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Earl Russell: Of course, I understand that the proposition that the level of public funding is sufficient is always a tautology. That has been the view of Ministers for a very long time. Whatever the level may be, whatever it is meant to do, in Minister's eyes it is always sufficient because it is the level. I also understand the Minister's comment that the Secretary of State will look at any issue that arises from this, and that he will consider whether the level of public funding appears to him to be sufficient, but in that the Secretary of State is judge and party in his own cause. Therefore, he is subject to a very severe temptation to believe that the funding is sufficient.

I am grateful to the noble Lord, Lord Whitty, for his support. He made an excellent speech in which he said a great many things that I wish I had said. The point about "Which law shall I break?" is a very telling one. If one believes in respect for the law, as any drive against fraud must believe, it can only undermine the purpose if one spreads the idea that the law does not need to be obeyed. The Minister referred to the anti-fraud challenge fund. I thought he would. Does the Minister deny that the money which goes into that fund

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is top-sliced from general finance? Therefore, it does not put any more money into local authority coffers; it simply enables one local authority to get a bigger share of the pie than another.

The Minister's reply reminds me of a letter written by Sir Robert Walpole outlining his reasons for setting up Queen Anne's bounty. Your Lordships may remember that that was a pension for clergymen's widows. Sir Robert decided that he would create a certain number of these awards but they would not be sufficient to go round. Therefore he said that a clergyman's wife day and night, in season and out of season, would not cease to urge upon her husband the virtues of conformity. That is ministerial thinking in any generation. I shall not divide the Committee again so soon, but I confess that I have been tempted. I can occasionally resist temptation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Russell moved Amendment No. 63:

Page 16, line 41, at end insert ("and").

The noble Earl said: The amendment deals with the requiring of authorities to contract out. Amendments Nos. 63 and 64 are linked amendments. Amendment No. 63 adds the word "and". Amendment No. 64 removes the words "and accepting" from the list of what local authorities are obliged to do with contracting out. The provision requires the local authority to put services out to tender but it does not require the local authority in all circumstances, regardless of what bids it receives, to accept one of those tenders.

Does the Minister believe in a free market? If he does, he must accept that a market cannot be genuinely free where one of the parties has to trade and the other does not. It is an extremely unequal negotiation which has taken place. I do not know how often the Minister has dealt with an auction house where a ring operated. One has rather low prices offered. That is precisely why auction houses in their wisdom have seen fit to put a reserve on property that they put up for sale. There is no provision in the Bill for the local authority to put a reserve on the contracting out of the services. If the Minister were prepared to provide for a reserve, he might rob my amendment of some of its force. I shall be interested to see whether he is prepared to do so. I beg to move.

Lord Mackay of Ardbrecknish: It may be helpful if I explain the purpose of new Section 139G. This section is aimed at giving power to the Secretary of State to make enforcement determinations. Such determinations could be issued following a failure by an authority to attain the standards specified in a direction and where the authority had not offered any reasons why a determination should not be issued. Thus, it would apply in only the most serious cases, where, despite being given the opportunity to improve its standard of administration, an authority had failed to do so.

The determination is designed to secure the attainment of the standards in question and, in order to achieve this, may also contain other provisions. These

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include that the authority must comply with specified requirements as to inviting, preparing, considering and accepting bids to carry out the work. This is necessary as the general powers on competitive tendering would not apply in these circumstances and there has to be a means for setting up a mechanism to allow this to be done. This provision also aims to ensure that, in undertaking a tendering exercise following the issue of a determination, the local authority complies with whatever requirements the Secretary of State decides are necessary, including requirements as to the quality of person to take on the work, procedures to achieve this and, assuming persons of sufficient quality apply, that a bid is actually accepted.

These amendments proposed by the noble Earl would have the effect of limiting the conditions which the Secretary of State is able to set out for the tendering process by removing the power to specify requirements relating to the accepting of bids. This would have the effect of removing all the teeth from this provision. It would allow an authority to pay lip service to the order to contract out by going through all the stages of the contracting process only to reject all of the bids out of hand or to award the contract to a bidder who could not provide the necessary effectiveness against fraud.

We do not envisage that the power to order contracting out will need to be invoked often. And we do not envisage that the powers relating to accepting bids will be used to tell a local authority which bid to accept from those that provide an acceptable level of action against fraud.

However, I think that it is important that we have the power and the teeth to make the system work effectively in the very small number of cases--hopefully, there will be no cases--where the authority is simply not prepared to take the steps which have been found to be necessary to be effective against fraud, and is going out to contract in a way which suggests that it is not looking for a bid which will give us an effective way of administering the system with the securities against fraud.

I understand the noble Earl's reservations. They are those he normally has about powers of Secretaries of State. But if we are to envisage the possibility that a local authority refuses to accept any of the points made by the fraud inspectors, and refuses to make any changes, and we have to contemplate the next step of forcing the local authority to go out to tender, we have to ensure that it is looking for and accepting a tender which will carry out the criterion of being effective against fraud that we seek.

I hope that, with that explanation, the noble Earl can withdraw the amendment.

Earl Russell: Before I decide what to do with the amendment, perhaps I may ask the Minister one point of clarification. He referred to a local authority not giving reasons for its failure to reach a required standard. Did he mean failure to advance any reasons, or failure to advance reasons which appear sufficient to the Secretary of State?

Lord Mackay of Ardbrecknish: I mean failure to advance any reasons. While I think it entirely theoretical,

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one might envisage the reasons the local authority gives as being thoroughly inadequate, not proper reasons, and showing no indication that it intends to change the way it has been carrying out the system.

We come back to all the discussions we have had. The local authority may give reasons which are reasonable and adequate and may suggest ways in which it might improve its system, as we discussed earlier. If those are reasonable reasons and it is making the necessary changes, the Secretary of State will accept that. We do not intend to force authorities to go out to contract willy-nilly. We wish to have this power only for those authorities which are obviously unwilling to take the necessary steps laid out by the fraud inspector.

Earl Russell: Has the Minister any idea how arbitrary he sounds? Think about it the other way around. Think of it from the view of officers of a town hall. Think of them using the same sort of language. Think of them saying that the Minister shows absolutely no ability to change, that he shows absolutely no ability to do what needs to be done, that he shows absolutely no willingness to take account of the points made. Those officers have as much right to make those points as the Minister has to make his. They have a point of view too. We cannot know in advance which of those points of view will be correct.

The Minister used the words that the local authority complies,

    "with whatever requirements the Secretary of State decides are necessary".
What would he say if he were required to comply with whatever the local authority deems necessary? There are a great many things that a local authority deems it necessary for his department to do. I do not suppose for one moment that he will do any of them.

We on these Benches complain frequently about over-centralised government. As the Minister says, we complain frequently about the powers of the Secretary of State. I have never heard quite such a barefaced defence of the Secretary of State's claim to enforce his own judgment as if it were infallible. When I rose I had absolutely no intention of asking the opinion of the Committee. But the Minister has really made me see red. I must do so. I ask the opinion of the Committee.

8.59 p.m.

On Question, Whether the said amendment (No. 63) shall be agreed to?

Their Lordships divided: Contents, 17; Not-Contents, 60.

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