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Page 52, line 14, leave out from ("1999") to end of line 15 and insert--
("(bc) making a substitute calculation in accordance with any of sections 70, 71 and 73 to 75 of, and Schedule 6 to, that Act;".").

On Question, amendment agreed to.

Clause 93, as amended, agreed to.

Clauses 94 to 96 agreed to.

[Amendment No. 225D not moved.]

Clause 97 agreed to.

Clause 98 [Aggregate credit approval for Authority and functional bodies]:

Lord Dixon-Smith moved Amendment No. 226:

Page 54, line 30, leave out paragraph (c).

The noble Lord said: It seems to me that it would be superfluous to repeat the words that I spoke in error when we were discussing the previous amendment. Therefore, with the leave of the Committee, perhaps we could take those words as having been spoken and relevant to this amendment. That would spare me the bother of repetition, which would, of course, greatly add to everyone's feeling that we were not making the progress that we ought to be making.

Clause 98 sets out pretty much a system which is largely consistent with existing local government practice. We have category A schemes which are specifically approved by the Secretary of State; we have category B schemes which relate to a nominated sum by the Secretary of State and which can be allocated by the authority; and we have category C schemes which, if I read the paragraph correctly, relate to designated amounts for allocation by the mayor to such authorities and for such purposes as he sees fit. I have no problem with any of those designations.

I have a little difficulty with category D schemes because this area appears to me to go back to giving the Secretary of State control, once again, over matters with

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which the mayor is dealing. I therefore find myself wondering more than somewhat whether that category really is necessary in view of the previous three.

Amendment No. 227 has been tabled because I must confess that Clause 99(3) is beyond my powers of comprehension, unless particular circumstances arise. As drafted, the subsection states:

    "Where an additional credit approval is issued not more than six months after the end of a financial year"-- in other words, it seems to me that it is a post-dated approval--

    "the period specified under subsection (2) above may be one which begins, or begins and ends, at any time during that financial year". For that clause to have any place in the Bill, the GLA will, perforce, have carried out items of capital expenditure which are, presumably, outwith its capital budget and, more significantly, outwith any capital approvals which it has previously received.

It is possible that circumstances could arise where such post-dated approval is in fact required. But if that is the case, it does not give me a great deal of confidence in the financial management either of the authority or indeed of the system of approvals which could allow such a situation to arise. It is with that in mind that I have tabled the amendment to remove subsection (3). I await the Minister's response with considerable interest. I beg to move.

Lord Whitty: I could attempt to go into considerable detail on this clause, but it seems to me that I should indicate to the noble Lord the fact that I do not think his objectives would be achieved by these amendments. Amendment No. 226 would remove Category C from the aggregate credit approval that the Secretary of State will issue to the mayor before the start of the financial year. That would restrict the mayor. Amendment No. 227 would remove Clause 99(3), which provides that as long as,

    "an additional credit approval is issued not more than six months after the end of a financial year" the period for which it has effect may begin at any time during that year. It is important that the Government should have the option of supplementing the allocation of capital resources by means of the aggregate credit approval. The provision gives additional flexibility to the Minister in that regard if an authority approaches him.

In my view the amendments would add unnecessary restrictions to the GLA's capital finance system. Amendment No. 226 would severely restrict the role of the mayor in allocating credit approvals to the GLA. Amendment No. 227 would also be restrictive and would be inconsistent with the flexibility which applies in the issue of supplementary credit approval to other local authorities. Therefore it would place the GLA at a disadvantage.

I am happy to write to the noble Lord with further detail. I have some rather lengthy notes here which I could read out but I am not sure that that would greatly enlighten any of us. I believe that the noble Lord's amendments would have the contrary effect to that

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which he seeks. Therefore I hope that he will not pursue them. However, as I said, I am happy to provide further detail should he request it.

Lord Dixon-Smith: I am grateful to the Minister for his reply. He has filled in some of the background which was what I hoped to prise out of him in tabling these amendments. I shall study with care what he has said. I should be grateful if he would write to me with the pages of detail that he says he has. Other interested persons might find that useful too. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 98 agreed to.

Clause 99 [Additional credit approval]:

[Amendment No. 227 not moved.]

Clause 99 agreed to.

Clauses 100 to 103 agreed to.

Clause 104 [Power to redistribute capital receipts of functional bodies]:

The Deputy Chairman of Committees (Lord Cocks of Hartcliffe): Amendment No. 228. Lord Dixon.

Lord Dixon-Smith moved Amendment No. 228:

Page 57, line 46, at end insert ("provided that no such payment may be directed to be made by a body until that body's debts have been fully repaid").

The noble Lord said: I hope that the Deputy Chairman of Committees will forgive me if I point out that I need to be referred to as the noble Lord, Lord Dixon-Smith, as the noble Lord, Lord Dixon, sits on the Government Benches. He may be upset if when he reads Hansard in the morning he discovers that he has proposed opposition amendments.

The Deputy Chairman of Committees: The noble Lord, Lord Dixon, was one of my Whips. With his physique I would not like to offend him. I call Amendment No. 228 in the name of the noble Lord, Lord Dixon-Smith.

Lord Dixon-Smith: I am most grateful for those comments. Clause 104 gives the Secretary of State power to make regulations to enable the mayor to direct the allocation of a functional body's usable capital receipts to some other part of the Greater London Authority. Amendment No. 228 requires that before the Secretary of State can make regulations to permit the mayor to designate those usable capital receipts for other purposes the functional body should have paid off any of its capital debt that is outstanding. Once that has taken place, reallocation becomes permissible.

The issue of capital funding and the tactics of capital management is inevitably complex. There is not the slightest doubt but that, even with interest rates where they are today, the cheapest way of funding capital expenditure is to fund it directly on revenue. One is then not subject to interest charges and interest payments over a long period of time, which of course inevitably raise the cost of projects. If that happens, the consequence is that the present generation finds itself

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paying for benefits which are enjoyed and will continue to be enjoyed by future generations, benefits to which they make no contribution. Of course, they may undertake their own capital expenditure. Loans spread the cost across the generations but, in doing so, they also increase the costs.

We are discussing the good management of resources. It is an issue which requires careful consideration. There is a separate issue within it; that is, that the functional bodies within the Greater London Authority will need financial incentives of some kind if they are to manage their assets efficiently and effectively in the interests of the people of London. If the financial consequences remain with the functional body, good asset management will bring about either lower cost systems or lower costs. Alternatively, possibly more beneficially, it might permit an increase in the overall volume of service.

However, if we follow the Secretary of State's powers of designation and the mayor reallocates the usable capital receipts elsewhere, the functional body may well find that it is not receiving the direct benefits of its good financial management; and, if it finds that it is not getting the direct benefits of its good management or its good management of its property assets, it may feel less inclined to manage those assets well in the best interests of the wider public.

It is with that in mind that we have tabled the amendment. Perhaps it would only partially bring about the effect that I desire, but partially is better than not at all. I beg to move.

10 p.m.

Baroness Hamwee: The noble Lord will not be surprised that we have difficulty in supporting the amendment. We have taken the line throughout that the authority's budget should be regarded as one budget, not as a group of individual budgets from the functional authorities. Although we do not much like the need in Clause 104 for the regulations to come from the Secretary of State to allow the redistribution of the receipts, we do at least recognise that the mayor will be the beneficiary of any regulations and be given the power to make directions. We think it is appropriate that the budget is one single budget, not a group of individual budgets. Questions of the control and care to be taken by the functional bodies are ones to which the mayor should have regard in running the authority rather than being matters for legislation.

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