Draft Local Authorities (Contracting Out of Community Infrastructure Levy Functions) Order 2011
The Committee consisted of the following Members:
† Blackman-Woods, Roberta (City of Durham) (Lab)
† Crabb, Stephen (Preseli Pembrokeshire) (Con)
† Cunningham, Mr Jim (Coventry South) (Lab)
† Dakin, Nic (Scunthorpe) (Lab)
† Field, Mr Frank (Birkenhead) (Lab)
† Fuller, Richard (Bedford) (Con)
† Gilbert, Stephen (St Austell and Newquay) (LD)
† Hepburn, Mr Stephen (Jarrow) (Lab)
† Kwarteng, Kwasi (Spelthorne) (Con)
† Leech, Mr John (Manchester, Withington) (LD)
† Leslie, Charlotte (Bristol North West) (Con)
† Mitchell, Austin (Great Grimsby) (Lab)
† Neill, Robert (Parliamentary Under-Secretary of State for Communities and Local Government)
Simpson, David (Upper Bann) (DUP)
† Truss, Elizabeth (South West Norfolk) (Con)
Wicks, Malcolm (Croydon North) (Lab)
Marek Kubala, Committee Clerk
† attended the Committee
First Delegated Legislation Committee
Tuesday 22 November 2011
[Mr Edward Leigh in the Chair]
Draft Local Authorities (Contracting Out of Community Infrastructure Levy Functions) Order 2011
4.30 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill): I beg to move,
That the Committee has considered the draft Local Authorities (Contracting Out of Community Infrastructure Levy Functions) Order 2011.
It is a pleasure to serve under your chairmanship, Mr Leigh. For some reason, one of my papers for a subsequent meeting found its way into my day folder and it was an invitation to a colleague’s birthday party. I thought that we were going to have a new type of delegated legislation Committee when I turned it over and it said, “There will be drinks and a karaoke machine.” None the less, I think that I can ensure that we do our best to make progress—[Interruption.] I will resist the temptation to enliven the proceedings in that way.
This is important but essentially technical secondary legislation. As you will know, Mr Leigh, the community infrastructure levy allows local authorities to choose to charge a levy on new development in their area to raise funds to meet the demands of hosting that development and, in turn, to facilitate growth. The CIL was introduced by the previous Government through the Planning Act 2008, part 11 of which provides for regulations to allow the imposition of the levy. The Community Infrastructure Levy Regulations 2010 made the first use of those powers and they came into effect from 6 April last year.
This order allows local authorities, if they wish to, to contract other parties to deliver some or most of the activities that they carry out under the CIL regulations. The order is consistent with other contracting-out legislation, made under the same powers, for contracting out of functions in relation to the administration and enforcement of the business improvement district levy, council tax and non-domestic rates. In approach, it is therefore very much of a piece with other measures. The objective is to provide levy authorities with the scope to contract out specified functions. That will enable them to meet their responsibility to ensure value for money. The order is of interest primarily to those authorities responsible for charging and collecting the CIL.
The Government consulted the Local Government Association and representatives of other levy authorities, and they welcomed the approach being taken in the order. Where an authority chooses to contract another body to undertake a function, that body does so on the authority’s behalf, so the contractor acts as an agent to undertake the function that it is contracted to deliver for the authority. Article 4 of the order makes that fact clear by requiring that where a contractor, in doing the work that the authority has contracted him or her to do,
enters into an agreement with another person, that agreement has to make it clear that the agreement is between the authority and the person, not the contractor and the person.The 2008 Act limits the matters that can be contracted out. It prevents the contracting out of any matter for which the legislation requires a meeting of the authority—certain aspects of the legislation require a full meeting of the authority—or, in the case of the Mayor of London, the Mayor personally to approve. Those matters cannot be contracted out; they are in effect reserved to the full decision-making process. Article 3 of the order reflects that situation. The effect is that authorities cannot contract out their functions to propose, implement or withdraw a CIL charge in their area—the policy decisions, in effect—or delegate their power to ask a court to consider imprisoning a levy debtor. Because of the public policy involving the liberty of the subject, that would have to be decided by the full council meeting or by the Mayor in person. That is what cannot be contracted out.
The order has no effect in relation to the spending of levy receipts. The existing regulations deal with that. The order allows the contracting out of functions such as gathering evidence to support consideration of whether there should be a charge and, if so, at what rate. It also allows the contracting out of the administration of the charge, which could include the processes for notifying, collecting and enforcing liability, and the administration of the funds that come in—the back-office functions.
The order provides local authorities with the flexibility to ensure that their responsibilities are delivered in the most efficient and effective manner, either in-house or through another party—it is their choice. It allows for a competitive process, which I hope will enable them to drive down costs and drive up standards. As I have said, the important policy issues remain reserved to the authority itself to address. It is a practical and, I hope, useful measure, and one that I trust will commend itself to the Committee.
4.36 pm
Roberta Blackman-Woods (City of Durham) (Lab): It is a pleasure to serve under your chairmanship, Mr Leigh. I apologise to the Committee, because, given the technical nature of the statutory instrument, I do not think that I can make it as exciting as a birthday party, with or without the karaoke. The best I can do is not detain the Committee for too long.
As the Minister has said, the order relates to the community infrastructure levy, which Labour legislated for through the Planning Act 2008 and subsequent regulations. We see the order as a follow-on from some of the previous regulations. I have some concerns that the CIL is being watered down, primarily by the Localism Act 2011, but that is probably a discussion for another time.
Essentially, the order seeks to give local authorities the power, should they wish, to contract out functions relating to the CIL, and, as such, it seems straightforward. Nevertheless, I have a number of questions for the Minister. First, will he be comfortable if, by delegating out the functions, different charges emerge under different local authorities that will essentially be doing a similar thing? Will he be comfortable if builders or potential developers
complain that they have to deal with vastly different processes in relation to the CIL when they carry out similar developments in different local authority areas? Does he have plans to do anything to ensure that the processes are at least broadly similar for those who wish to undertake developments?Secondly, I want to check that I am correct in thinking that this is an enabling measure and that no pressure will be put on local authorities that do not want to contract out the functions. Thirdly, what powers do local authorities have in order to discharge the person or body to which they have contracted the functions, should they be seen to not be delivering on the contract? Where can we find that information, so that we can all check that we are happy with the processes and, in particular, that local authorities are able to stop very quickly a contract with which they are not at all happy?
The CIL will be reviewed in 2015. In light of this order, will that review cover whether contracting out is good value for money and whether the consequences of the CIL process include the emergence of vastly different charging schemes for potential development or potential benefits for local communities?
Finally, will there be any additional guidance on the operation of CILs, should that be necessary?
4.40 pm
Austin Mitchell (Great Grimsby) (Lab): I am obviously excited by the opportunity to serve once again under your chairmanship, Mr Leigh, having served under you for several years on the Public Accounts Committee.
I am so excited by the order that I cannot refuse to speak. My hon. Friend the Member for Scunthorpe, who is the Opposition Whip, persuaded me to attend—the effects of his persuasion on my right eye are healing very well—but I cannot remember whether he was shouting “Do speak” or “Don’t speak”, because I am slightly deaf. However, I will speak—very briefly, of course—because the order needs examining, and I am sorry that I have to delay the Minister’s departure. Will he be doing karaoke or enjoying it at the forthcoming party?
The Chair: Order. I think we have had enough karaoke in this Committee.
Austin Mitchell: First, I would ask the Minister why the order is necessary. It does not make any great change, and I do not see why it is necessary to take this function out of the hands of councils and to give it to other people. Who, exactly, are we handing these powers to? Who are the people the explanatory memorandum envisages will exercise these powers, as authorised by the local authority? Are they local heavies? Are they a branch of the mafia? Are they consultants employed by the council? Are they contractors, employing muscle against another contractor with planning permission for a building? Who, exactly, is it envisaged we will hand these powers to?
These are fairly substantial powers. What possibilities, if any, are there for corruption? We know of cases where the chairman of the council or the planning committee suddenly finds he has a new asphalt drive or a new extension after planning permission has been
given to a housing development of some kind. Admittedly, such cases are rare, because local government is open to scrutiny, but are there possibilities for corruption in transferring the function of fixing the deal and the amount to private individuals? Such things will have to be ratified by the council, as the Minister said, but much can be concealed.That brings me to my next point. How open will the agreements be? What provisions are there under open government legislation to ensure that ratepayers can see what agreement has been reached, how it has been reached and what the exact deal is? Is there any quid pro quo? The explanatory memorandum says—this reads like legislation by propaganda—that a competitive bidding process will take place between suppliers of this service
“with the attendant potential to drive costs of services down and standards up.”
That is one potential, but the other is that covert dirty deals will be reached to reduce competition and to allow some element of corruption or some functions to be transferred to people. We have to ask how open this process will be and what open government legislation provisions will apply.
Finally, what impact will the order have? The explanatory memorandum says that it will have no impact on business, but it must have some impact if it is to achieve its purpose. It has an impact either on the person facing the levy or on the profits of the person who is doing the deal in the first place. There must be an impact on business; that is why it is being done and that is why business is involved in the negotiation. Why does the impact assessment say it will have no impact?
Mr Leigh, you will be pleased to hear that I cannot read the rest of my notes, which I scribbled down as the Minister was speaking, so I will conclude at that point.
4.45 pm
Robert Neill: I am grateful to Committee members for their deliberations on this instrument. I thank the hon. Member for City of Durham for her constructive approach. She is quite right—and perhaps this is a partial answer to the hon. Member for Great Grimsby—that this piece of secondary legislation follows on from that implemented by the previous Government. I suspect he voted for that legislation at the time, but I will not chance my arm on that without checking. It is also of a piece with several other statutory instruments that enable local authorities to contract out essentially administrative and back-up functions.
In relation to specific points raised by the hon. Member for City of Durham, I am content that there should be different processes, because that is the whole point of localism. Local authorities should be able to decide the best means of carrying out those functions for themselves. I doubt that, in practice, the processes are likely to be very much different. Essentially they are dealing with the information needed to decide whether to levy a charge and, if so, how much. They are dealing with the administration of notices that go with the charge, maintaining the list, sending out the paperwork and dealing with the collection, which are all essentially process and transaction issues. I do not think there is likely to be much variation in how it is done, and such as there is is unlikely to cause any difficulty.
With regard to different charges, this statutory instrument has nothing to do with the level of charging and does not alter that in any way. That is a policy decision which, as I indicated, remains to be taken by the full authority or the Mayor of London in person.
Roberta Blackman-Woods: I am grateful for the Minister’s response. I appreciate that this particular instrument does not deal with charging; local authorities will decide on the level of charges. Nevertheless, they may be responding to data collected by an agency to which they have contracted out these functions, which may lead to recommendations for different charging regimes from the one originally agreed by the local authority.
Robert Neill: That is true. I hope local authorities would—and indeed should—base their decisions on whether to charge and how much on the most appropriate information. All that the instrument does is enable them to contract out that process, perhaps to a qualified chartered surveyor or a suitably qualified professional person of that kind, who will bring a degree of expertise. It is likely, if anything, to enhance the quality of the information.
Coming back to the second point made by the hon. Lady, and referred to by the hon. Member for Great Grimsby, this is an enabling provision; there is no compulsion on a local authority to contract out. It is a provision envisaged under the primary legislation. Similar provisions enable such transactional jobs to be contracted out in relation to council tax bills, business rates and so on. It is a perfectly common, sensible measure to deliver. Nothing is taken away from local authorities. On the contrary, local authorities are given a power to have discretion as to whether they do the job in-house or contract out. All the policy decisions remain with the local authority. It is also important to say that the contractor acts as agent on behalf of the authority, so the legal responsibility is ultimately still with the publicly accountable local body.
I hope that the hon. Member for Great Grimsby will forgive me if I do not go down the road of the interesting thoughts expressed regarding the internal processes of local authorities. I am sure that he knows as well as I do that local authorities generally do a good job. I would
not wish to think that there was any likelihood of dark deeds as a consequence of this piece of legislation. The basics rules regarding transparency will apply. All the rules related to local government transparency and freedom of information will apply, as they would to any local authority contract.On the question of discharging someone who does not come up to the job, the basic rules of contract law will apply. It will be for local authorities to write the contract, and if a contractor falls into a breach, the authorities will apply their normal remedies. The statutory instrument specifically places an obligation on contractors regarding the funds that they might collect if they are contracted to collect the levy. They will have to hold and apply the money, which authorities entrust them with, purely for the circumstances, so they cannot speculate with it in any way. Additionally, they are not permitted to do anything other than that which is specifically contracted for them to do. There are proper and careful safeguards.
I envisage that generally, local authorities will go to reputable contractors who specialise in such transactional work. We know that the industry is quite established and that there is a considerable market for firms that do such work for local authorities, of all political persuasions or none, so I do not think that there will be a risk.
We have not yet decided the scope of the 2015 review. I do not rule anything in or out. It will perhaps be better to revisit that at the time. Of course, we want the policy to work, and naturally we will monitor what is intended to be a practical tool, as we do as a matter of course. Generally, however, we can and should trust local authorities to get on with the job. For that reason, it is not proposed to issue any guidance about what is essentially a technical matter, with which local authorities have a lot of experience in dealing.
Without more ado, unless anything else arises, I hope that I have dealt with the questions raised by hon. Members. I certify that the statutory instrument is compliant with the European convention on human rights—that might be an appropriate statement; I thought that I would leave the uncontroversial bit to the very end. I commend the instrument to the Committee.