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Baroness Hanham: I have some subsequent amendments but they do not relate to this point. I support the amendments of the noble Baroness, Lady Hamwee.

Lord Bassam of Brighton: We disagree on this point, part of which was debated on previous amendments. There is a clear division of opinion on the importance of performance assessments, the grading of local authorities and how they work.

Amendment No. 203ZA is unacceptable because it would mean that the Secretary of State could not grant freedoms or powers on the basis of the performance categorisation of an authority. Effectively, the granting of trading powers would not be linked to the authority's performance categorisation or culture. We find that unacceptable. Similarly, the Secretary of State need not confer on authorities extra functions on which they might spend their retained receipts from litter and dog fouling fines specifically by reference to their performance categorisation under Clause 100.

In England we intend to introduce the new powers for local authorities to trade as part of the new package of freedoms and flexibilities following a report from the trusted hand of the Audit Commission categorising authorities according to performance. We intend also to make available the new powers to councils judged "fair", "good" and "excellent". As a general principle, poorer performers should concentrate on providing essential services and not undertake trading activity. That is probably one of the key points and dividing lines between us. The granting of the new powers should be clearly and directly attributed to a local authority's performance.

Clause 119 will allow local authorities in England and Wales to keep their receipts from fixed penalty notices issued in respect of littering and dog fouling. The clause provides that all authorities may use such retained receipts only to finance their statutory functions relating to litter and dog fouling, plus any additional functions that the Secretary of State may subsequently set out in regulations.

Clause 101(2)(f) permits the Secretary of State to make regulations under Clause 119 in respect only of English local authorities coming within particular "performance categories", thereby allowing high performing authorities a greater freedom to spend receipts. The amendment would mean that the Secretary of State need not have regard to

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performance categories when making regulations under Clause 119, adding to the types of function that local authorities may finance using their receipts.

In England, it is proposed that a greater range of functions on which to spend receipts would be given only where the Secretary of State is sufficiently satisfied that local authorities' performance justifies it. That judgment would be based on an assessment of a local authority's performance. "High performing" authorities would be given greater freedom.

I hope that the noble Baroness will withdraw the amendment, and that she can see the value and importance of our developing and using the ratcheting-up of performance as a means of providing incentives to local authorities to do better and to desire greater flexibility.

Baroness Hamwee: As I said last week, the noble Lord knows well that, at any rate, his hopes will be fulfilled today under our Grand Committee procedure. I am no closer to understanding the Government's reasoning on this issue. I hear the words, but they still do not make sense to me—perhaps because I expect that people go into local government as both councillors and officers to do the best they can, not for reward. Over some time in local government, that expectation has broadly been fulfilled. It does not seem to me good psychology to suggest that extra powers, such as powers to keep the money from penalties imposed for dog fouling—which would then be used immediately and transparently to provide the kind of facilities that help to reduce the nuisance of dog fouling—will incentivise people. In fact, it seems to me that the very opposite might be the case—that one loses self-motivation, because the powers are imposed from the outside rather than relating to a measure that one is pushing oneself to achieve.

I have a further question to which we shall have to return on Report. Is it just because Clause 119 happens to be in the Bill that it is picked out to be dealt with in the way that we are discussing? Was a trawl done of local authority powers which might be given and then, as it were, hauled back?

Lord Bassam of Brighton: We shall have a look at that and find out.

Baroness Hamwee: I am interested to know how the matter has been approached. As I say, we shall return to the subject at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 203A not moved.]

Baroness Hanham moved Amendment No. 204:

    Page 55, line 37, at end insert—

"( ) The Secretary of State shall, in accordance with the classifications provided for in section 100, ensure that the following reductions in inspection activity for all inspectorates are made so that—
(a) for authorities in the top tier of classification there shall be no external inspections during the period of the order made in section 100(4), and

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(b) for authorities in the next two tiers of classification there shall be a reduction in inspections of at least 50 per cent during the period of the order made in section 100(4)."

The noble Baroness said: In moving this amendment, I wish to speak also to Amendment No. 204C. Although the amendments are not directly related in context, they are related through the whole CPA regime.

Following the previous amendment, in introducing the CAP regime the Government justified it by claiming that it would lead to an overall reduction in inspection activity on the basis that local authorities engaged with the process. All of them were absolutely inundated with inspections.

But there are some worrying reports that although the Audit Commission may be willing to play ball, other inspectorates, such as Ofsted and the Social Services Inspectorate, are less willing to reduce their inspectorate activity. That may or may not be true, but the key point is that there should be a statutory agreement on the level of reduction in inspection activity for each class of authority. That would send a powerful signal from the Government to the local authority community that they mean business and will compel inspectorates to comply with their targets.

Setting statutory targets for reductions in inspection activity does not mean a less flexible system. It will still be possible to tailor individual inspection programmes to the needs of individual authorities. It does mean, however, that authorities will know in advance exactly how much inspection activity they can expect in the medium term. That would aid budgetary stability and forward planning processes for local authorities and would be welcomed. Indeed, not only that, it would save an enormous amount of officer time where authorities are considered to be either excellent or good.

That would deal with the inspection activity of the CPA, but I should like also to propose that, where authorities are considered to be good or excellent, it is about time that they were allowed to determine for themselves what structure they want to operate under. The new executive structures were set out in the Local Government Act 2000. There was much debate at that time over how those structures should be implemented. Indeed, there has since been much criticism in local government about the lack of flexibility and, to a great extent, the inability of Back-Benchers in particular to take part in the decision-making process of councils.

The purpose of the amendment is not to suggest that one form of executive structure is better than another. It is not about turning the clock back. The amendment is about providing choice. It is about providing good or excellent authorities with the power to determine for themselves their internal governance structures. I concede that the Government might claim that it is not helpful for authorities to revisit their executive structures and that that would cause unnecessary upheaval when they should be concentrating on service delivery. However, that is precisely why we are opposed to the creation of elected regional assemblies

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and the constitution of the whole local government structure beneath the regions. Therefore, I do not disagree with the Minister.

It might be argued that the authorities themselves have axiomatically benefited from these executive structures. After all, they are good or excellent. Why, then, should anyone want to change what might be perceived as a winning formula? It is right for good and excellent authorities to judge such matters for themselves. They are in a position genuinely to consider the costs and benefits of changing their executive structures.

The main point is whether the Government trust local government to judge for itself whether its current structures are better or whether a committee-based structure is the better way forward. I believe that the Minister should recognise that how local authorities govern themselves is not a marginal issue. It was at the heart of the discussions on the previous Local Government Bill and it is certainly a debate that noble Lords will have on another matter over the next few months. The important point is not whether they exercise that freedom, but whether they have the power to exercise it. Do local authorities have a choice? I beg to move.

3.45 p.m.

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