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Lord Bridges: My Lords, before the Minister replies, perhaps I may ask him whether he can enlighten us on one matter. I am sure that this is a very helpful initiative by the Government. However, I recall the debate that we had during the passage of the Countryside and Rights of Way Bill on the question of bridle-ways, which were also being used in a similar way, and I wonder whether it would be possible for the helpful procedure now before us to be used to correct injustices and mistakes that occur in the use of those bridle-ways by similar recreational vehicles?

Lord McIntosh of Haringey: My Lords, I shall take the points in reverse order and respond first to the noble Lord, Lord Bridges. The noble Lord will know that from the beginning of this month we have been implementing provisions in the Countryside and Rights of Way Act to convert roads used as public paths, which happen to constitute about 3 per cent of the Ridgeway, into restricted byways from which vehicular traffic will be prohibited. If the noble Lord is aware of any particular case in which the regulations are being flouted—I am not—I should be grateful if he would write to me so that we can deal with it.

On the point raised by the noble Lord, Lord Berkeley, we are happy to engage parliamentary counsel who use ordinary English—what I would call demotic English—in the drafting of the Bill. I believe that "think" says what it means and is the right word to use, rather than "is of the opinion" or some more pompous phrase.

I am grateful to the noble Lord, Lord Luke, and to the noble Baroness, Lady Scott, for their contributions. The noble Baroness, Lady Scott, raised the additional point about traffic regulation orders in a more general sense.

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As I am sure she is aware, we have in preparation a traffic management Bill, of which traffic regulation orders will form a part, and we shall have an opportunity to debate that matter.

On Question, Motion agreed to.

Local Government Bill

11.16 a.m.

Report received.

Clause 94 [Power to charge for discretionary services]:

Lord Hanningfield moved Amendment No. 1:

    Page 51, line 18, leave out subsection (3).

The noble Lord said: My Lords, we consider that the new power to charge for discretionary services is important, and we welcome it. In my county of Essex, we are keen to make the most of this new freedom to maintain as many of our discretionary services as possible. However, we are disappointed to find that, having been granted this freedom, local authorities will have their hands tied by the unnecessary caveat of having to ensure that the income from charges for a service does not exceed the cost of its provision.

We are concerned that this restriction will prevent local authorities improving the quality of services that they provide. We understand that the power is to be exercised primarily to promote the economic, social and environmental well-being of our communities and is not to be seen as a money spinner. That is fine. However, for local authorities to be able to provide a service and raise their standards of service provision, it is clear that they may on occasions want to over-recover their costs in order to invest in service improvements. To prevent them doing so is likely to lead to a gradual deterioration of service. It seems to me to be a topsy-turvy world in which the instruction that we send out to local authority managers is, "You must not make a profit. By all means make a loss, but do not make a profit".

In Committee, the noble Lord, Lord Rooker, mentioned the dangers of allowing authorities to enter into an unrestricted commercial activity. He did not say what those dangers were. As the leader of an authority under financial pressure, I believe that the key danger is that the service would lose money, which would put pressure elsewhere on the authority's budget. From my perspective, the danger of authorities making a profit is a somewhat lesser concern.

The amendment does nothing to affect the scope of powers to charge for discretionary services. That is not the issue. The issue is whether a local authority providing a service that it does not need to provide should be able to charge what the market is happy to pay for that service. The Minister says that it should not be allowed to do so. I say that in principle it should. If the only reason standing in the way of that is the effect that it might have on powers elsewhere in the

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Bill—that is what the Minister said in the other place—it surely cannot be beyond the wit of the Minister and his civil servants to work out a way of resolving the problem. I am also concerned that insisting that local authorities enter local markets on a non-commercial basis will distort local markets and will not be welcomed by local businesses.

I appreciate that the Minister will probably take the view that the purpose of these powers is to enable local authorities to step in to provide services where the local market cannot or will not do so. In many cases, that may be true. But should we not also see these powers as providing an opportunity to stimulate local markets? That would not have the effect of a large, uncommercial player taking part.

As well as the principled objections we have to this measure, we are also concerned about how it will operate in practice. What will happen if the calculations go slightly wrong and against all the odds local authorities make a slight profit on the discretionary services? We might have to make adjustments the following year to the pricing structure—perhaps reducing charges—but that might only have the effect of leading to more people taking up the service and an even higher profit. I suppose that we could consider that as a way of providing the service. Perhaps local authorities may be carrying out the work too efficiently. Therefore, we could try to meet the Government's requirements by increasing our cost base. It seems to me that the provision is wrong in principle and difficult to police in practice. I hope that the Minister will think again. I beg to move.

The Chairman of Committees (Lord Brabazon of Tara): My Lords, I have to tell the House that if this amendment is agreed to, I cannot call Amendment No. 2.

Baroness Hamwee: My Lords, Amendment No. 2 stands in my name, and I would be delighted if it were to be pre-empted by the deletion of subsection (3). My amendment is less ambitious. While I fully agree with what the noble Lord, Lord Hanningfield, said, if the subsection is retained, I am concerned about a point in it.

In Grand Committee I said that I wondered whether a local authority would be caught out—to use demotic language—if its income slightly exceeded its costs. That was because of the very precise and technical point of the local authority's vires—less demotic—or its powers. If a local authority were to be challenged on the basis that income, even taking a number of years together, was just a little over its costs, what would be the position?

I accept that it would be difficult for all income to be attributed to a particular charging activity. If the Government seek to take that approach, I understand why they have done so in that way. It does not seem to me that what is being done addresses the dangers of the challenge on the ultra vires basis. Although I do not for a moment support some of the activities that happened in the 1980s that led to the cases in regard to what were local authorities' powers, I am alert to the dangers that they articulated at some length.

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My amendment seeks to provide that the income from charges does not significantly exceed the cost of provision—I used different language at the last stage. The noble Lord, Lord Rooker, said in Grand Committee:

    "I would hate to think that a local authority would fall foul of some crazy interpretation of the Bill and that because its costs turned out to be a little lower than it thought and it made a profit of a quid, that nullified the whole exercise . . . Obviously, if the noble Baroness tables such an amendment I will be happy to give her a considered response to it".—[Official Report, 17/6/03; col. GC 262.]

I have tabled this amendment in order to hear the Minister's considered response.

Lord Bassam of Brighton: Good morning, my Lords. What a wonderful day—back on local government finance! With Amendment No. 1, we have a choice between the ambitious and the less ambitious. I do not favour either of the approaches, although I entirely understand them. Thinking back to the time when I led my local authority, we could have done with some more flexibility in terms of costs and charges. I can understand where noble Lords are coming from in this regard.

Clause 94 is designed to allow authorities to cover the costs of providing discretionary services, but not to provide a new source of income, a new profit line. Amendment No. 1 understandably seeks to remove part of the clause, the part designed to ensure that authorities do not profit from the provision of discretionary services.

In Clause 94 the costs of provision are deliberately not defined so as to give authorities the maximum amount of discretion and flexibility in its interpretation, both now and in the future. We have built in flexibility and it is guaranteed in the clause as it is written. Our belief is that authorities should be enabled and free to establish their own robust methodology for assessing the costs of providing a discretionary service.

I believe that that is the way it should be left. If we become overly prescriptive—that was our original intention—and if we over-regulate we shall create more of a problem for ourselves. We want the flexibility; that is what we have tried to achieve in the way in which the clause is designed. I suggest to noble Lords that it is probably best left that way. If the determination is made locally, and if the assessment is made locally, I am sure that in the localities the local authorities will exercise their powers and duties sensibly.

Amendment No. 2 differs as the noble Baroness, Lady Hamwee, explained. She has put the word "significantly" into the script. Our problem with that is that it is open to very variable interpretation. It is hard to see what it would mean and what it adds in terms of the clause. That is why we have adopted the formulation,

    "taking one financial year with another",

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because we recognise that one cannot have an exact balancing act in organising costs. I believe that to add the word "significantly" would raise the possibility that year in, year out best value authorities could make a profit from charges for discretionary services without any real gain being made in terms of service quality.

The noble Lord, Lord Hanningfield, suggested that local authorities need an extra bit of up-front income generation to ensure that they do not run at a loss or there is not a deterioration in service. I do not believe that that will happen. My belief is that there is already sufficient flexibility. I say that because I want it to be understood by the local authorities. I think that what we have will work. Obviously, it is something that we shall watch for carefully in the future.

We do not want to blur the line between trading and charging. We are clear that we want trading to be achieved through companies, but we want to give local authorities the ability to charge for discretionary services where they wish and where there is no current power or current prohibition. That is why I believe that we should stick with what, ultimately, is quite sensitive wording in the Bill.

Having heard those words of encouragement, I hope that the noble Lord and the noble Baroness will feel happy to withdraw their amendments. I believe that we have the situation about right. The freedoms and flexibilities that we have provided up front will give the local authorities the scope and the freedom to work well in that area.

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