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However, what is not in the paper or the Bill is any sense of what the relationship between central and local government should be like. Local government feels that it is very much at the whim of central diktat. In the Bill, executive arrangements are forced on to local councils regardless of whether they want them or how badly they are performing. Councils’ financial freedoms are increasingly curtailed. The amount of ring-fenced or specific grant for local authorities is increasing annually, currently at about 60 per cent.

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Not only are local councils raising a very small amount of money themselves—about 25 per cent—but about 60 per cent of their total spend can be spent only in ways determined by central government.

We hear only today from Hazel Blears at the LGA conference that citizens are now to determine how further parts of the budget are spent. That may or may not be a good idea; I do not know because I have not seen the details. However, the fact that a Minister goes to a meeting and tells the local government sector, “This is how it’s going to be”, without discussing whether it is practical or desirable or whether anything like it has already been done, demonstrates an attitude that indicates that certain parts of government have not quite got the idea of devolution. They seem to be saying, “We will devolve only where we think it is a good idea and where you, local government, cannot do any harm”. Actually, devolution means allowing local councils to make choices. Sometimes they will be wrong. Devolution means allowing people to try things and to make mistakes occasionally.

The Bill does not do anything to address the growth of that part of the public sector that is not covered by democratic institutions—quangos, in other words. Quangos are now outspending local government and in some respects have a more profound effect on local areas than local councils do. However, there is no real sense of how a devolutionary agenda might be used to influence the way in which quangos work.

My noble friend’s amendment provides a framework to carry forward the Lyons review and the general devolutionary sentiment that is now current in all three major political parties. It is a chance to explore not just how the relationship between central and local government and citizens works, but also the fundamental relationship between local authorities and the Government. Paragraph 179 of Tuesday’s Green Paper mentions the development of a concordat between central and local government. My noble friend’s amendment would provide a framework for moving that proposal forward.

Viscount Eccles: I rise to add to the probing. The Statement and the Green Paper were clear in their analysis and description of what the Government meant by devolution. For example, there was strong mention of London and city regions, but scant reference to the structure of local government as it exists today. There was also the reference to a concordat—a nice vague word—and a page and a half on regions and responsibility.

It seems clear that the Bill is an enabling mechanism to make it possible to end with a structure that is regional in England, with devolution in Scotland, Wales and Northern Ireland. That structure goes over all those institutions, including local government, that might be aspiring to some kind of independence, and reaches down into something called communities.

There is no definition of “community” in any government document produced to date. I know when I go to the village in which I live in North Yorkshire

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that it is a community—one of about 300 souls. It is a real community. However, when I come to Westminster, where is my community? Is it Westminster? Is it London? What is it?

There are many references to local people and to their rights, which are described in a way that means that what they are supposed to do is to hold administrators to account. According to this Green Paper, it does not really matter whether the people in the local government structure that we know today are elected.

Under the new dispensation, it is not clear whether the Prime Minister minds that there was a referendum in the north-east that rejected the proposal for an elected regional assembly. He may prefer to have appointed regional bodies. Therefore, I believe that this Bill is an enabling mechanism to increase centralisation and central control. It has nothing in it to make it at all likely that local democracy will be revived in the way that the majority of noble Lords would wish.

Baroness Sharp of Guildford: I support the amendment tabled by my noble friend Lord Greaves. I became interested in devolution when conducting research on comparative economic development across Europe and looking at the role of regional redevelopment and regeneration. It became clear that the parts of Europe where there was considerable regional devolution were moving forward faster—Barcelona could be an example. That was because the local authority had the power to go to the market to raise money in bonds and to go ahead with ideas of its own volition as distinct from always having, as in this country, to go hat in hand to the Treasury to say, “Please Sir, may we do this?”.

Time and again, as in the Green Paper published earlier this week, we see the statement that we need more devolution because we are a centralised country. Indeed, we are the most centralised country in Europe—in the whole world, I think—in terms of governance and economy. Everyone used to pour scorn on France. One used to say that one always knew what the schools were studying at a particular hour of the day because that was laid down centrally. In the 1980s, France went for major devolution under Mitterand and the provinces now have a considerable element of autonomy to do their own thing. In the comparative development of provincial France, again, it was this power to do their own thing that I judged gave the provinces considerable advantages over the English regions. The Länder in Germany have considerable statutory powers to do their own thing. We should remember that this type of governance was set up on British advice in the post-war period to prevent the centralised state from abusing power. We deliberately created the Länder system to do this.

I feel strongly about two issues. I have already referred to one, which is economic devolution. It seems an insult to local democracy that we now have in this country a Government at the centre who dictate to local government not only what it may spend, as my noble friend Lady Scott made clear, but, through the capping system, what it should tax. What

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greater insult is there to a country, which is sometimes regarded as being the mother of democracy and whose democracy was built on the tenet of “no taxation without representation”, that the Government are telling us what we may tax at a local level? In a form of stealth tax and through the squeeze imposed by limits on what local government may spend on social services, the Government frequently pass on unpopular decisions, such as those affecting the care of the elderly. That is dictated through these mechanisms.

Another issue is capital. I have already referred to the fact that in other countries metropolitan authorities can go to the market and raise money through bonds. That is not allowed in this country, where no local authority can raise money directly from the market. In America, the states and cities have their own credit rating; an equivalent process could happen here for local authorities. Devolution is extremely important and economic devolution is an important part of that process.

Secondly, I wish to consider the degree to which the Government have devolved authority to quangos. We are again seeing the giving of power to academies to do their own thing—to opt out of the national curriculum. What is the academy? It is a group of people who can raise £2 million towards the cost of a new building and then can have a governance role in relation to the whole school and decide its ethos. Not only is the academy totally unaccountable to any democratic organisation, but it is put outside the bounds of the community. On these Benches, we feel strongly that education should be community oriented and should serve the local community. Enabling people to set up a school outside the bounds of any form of local accountability is an insult to local democracy.

Noon

Baroness Miller of Chilthorne Domer: I support the amendment of my noble friend Lord Greaves. I cast my mind back to when the Labour Government came to power in 1997. They wanted to devolve more to local government, but recognised that many councils were not in a good enough state to take on more power at that time. They created the Improvement and Development Agency in order to raise standards throughout councils, with a view—I believed—to devolving a lot more power to them.

Subsequently, it is hard to see what has happened. The Improvement and Development Agency has been working for some eight years. Either it has substantially improved the vast majority of councils, in which case the time has come to devolve power to those councils—which is certainly what should happen—or, perhaps, the Minister thinks that councils have not substantially improved, despite the efforts of the Improvement and Development Agency, in which case something is fundamentally wrong. That, too, could well be the case, because of the opaqueness of the finance system and the lack of connection between voters and their councils. Either way, the suggestion in my noble friend’s amendment is absolutely right: this needs a fundamental look. The

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reaction in the Bill to these issues, which takes us nearer to the French préfet system of local councils feeling like, and being regarded as, an administrative wing of central government, travels in exactly the wrong direction.

My noble friend Lady Scott mentioned the announcement made by the Minister, Hazel Blears, on giving people power over some of the local spend. It is hardly a new idea. I declare an interest as a former south Somerset district councillor and a Somerset county councillor. The Minister will be aware that the power is already there; we did it in both places. In south Somerset we devolved budgets to a very local level, giving parish councils and local residents the power to say how they would like money to be spent in their area. It is not simply a question of voting on it, but of having a debate to which people are entitled to come and ask questions in their locality. They should not have to travel to some remote and hostile council building at unsuitable times of the day. It is not a simple mechanism whereby you have a referendum on how money should be spent and tick box A, B or C. There is a lot more than that involved.

The Minister also mentioned the idea that councillors might be given a budget. Again, this is hardly new: Liberal Democrat authorities up and down the country have operated very successfully, in consultation with local organisations, the system of a small budget that can pump-prime schemes. These are not new ideas. The Government’s direction of travel quite reverses what it set out to do some 10 years ago. I would be interested to hear from the Minister just what has happened to the concept of improving councils. The goal when the IDA was established was quite short term: councils would be so improved that they would then be in a state to receive back those powers that had been taken away by the previous Conservative Administration.

Lord Hanningfield: We are having quite a long debate on this first amendment, but perhaps we can get some of the issues out of the way in this more general discussion. I make no apology that during the Committee and later stages of this Bill I will be using my knowledge and position as Leader of Essex County Council. I will not keep repeating that, but I shall be speaking a lot because I am on the Conservative Front Bench. And, yes, I know that some of your Lordships pay council tax in Essex.

I remind people that Essex is a very large local authority. We are approaching the size of Northern Ireland and our domestic product is bigger than that of five European countries and eight states of the United States. We do not need regionalism when we have counties operating at that sort of size. Essex is a region in its own right—I want to make that statement right from the start. Therefore, we are rather disappointed to have regional Ministers appointed this week, when we would much rather—as with the general tone of the debate—devolve things.

Some noble Lords might know that I have been instrumental in setting up a dining club called the Chamberlain Group, which is very much supported

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by three friends of local government, Nick Raynsford, David Curry and Alan Beith. We are trying, all-party-wise, to get more general support for local government. I have tried since becoming a Member of this House, and we have some good and loyal friends here today. I was interested to note at Second Reading that, while the Bill is so thick and the health bit only thin, most of the debate—almost two-thirds—was on the little health bit rather than generally on local government. That disappointed me, because we have a mammoth bit of local government.

Like most of the noble Lords who have spoken today, I think that the Bill has not gone far enough. That is why I give a cautious welcome to the amendment. Personally, I am not that keen on commissions. They normally take 10 years to report and I would rather something happened more quickly. Perhaps the noble Lord, Lord Greaves, might reply with a timetable for when the commission will report, because a long commission will do no good. I would rather one Government or another do something now.

I would like to give an instance of something we did in Essex, with Radio Five Live, just for localism. I am keen on that. We talk a lot about localism, but we do not do it. In a pilot project with Radio Five Live, we allocated £50,000 to two wards in the middle of Braintree for a project that the community would like. In a period of about seven weeks, the community itself came up with 10 ideas, such as projects for the scouts, a day centre for the elderly, a school and the street scene. Then there was a hustings and the community voted. Within that short time of seven weeks more people voted for a project than in this year’s local election—something like 36 or 37 per cent, rather than 29 per cent. What they voted for was interesting: an improved walk along the canal. They voted for a quality-of-life project. They did not vote for the others, they voted for a walk and for seats along the canal. The local community did that. I would love to do more, but unfortunately the Essex budget cannot give £50,000 all over the place.

That was an interesting idea and we ought to pursue such ideas. Please let communities make some of their own decisions about what they would like. Do not let things always be from the top. Even in a large authority like mine, I want local people to decide what they want from the money raised through the council taxes and government resources. So, I give a cautious welcome to the amendment, because it is in the right spirit, although I am not so sure that I want a commission. I want people just to get on with it now.

Lord Graham of Edmonton: The tenor of the debate is interesting. The noble Baroness, Lady Sharp, more than once used “insult”, but it was an insulting speech that she made. Her inference was that the Government, by ignorance or malice, are producing legislation that not only fails to take into account the need of the people but is inhibiting good people from doing good work at a local level. I do not subscribe to that view at all.

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I do not have as much experience in local government as many of those who have spoken, but I have some. After many years, I have come to the conclusion that a rosy picture is painted of what is wanted by the people—the ratepayer, the foot-soldier or those who are led. In many instances, it is the leaders who are irritated; they want more power, in the belief that that is populist. I do not think that that is necessarily so. In practice, I have sadly come to the conclusion that I have misled myself, and others have misled themselves, into believing that the people are full of ideas and they are simply waiting to be stimulated by an invitation from those who are in charge.

This Government have recognised faults from the past, some of which were their own, and are making a genuine attempt to improve the situation. I would be interested to hear from the Minister whether the ideas in the amendment are practical and realistic. If they are not, we have to take account of that. If they are, I very much hope that she will give a nod in the right direction. Sadly, we should not delude ourselves too much that the people of any local community in this country are being stifled from putting forward their ideas. In any community there are good people—politically, socially and environmentally—who take an interest in how their community is governed, managed and financed, but the vast majority are, if I can use the word kindly, apathetic. They are simply willing to be led by those who are elected. We all know about the decline in the number of people who vote in elections. I very much hope that the Minister can be helpful to the House, but the tenor of the speech of the noble Baroness, Lady Sharp, was an insult to the Government and I resent it.

Baroness Andrews: I thank the noble Lord, Lord Greaves, for his kind words. I am delighted to be back at the Dispatch Box representing my department, which has one of the most important and challenging jobs in government. It is a privilege to be able to represent those policies. I thank him for his kind words about my restoration to health. I should also like to say how nice it is to see the noble Baroness, Lady Scott, back on the Front Bench. I send our sympathies for her recent bereavement.

This has been an interesting debate. In fact, it has been a sort of Second Reading debate, although I shall forgo the opportunity to make my own Second Reading speech, which I missed at the appropriate time. The issues that the noble Lord, Lord Greaves, opened up, which noble Lords around the House have responded to, are the right issues and go to the heart of the Bill. While I am grateful for the welcome that he and others gave to certain parts of the Bill, I am still a bit mystified. I hope that we will explore how it is that we are so much in tune with so much of what has been said by noble Lords about the need to let go and why it is that in this Bill we are indeed letting go of power. That is the whole purpose of the Bill. It is about rebalancing the relationship between local and central government. I urge the noble Viscount, Lord Eccles, who disputes this, to stay with us during our deliberations so that we can explore what that will mean.

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Member of the Committee also opened up the debate that was begun by the publication of the Prime Minister’s Statement on governance. That underpins much of what we are doing in the Bill. It opens an even wider canvas, creating new possibilities. The noble Baroness, Lady Miller of Chilthorne Domer, is right that of course some of the ideas that we are exploring are not new. Good councils make innovative progress and decisions. We want to give—I use that word deliberately—an enabling framework for local authorities to use their imagination and innovative ability to pass on power beyond the town hall in a way that has not been done before. I cannot think of a shorthand way of saying that. I cannot pre-empt the nature of the concordat described in the Statement, or the dimensions of the debate, except to say that it is a serious debate about what has been called the new politics and localism. Certainly, Members of this House here today are surely going to see this for the major and innovative opportunity it is. It has been welcomed as such. It is our responsibility to ensure that we have that debate and try to resolve some of those issues. Statements that my honourable friend Hazel Blears has made today about giving assets and community control in various ways are very exciting. This is the first time that any Government have approached the notion of what else local communities want in this way. Let us not underestimate or misrepresent the significance of what this means.

12.15 pm

Strong and Prosperous Communities, the local government White Paper which we published in October last year, introduced a fundamental rebalancing of the relationship between central and local government. It is a new settlement and a new start. It is what the noble Lord, Lord Best, talked about at Second Reading as a turning point. Yes, noble Lords probably think it is sufficient, but it is a start from which we can make progress in way that we have not done before in this country. It is designed to provide councillors with the scope to work with their local partners and communities to develop better services and better places.

On the proposed new clause, I must disappoint the noble Lord. My basic argument is that this proposed standing commission on devolution, while we completely understand the sentiment behind it, does not go far enough for us. Devolving increased powers and responsibilities to regional, sub-regional, local and neighbourhood level not only is the direction of travel that has been articulated, but has been developed in dialogue with, and endorsed by, the Local Government Association. As I have said, it has been set out in the Green Paper The Governance of Britain. The Prime Minister said that he wished to build a new relationship between citizens and government that ensures that the Government are a better servant of the people.

With the best will in the world, I do not believe that the commission proposed by the noble Lord will be the way of delivering that. I agree with the noble Lord, Lord Hanningfield, that commissions are slow, cumbersome, sclerotic and become obsessed with

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their own self-interest. It is an unnecessary element. I look forward to hearing Essex’s unilateral declaration of independence during the passage of the Bill. I did not realise that there were some telling comparisons.

I want to convince noble Lords that the process that we are engaged with is and should be action-led, organic and represented in the Bill by way of local area agreement, the bonfire of regulations—which I hope that the noble Baroness, Lady Miller, accepts—and the abandonment of 1,200 centralised targets. Yes, we can hold our hands up to say that we were overcentralised. We needed to drive improvement by setting some ambitions and measurable targets. We have done that. You only have to look at the number of local authorities that have now achieved the highest standards to see it.

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