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Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord, Lord Peyton, for his intervention. I take up the point he raised with regard to how valuable the subsection is. I believe that it is extraordinarily valuable. I was leader of Brighton, and then Brighton and Hove City Council, for a total of some 13 years. In 1990 we had to implement the nonsense of the poll tax. It was nonsense. I believe that that is now the universal view. A strange alliance of political forces wanted to defeat our annual budget. On the one hand, there was the core of the Labour group and on the other an alliance of what I later described as "Trots and Tories" who were determined to vote down our first budget. The Conservatives thought that the rate set was too high and they wanted to knock a pound off the poll tax, if I remember rightly. The Trots were fundamentally opposed to the poll tax. They defeated our first budget resolution. We were in a state of financial gridlock for 15 hours. We abandoned the council meeting that had gone on through the night and had to meet again the following day to try to secure a budget for the authority.

It would have been extremely useful to have had the clause we are discussing on the statute book at that time as it would have been much easier for me as leader of the authority to remind those colleagues who were playing with the budget of a council that provided services and, therefore, were playing with people's lives, of the potential impact of their intransigence on the financial position of that local authority. I summoned lawyers to talk to both the groups involved in that strange alliance. Some Conservative members resigned their Whip as they thought the position that was adopted was bonkers, and they were absolutely right. That reduced the majority that the Trots and the Tories had. After being faced with what I can only describe as some fairly menacing threats from the lawyers with regard to going ultra vires with the budget, the Conservative members who were becoming increasingly uncomfortable with the situation withdrew their opposition to the budget and let it go through with only the Trots voting against it.

That is one account of an authority in a critical situation at a critical time of change of financial system when the extremely controversial poll tax was introduced. However, I argue that subsection (3) would have been extremely useful in enabling me to remind colleagues of the importance of ensuring that proper monitoring took place, that we stuck to budget

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resolutions once they were made and that those budget resolutions had a real effect on the viability of the authority and its ability to provide services. At the end of the day, that is what they are there to do.

It is no good saying that that is history because ignorance of the budget position was exactly what got Hackney into a mess during the past few years. It is right that local authority members are reminded, first, of their responsibilities, secondly, how budget processes work, and, thirdly, of the value and importance of carrying out effective monitoring. Clause 28 seeks to enshrine in law a fundamental principle of good financial management. Having heard what has been said on the Benches opposite, I do not believe that there is much disagreement on the matter. I am sure that the noble Lord, Lord Peyton, does not disagree with it. What we seek is not to impose a burden on authorities but to put into place in law, and make it plain in the legislation, that what we require is good financial management. The clause enshrines that.

I say to noble Lords opposite that to argue against the clause is to argue against something which is plain common sense and is included for the good of local government, not to place burdens upon it or to make its life more difficult. I hope that, having heard that explanation, the noble Lord will withdraw his amendment.

Lord Hanningfield: My Lords, I thank the noble Lord, Lord Bassam, for that reply but I am disappointed in it. I try to strike a balance between my love and affection for local government and my duties as a Member of this House. Whatever happens in the future, I intend to try to support local government. I am disappointed that the noble Lord, Lord Bassam, in his response rather neglected his affection for local government. As I said in moving the amendment, local government takes on board the concept that we are discussing. I believe that local government finds it offensive to put a measure in a Bill that is unnecessary.

Lord Bassam of Brighton: My Lords, I will not have it said that I have withdrawn my affection for local government—far from it. It is because I feel strongly that local government should conduct itself well that I believe this clause is an important part of the framework that we have set out in the legislation.

Lord Hanningfield: My Lords, I am afraid that the noble Lord and I must beg to differ on that. The view of the chairman of the Audit Commission, Mr Strachan, is to deregulate. Including such measures in legislation is not, as I see it, deregulation. However, we have debated the issue on several occasions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 [Power to pay grant]:

Lord Rooker moved Amendment No. 42:

Page 14, line 29, after "authority" insert "in England"

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The noble Lord said: My Lords, in moving Amendment No. 42, I wish to speak also to the five amendments with which it is grouped.

These amendments would remove Clause 32 from the Bill which enables a Minister or the National Assembly for Wales to seek any information necessary when considering the award of a grant to an authority under Clause 31. It would also allow Ministers to require retrospective information on the way a grant had been used.

The wording of Clause 32 provides that a local authority must supply such information. Concerns were raised in Committee about the wide scope of this power. In the light of those concerns the Government agreed to look again at the power. We agree that it is too wide. By contrast, Clause 31(3) allows conditions to be attached to the payment of grant. A condition could be attached to the payment of a grant that the receiving authority supply certain information, if ever necessary. Noble Lords will appreciate that it is much more limited in scope being linked to the actual payment of the grant. Having reflected on this, we are therefore happy to remove the wider Clause 32 power from the Bill.

As this would make it unnecessary to retain a separate clause in order to allow the National Assembly for Wales to use the grant-making power, we have also proposed removing Clause 34 and including the provisions of that clause within Clause 31. I beg to move.

On Question, amendment agreed to.

Baroness Hanham moved Amendment No. 42A:

Page 14, line 30, at end insert "provided that the grant is available to all other local authorities of the same category on the same terms and those terms have been publicly certified as equitable by the accounting officer of the Department and that all documents and correspondence relating to decision on such grants are made available annually to the Comptroller and Auditor General"

The noble Baroness said: My Lords, a number of important points were raised in Committee on the topic of grants as set out under Clause 31. The amendments focus on one particular aspect of that. When I spoke to amendments in Committee, I was aiming to remove what I see as a potential danger in Clause 31—that the clause allows for the possibility of grants being given to favoured councils for undefined purposes.

As I made clear, we already have the Bellwin formula, which allows for specific grants to be given to particular local authorities in response to emergencies. We discussed matters such as flooding, foot and mouth and so on. We therefore do not have any need for the new power, which leaves any Minister, not only the Secretary of State, to make grants to individual local authorities with no specification as to the purpose for which the grant is made. I am not averse to devolving power to local authorities to use grants for purposes for which they think fit, as is the case with block grants.

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Would the Ministers like me to stop while they consult on the matter, or will the reading of the reply be sufficient?

Lord Rooker: My Lords, I apologise if I am disturbing the noble Baroness. Amendment No. 42A does not appear anywhere in my speaking notes, nor in those of my noble friend. It does not appear on the list issued by the Whips Office either, but it is Amendment No. 44, as we have just discovered.

Baroness Hanham: My Lords, Amendment No. 44 was renamed Amendment No. 42A. You tell me. I do not know why either—pass.

I shall start with a problem, which always seems a good way to come back to a matter. My problem with the clause is with the inequality of the situation. Good and excellent authorities may suffer at the expense of badly managed and ailing authorities in terms of the amount of grants that they receive.

We have had a discussion on the principle at least once during the passage of the Bill, and I shall not go through it again. However, the purposes of the grants still remain obscure. The Minister kindly sent me a commentary on the matters raised under all the amendments moved in Committee, and I want to say how much I appreciate that. On Clause 31, it said that it makes it easier, subject to Treasury approval, for government departments to make grants without conditions. That means either that they are general grants that can be used for any purpose—if that is the reason, why are they being distributed under this method?—or that they are grants for specific purposes.

The Minister also indicated that the Government intend to reduce ring-fenced grants to below 10 per cent by 2005–06. That will be welcomed, of course, as the grants come with very stringent conditions and are limited to specific purposes. However, the reduction to 10 per cent will be meaningless if it is counterbalanced by the grants in the clause, as it will mean that only a limited number of authorities receive them.

The inconsistency and inequality in relation to grants to individual local authorities could, under the provisions, be misconstrued as preferential and/or prejudicial. To try to avoid that, the two amendments seek to ensure that grants made under the powers are available on the same terms to all authorities of the same category, under the watchful eye of the relevant department's accounting officer, who would have to certify the grant process and its purpose. Amendment No. 47 would ensure that no grants were made in circumstances where they could be construed as being given political purposes. I beg to move.

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