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Baroness Hanham: I wonder which came first, the chicken or the egg? My understanding is that these clauses were in the Bill long before anyone thought of getting CIPFA to produce a code of practice. If they were, it would have been sensible to put that organisation in.

I need to read the regulations, and we shall return to the matter on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment No. 13:

The noble Baroness said: In moving the amendment, I shall speak also to Amendments Nos. 14, 15 and 16.

Amendment No. 13 to Clause 3 refers again to codes of practice. It suggests that regard should be had to codes issued,

    "by or on behalf of the Secretary of State".

This amendment and Amendment No. 14 would insert the full stop and leave out the words, "or another".

The position is that a code issued by "another" should be regarded as one issued on behalf of the Secretary of State. I am happy to see the draft regulation, but it seems to me that the Secretary of State should put his own name to it, as the amendment would achieve.

Amendment No. 15 returns us to the issue of parliamentary approval of regulations, proposing that the regulations under subsections (1) and (2) are subject to the affirmative resolution. Since I tabled the amendments, I have seen the draft regulation. In a sense, one could say that it puts the code at a further remove from Parliament. The regulation refers to the current code, which can change from time to time, so the Government's proposal does not even offer real scope for challenging the next but one code. At least, that is how I understand the way in which the procedure might work.

I am not criticising the draft CIPFA code, but we are always considering a situation in which there may be a different Secretary of State and, perhaps, a different group of people running CIPFA and making proposals on its behalf. I hope that they would not go off their respective heads at the same time, but one would want Parliament to be able to stop the worst effects of that, if it were to happen. However, I accept that Parliament might be more likely to lose the plot than would CIPFA.

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Amendment No. 16 probes just how much discretion local authorities will have. The draft code sets out its objectives and states, in paragraph 5, that:

    "Prudential indicators that are limits are for the determination of the local authority subject only to any long stop controls under statute exercised by . . . the relevant Minister. The government . . . have indicated that these are long stop powers and will be used only in exceptional circumstances".

The obvious question is: could we have some examples of exceptional circumstances? For instance, are they different from circumstances that could cause reserved capping powers to apply? Why is it necessary to have different long-stop powers exercised through the code? I beg to move.

Lord Rooker: If I was an impartial, dispassionate observer—which I am not—I would think that the speech I have just heard could be regarded as that of someone wanting to be an interfering busybody in local government. The noble Baroness seems to be saying, "Let the Secretary of State and Parliament do everything", but we do not want that. We do not want to be prescriptive; we are quite happy to work with independent professional people producing professional codes of practice which are well tried and tested. It goes without saying that this is not the first code that CIPFA has produced. The suggestion that we would want to interfere and that the Secretary of State should do everything may be Liberal Democrat policy, but it is not Labour Government policy.

Amendments Nos. 13 and 14 relate to Clause 3(7). This provides that regulations may specify codes of practice to which authorities are to have regard when setting their affordable borrowing limits. Such codes may be issued by the Secretary of State or by some other body. The amendment would only allow the regulations to specify a code issued by "or on behalf of" the Secretary of State. That would require a very different approach from the one currently envisaged. I have made it clear that the code we intend to specify in regulations is the one being specifically prepared by CIPFA, which is an independent body. The latest draft code has been placed in the Library of the House.

CIPFA has developed the code in collaboration with the Government. I should tell the noble Baroness, Lady Hanham, that the code has been part of our proposals from the very first. The whole point is to rely as much as we can on professional regulation. It is worth trying to set this out because I do not want there to be any misapprehension. We have no secret motive or agenda in subsections (5), (6) and (7). They are there for the very reasons I gave when I replied to Amendment No. 12.

CIPFA has developed the code in collaboration with the Government, the Audit Commission and representatives of local government. However, despite that close working relationship, the code remains CIPFA's own publication. In no sense has it been produced on behalf of the Government. The great merit of the code lies in its independent status. It will be viewed by local government in the same light as CIPFA's other well-established codes of practice.

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There is, however, no risk in relying on an independent code since it acquires no legal status until it is named in regulations. Unless the Government are content with a code, they will not specify it in regulations.

Amendment No. 15 relates to Clause 3(5), under which regulations may be made about the way in which authorities set their affordable borrowing limits. As drafted, the Clause 3(5) power would rely on the negative resolution procedure. That is consistent with the position under the present capital finance system, which depends heavily on secondary legislation. However, the amendment seeks to make the Clause 3(5) power subject to the affirmative resolution procedure.

The Select Committee that looks after these matters in Parliament—the Delegated Powers and Regulatory Reform Committee—in its 16th report did not recommend any change to the procedure proposed for the Clause 3(5) power.

Amendment No. 16 also relates to Clause 3(5). The amendment is concerned with the scope of the regulatory power and seeks to limit it. I am not clear about the precise intention behind the amendment, but I must emphasise that we consider it essential to have a flexible power to regulate the setting of the affordable borrowing limit. The whole system is designed to give authorities much more freedom than they now have, but the freedom must be balanced by safeguards for local taxpayers, which means that we must be able to ensure that the affordable borrowing limit is set professionally and responsibly.

Our present intention is that the regulations will simply require authorities to have regard to the CIPFA prudential code. However, we need to keep the legislative options open in case practical experience of operating the new system highlights concerns which need to be tackled through regulations. I do not believe that should be described, in the words of the amendment, as seeking to "fetter the discretion" of authorities. That is far from our motives.

I hope that I have given some reassurance. I may not have completely reassured the noble Baroness, Lady Hamwee, because she wants to go down a far more prescriptive path than the Government. I could not accept that.

Baroness Hamwee: If I were an impartial observer, I would say that it is the Government who want to interfere, more than do my noble friend Lady Maddock and I. We are saying not that the Secretary of State should do everything, but that there should be greater accountability to Parliament. I am not questioning the current Government's motives; I simply want to make certain that the wording ensures that the motives find their way into action.

The Minister said that CIPFA was independent and talked about the code being developed in collaboration with the Government. I accept that it was also developed in collaboration with the Audit Commission and local government. I started to write down a question about what would happen if the Government disliked the code, and, as I was doing so,

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the Minister said that they would not specify it if that were the case. Draft Regulation 2 does not say that. It states that a local authority and mayor shall have regard to the code. So, it is good in parts, in that the Secretary of State cannot stop it, but it still leaves me a little concerned about where responsibility lies.

5 p.m.

Lord Rooker: That is an unfair way of describing it. These are not the regulations and code; they are in draft form. The code has no statutory instrument number; it will have to be approved in due course. If we were not satisfied with the final code, we would not specify it. The regulations and code are in draft form, so the noble Baroness's concluding point is wrong and could be misunderstood by those outside Parliament who follow our proceedings.

Baroness Hamwee: In that case, I am glad that I raised the point. Draft regulation 2 states:

    "In complying with their duties under Sections 3 (1) and (2) . . . a local authority and the Mayor shall have regard to any current prudential code for capital finance in local authorities issued by the Chartered Institute of Public Finance and Accountancy".

I take from the Minister's comments that that part of the draft regulations may not appear in the same form in the final draft. I am not trying to impute motives. Perhaps others do not share my lack of understanding, but I am trying to understand the chain of command. After all, the draft regulations are all that we have to go on at the moment—although I accept that they may not be in their final form.

I am sorry that I was not clear about Amendment No. 16 in asking what were the exceptional circumstances referred to in the current CIPFA code, which, I accept, is in draft form. The question remains of what long-stop powers the Government might need as part of this regime that could not be covered by applying current long-stop reserve powers for capping of revenue spending.

I will read what the Minister says. I assure him that, as much as anything, I seek clarity and accountability to Parliament. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 14 to 16 not moved.]

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