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Lord Hanningfield: I thank the Minister for those comments, on which I should like to reflect. Obviously, I shall be consulting the town and parish councils. As I said in my introduction, there are several of considerable size with budgets of several million pounds and representing communities of 50,000 or 70,000 people. I think that they should be able to benefit from some of the provisions of this Bill. I thank the Minister for his comments. I shall examine his comments and consider whether we should return to this issue at a later stage.

In addition, I was interested to hear his comments about the voting age. Certainly, the Association of Councils feels that it would like a younger age of representation in order that it could more widely represent its communities. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment No. 65A:

"( ) The Secretary of State may by order make provision amending the definitions referred to in subsection (2) and contained in Part 5 of the Local Government and Housing Act 1989 to ensure that the definitions conform to generally accepted accounting practice.
( ) An order under subsection (5) shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament."

The noble Baroness said: I turn first to the issue of age, which is one to which we shall return when we discuss the amendment tabled on that matter.

Yesterday, I mentioned a briefing that we had received from CIPFA. I talked about it being "in elation" to the Bill—maybe this is the time to apply that. Amendment No. 65A is made at the request of CIPFA and is supported by the Local Government Association. The regulatory framework for local authority companies is currently provided in Part V of the Local Government and Housing Act 1989. The definitions in it differ in small but very significant ways from definitions in the UK Generally Accepted Accounting Practice (UK GAAP). That practice, adapted to reflect local authority circumstances, is the basis for financial accounting for UK local government and also underpins the definitions and the computations of the key indicators in the Prudential Code. It will also form the basis of the information flows for the Whole of Government Accounts programme, which is now rapidly developing momentum—I am told by this note.

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It is expected that local government will be included within this programme. If the current Part V of the 1989 Act definitions continue, local authorities will have to carry out separate classification exercises for prudential framework/annual financial reporting purposes on the one hand and the regulatory framework on the other. As Members of the Committee will appreciate, that will create costs and—I am not sure that this is a technical expression—will risk creating a technical fog where we want to see clarity and transparency.

The Local Government Association confirms the importance, in its eyes, of local authority accounts following best practice and supports the mechanism introduced in the Bill to allow statutory definitions to be replaced with definitions from UK GAAP, subject to modifications for local authority practice. CIPFA has also said that the amendments are not merely technical. In the post-Enron environment the issue of whether entities are on or off balance sheet has a particular resonance and it looks forward to local authority accounts following best practice. I beg to move.

Lord Rooker: Amendment No. 65A relating to Clause 18 is important. While we should like to accept the amendment as it is, we cannot do that. But we shall accept the spirit of it and, by and large, come back on Report with something that goes even further. I am quite happy to put all this on the record, but I do not think that it is strictly necessary to go through the whole of my speaking notes.

We were aware, of course, that CIPFA, which lays down the accounting standards for local government, had been examining the treatment of local authority companies and whether local authorities should move to a formal system of group accounting under which the authority would prepare consolidated accounts for itself and its companies. Once such a system is in place, the statutory definition of a company could easily be based upon that in the revised accounting code. That would mean a reference to the 1989 Act would no longer be necessary.

Such a change would also fit well with another imminent development—that is, the Treasury's Whole of Government Accounts initiative—to produce a consolidated set of accounts for the whole public sector, as required by the Code for Fiscal Stability.

The difficulty is that the timetable for CIPFA's introduction of a group accounting standard is still uncertain. The revised accounting code may not be in force by the time the Bill becomes operative. We were therefore unable to refer to this accounting definition and decided to keep the existing definition which, though far from ideal, is workable.

The amendment suggests an interesting approach. It would leave the definition as drafted for the moment, but would give us power to update later by order in line with changes generally accepted in accounting practice. The introduction of CIPFA's group accounting proposals would certainly come under that heading. Therefore, as soon as its new standard is in

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place, we could make an order which would base the definition of a local authority company on the new accounting standard.

Since the Bill was drafted, we have continued to explore this whole issue in liaison with CIPFA and the Local Government Association. Our own ideas have moved in much the same direction as those embodied in the amendment. However, we have taken the concept a little further. We are aware that other international and national developments are on the horizon, including potential major changes in the accounting treatment of leasing and borrowing. Some of these accounting changes may be a few years away but, if and when they materialise, it may be necessary to harmonise various aspects of existing local government financial legislation. We should like to ensure that we have the power to do that.

Consequently, we are proposing to put down our own amendment on Report which would go rather beyond what is proposed in this amendment and allow a wider range of definitions to be revised by order in line with accounting practice. That would achieve all that the amendment proposes and, indeed, more besides. I am extremely grateful that the amendment has been tabled because it has given me the opportunity to make that response and foreshadow what we shall put forward.

Baroness Hamwee: For my part, I am grateful that the Minister has not teased me about proposing to give the Secretary of State an extra power. That is very welcome news and I thank the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 agreed to.

Clause 19 [Application to parish and community councils]:

Baroness Hamwee moved Amendment No. 66:

    Page 8, line 35, after "may" insert ", following consultation with representatives of parish and community councils and charter trustees,"

The noble Baroness said: In speaking to Amendment No. 66, I speak also to Amendment No. 230 with which it is grouped. Amendment No. 66 proposes inserting in Clause 19— under the power which allows the Secretary of State or the National Assembly to make regulations to extend the provisions of the Bill—that,

    "parish and community councils and charter trustees",

have an obligation to consult with their representatives. I hope that I can quite simply be told that that will happen and have that assurance on the record.

Amendment No. 230 has been tabled because it is perhaps unclear whether Clause 23(2), bringing in first tier councils, is replacing Schedule 13 of the Local Government Act 1973. The local councils have asked me to table this amendment to probe whether that is the case. I beg to move.

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Lord Hanningfield: I support the amendment, which is very much in line with the amendment I moved earlier. It is very important that we involve parish and community councils, which are the trustees, in the new provisions and the new legislation. They are an increasing part of our local communities and it is important that we support them. I endorse and support the amendment.

6 p.m.

Lord Bassam of Brighton: I can deal with the amendment reasonably easily and provide the assurance and clarification that the noble Baroness—and, by extension, the noble Lord, Lord Hanningfield—seeks.

Amendment No. 66 would require consultation with representatives of parish and community councils before regulations were made under Clause 19(3). This power allows provisions in Chapter 1 to be applied to these councils and corresponding provisions in Schedule 1 to be disapplied.

The system for regulating parish council borrowing has always operated in close consultation and co-operation with the National Association for Local Councils and its network at county association level. The package of administrative improvements to the system announced in the White Paper was developed in consultation with it. We greatly value its input and—I can say this without any fear, favour or risk—it would be unthinkable that the power under Clause 19(3) would be used without seeking its views.

Amendment No. 230 is quite interesting and I can understand why the noble Baroness has brought it forward to probe what has happened. As it stands, the amendment would add Schedule 13 to the Local Government Act 1972 to the list of repeals in Schedule 7 to the Bill. The schedule contains the provisions regulating borrowing by parish and community councils that are to be superseded by Clause 19 and Schedule 1.

It therefore seems perfectly logical to include the repeal in the Bill, so why did we not do so? The answer is that it was unnecessary. The repeal of Schedule 13 is already on the statute book. It came about in this way. Before 1990, Schedule 13 applied to all local authorities. The Local Government and Housing Act 1989, which introduced the current system of capital controls for principal authorities, included the repeal of the relevant parts of Schedule 13. But the 1989 Act controls were never applied to parish and community councils and so the repeal was never commenced for those councils. When Clause 19 and Schedule 1 are brought into force, we intend simply to make a commencement order under the 1989 Act to complete the repeal.

The amendment is virtuous but unnecessary and I am sure that the noble Baroness will feel quite confident in withdrawing it.

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