reason, I ask Opposition Members to withdraw their amendments and to support the Government amendments.
New clause 12 accordingly read a Second time, and added to the Bill.
Mr. Llwyd: On a point of order, Mr. Deputy Speaker. I apologise for interrupting, but I indicated that I wanted to press new clause 3 to a vote.
Mr. Deputy Speaker (Sir Alan Haselhurst): I will invite the hon. Gentleman to do that at the appropriate time, when we reach it-it will not be forgotten.
'(1) Subject as follows, a qualifying authority may -
(a) become a member of a body corporate-
(i) all of whose objects fall within the objects specified in subsection (2), and
(ii) all of whose members are qualifying authorities, and
(b) do anything that is required by, or is conducive or incidental to, membership of any such body.
(2) The objects referred to in subsection (1)(a)(i) are-
(a) to provide insurance, in relation to risks of any description, to-
(i) qualifying authorities who are members of the body corporate, and
(ii) persons prescribed in regulations made by the appropriate national authority,
(b) to enter into arrangements under which such insurance is provided to-
(i) qualifying authorities who are members of the body corporate, and
(ii) persons prescribed in regulations made by the appropriate national authority, and
(c) to do anything that is required by, or is conducive or incidental to, the provision of any such insurance or entering into any such arrangements.
(3) The power of a qualifying authority under subsection (1)(b) includes in particular power-
(a) to pay premiums and make other payments to the body corporate;
(b) to agree to make any such payments;
(c) to assume financial obligations in relation to persons prescribed for the purposes of subsection (2)(a)(ii) or (b)(ii).
(4) The appropriate national authority may by regulations impose restrictions or conditions on the exercise of any power conferred on a qualifying authority by subsection (1).
(5) A qualifying authority must, in exercising the powers conferred by subsection (1), have regard to-
(a) any guidance issued by the appropriate national authority, and
(b) any guidance or document specified in regulations made by the appropriate national authority.
(6) The appropriate national authority may by regulations amend this Chapter for the purposes of changing the authorities which are for the time being qualifying authorities for the purposes of this section.'.- (Ms Rosie Winterton.)
Brought up, and read the First time.
Ms Rosie Winterton: I beg to move, That the clause be read a Second time.
Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 20 - Mutual insurance: supplementary.
New clause 1- Building targets -
'No local authority which has a responsibility to plan for building a target number of homes may promote an area for housing allocation within the area of another local authority nor count such an allocation towards its housing target without the agreement of that authority.'.
New clause 9- Duty to draw up a strategy for public toilet provision -
'(1) A lower-tier local authority must make a strategy for the provision of public toilet facilities in their area.
(2) Before drawing up its strategy, the authority shall take whatever steps it deems necessary to consult the public in its area.
(3) The authority shall have regard to the results of the consultation when drawing up its strategy.
(4) A lower-tier local authority must-
(a) review its strategy at least once a year;
(b) take whatever steps it deems necessary to consult the public in its area as part of its review;
(c) have regard to the results of the consultation when reviewing its strategy; and
(d) publish its strategy and information relating to its consultation on its authority's website.
(5) An authority may delegate to a town or parish council its responsibilities under this section in respect of any area covered by that town or parish council.'.
New clause 15- Delegation by regional development agencies-
'(1) The Regional Development Agencies Act 1998 (c. 45) is amended as follows.
(2) After section 6A (delegation of functions to the Mayor of London and the London Development Agency) insert-
"6B Delegation of functions and funding by regional development agencies
(1) The Secretary of State shall make proposals in consultation with the regional development agencies within six months of the coming into force of this section for a scheme of delegation for the discharge of their functions to a local authority within their area, or jointly by a group of local authorities within their area.
(2) For the purposes of this section, a "function" shall include-
(a) part of a function or any function which is exercisable only in relation to part of the area of a local authority;
(b) the determination and allocation of funding or any expenditure programme to other persons or bodies, whether by grant, loan or other means;
(c) the transfer to one or more local authorities, or to a partnership of one or more such authorities with one or more other persons or bodies of funds for the purposes of implementing a programme of investment in pursuance of the social, economic and environmental wellbeing of the area.
(3) The scheme of delegation shall apply to the functions of all or any of the regional development agencies as the Secretary of State considers appropriate following consultation with relevant local authorities in the area.
(4) The scheme shall be implemented no later than two years from the coming into force of this section.
(5) Two or more local authorities to which any function has been delegated under this section may arrange for it to be discharged by them jointly or in accordance with any executive arrangements agreed by them from time to time."'.
New clause 16- Power of general competence -
'(1) The Local Government Act 2000 (c. 29) is amended as follows.
(2) For subsection 2(1) substitute-
"2 (1) Every local authority has full powers and capacity to carry on or undertake any activity or business, do any act, or enter into any transaction with full rights, powers and privileges for so doing.".
(3) For subsection 2(2) substitute-
"(2) Subsection (1) applies subject to-
(4) For subsection 2(5) substitute-
"(5) The powers under subsection (1) may be exercised in relation to or for the benefit of-
(a) the whole or any part of the local authority area; or
(b) all or any persons resident or present in a local authority's area; or
(c) any person or area situated outside the local authority's area if they consider that it is likely to benefit their area or persons resident there."'.
Government amendments 28 and 29.
Ms Winterton:
New clause 19, together with new clause 20 and amendments 28 and 29, relates to mutual insurance arrangements. I thank Opposition Members from both parties for their assistance with bringing forward the amendments. They may well have issues that they wish to raise, but it is generally recognised on
both sides of the House that this has been a matter of some concern for local authorities since the Court of Appeal handed down its judgment in the LAML-London Authorities Mutual Ltd-case in June 2009.
In July, my right hon. Friend the Secretary of State for Communities and Local Government published the consultation paper "Strengthening local democracy", which sought views on the scope of local authority powers, particularly as regards their powers to undertake mutual insurance arrangements. The consultation response attracted 96 responses to the specific question on mutual insurance, with 82 per cent. agreeing with the proposed power. New clause 19 provides permissive powers for authorities to enter into mutual insurance arrangements, if they wish to do so. Authorities exercising the power will need to ensure that any proposed arrangement meets the duty of best value as laid down in legislation. While it seems unlikely that all local authorities will wish to establish or participate in an insurance mutual, for those for which it makes good business sense to do so, clear and specific legal powers will be available to them for that purpose.
The amendment provides that best value authorities, which are described as "qualifying authorities", may establish and become members of a corporate body-for example, a company-the object of which is to provide insurance in relation to insurance risks to authorities that are members of the mutual. Only qualifying authorities may be members of the mutual.
The mutual may also provide insurance to other bodies, which may be prescribed by regulation and which I will call "affiliates". They will be bodies that have some association with qualifying authorities-for example, arm's length management organisations, academy schools or wholly owned subsidiaries. Broadly, the intention is for a qualifying authority to be able to sponsor an affiliate to bring it within the mutual's insurance cover, as we understand that many local authorities arrange insurance cover for ALMOs and some schools. However, affiliates will not be able to become members of the mutual.
5 pm
The qualifying authorities are to be provided with a power to pay premiums and other payments to the mutual insurance body, and can agree to make any such payments as may be necessary in future. They can also assume financial obligations in relation to affiliates. The Secretary of State in relation to England, and Welsh Ministers in relation to Wales, may by regulation subject to the affirmative procedure amend the list of qualifying authorities. They may also impose restrictions or conditions on the use of the power by regulation subject to the negative resolution procedure. We intend to consult on the content of such regulations. Qualifying authorities are required to have regard to any guidance issued by the Secretary of State or Welsh Ministers and to any documents specified in regulations, such as guidance from the Chartered Institute of Public Finance and Accountancy. Again, we want to consult on that.
New clause 20 lists the qualifying authorities that are to be provided with the power to become members of a mutual insurance body. It also sets out the appropriate parliamentary and Welsh Assembly procedures for
regulations. Amendment 28 provides for commencement of the new clauses, which will be brought into force when commenced by order, and amendment 29 is a consequential amendment to add a reference to insurance to the long title of the Bill. I commend those amendments to the House.
New clause 16, tabled by the hon. Members for Wycombe (Mr. Goodman), for Peterborough (Mr. Jackson) and for Ludlow (Mr. Dunne), would amend the current well-being power, a power that local authorities have to promote or improve the economic, social and environmental well-being of their area. It would remove the link to well-being, giving authorities the power to
"undertake any activity or business, do any act, or enter into any transaction"
for the benefit of their area or its inhabitants.
The Government have long been committed to ensuring that councils have a wide range of powers and providing them with the freedom to be innovative and act in the local interest. Indeed, we introduced the well-being power in 2000 as a broad power of first resort to enable local authorities to act for the benefit of their local community. In 2003, we introduced new freedoms and flexibilities for capital finance, including prudential borrowing powers. At the same time, we provided powers for best value authorities to charge for discretionary services and enabled new trading powers to be conferred on authorities.
We are aware that the decision in the LAML case raised concerns about the scope of local authority powers, and through the "Strengthening local democracy" consultation we have sought to better understand them. We have acted speedily to answer the immediate concerns raised by the case, so as to ensure that best value authorities can take part in insurance mutuals.
As part of our commitment in the consultation, we are considering whether there are other cases in which existing local authority powers are not sufficient to enable them to improve services and achieve efficiencies. However, they are complex issues that need careful consideration. I assure the House that we are committed to such consideration following the recent consultation, but I am concerned that "power", as it is expressed in the amendment, would not give councils the certainty that they need if they are to take part in mutual insurance. Indeed, the Court of Appeal judgment, which in a sense is at the root of the Government amendments, indicated that any general power would be unlikely to provide local authorities with the necessary confidence to engage in mutual insurance and similar arrangements. We are introducing our amendments today to address that problem, but, as I have said, we are committed to considering other ideas that came forward in the consultation.
New clause 15 would provide for the Secretary of State
"in consultation with the regional development agencies"
"make proposals...for a scheme of delegation for the discharge of"
"a local authority...or...a group of local authorities"
in its region. However, new legislation is not necessary to achieve what we all want, which is interventions delivered at the right level that will align with and strengthen effective partnership working between all
parties in a region. The Bill already has a very clear focus on enhancing the role of local authorities in economic development through the introduction of economic prosperity boards and local economic assessment duties and by providing a statutory basis for multi-area agreements.
The economic assessment duty, for example, will provide a shared and agreed understanding of local economic conditions and will form a key part of the evidence base that will inform priorities for regional strategies and their implementation plans to ensure that local circumstances and perspectives are properly reflected. In that context, the focus should be on the principle and practice of joint investment planning, which can be achieved within the existing legislative framework, rather than on delegation of RDA functions. The key is closer working between RDAs and local authorities in planning the implementation of the regional strategy, which will deliver the optimum outcomes at local level.
Certainly, we propose a joint approach to planning and investment in the region, which will enable local authorities to take on a large degree of responsibility for delivering agreed programmes and projects in their areas. However, RDAs should retain final accountability for funds passed through them.
Graham Stringer (Manchester, Blackley) (Lab): I may have had this discussion with my right hon. Friend and others before, but will she tell the House why non-elected people should have power over elected people?
Ms Winterton: The new arrangements that we are introducing-the RDA and leaders boards-will address some of the issues raised by the question whether RDAs have an input from local government when they are drawing up regional strategies. The new changes in the sub-national review will achieve that. As my hon. Friend knows, I was a great supporter of regional government, but we have moved on. We have therefore looked at how to ensure that RDA boards work closely with the leaders boards from local authorities. In many instances, they are drawing up joint boards to consider particular aspects such as planning and transport. This brings together local authority colleagues with the regional development agency boards in a joint approach, which will be very important.
Accountability is necessary to ensure that money is strongly focused on economic development activity that is of strategic value to the region as a whole and is therefore good value for money. Obviously, this is even more important in an environment of tightening resources. Secondly, it is important that the RDAs maintain flexibility in their budgets.
The key point is that RDAs and local authorities will jointly agree what programmes of intervention will be undertaken in particular areas, but the RDAs will retain the responsibility to make the final decisions. Any funding from RDAs to local authorities would have to follow the usual rules that apply to the RDAs, and would have to be used within the same overall financial framework. RDAs and local authorities will jointly agree how projects within the programme will be appraised, monitored and evaluated.
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