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The principle of the first part of the Bill is improvement and restructuring by invitation. The Government are imposing nothing on local authorities. It is being done by invitation, and local authorities have responded to that. The sense of effective partnership that we are working to reach is about the best solution for each area, determined by each area—those 35 local designated agreements, for example. We know that we need more flexible and organic processes. I say to the noble Baroness, Lady Sharp, that if she is right about economic devolution then the local area agreements that will focus on local priorities will be able to drive the sort of economic devolution that she is so keen on. The sub-national review, which is looking at how sub-regions are capable of taking on functions, will be driving a better form of economic competence at sub-national and local level.

Our challenge is to let go and to do it in a way that enables local authorities to get the best out of what we want for them and they want for themselves. In the Bill, we have a very balanced and nuanced package of reforms. Although I should like to start this debate by agreeing wholeheartedly the need for this commission, I cannot accept the amendment although I understand the intention. Local government and stakeholders are capable of conducting their own dialogue. We do not think that they need this to be centrally imposed. In some ways, this commission is a sort of contradiction of everything that Members of the Committee have said.

In conclusion, the Sustainable Communities Bill, which the Government support and which will come before this House next week, already proposes a new way for communities to communicate with local authorities and central government, and will suggest changes on how best to promote sustainable communities. Regretfully, I do not think that the devolution commission will add any value. Our reforms will focus on delivery, responsiveness and not on process. On that basis, I hope that the noble Lord will be able to withdraw his amendment.

Lord Greaves: I am grateful to everyone who has spoken and to the Minister for a great deal of what she has said, quite a lot of which I think will be talked about in the Committee in the next two or three weeks. She is using the right words. She said that our

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challenge is to let go. The purpose of the amendment was to challenge the Government to seriously let go. We do not believe that they are doing that, which I think will colour a great deal of the rest of the debate.

I am grateful for the comments made by the noble Viscount, Lord Eccles, who has a long and distinguished career of support for local government, and my noble friend Lady Miller of Chilthorne Domer. Ten years ago, Pendle Council looked at seriously decentralising decision-making in Pendle, at the same time involving people from parish councils and local organisations, and citizens. We looked at and then based our system heavily on the South Somerset model, and I pay tribute to the pioneering role which it took.

One reason why I am not in London on a Monday is that on Monday evenings, the NAG meets in my ward. The Minister may think that that is an appropriate name for a body with which I am associated. It is the neighbourhood action group, associated with a neighbourhood management project, which comes because we are a housing market renewal pathfinder and that is how it is financed. That NAG, in an area with no more than 5,000 electors—there are probably 7,000 or 8,000 people at the very most—has an annual budget of £100,000, give or take a bit, for local schemes, grot spots and small local improvements. It effectively makes the decisions by consensus because it consists of councillors, council officers, residents, people from other local agencies, et cetera.

The idea that this is in some way revolutionary is not true. To be able to do this, you must have the money to devolve to this kind of scheme. If you have not got the money because you have been capped or are having 3 per cent cashable efficiency savings every year, it is rather difficult. We can do it because of the housing market renewal pathfinder. We could not do it otherwise. Some of the schemes which have been set up, which I suspect are models for what the Government are doing in their neighbourhood management pathfinders, are there only because extra funding is being provided, and mainstreaming these things is very difficult.

The noble Lord, Lord Hanningfield, asked about a timetable. It seems to me that what is required is an evolutionary process. I agree with him that what we want is action now but we need a process, a system, a culture and means of delivery which is going to significantly remove controls, bonfire regulations and enhance the powers of local authorities. That cannot be done with a big bang; there has to be some process of doing it over years and I have put one forward. What I propose is much more radical than anything that appears in the Bill. It is on the agenda now. The Minister said very helpfully that what I am proposing does not go far enough. I will think about those words and come back and remind her when I am proposing more. I tabled the amendment to try to put the issue on the agenda, but the Prime Minister has done a much better job of that than I could. The Pandora’s box is open and the discussions on the concordat are going to be absolutely vital. I say to the Local Government Association, “You now have this

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on the agenda. Be much bolder than you have been before. Think bold, demand bold things and challenge the Government to—in the words of the Minister—let go”.

I am very grateful to the people who have taken part in this debate. Many of the themes will come back as we discuss the detailed amendments in the Bill. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Invitations and directions for proposals for single tier of local government]:

Baroness Hanham moved Amendment No. 2:

Clause 2, page 2, line 5, leave out “or direct any” and insert “a relevant”

The noble Baroness said: I too say how nice it is to see the noble Baroness, Lady Andrews, back; we were sitting with our fingers crossed in a most unpolitical way over recent days. I thank her for giving me her cold.

That was a very long and interesting debate on Amendment No. 1. I hope that the debate on Amendment No. 2 will not be quite as long but it is important. We are talking in Clause 2 and onwards about retrospective legislation. There has been no opportunity for Parliament to consider the proposals in this part of the Bill before they were implemented. That is very unusual. The House of Commons was debating this clause about invitations and directions to local authorities to form unitary authorities in February, but the invitations had gone out in January. It has therefore not been possible to either stop or control this aspect of the legislation.

I took exception to Clause 2(1), on the Secretary of State being able to direct “any” principal authority, because that is not what the clause is about. It is about a small number of authorities wishing, or not, to become unitary authorities and the Government opening the door for that to happen. This has put council against council, district against council and council against district. That curious proposal is winding its way through the systems. We did not get “any” principal authority; we got a few authorities, so we cannot have this legislation saying that a Government can go to “any” local authority, because they cannot. That was not what this was about in any event at any time. That is why I am trying to change this to “a relevant” principal authority.

The House of Commons managed to insert into the Bill Clause 3(1)(a), which limited the time for which these provisions could be available, stopping the proposals for putting unitary government to more and more councils. But where did the provision come from? Why is it in the Bill? Why is it in the Bill in a way which allows Parliament no chance to amend it?

I understand that there were 16 applications originally and that it is likely the Government will go for no more than eight. We have had a turn-up of the local government system and some unhappy and anxious councils being put forward, but we have been able to do nothing about it. I must therefore ask the

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Minister for an explanation as to why this part of the Bill has been implemented and why it is almost at the end of its process. I understand that the eight or 16 authorities—which in terms of the number of authorities in this country are trivial—will be advised whether they are going to become unitary authorities by the end of this month. The Bill will have barely finished Committee by the end of this month. It certainly will not have got to Report. By the time we get to Report, as I understand it, the orders will just about have been laid.

It is not often that one accuses the Government of mismanagement, but I have to on this occasion. They have allowed this to go ahead without allowing Parliament to have a say in it, or an opportunity to amend the provisions or to consider further whether it is a good idea. I beg to move.

12.30 pm

Baroness Hamwee: The amendment seeks to insert “relevant”, but relevant to whom? The answer should be “relevant to local communities”. The noble Baroness is right: we are in a bizarre situation. I considered whether we should have a go at some wholesale amendments to these clauses, because they seem not to relate to real life—or, at any rate, life as of the beginning of July 2007—but it would certainly be easier to wait until we have heard the explanation.

The noble Baroness, Lady Hanham, referred to the announcement which we are led to expect will come towards the end of this month; she did not mention the application for judicial review which is to be heard in September. I hope that by Report the Government can replace these clauses with what they actually mean and tell the world where, if at all, they propose to go forward beyond the current stage. It is okay for us as legislators to grapple with all this as something of a waste of time, but it is not right to have on the statute book the holding out of some sort of lollipop—but not quite giving it—to those authorities, some of which might be disappointed by the announcement we are about to have, and others might be thinking of change in the future. These clauses do not say what the Government are proposing. They may say what the Government were proposing some while ago, but they are completely out of date.

Lord Hanningfield: I support my noble friend. I returned this morning from a local government conference in Birmingham, which is continuing today. Over the past two days there has been nothing talked about but the chaos in some authorities awaiting decisions which they hope to receive over the next few weeks. I hope the Minister will refer to that in her reply because it is of considerable concern. I have been asked by authorities to put them out of their misery or tell them where they are going.

I totally support what my noble friend has said. I believe there are some benefits in the unitary system in some places, and thought needs to be given to that, but we must not be obsessed about structure; the real concern is about function. In the debate on Amendment No. 1, there was reference to what local

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government does and how it serves our communities; to keep talking about function is a big distraction. We need to get on and deliver locally.

This has been a grave mistake by the Government. If they intended to do something they should have done it in a different way. For us to be debating this issue now, months and months after it was initiated, is totally wrong. I hope that any future Government will not do it in this way. We have a lot to learn from this and I hope the Minister will be able to give a positive reply to the short debate.

Lord Greaves: I tabled objections to Clauses 2 and 3 stand part in the belief that we needed a short debate about general issues in the restructuring proposals. It is clear that the noble Baroness, Lady Hanham, has taken advantage of her amendment—I did not understand what it meant specifically—to initiate such a debate now. I shall not, therefore, pursue the stand part discussion later; which might be helpful to the Committee, as long as I can have my tuppenceworth now.

I should qualify and expand my declaration of interest on the previous amendment. I said that I was a member of Pendle Council; I should remind the House that Burnley and Pendle together put forward an excellent bid for a unitary authority but the Government did not approve it. This was not because of the quality of the bid but because of the problem with the rest of Lancashire. If some authorities within Lancashire were to escape the clutches of the county council, what would happen to the rest? It is absolutely clear that that is why the decision was made. This raises further issues to which I shall come in a minute.

My first point concerns the way in which this whole exercise has pre-empted the passing of the legislation. The noble Baroness, Lady Hanham, referred to this in moving the amendment, as did my noble friend Lady Hamwee. It is a scandal that this should have happened. Without going back too far, I can remember times in the past—perhaps 25 or 30 years ago—when the Government were trying to increase council house rents, for example, and were telling local authorities to put them up before the legislation had gone through Parliament. That was a great scandalous issue at the time and some authorities said that they would not do it. Nowadays, the Government announce what they are going to do regardless of the legislation, and everyone lies down and does it. The whole culture has changed. But it is still wrong and should not have happened. As the noble Baroness, Lady Hanham, said, the way in which it has happened has increased the difficulties and caused more confusion.

My second point relates to the timescale. Some authorities, knowing that this might be coming up, had been planning for a long time. However, a timescale of effectively no more than about two months—if you take out the Christmas break—in which to decide whether to put in a bid and to carry out the detailed work necessary behind it was, frankly, ridiculous. It was an absolute shambles. It would have been perfectly easy for the Government to have

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announced in last September or October that they were going to consider bids, to get the legislation through and to do it. They may say that that would have increased the uncertainty, but at least it would have given people more time to plan, to put in good bids and to talk to other people; it would have given the authorities in a county time to talk to each other and to try to find a consensus, instead of fighting the pitched battles which are taking place in some areas.

The third point, as raised by the noble Baroness, Lady Hanham, is that the Government have no strategic view about unitary authorities. They started off with a strategic view and said that unitary authorities were good—just as the previous Government did with the changes from the 1992 Act—but, as time has gone on, it has been watered down. I think there were 25 bids originally, 16 were shortlisted and we are told that about eight might be approved. We shall wait and see.

Is unitary government the best system or not? Is there a general presumption that the two-tier system has had its day? I think that the two-tier system set up under the Local Government Act 1972 worked very well in many counties for quite a long time, but in much of the country it is no longer working well for all kinds of reasons that I will not go into now. It is certainly not working well in Lancashire.

A strategic view across England really is needed. If the Government think that this round under the Bill will close the issue down, they are wrong. It will not close the issue down at all; all it will do is put it off for another five or 10 years until it is raised once more and then we will have to go through the whole thing again. Certainly, in a county such as Lancashire, the present situation is frankly not tenable. It certainly will not be tenable under local area agreements and things will have to change. The uncertainty has not been removed; it is there all the time. It has been there now for the past 10 years, it is still there and it will remain until it is properly resolved.

I agree that we are talking about functions rather than structures but we are also talking about communities. It seems that some of the bids being considered in terms of communities are far too large for the geographical area of the unitaries. I am not suggesting that in some cases counties will not make good unitaries. In some of the more compact counties where the districts are traditionally weak—places such as Shropshire or even Cornwall, which is not very compact but has a real sense of community—the unitary model might work. But would it work in North Yorkshire, which extends from the North Sea coast at Scarborough and Filey to within a few miles of Morecambe on the west coast, takes in two national parks and a vast tract of the north of England? The idea that North Yorkshire County Council without districts would be a satisfactory local authority redefines what is meant by local authorities and local government. The fact that that such an idea is being taken seriously indicates a serious flaw in the system.

There is no strategic view. What is the ideal size for a unitary? We are being told that some bids were not really big enough, yet they are bigger than some of

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the existing unitaries; for example, in Lancashire and the north-east. Are we looking for compact unitaries such as Blackpool or Blackburn, or are we looking for great big sprawling counties such as North Yorkshire or Cumbria? There is no overall strategic view. I do not think a satisfactory solution can be found until a decision is made. I may not agree with that decision but at least one has to be made as to whether we are looking for compact authorities on perhaps the metropolitan borough model, for which I would be looking, or something much bigger.

The present proposals are a mishmash. They do not really make any revolutionary change to local government; they do not make much change at all; they involve change in just a few parts of the country. Even within the present proposals—we have Exeter, Norwich, and Ipswich on the one hand and North Yorkshire, Cumbria and a unitary Somerset on the other—there seems to be no idea of what it is we are looking for in terms of local government. I would be very happy if the Government withdrew this part of the Bill even though it would upset some of the people who are well on the road towards unitary status and cause real problems in those areas. Whatever happens with this, it is not going to go away; it will come back and if we are preserved long enough we will all be here discussing the same thing in a few years’ time.

Baroness Scott of Needham Market: I rise to make one or two remarks in view of the fact that my noble friend will not be objecting to Clause 2 standing part of the Bill. I invite the Minster to address the specific point of why the process of beginning the formation of unitary councils was started in advance of this legislation. We have had the two-tier system for a long time. While it is right that it should be reviewed from time to time there was actually no tearing hurry. I can see no reason, unless the Minister can give me one, why it was not possible to put the legislation in place and then move forward to the specifics. That would have been more logical in terms of the parliamentary process and would also have avoided some of the problems we now face where local authorities are out there and are more or less to guess why one proposal or another has found favour.

My noble friend has just mentioned the Lancashire example. He believes that it was the effect on the remainder of the county which proved to be the stumbling block. Yet in East Anglia, where I live, both Ipswich and Norwich have moved forward to be considered as unitaries, despite the same issues being raised by the rest of the county. Local authorities are left trying to operate in a sphere that they do not understand. Had we had the legislation first we could at least have debated the principles of unitary authorities and set out some ground rules under which we could operate.

The debates on the Bill in another place raise more questions than answers. For example, Mr Woolas, who was in charge of the Bill at the time, argued that one of the ways in which bids will be measured is the effect that they will have on council tax. Anyone who knows anything about local government knows that

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council tax is not really related to how much local authorities are spending or whether they offer value for money. It is such a complicated system. Council tax is a pretty imperfect way of measuring anything. To determine whether a unitary bid should be favoured simply on the basis of how it affects the council tax is bizarre. It is certainly not clear from what the Minister said what will happen if a proposal is based on some promise made by a council that it will keep the council tax at a particular rate. What if it does not? Will it be capped? How will this work?

Councils have put in bids without knowing any of these basic ground rules. Had we had the legislation first, we could have at least established some of those rules. I would like the Minister to address that issue.

12.45 pm

Viscount Eccles: I want to draw attention to a particular situation. What is proposed is also affecting people who are funded by local government. I declare an interest as chairman of the Bowes Museum in County Durham. We receive 25 per cent of our annual revenue from a county grant. Of course we have been approached by the county and the Teesdale District Council, which seek to know what way forward we support. This has to be done in advance of the legislation. If you are an institution you handle the matter carefully. People are being set against one another in County Durham because there are different schools of thought about what might or might not be the right way. But what is really happening is that people are second-guessing the Government. They know that that is where their money comes from so they are very chary of upsetting central government and they are second-guessing how they are supposed to reply to the request for proposals. This is having a very deleterious effect on County Durham.

Baroness Andrews: The issues that have been raised in the debate go far beyond the technical amendment. I am happy to address the range of issues, which have been about the process in which we have been engaged—the relationship between the invitation process and the legislative requirement and the current ways in which things are being worked out as part of the consultation process.

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