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Baroness Hanham: My Lords, I support the amendment moved by my noble friend Lord Hanningfield, which stands in both our names. The Bill has been heralded as the Bill of freedom and flexibility. Those two words are mentioned in almost every second breath. It has been hard to find during the proceedings on the Bill—the Committee stage was held off the Floor of the House—where those freedoms and flexibilities are. So the purpose of the amendment is to try to pick out some of those areas where the excellent and good councils in the performance assessments might be able to find some freedom and flexibility. My noble friend Lord Hanningfield has described those very well.

It would be helpful for local government to have those issues put together in one statutory clause. The inspection regimes have caused a great deal of angst; and that angst has not necessarily produced any very sensible or useful results. There have been far too many inspections. Most people now accept that that was the situation. I have always thought it absurd for the Government to be laying down from the centre exactly and definitively how local authorities should run themselves and how they should make their decisions. It is my belief that what has happened and what is happening is that we are making local government unattractive, except to the very few at the top who have a job to do and a job to lead. If we are not careful we will end up having to advertise for councillors who can perform specific roles rather than being generic.

I support my noble friend Lord Hanningfield. I very much hope that the Minister will receive the amendment sympathetically.

11.45 a.m.

Baroness Hamwee: My Lords, it seems to us that the Conservatives have bought into the Government's notion of earned autonomy for local government. We on these Benches have made it clear on many occasions that we believe local authorities should be treated as inherently autonomous. I have said before—I do not want to go through the matter at great length—that Audit Commission review can be very helpful. I have experienced it being helpful. But the inspection regime which is now in place and to which the noble Lord and the noble Baroness have referred—the inspections are often carried out by people who do not know as much about the subject as one might like to think they should and, indeed, who sometimes do not know as much as those who actually deliver the service—has got quite out of hand.

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Categorisation is quite a different matter. The Government think that outside assessment, other than by the electorate, is a driver for councillors and officers. I do not think that that brings job satisfaction, but that doing the job well does. I really fear that the route which the Government are taking will mean that it will become a self-fulfilling prophesy; that one looks at the assessment through the eyes of other people who perhaps are not doing the job well for its own sake.

We do not support the Government's approach, which is more or less, "Here is a freedom provided you are good boys and girls". But, at least, the Bill as drafted gives freedoms which are not necessarily confined to those at the top of the class. Some of the powers to disapply are discretionary powers. We have heard throughout from the Government that they hope in many cases not to use them.

It seems to us that the amendment would consolidate rather than ease the distinctions. It frankly does not make Sections 11 and 26—I share the distaste for those—any more palatable. I find the suggestion of disapplying Section 11 of the Local Government Act 2000 curious; that is, disapplying the duty—as I read it—to put in place an executive scrutiny structure which is one of the models provided by Section 11. We had considerable criticisms of that Act as it was passing through the House. Indeed, I was able at the final stage to persuade the Government to exempt small authorities from the provision. Saying that is probably enough to confirm that we do not like Section 11 of the 2000 Act any more than the others that are referred to. However, we do not feel that this amendment is the solution to the problem. If anything, as I say, it would consolidate and not relieve what we see as a very real issue and difficulty inherent in the Government's approach. I am afraid we could not support the amendment.

Lord Bassam of Brighton: My Lords, this amendment is a curious and interesting one in terms of debate about the general direction of local government—where it should go, the nature of its leadership, how it works, its relation with central government and the degree of deregulation that should take place. I am intrigued by the amendment. I should like to congratulate noble Lords opposite because they have bought into what the Government are trying to achieve. I can see that they are trying to exercise political imagination in extending where we are going, though not in all regards. It is a useful contribution to what I genuinely believe to be a very important debate. The noble Baroness, Lady Hamwee, has seen that. This has moved the debate on. I congratulate the noble Lords opposite for having seized that opportunity.

The focus of the amendment is on the best performing authorities. They are important, but I should make clear to your Lordships' House that greater freedom for all authorities is central to the approach in this Bill. Much of this additional freedom to charge for discretionary services and the introduction of the new prudential regime for capital finance will be available to all authorities. Many of the

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burdens that we are removing, whether through this Bill or in other ways, will be removed for all authorities. In this we are going a great deal further than some of the more recent converts on the Benches opposite thought we would go and perhaps at an earlier stage in the debate, were prepared to go themselves. So I am grateful to the Opposition for joining in the discussion.

We do see the need, in some cases, to be able to take account of capacity of authorities in deciding whether to provide an additional flexibility. That is why we are providing higher performing authorities with further substantial freedoms. Our commitment to greater freedom for all authorities in order to remove barriers to improvement, and for higher performers to give them the opportunity to do more is absolutely clear.

I ought to turn to the amendments in more detail. The first amendment seeks to impose a requirement that everything that we do in exercising powers under the Bill should be directed at increasing the freedom of the best authorities. Secondly, it seeks to write into statute a rather disparate wish list that the noble Lords opposite have put together to exempt good and excellent councils from certain requirements. As far as concerns the first point, I have already set out our commitment to greater freedom, but it seems to me that the proposal is fundamentally flawed. I am not sure that I understand what a general duty to increase freedom and flexibility would actually mean in practice. Noble Lords opposite might want to flesh this out in more detail. It can only be given effect by specific policies and decisions of the kind that we have set out, many of which are included in this Bill. The only point on which I am certain is that it would be likely to create absolute confusion about the use of powers under the Bill.

As an ex-leader of an authority, I have some sneaking sympathy with what I take to be the basic point that underlies another part of the amendment—looking at how regulation affects freedom of operation for authorities. We agree that there is a need to look at the way in which government engage with local authorities, particularly authorities that are performing well. Being more refined in our approach and seeking a more variegated engagement depending on their performance across different service areas is indeed something that we are seeking to develop. However, I do not think this is well served by asking the Secretary of State to produce in each case some kind of certification that the use of a regulation-making power will increase freedom and flexibility. This seems like the long hand of centralism gone mad. In practice it would be inoperable as I suspect the promoters of this amendment are well aware. The way forward here is to strengthen and deepen what we have been doing—less control over process for authorities, more of a focus on outcomes, more freedom about how to achieve them and support and engagement that is proportionate to the performance of the authority. I do not believe that can be quantified and written into statute.

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I wish to turn briefly to the second set of issues. On inspection, it is indeed our policy that the very best authorities should have a holiday from most inspection activity and that good authorities should see the level of inspections cut by at least a quarter. But the duties under which inspectorates operate preclude this being written into law even were that a sensible approach in the first place. We cannot write into legislation an absolute ban on all inspection activity. Excellent councils are clear that in some cases inspection may be required. Take for example the significant concern of serious child abuse. Inspectorates also have statutory obligations to inspect certain functions, such as residential care homes and day nurseries, as part of their registration process. Our policy on reducing inspection activity is clear and we shall shortly be making announcements on what has been achieved to date. Good progress is being made on working with the inspectorates under a shared commitment to co-ordinated and proportionate inspection.

On the powers that we have to make regulations about the use of capital receipts in Clause 11, this amendment would exempt certain classes of authorities from the requirement to contribute to the redistribution mechanism that underpins housing investment in this country. As I have made abundantly clear in earlier debates, it is a fundamental principle of local government finance that resources are allocated in line with need. Anything else would be irresponsible. I simply do not accept that some authorities should have significantly more resources to spend than others, regardless of the condition of their stock or their other housing needs. This proposal is neither fair nor logical. It could lead to either higher taxes or a reduction in government funding for the most needy authorities. I doubt whether your Lordships would find that outcome acceptable.

On the power under Clause 26 to set minimum reserves, we have set out the very limited circumstances in which we would seek to use that power. I hope that no authority in the top tiers would be a candidate for a statutory minimum. But we have also made clear the very great importance that we attach to sound finances in the local authority sector. The new freedoms and flexibilities that we are giving re-emphasise the need for a sound financial base on which to operate them. If an authority in one of the top tiers for any reason neglected the need for adequate reserves we would not want to be deprived of the means of setting that right.

Finally we have that old bugbear about allowing authorities in the top two performance categories to opt out of the requirement for executive arrangements. We have heard that the Liberal Democrats do not like Clause 11. That is clear from the way they performed in local government. I respect their different viewpoint. The purpose of requiring authorities to have a cabinet executive or alternative form of political management arrangements for smaller councils is well recorded. Our commitment is to maintain this reform, and to promote efficient, transparent, and accountable decision-making.

We believe that the current arrangements are working very well. We set a target of all authorities having their new form of political management

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arrangement in place by the end of last year. We met this, primarily because of a lot of hard work by authorities. To suggest unravelling the process, even if only for highly performing authorities, would signal that that hard work was in vain and would undermine our determination and that of well led Conservative, Liberal Democrat, Labour and Independent authorities. It would also undermine the shared and collective recognition of the need for good quality, well understood and transparent leadership in local authorities, something which I thought had become a commonly accepted value and was widely supported.

What appears to underlie this amendment is the clear view of the Benches opposite that political management arrangements are in some way a burden on authorities from which they need to be freed. I take the contrary view. The new system provides councils with exactly the kind of flexibility they need to sharpen up leadership and delivery, and to be properly held to account. Indeed, the irony of the position adopted by the Opposition is this: certainly in my time in local government I constantly encountered Conservative council leaders who said, "If only I had the freedom as a leader to act more decisively and authoritatively, I could do so much more for my authority". We have now provided the framework for that kind of dynamic leader to enjoy the freedom to get on with the job, because that is what people want their leaders of local authorities to do.

I believe that this amendment, although well intentioned, does not add in a sensible way to the freedoms package that we have developed and put in place. Nor do I think it would add anything to the reforms that we have set in train over the past three or four years. The amendment is useful because it demonstrates a recognition that the world of local government has moved on. I congratulate the movers on that recognition and I am pleased to see that they are now beginning to catch up with the general drift of the Government's thinking.

I hope that, having heard my encouraging words on some of this, noble Lords opposite will feel able to withdraw the amendment.


Lord Hanningfield: My Lords, I have listened with interest to what the Minister had to say about our proposed new clause. As a past leader of a local authority himself, he knows very well how local government operates. I would not say that noble Lords are converts—to repeat the word used by the noble Lord at one stage—to the Government's policy on local government, but we are realistic. We have before us a piece of legislation that we are trying to improve. This amendment therefore seeks to improve the Bill which, in one way or another, I am sure will shortly become the law of the land.

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I, along with others, do not like comprehensive performance assessments any more than does the noble Baroness, Lady Hamwee, but we have them and we can see which authorities are designated as good or excellent. However, I think we would all agree that the subjective judgments in this area are not all that we would desire. However, we have comprehensive performance assessments and the Government talk consistently about those authorities enjoying greater freedoms and flexibility. That has been a theme running through the legislation, which is why we felt very strongly that the theme should be brought together in a single new clause.

The most important element of the assessment is the inspection. Over the past five or six years of Labour government we have seen a consistent and continuing growth of inspections. Now literally hundreds of millions of pounds are spent on inspections, which is money that we would rather see spent on services for children, the elderly and schools. We are facing so many problems with regard to school budgets that it would be much better if some of the enormous sums being spent on inspections were directed towards school budgets. The amendment would tie into the legislation a theme of reduction of inspection.

I was interested to hear the noble Lord remark that he thought the best authorities might see a 25 per cent reduction in inspections, although until today there has been talk of a reduction of around 50 per cent. This is an extremely important issue.

I read with interest what was said by the Prime Minister last weekend. He commented that he was keen to take Labour policy forward on the delivery of services by imposing fewer targets, carrying out fewer inspections and thus spending more money on the services themselves. This amendment would help in that process by enabling the Government, in their dealings with local government, to provide greater freedoms. Although there were some thoughtful words from the noble Lord, Lord Bassam, we did not hear all that we wanted to hear.

I turn now to the structure of local government in this country. It is quite absurd that we have to retain such a totally rigid structure for local government. The noble Baroness, Lady Hamwee, mentioned that there was a clause to exempt, but that applies only to very small district authorities which do not have to make provision in many service areas. By contrast, large authorities must have 10 cabinet members; they cannot have 11 or 12, although for larger authorities it would be much better if they could operate with a degree of flexibility on such matters. In the amendment we suggest that good authorities should be allowed to experiment.

As I have said, it is absurd that in a country of this size, with some 50 million people, that there is only one system of local government. No other country in the world has such a rigid structure. Elsewhere people are allowed to introduce their own systems of management within a guidance framework. This approach is objectionable and

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demonstrates the fact that national government do not trust local government. Greater trust is a theme that I should like to see pursued in this legislation.

On this side noble Lords feel strongly that some of these matters should be included in the Bill, so I shall now test the feeling of the House on this proposed new clause.

12.6 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 101; Not-Contents, 138.

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