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On Question, amendment agreed to.

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Lord Evans of Temple Guiting moved Amendment No. 5:

(a) a company within the meaning of the Companies Act 2006 (or, before the commencement of Part 1 of that Act, the Companies Act 1985);(b) a company within the meaning of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6));(c) a body corporate which is incorporated in an EEA state other than the United Kingdom.”

On Question, amendment agreed to.

Lord Evans of Temple Guiting moved Amendment No. 6:

The noble Lord said: This amendment ensures that the FSA has powers to charge fees for any functions conferred on it under the Bill. It extends the FSA’s existing powers to charge fees under the Financial Services and Markets Act 2000. This is a consequence of extending Clause 3 to mutual insurers and to other EEA mutuals. It will be a precondition of a transfer to a subsidiary of an EEA mutual that safeguards equivalent to those applicable to UK mutuals are in place. Those safeguards will, first, give members of the transferring mutual membership rights in the holding mutual and, secondly, restrict demutualisation of the holding mutual and further transfers of the transferring mutual’s business. In most cases, transfers of business by mutual societies require FSA approval, and transferring mutuals will have to satisfy the FSA that these safeguards are in place. This could be more complex and difficult to demonstrate when the transfer is to a subsidiary of an EEA mutual. As this would result in additional work and, therefore, costs for the FSA, we and the FSA consider it appropriate that its fee-charging powers should be extended. I beg to move.

8 pm

Lord Naseby: I understand why the amendment is here, and of course we accept it. However, one notes that the FSA is currently running a surplus on its income, all of which has arisen from fees charged from varying transactions. Secondly, many of the mutuals are very small organisations and one encouraging feature of the Bill is that it will allow small and medium-sized mutuals to work together and amalgamate in one way or the other in the UK or across the UK and the EEA. I hope, therefore, that when the FSA comes to provide its fee structure, it will recognise that these are small mutuals, entirely there for the benefit of the membership that has joined together, and that it will not provide for—as it attempted when the Financial Services and Markets Act 2000 was passed—a de minimis fee structure. I hope that the Government and the Minister speaking for the Treasury will recognise that this is a different kettle of fish and that while there is to be a fee structure—and it is understood that there has to be one—nevertheless the message will go to the FSA that normal fee structures are not always appropriate to small mutuals.

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Baroness Noakes: I completely understand where my noble friend is coming from, but I am a firm believer in fee structures being reflective of costs so that there are not cross-subsidies between different parts of the sector that is regulated by the Financial Services Authority. I understand that there may in some cases be public policy reasons for cross-subsidy, but I do not think that we should offer a blanket encouragement at this stage of our proceedings for such cross-subsidy.

Lord Evans of Temple Guiting: I am most grateful to the noble Baroness, Lady Noakes, for helping me out. I completely agree with everything that she said. At the same time, the noble Lord, Lord Naseby, made two valuable points. He has them on the record and I am sure that the FSA will read Hansard and take note.

On Question, amendment agreed to.

Clause 3, as amended, agreed to.

Clause 4 agreed to.

Lord Evans of Temple Guiting moved Amendment No. 7:

Her Majesty may by Order in Council provide for any of the provisions of this Act to extend, with or without modifications, to any of the Channel Islands or to the Isle of Man.”

The noble Lord said: The final amendment allows the provisions of the Bill to be extended to the Channel Islands and the Isle of Man, with modifications if appropriate. Although not all the current mutuals legislation is so extended, it has the capacity to be so, and it makes sense that this Bill should have the same powers. The authorities in the islands have been consulted and agree with this approach. It was not possible to introduce this clause in the other place as there was insufficient time to consult the islands. I beg to move.

Lord Naseby: I totally agree with the amendment, but I should be grateful if the Minister would put on record the answer to the question that I asked him right at the beginning, on the commitment from the Treasury that there will be consultation on all secondary legislation in relation to this and the other clauses.

Lord Evans of Temple Guiting: I can confirm that that is the case.

On Question, amendment agreed to.

Clause 5 agreed to.

House resumed: Bill reported with amendments.

Lord Bassam of Brighton: My Lords, I beg to move that the House do now adjourn during pleasure until 8.40 pm.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.06 to 8.40 pm.]

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Local Government and Public Involvement in Health Bill

House again in Committee on Clause 62, Amendment No. 115.

Baroness Andrews: I am grateful for the opportunity to resume the debate on the amendment. It was a good idea to break, because I understand noble Lords’ frustration when some of the details of the Bill are not explicable. It is a complex Bill and we are talking about an innovative model. I am happy to explain it and hope that I can answer the questions that have been raised. I shall certainly take advice if I cannot.

I shall go into a little more detail on how the model works. The nomination system for slates is the same as is used for mayors. Parties will submit their nomination papers with relevant supporting signatures 19 days before polling. Nominations from corresponding ballot papers will clearly identify the prospective leader and contain between two and nine executive members, as provided for in the council’s constitution.

There is a limit of 10 members for such an executive, as laid down in the 2000 Act. The minimum number laid down in the Bill is three. The statutory boundaries of the slate, therefore, are three and 10, but the council can decide to vary them to four and nine. There is definitely scope, therefore, for the elected executive to vary in size, which will govern what triggers by-elections.

Voting takes place by the supplementary vote. I am sorry to say that to the noble Lord, Lord Greaves, but that is the position. It is the same with mayors. The whole area of the council votes for the slate.

The elections will take place at the same time as either whole-council elections or by thirds and halves, but the slate is elected for four years. That is the common thread which goes through the three models.

Individuals can stand for election to the slate and for ward councillor. As I have said, if they are elected for both, they have to resign as ward councillor and a by-election is held for the resulting vacancy. It is necessary to allow candidates to stand for both positions; otherwise, there would be hardly any incentive for those who fail to secure an executive post to stand in the first place. The alternative would be to allow for a dual role, but, as I said, the model creates a sharp distinction between the role of the executive and the role of the ward councillor as scrutineer and challenger.

The successful slate can be made up of ratepayers—it can have a ratepayer mayor, for example. Members of the slate will take office for a fixed term of four years, four days following the election. The leader will allocate portfolios and appoint a deputy, who can also have portfolio responsibilities. If the executive leader dies or resigns, a by-election for the whole slate must be called. That is essentially because the slate is branded with the leader: they stand and fall together.

If a cabinet member dies or resigns, the executive leader decides whether to hold a by-election or to continue with a smaller executive, subject to the executive remaining above the effective minimum as specified in

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the council’s constitution. Perhaps I may explain that in a little more detail. The leader chooses, except in certain circumstances, what happens. The leader can decide to carry on with a smaller executive, or he has to call a by-election where the size of the executive is reduced to below the effective minimum. Therefore, if it is below three, he has to have an executive or if the council has set a non-statutory minimum of four or five, then as soon as it drops below that, it has to have a by-election. That introduces some stability. The detail is set out in Schedule 4. Therefore, there are provisions which are designed to prevent constant turmoil.

8.45 pm

Local authorities are going to have to consult very widely before they adopt this model and in drawing up the proposals. They will have to consider the extent to which moving towards such a model would secure continuous improvement in the way in which they function. They will have to meet that test. I thought noble Lords might be interested to hear what inspired Stockton-on-Tees to opt to consider this possibility. In its letter to the Secretary of State of December 2005 Stockton-on-Tees Borough Council stated:

Baroness Scott of Needham Market: Will the Minister say where from Stockton this letter came? Was it generated by the elected members or the officers?

Baroness Andrews: It came from the elected members. That puts a little more substance around what I can see noble Lords have understood to be innovative but also speculative. It also raises some important questions which I have tried to answer. However, if there are some outstanding issues, I am happy to attempt to answer them further.

Baroness Hamwee: We are grateful for that and will have a good read of it. We will come later to parts of the Bill that relate to this. I have one question and one request. Am I right in thinking, from what the Minister has said, that different candidates could be standing for election at any given time with different size slates within the minimum and maximum? The noble Baroness nods at that, so the answer is yes.

The request picks up a point made by the noble Baroness just before we broke for dinner. She referred to this not being an entirely new concept and she referred to other models, which I understood to be overseas models. I ask the noble Baroness to write to noble Lords giving more detail. Where does this come from and will the issues identified by noble Lords, such as the by-elections, arise with those models? Noble Lords are concerned by the knock-on effect of

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some proposals. Therefore, if I may say so, to be told that this is not novel is not a complete answer to those concerns.

Baroness Andrews: It is novel in our experience in the UK. However, there are examples from Switzerland and Portugal, where they have similar arrangements, but I will do my best to substantiate that.

Regarding the different size slates, it is worth bearing in mind that if the council opts for this process, it is going to have to set out, in its constitution, what it wants to see happen. Therefore, different sized slates could stand if that is what the council decided in its constitution. As I said, there is scope in the size of the slate—the minimum and maximum—to have points at which by-elections are triggered. Those could be different for each arrangement.

Baroness Hanham: Will the Minister delve a little more deeply into what the other members of the elected council will do? The councillors in the elected-member part of the council and this elected executive on top of it may or may not come from the same party; they may or may not have anything to do with their majority. Will they have a leader of the scrutiny part of the council? Who will actually govern them? If they are not from the same party as the executive, it will be a recipe for complete disaster. A whole raft of elected councillors will feel resentful that they have no hope at all of reaching a cabinet position; that they are very unlikely to be given anything to do other than overview and scrutiny; and that unless they can be persuaded to stand on the slate they will never reach a position of authority within the council. How will this split be dealt with? It could be a very uncomfortable situation.

Baroness Andrews: The noble Baroness is right that the executive could be of a different party from the council composed of all the councillors. If the council opts for this it will have to understand what it is doing and collectively make that choice. Those who are committed to the council’s business will have to see this in the round and make a decision accordingly. I do not think that it denies the councillors a role; they will have a very challenging role as back-bench councillors holding the executive to account. I think that this model gives more force to the notion of scrutiny and challenge than some other models do. Their role will be extremely clearly defined. They will also be slightly enhanced ward champions, a very definable and accountable role. So I do not agree with the noble Baroness's dire predictions. Apart from anything else, the matter would have to be worked out in consultation before the decision was taken.

Lord Greaves: It is interesting to imagine how such a council might work. The Minister is eloquent in describing it but I cannot get my head round it at all. As for the idea that ward councillors would in these circumstances have a “challenging” and enjoyable role and act as ward champions, I do not know how it would work. It seems to me that they will just be cut out of everything. There will probably be massive frustration and an inability to do very much at all. However, those are matters that can be discussed.

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I have a few questions. First, under this model of the elected executive, who and what body will decide the annual council budget? Secondly, although the noble Baroness explained how the competition between slates of different sizes would work, she did not explain why it was a sensible arrangement where three people might be standing against seven, nine or whatever number of people. I do not understand why that is a sensible arrangement at all or how it will help people better to understand how local government is run. Thirdly, the Minister said that it might be possible not to have by-elections if people were elected to the council through both the ward and the executive and the council size was not very great. In such circumstances, however, would not the ward or wards concerned be a councillor down, which would not be a good idea?

Baroness Andrews: The budget process will be the same as now; the council as a whole will still have charge of it. If the leader presented a budget that the council did not accept, then, as currently happens, the council would have to summon a two-thirds majority to overturn it. That is what happens.

Lord Greaves: Why two-thirds?

Baroness Andrews: It is modelled on the elected mayor.

Lord Greaves: There may be two-thirds if there is an elected mayor. If there is a normal executive and cabinet operation, the council decides the budget—full stop, no two-thirds.

Baroness Andrews: Absolutely, but this is modelled on the elected mayor. There are so many parallels of a DEE with an elected mayor, and this is one of them.

Why the variable sizes? Again, it would be up to the council to choose. We have tried to enlarge the scope for the council to make its own choices. You could have two or even three slates of variable sizes, and get different configurations of leaderships and executives, one of which might appeal more to the local electorate than another. You might be able to show that, with four people on the executive, you could focus the work and do it properly. That would be entirely up to the council. It is about allowing scope.

On the ward by-election point again, if you are elected on the slate and you stand as a ward councillor and are elected, then you have to stand down as a ward councillor. However, whether there is a by-election depends on the arrangements that the council has made about the size of the executive and the trigger point for those by-elections. Shall I put that in writing for the noble Lord?

Lord Greaves: I understand that very well, but it does not seem very sensible. Single-member wards might end up not having a councillor for the rest of the four years, which would not seem sensible at all.

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