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Lord Mackay of Ardbrecknish: My Lords, it is important that we have sensible and sound regulatory systems in place, but, dare I say it, it is perhaps only the noble Lord, Lord Desai, who thinks—I doubt whether even he thinks it—that that would necessarily prevent any kind of adverse situation arising, especially one which comes, as this appears to do, from someone behaving in a maverick way and breaking all the internal rules as well as all the other rules.

The noble Lord mentioned some other aspects. Those are exactly what the Board of Banking Supervision will be investigating, as indeed will the main regulator of Baring's Singapore subsidiary, which is the Singapore Monetary Authority. It has delegated its formal responsibility to an organisation called SIMEX, which is the Singapore International Monetary Exchange Limited. All these questions will be asked by it and we look forward to seeing the answers.

Viscount St. Davids: My Lords, I have to declare an interest in these matters as a director of a securities house which is also a subsidiary of a bank. My noble friend will agree, in answer to the noble Lord, Lord Desai, that if one is to contemplate any additional regulations in this market they would have to be agreed with every stock exchange, with every exchange involved in foreign exchange and with every user of those exchanges. We should not contemplate any legislation which places our banks at a disadvantage in international markets, however weak the regulatory bodies are in foreign countries.

Lord Mackay of Ardbrecknish: My Lords, my noble friend makes the point which was made earlier—we are dealing with an international market, international exchanges and international companies. It is all very well to call for regulation here in this country but, frankly, one has to look for sensible regulation and not overburdening regulation all around the world.

Avon (Structural Change) Order 1995

Debate resumed.

4.26 p.m.

Baroness Hamwee: My Lords, in moving a little nearer home and looking west rather than east, perhaps we can return to the Avon (Structural Change) Order. It is clear that the county of Avon—this is no reflection on the county councillors or on the staff—has not won hearts and minds. The artificiality of the new county was always clear. Though I accept that 20:20 hindsight vision becomes even clearer 20 years on, some might say that they had a fairly clear vision of the problems even then. However, this is no reflection on the councillors, the officers and all the staff of the authority, for whom I have the greatest sympathy. Carrying out

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good local government is hard enough; carrying it out in the circumstances in which they have to do so is even harder.

It has seemed to me from central London that the answer which most people in that area wanted to be able to give to the question "Where do you live?" is "I live in Somerset" or "I live in Gloucestershire". It therefore seems particularly odd that their aspirations are met by the provisions for ceremonial purposes contained within the order, though that is perhaps the least of the problems of an approach which deals with structure before function. I find it a little ironic that even that aspiration has been met only in the most peripheral way.

In the case of Avon, I support the creation of the unitary authorities in place of the existing authorities for the reason I have already given, but I have considerable reservations about the order. The Minister said that the noble Baroness, Lady Farrington, regretted that two authorities were to continue as unitary authorities. Whatever the noble Baroness's views about counties, districts and unitary authorities, I read her amendment as regretting the technicality of the continuation—continuing authorities in that sense—and not anything directed at the particular authorities. The noble Baroness nods her head.

Outside the order, but fundamental to it, is the question of financing. Perhaps I may ask some questions in this connection before turning to the order itself. I am aware of the announcement of supplementary credit approvals allowing the capitalisation of revenue costs in connection with the costs of reorganisation. However, as your Lordships will readily appreciate, supplementary credit approvals are not grant. After reading the announcement, some questions occurred to me. The first question which I hope the Minister will be able to answer is how in the forthcoming financial year, 1995-1996, this will relate to the cap for each authority. Will there be any relaxation of the cap to take account of the recognised need for borrowing and the costs that will be incurred in connection with that borrowing?

Secondly, how will the costs be treated from 1996 onwards? Will they be disregarded for the purposes of SSA, grant and capping? This matter extends to all the costs of reorganisation, not just those that will be met by borrowing that is approved through the supplementary credit approvals. I expect that the Minister will say that the costs will be balanced by savings. Although one hopes not only that that will be the case, but that savings will outweigh costs over a period, it is inevitable that in the early years the costs will outweigh the savings. That is why I seek clarification of how those costs will be treated in the early years.

The announcement referred to supplementary credit approvals for the shadow authorities after their election. I ask the Minister to take this opportunity to give a reassurance that they will be available to the authorities after they are elected. I have heard some concern expressed in the area that that may not be the case. I should like to ask the Minister to state that sufficient amounts will be approved, but I recognise that that is

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probably a meaningless question. However, some recognition of the requirements of the shadow authorities would be much welcomed.

Turning to the amendment, the House will be grateful to the noble Baroness, Lady Farrington, for expressing the concerns so succinctly in her amendment and so clearly in her speech. The noble Baroness apologised for the detail; but I believe that your Lordships will feel as I do that there was no need to apologise for that detail, which was extremely helpful. The Isle of Wight is a good example because there is consensus there about the objective and concern about the procedure. Although some of the points raised are different, that highlights the difficulties towards which authorities are heading, led by the format of the orders.

The noble Baroness referred to Article 21 of the order. I find that a difficult provision. It has been suggested that all outgoing authorities will be prevented from exercising their statutory functions. Is that so? Perhaps it will be the case if the reference to a "requirement" ceasing to have effect—that is the word used in the article—means that the transferor authority cannot deal with the subject matter at its discretion. Even if the article is not so tightly drawn, the transfer of responsibilities under the article will lead to real problems in the real world of real difficulties, even with the maximum of co-operation and goodwill.

Incoming authorities will not have the staff to take over immediately—nor the departmental or committee structures that will be necessary. I share the fears that have been expressed about the potential limbo for matters on which there is a statutory duty to consult. I refer, for example, to community care plans, to amendments to schemes for the local management of schools, and to school admissions.

Is Article 19 sufficient to cover the gap? I should be delighted if it signalled that the Government were open to local authorities having a power of general competence, but I do not think that that is so. Local authorities need specific powers. I, too, am concerned that, taken together, Articles 19 and 21 will not be adequate.

I also share the concerns about the effect on staffing and on individual staff. Although I shall not develop my anxieties about the latter now, perhaps I may endorse what has been said about the human element of the problem. I believe that Staff Commission Circular No. 4 encourages continuing authorities to restructure and to create as many new posts as possible as a way of getting round the distinctions in staffing and the need for staffing for the new authorities. Restructuring and creating new posts seems just the sort of artificiality for which central government criticise local government. I believe that that could be open to challenge in an industrial tribunal. Indeed, more restructuring must mean more redundancies and a higher redundancy bill. I am concerned about the fact that that is the recommended approach. Indeed, the fact that that has been recommended seems to point to an enormous defect in the order and in the procedure.

It has also been suggested that Avon and Somerset Police Authority will be unable in 1995-96 to consider matters relating to the period after April 1996 on the

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basis that members who will not be there after 1996 cannot take part in that decision-making process. I should be grateful if the Minister could clarify that point. If that is correct—I hope that it is not—I hope that the Minister can comment on how forward planning can be achieved in such difficult circumstances.

Authorities which presently provide services, including education and social services, appear to have no right to be consulted by the new authorities. No doubt that consultation will take place as a matter of good planning, but perhaps the Minister can assist the House by saying why that has not been included in the drafting.

I appreciate that I have dealt with a number of technical matters, but they are real matters to those who have to implement the order. Much reference has been made in debates on the reorganisation throughout the country to the need for an "early win", as the chairman of the commission referred to it. I notice that the Official Report of another place on this debate referred to an "early wind". The writer had perhaps misheard—or had perhaps put his own cast on the point. I wish the authorities a "fair wind", and I hope that they have a "win" and success. However, I join with the noble Baroness, Lady Farrington, in having considerable reservations both about the content of, and the omissions from, the order.

4.37 p.m.

The Lord Bishop of Bristol: My Lords, I must first declare an interest as a proud inhabitant of the city and county of Bristol. I address your Lordships' House in support of the amendment moved by the noble Baroness, Lady Farrington.

The Avon (Structural Change) Order which has been placed before your Lordships' House neither recognises the need for a unitary authority that would encompass the whole of the urban area of Bristol nor the desire of many to return to their former counties of Somerset and Gloucester. However, rather than encourage your Lordships to reject the order (because the process has already been painfully drawn out over the past three years to the detriment of those who work in local government as well as the people of Avon) I hope that the House will support the amendment.

I am delighted that so many people have spoken warmly about the councillors and officers of Avon and its local councils. Over the past three years they have worked very well together in trying to plan for the future. They are committed to the good of the people of Avon, despite some of the technical flaws which appear in the order. I should like to share three of those flaws with the House.

We have already heard much about the distinction between continuing and new authorities. There is a commitment on the part of all the local councils and the unions that all staff should be fairly and equally dealt with under a common approach. I hope that the noble Viscount will be able to give the House the assurance that the principle of a national detriment compensation scheme for local government staff who lose pay—I

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stress "pay", not posts—as a result of the restructuring will be honoured. That is an important point, and many look forward to hearing that assurance.

The House has already heard of the concern over planning which comes under Article 15. The Minister said clearly that the Government have decided that there does not need to be a statutory requirement for joint preparation of structural plans but that the plans are being devolved to the four local authorities. The travel-to-work area for Bristol and its surroundings will cover three unitary authorities. While it is fine to plan together when there is good will, the law is there when the good will is not to be found among the bodies concerned. The law exists to protect the worst situation, not to deal with the best. Although the Minister said that the Government did not believe it necessary, I hope that there may be a rethink in this area.

We have already heard about policing. I am delighted to hear the Minister claim that there will be a co-ordinating body with regard to the fire authorities, because many people are disturbed, at present and under the present order, about whether there will be co-ordination of emergency services. One authority has been promised. We trust that that will be the case and that it will come quickly.

The noble Baroness, Lady Hamwee, referred to the money required to effect the change from one pattern of local government to another. Many people feel that the cost of implementing the changes and the new authorities to provide services to the people of Avon is already underfunded for various reasons, not least the present system of calculating SSA. We hope that the Government will listen to the pleas that have come from local authorities, because we believe that the underfunding is detrimental to the people of Avon and the services which the four unitary authorities are being asked to provide. I hope that the House will support the amendment.

4.43 p.m.

Lord Peyton of Yeovil: My Lords, I am sure that my noble friend on the Front Bench would have liked to have been able to return to that august department of which he is a distinguished ornament and have said that the order had been welcomed warmly. It would be churlish of me if I did not say at a very early stage in my speech how grateful I am to his right honourable friend who, I recognise, is not the initiator of the commission but just the heir to its recommendations. He drew back from the commission's original idea of making a mess of Somerset. For that, I am genuinely and sincerely grateful. I hope that my noble friend will pass on my cordial thanks to his right honourable friend.

When the commission was first launched I thought what a very good idea it was to go around to find out what people wanted. Of course, I had taken a rather naive position. It appeared later that the Government had a clear idea of what they wanted to do; the commission was not at all slow to pick that up, and thereafter listened with attention to what the district councils had to say but did not do very much to find out what the general public thought about the proposals. So

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we had this rather difficult process of reversing the tide which at one time seemed to flow inexorably towards unitary authorities.

I had hoped originally that the whole exercise might produce an opportunity to restore Somerset to that state which it had enjoyed before being rudely dismembered in the early 1970s. Here I have, sadly, to make a confession: although I had no direct responsibility for that decision, nevertheless I had the doubtful privilege at that time of labouring in the DoE, and I am so sorry that I did not then express my distaste for the proposal.

I shall return to the order, which will leave the people of Avon labouring under four separate unitary authorities. I should like to express some doubt about the wisdom of separating so many of the arrangements from what is happening on the ground. To my mind, the value of ceremony is that it is linked with what is done. If we have ceremony which has no basis, it is apt to look foolish. I just wonder whether the Government have been wise in the rather papered-over compromise they have reached.

Joint arrangements for key services is a concept about which it is easy to talk, but, as the right reverend Prelate said —I agree with him entirely—when there is good will and no particular conflict, it is easy but when conflict arises it becomes difficult. The proliferation of boundaries which this arrangement will produce is a potential source of great difficulties. I agreed also with the right reverend Prelate in what he said about the boundaries of Bristol. It is rather odd that a large part of the urban area of the city should be dismembered. It is clear that the Government will have to return to that problem before very long. I must express some surprise that they did not seize the opportunity, take the bull by the horns and deal with it now.

There is then the argument about costs versus savings. Costs are real and immediate. People have to dip into their pockets to meet them. Savings are very much more remote and speculative. It is probably asking too much of my noble friend to make any precise forecast about when the savings might be realised and when the people who now reside in Avon will be the happy recipients of those benefits. It may not be until their grandchildren are affected or even after that. It is a bit remote for people to take present pleasure from.

I appreciate the difficulty my noble friend is in this afternoon. He said that the order would end the uncertainty. Well, maybe. A decision has been made, but it is a rather messy one. As he was more or less bound to, he said that the Government hoped and expected that everyone would now co-operate in a reasonable manner. But that is stretching optimism a bit too far. I am sure that it is within the recollection of all noble Lords that people are not always reasonable, particularly in areas of government. People defend their boundaries with real resolve and determination.

While I hope that everyone will be peaceful and happy under this arrangement, I fear that it is a messy one, of which the benefit, if any, will be long postponed and the enjoyment very small indeed. I shall not detain your Lordships further, but with the air of mild disapproval to which the noble Baroness characteristically and kindly restrained herself, I am

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willing to support her amendment. I feel sorry for my noble friend in that he is unable to go back to that awful department clothed in the garlands of a victor.

4.49 p.m.

Baroness Faithfull: My Lords, I hope that your Lordships will forgive me for speaking in the gap. I did not realise that there would be a Statement and I thought that I should not be back in time for the debate. I shall speak very briefly.

I am not at all clear about the decision with regard to staff and duties which require special knowledge and experience. As I understand it, the unitary authorities will stay in place and the staff will be added to them. Those staff will have to undertake duties which they had not previously carried out.

I wish to speak in particular about social services. It will be impossible for staff without the necessary experience and training to administer the law in the field of social services. What will be the position of members of staff who have devolved upon them duties which they have not previously carried out? Will provision be made for senior posts so that the departments are able to administer the requirements of the Children Act 1989, the Children and Young Persons Act 1933, community care and so on? All that needs training, experience and managerial structure. I am not clear about that and I should be grateful for some help on that matter.

4.50 p.m.

Baroness Hollis of Heigham: My Lords, I thank the Minister for introducing the order and I shall speak also to the amendment in the name of my noble friend Lady Farrington. It is clear that the principle of the orders for unitary authorities enjoys widespread local support, in fact, some of the strongest local support in the country. Some 72 per cent. of the population polled by the Local Government Commission favoured the reorganisation and only 16 per cent. were against it.

The order would ensure that Bristol which (with Norwich) until the Industrial Revolution, was one of the second cities of England, would regain the full competence that it enjoyed from the 14th century until 1974, as would the continuing authority of North West Somerset and the two new merged authorities of Bath and North East Somerset, one of which was Wansdyke and South Gloucestershire, and the other which was Kingswood and North Avon. In other words, of the six district authorities, two remain as is and the other four merge into two pairs of two.

As the Minister said, apart from Bristol, which has become both a county and a city, the local authorities will revert to Somerset and Gloucester for ceremonial purposes. But although those reorganisations enjoy a great deal of public support, some worries which I share have been quite rightly expressed by your Lordships, and I hope that the Minister will address them.

The first of those anxieties is that there is a problem about the continuing authorities. That was raised by my noble friend Lady Farrington. Two authorities are on the same boundaries and they are continuing; two are new. There will be all-out elections for the four authorities in

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May 1995—in nine weeks' time—whereupon the continuing and shadow authorities will have the same ability to plan, budget and employ. Nevertheless, Avon's staff have real and justified fears that in the continuing authorities, which have a two months' head start, there will be a presumption in favour of existing staff and that county staff may be disadvantaged. I know that the Minister in the other place expressed the hope that there will be honourable and decent solutions but it may be appropriate to issue more general guidance should that situation occur. It is unfortunate and we all recognise that.

There are two continuing authorities because they remain in the existing boundaries. As the right reverend Prelate said, that is clearly a matter of considerable anxiety in Bristol where existing boundaries appear to wander rather vaguely and absent-mindedly through the middle of people's back gardens.

I appreciate that the neighbouring districts of Kingswood and North Avon have no wish to see Bristol's boundaries enlarged at their expense. I realise also that the Local Government Commission ducked the issue and that the Boundary Commission has the power to follow that up subsequently. But at the very least, I believe that everyone agrees that a minor tidying up would have been sensible. The Secretary of State should have had the courage to do so in the light of local calls not only from the CBI but also from the local Labour Party and, this evening, from the Church.

I am less persuaded than is my noble friend Lady Farrington that there is a problem in relation to the transfer of services. On the contrary, many of us are confident that the districts, whose sizes range from 163,000 to nearly 400,000 people—larger than many existing London boroughs and metropolitan authorities—are entirely competent to perform the range of services. Certainly, the Audit Commission and the Local Government Commission agree with that.

It is appropriate also for the order to refer to statutory functions such as police and fire services. It would be unwise for the order to carry detailed arrangements for other services when the Secretary of State has the power to make subordinate and detailed legislation tailored to the local situation as required by Sections 19 and 22 of the Act. That detail should be dealt with not in the order but by supplementary regulations. That is a sensible way in which to proceed.

The same staff anxieties raised by the Cleveland order have not been allayed in relation to this order. I admit that all the authorities concerned have agreed to avoid compulsory redundancies before transfer and have agreed also to work within the national agreements on salary protection, as mentioned by the right reverend Prelate.

It is the case also that the compensation for voluntary severance for those under the age of 50 is less generous than it was in 1986. For the life of me, I do not understand why the Minister has not deemed it worthwhile to smooth what is inevitably a traumatic experience for the dedicated staff of Avon County Council with the more generous terms which were widely and properly applied in 1986.

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Finally—and this was a fear expressed by noble Lords on all sides of the Chamber—my wider fear is that the reorganisation is taking place against a background not merely of inadequate finance for the structural reorganisation itself but against a background of the most severe financial restraint ever experienced by a local government—a shortfall of £1.5 billion before the pay and price increases of next year. For example, my own authority of Norwich will have lost 40 per cent. of its staff in four years. Some of its services may disappear entirely. Sensible, moderate local authorities across the country propose to go beyond their capping limits with the support in many cases of all three political parties rather than in a year wreck what has been built up over decades. School governors are in revolt across middle England as they sack experienced teachers because they can no longer afford to pay their salaries.

I hope that the Minister appreciates that to cut local authority expenditure on services in real terms at the time at which the reorganisation is taking place is the deepest folly. Severe cuts, the closure of services and compulsory redundancies which authorities like mine may face for the first time in decades will be attributed to reorganisation when instead it is due to the SSA determination and the revenue support settlement.

For local government reorganisation to generate the improvement to local and accountable services, which I believe is needed, requires at least a level playing field as regards finance. By refusing that, the Minister—and he should not take it lightly—is jeopardising his own local government review.

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