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Baroness Hanham: Again I thank the Minister for his careful explanation. I note his point as regards Clause 4(2). The purpose of the power is to ensure that authorities do not borrow more than they can afford, but given some freedom and flexibility, at some stage they may do just that. I suppose that a restriction is required to prevent that.
I shall read what the Minister has said and for the moment I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham moved Amendment No. 22:
- Page 3, line 4, leave out subsections (2) to (6) and insert—
The noble Baroness said: This amendment seeks to lay down some conditions that we feel are appropriate for when the Secretary of State may wish to limit the amount of money that a local authority can borrow. This covers points that we have already talked about, but as I explained earlier, discussions on these amendments are taking place around each other.
The Secretary of State may want to limit the amount of money that a local authority can borrow when he feels that it is necessary to do so for "national economic reasons". The amendment also seeks to remove the provision given in subsection (2) that gives the Secretary of State the power to set individual borrowing limits on local authorities for reasons other than national economic emergencies. We touched on this when discussing the previous amendment.
It is welcome that the Government are concentrating on the economic cycle, the same cycle that the Chancellor told us in his first few years in office was a thing of the past. However, perhaps that is a political snipe that I should leave alone.
The first part of the amendment requires the Secretary of State to consult local government before taking action. I remind the Minister that this was a key recommendation of the Select Committee. We believe that it would be inconceivable for the Secretary of State to take such drastic action without consulting local government.
The second part of the amendment provides for the Government to report to Parliament to explain the macro-economic reason that gives rise to the need to limit local authority borrowing.
Thirdly, we propose that there should be an affirmative resolution of both Houses to approve the order that imposed the new limits on local authorities. The Committee should note that this procedure is used in an extreme macro-economic crisis only, and while we wish that the Secretary of State never has to come before the House to seek such an order, I hope that we have broad support in asking for this type of parliamentary scrutiny.
I would like to give a topical example of when the Secretary of State may need to reduce borrowing limits. If in the future the Government take us further into the euro-zone, they may find it necessary, in order to satisfy the European Bank, to curb the country's borrowing. Indeed, we understand that some countries, including France and Germany, are already having difficulty with the 3 per cent deficit. In this instance, I feel—and I hope I have broad support—that the Secretary of State should come before the Houses of Parliament and that his decisions should be subject to parliamentary scrutiny. I beg to move.
The Deputy Chairman of Committees: I should advise the Committee that if this amendment were to be agreed, I should be unable to call Amendments Nos. 23 to 28 inclusive.
Baroness Hamwee: We support this amendment. Perhaps I should sit down to enable us to get through it before either the noble Lords, Lord Pearson of Rannoch or Lord Stoddart of Swindon, come into the Room and find us discussing the corrupt octopus of Brussels.
Lord Bassam of Brighton: Amendment No. 22 would substantially change the operation of Clause 4. The first effect would be on the power to set a national borrowing limit under Clause 4(1). As drafted, the power would be exercised by making regulations under the negative resolution procedure. My understanding is that the Delegated Powers Committee was very happy with that. The amendment would require a report to be laid before and approved by both Houses of Parliament as well as the undertaking of formal consultation with local government before regulations could be made.
Any national limit would be in accordance with policies on public expenditure which had already received parliamentary approval. Economic circumstances serious enough to demand national borrowing constraints would inevitably be the subject of extensive parliamentary debate. But Parliament has never been involved in scrutinising the allocation of the local authority borrowing limits which, every year since 1990, the Government have set by the issue of credit approvals. Under the new system, a national limit would achieve exactly the same result. We see no need for a statutory requirement for parliamentary approval of that process.
With regard to consulting local authorities, we have already given clear commitments to local government representatives that they would be fully consulted about any possible need to set a national borrowing limit. I am quite happy to put that on the record this afternoon. There are well established agreements between central and local government about consultation, and we take those commitments very seriously. Under the present system, there is no statutory duty to consult prior to the annual issue of credit approvals, which act as borrowing limits, but we regularly discuss these matters and the arrangements that follow from them with local government representatives.
Amendment No. 22 would, in our view, have other unfortunate effects. Deleting Clause 4(2) would remove the Government's power to set a borrowing limit for an individual authority. But that second reserve power provides a vital safeguard for local taxpayers against unaffordable borrowing by their local council.
Amendment No. 22 would also eliminate the important flexibility conferred by Clauses 4(4) to 4(6). These provisions would allow local authorities to transfer borrowing headroom between themselves under a national limit, without Government consent. They make no difference to the total effect at the national level and would ensure that borrowing capacity was distributed efficiently and not wasted. These provisions also help to underline the fact that the Clause 4(1) power is directed only towards protecting the national economy.
In addition, Amendment No. 22 would disapply Clause 122 when regulations on a national limit are made and thus prevent different provisions being made for different cases and different descriptions of classes of authority. Such flexibility could be important in spreading the impact of a national limit fairly among authorities. For those technical and rather hard-nosed reasons, I hope that the noble Baroness will feel happy about withdrawing the amendment.
Baroness Hanham: I thank the Minister for his reply. This was a probing amendment and the response was interesting. Of course we have the local government consultation process, but what is being suggested here is that this might come about in an unexpected way. If a national economic crisis arose, we would not be working with normal factors. If at some stage
On the other aspects, I shall read the Minister's reply. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 23 and 24 not moved.]
Baroness Hanham moved Amendment No. 25:
The noble Baroness said: The purpose of this amendment is to achieve an important element of transparency in the exercise of powers under this section which would allow the Government to make different rules for individual authorities. No one who has studied this year's local government settlement could doubt that there was a great variation between the apportionment of money to individual authorities.
Against that background, an explicit power to penalise individual authorities, as set out in the clause, should be subjected to the closest scrutiny. The amendment suggests that when a government uses this power, an open and transparent statement must be laid before Parliament by the Minister to explain on what grounds the power is being used. That would give proper protection in the case of a selective power which would enable an intervening Minister's actions to be probed by public and Parliament alike instead of being shrouded in secrecy. It could be a provision that might be applied in other powers to intervene selectively being sought by the Government in this Bill. I beg to move.
"( ) No regulations may be made under this section unless—
(a) the Secretary of State has consulted such representatives of local government as appear to him to be appropriate,
(b) he has laid before each House of Parliament a report explaining the reasons why he considers it necessary that the regulations be made, and
(c) the report has been approved by resolutions of each House of Parliament.
( ) Section 122(1) and (2) do not apply to regulations made under this section."
5.45 p.m.
Page 3, line 8, at end insert—
"( ) No direction or regulation that applies to a particular local authority or local authorities may be made by the Secretary of State unless he has laid before Parliament a statement explaining the reasons that justify selective action in the case of that authority or authorities."
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