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Local Democracy, Economic Development and Construction Bill [HL]

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Report (4th Day)

6.20 pm

Clause 85: EPBs and their areas

Amendment 168A

Moved by Baroness Hamwee

168A: Clause 85, page 58, line 5, after “order” insert “at the request of all the principal local authorities for the local government area concerned”

Baroness Hamwee: My Lords, the amendment starts a long group to which I shall speak, but the point is relatively short. I have two amendments in this group. They may seem inconsistent, but they reflect that we have in principle objections to the visions regarding economic prosperity boards. If they are to stay, the amendments would make them less unpalatable.

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The order in which the amendments are taken may seem to go against what we seek to achieve, but it would not have won the sympathy of the House if I had sought to table something like, “Before Clause 85, Clauses 85 to 117 shall not apply”. I did not attempt to do that. Your Lordships will be familiar with committees and boards where one has a vote, a debate, and then a vote on an amendment to the proposition and even if the amendment is accepted the amended proposition, not commending itself, may be voted on as well. As it is perhaps a little unusual in this House, I thought that I should preface my remarks in that way.

We object to economic prosperity boards and combined authorities because what is proposed involves the transfer of local authority functions to new bodies that may not consist wholly of elected representatives and will not consist of people directly elected for the particular task. The Bill has at many points highlighted how we differ from the Government in our views of what representative democracy is. Here we will have the Secretary of State making an order.

I appreciate that, if there is to be a transfer of local authority functions, it needs an order—that shows how serious the matter is—to establish a body with a majority appointed from councils, or, to put it another way, a minority who will not be elected. Who will those people be? We do not suggest that councillors have a monopoly of wisdom on those matters—far from it. Many people have experience to offer but there are also many ways in which to involve those people without creating a new organisation of which they will become board members. The principle of elections in the conduct of local authority functions is important. Those councillors who are members will not have been elected directly for the task. I see some drawbacks in that situation in that, whereas in some economic prosperity boards the councillors may see the EPB as their prime activity and priority, in others it will be something that has to be dealt with and not a priority.

The second concern is that funding will go to the new bodies and it would be extraordinary if that were not to be at the expense of direct local authority funding. Local authorities will be told that that is where the money is going and so they should sign up to the EPBs. I have not caught up with the detail of the Budget announcements today, but I was not surprised to hear the noble Lord, Lord Smith, refer earlier this afternoon to the arrangements for Greater Manchester. That is a Budget announcement. We have a Bill to deal with and we must address the Bill, not what the Government are doing outside the legislative framework.

We have been told—my amendments are an attempt to write the subject into the Bill, because it is not there—that all of this is voluntary. Even if that is so technically, the facts will be different. We have referred at earlier stages of the Bill to the likely—forgive the pun—peer pressure from some authorities on other authorities that are reluctant to join in and sign up to an EPB. I have referred to the likely arrangements over funding. It is all very well to say that membership may be voluntary, but once an authority is a member, how is it to cease being a member in the real world?

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Furthermore, it is most unclear what the remit of EPBs will be in the future. We will be content to see organic growth after clearer debate about their role. Jobcentre Plus functions and benefits functions have both been floated as possibilities. Partnerships succeed when the partners buy in and have a hand in the design of the structure. These proposals seem to have been designed without full involvement. Councillors from district councils to whom I have spoken over the past few weeks have been unaware of the proposals. Understandably, they have made comments about the Government fiddling with structures and processes in areas that they do not understand rather than supporting outcomes from existing structures or boosting existing structures.

I therefore suggested privately to Ministers that the place for all of this would be in the draft Community Empowerment Bill, whose arrival seems not yet to have been signalled, but which we have been told is in the programme. That draft Bill, which would be subject to pre-legislative scrutiny, could take evidence and in the best way of scrutiny have what are in effect round-table discussions about the scope and functioning of EPBs. That would also provide an opportunity to assess whether multi-area agreements, which are already possible, have shortcomings and whether there are things that should be put on a statutory basis within the EPB proposals.

In short, we object to the transfer of local authority functions away from those who are elected. We do not think that the Government have yet taken with them local authorities outside the cities for which EPBs seem to have been designed. Our Amendment 168A would make it explicit that this would be voluntary and voluntary for all. Most of our other amendments in the group would delete the proposals for EPBs entirely, which is our preference. There are other amendments in the group. Amendment 168B, tabled by the noble Lord, Lord Hanningfield, makes the same underlying point about EPBs needing to be voluntary. I have expressed some scepticism as to whether they can truly be voluntary, although I am curious about the use of the term “reaffirmed” by local authorities, because I cannot see that the arrangements will be affirmed in the first place. The Government have tabled amendments to Clause 95. Perhaps on a slightly more positive note, I will welcome those. I beg to move.

6.30 pm

Lord Hanningfield: My Lords, we have tabled Amendment 168B in this group. Its purpose is to seek an assurance from the Government very much in line with what the noble Baroness, Lady Hamwee, talked about; that is, the voluntary status of EPBs. We have been considering this legislation for a while now, and Members on these Benches first viewed EPBs with an immense amount of suspicion. However, that view has changed considerably during the passage of the Bill, and a lot of that is the result of assurances from the noble Baroness.

At first sight, we were worried that the Government were planning to put the Secretary of State at the centre of local authorities’ business. We were concerned that, having failed with many regional approaches, the

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Government were coming back with a new attack on the independence of local authorities. As we have discussed several times, we are unhappy with some of the planning arrangements set out in this legislation, and we are concerned that this might be an additional element. However, I have read carefully the responses of the noble Baroness to questions in Committee and I have some hope that the Government may have got the message. I shall be interested to hear her response. She has said that there is no question of local authorities being coerced into forming EPBs, and she admitted that they might not necessarily be suitable for every area. In a letter dated 19 March, a copy of which I understand has been placed in the Library, she seemed to make it implicit that it is intended that the Secretary of State would exercise order-making powers only with the full consent of the local authorities involved. Perhaps she would reaffirm that point today.

I also had a useful meeting with the Minister after the Committee stage at which she was at pains to emphasise that EPBs would be voluntary creations for local authorities and that the powers granted to the Secretary of State in this Bill are no more than those required to establish the legal framework necessary for them to function. I hope that she might also reaffirm that today so that it can be read in the Official Report.

The crucial test will be to see whether the Government can keep to these commitments in practice. Indeed, the noble Baroness, Lady Hamwee, expressed some doubts about that. As everyone knows, my view is that local authorities know what is best for their own areas and that, when it is possible to do so, they know which other authorities they want to work with in order to solve problems. Thus, as long as the Minister can confirm that EPBs are going to allow local authorities to operate in that way, we can accept that there needs to be a legislative framework to set them up—but if, and only if, local authorities want them. Again, I hope that the noble Baroness can give us a reassurance on this point.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews): My Lords, I am pleased to have the opportunity to offer the reassurances being sought by the noble Lord. I am grateful to him and to the noble Baroness, Lady Hamwee, along with the noble Lord, Lord Tope, for the fact that we have been able to talk about these issues outside the Chamber in order to get to the heart of what we are trying to do. If we still disagree on either the necessity or the purpose, it is not because we have not attempted to understand the position and we shall have to disagree on the principle. I am pleased that the noble Lord, Lord Hanningfield, said that we have got the message. Indeed, the amendments I am bringing forward in this group make it perfectly clear that we understand the voluntary nature of these organisations, which may not have been as clear as it should have been. I shall expand a little on that.

In Committee we established that significant benefits could be gained and major opportunities exploited by tackling economic issues at the sub-regional level. Many examples of this were given from across the

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country. By working with real economic markets, one can have a real influence on the way in which services can be offered. We went on talk to about maximising the benefits of how sub-regional is working already using the MAA model because in so many instances it offers the greatest benefit. In many areas, that will be sufficient. However, our case is that, where there is a strong economic case for even closer joint working, an EPB could make that possible. It could take the intention a step further by creating a legal body at the sub-regional level. I was pleased to hear the agreement of the noble Lord, Lord Hanningfield, to that in principle when he said that as long as EPBs were mostly composed of elected members, they could be a recipe for success. So the first reassurance I can give him is that they will indeed be composed largely of elected members and that any non-elected members will be there only at the behest of the local authorities involved. Unfortunately, that may not satisfy the noble Baroness, Lady Hamwee, but I shall address that point in more detail later in my remarks.

I have also made it clear that we accept that EPBs will not be appropriate for all or even many areas, but in those places where partnership working has already made a mature contribution, there are some additional benefits to be had which we should not deny to local authorities. Those benefits are principally delivered by the creation of a legal personality, a legal body that can hold budgets, secure more direct management of economic programmes and serve the area as a whole. Furthermore, it could conduct a single conversation with government departments about what the area needs, which programmes are relevant, how they can be managed, what can be delegated and what can be achieved.

The noble Baroness, Lady Hamwee, and the noble Lord, Lord Tope, have made it perfectly clear that they are sceptical about EPBs; the noble Baroness has rehearsed the argument again today. Before I turn to the argument, I should say that I think that theirs may be a minority voice because the LGA itself considers this to be a positive step. The principle of statutory bodies at the sub-regional level was certainly supported in the 2008 consultation, so long as they are voluntary. That is the stage we have reached in the debate, and I want to reiterate the point because it is where the democratic argument turns in the issues we are debating. I still hope to be able to persuade the noble Baroness that we are on the same side.

I understand that there is a lack of conviction that EPBs are not truly voluntary, and not least is that the reason for bringing forward our amendments, which should make the voluntary nature of EPBs stronger, clearer and thus indisputable. Following our discussions in Committee, I have taken the opportunity to remove any possibility, however remote, that a non-unitary district could ever be included in a scheme for an EPB without the district council concerned having given its explicit consent. That is achieved through government Amendments 168R and 168S, and Amendments 168AH and 168AJ, which make the same change for combined authorities. Further, Amendment 168M will ensure that any authority, including a non-unitary district whose area as a result of any changes to an EPB

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would be added or removed from it, must also give its consent to the change. Thus, in two-tier areas, both the county and the district will have to give their consent for an area to be included in a scheme for an EPB, while Amendment 168AD makes the same change for combined authorities. At this very fundamental level, therefore, I hope that the noble Baroness is reassured that we are genuinely serious that EPBs are not only voluntary for authorities but are also seen to be so.

I turn now to the arguments advanced by the noble Baroness this evening, and put by the noble Lord, Lord Greaves, in Committee, that EPBs will not be voluntary since by force of circumstances authorities will have no choice because of the way the funding flows. It is hard to argue counterfactual evidence, but we have taken significant steps to ensure that these bodies are voluntary. I have outlined that point. They represent choices for authorities based on a distinct local appreciation of the benefits that they would bring.

We have also provided other safeguards. For example, there is a requirement that authorities must use a review to gather evidence that an EPB would be beneficial for the area. If that evidence cannot be produced, there can be no EPB, even if the Government would wish to have one for some other reason. Furthermore, the Secretary of State must consider that the creation of an EPB is likely to improve the exercise of statutory functions relating to economic development, regeneration and economic conditions in the area. Again, that has to be based on evidence.

I would also argue, on the basis of commonsense, that there is no point in coercing local authorities into these types of arrangements, because they are about partnerships and fundamentally working together for common aims and common good. You cannot generate a willingness among partners to work together if they do not want to work together, and partnership working must be in place before the EPB is created if it is to stand a chance of working properly.

Lord Greaves: My Lords, I was not going to intervene but the noble Baroness paid me the compliment of reminding me of what I said in Committee. Is she denying that that kind of financial coercion occurs at the moment, because in my part of the world it certainly does?

Baroness Andrews: My Lords, the noble Lord gave examples of that in Committee. I am saying that there is self-interest in these arrangements but one cannot generalise about localities. My argument holds that partnership working serves interests. There is a mutual interest at stake here and an EPB will be a serious undertaking. Given the changes that we have made to the Bill, it is highly unlikely that anyone could be coerced if there was not a real interest in being a part of such a partnership.

On the issue of local authorities leaving EPBs—I shall try not to provoke the noble Lord again—there is a balance to be struck between allowing for flexibility and a recognition that we are trying to provide something that will serve for the long term. Difficult, long-term problems cannot easily be tackled effectively without

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some degree of commitment, stability and permanence, and EPBs are designed to be one of a range of options that operate at different points on this spectrum. We appreciate that significant alternatives such as MAAs will be available and it will be up to local authorities to determine whether, for their particular needs and partnerships, flexibility is, frankly, more important than having a robust governance arrangement. The noble Lord, Lord Hanningfield, discussed these kinds of issues outside the Chamber. As I have said, EPBs are designed to be stable and should be created only where there is a strong commitment to joint working and a clear economic case, so we would expect local authorities to have made every effort to resolve differences that arise between them before seeking to withdraw from the EPB.

But, of course, circumstances, people and situations change, and, in some instances, local authorities may no longer feel that the economic development of an area is being well served by the EPB. Therefore, there is a process within the Bill for local authorities to leave an EPB or for an EPB to be dissolved. This process involves one or more of the local authorities conducting a new review and preparing a revised EPB-free scheme as it would obviously be important to consider how the area was going to be affected by the change and how the functions carried out by the EPB would be exercised if it no longer covered a particular area.

A withdrawal would be a symptom of a major breakdown between the local authorities. In those instances, there would be a legitimate role for the Secretary of State in determining whether the proposed change to the EPB was beneficial for the area, although it is clear that if there are irreconcilable differences within an EPB it would be in the interests of the area as a whole for the boundaries to be altered or for the EPB to be dissolved altogether. So there are safeguards built in.

6.45 pm

Amendments 168A, 168D, 168G, 168Y and 168AA, tabled by the noble Baroness, Lady Hamwee, and the noble Lord, Lord Tope, require that a number of the Secretary of State’s order-making powers in this part could be exercised only following a request from principal local authorities. For the many reasons that I have advanced already, these amendments are unnecessary, but particularly so in relation to what I am about to say. There are only four instances in which the Secretary of State will make an order under this Bill: to create an EPB or combined authority and to set out the conditions under which the body would operate; or to amend an existing EPB or combined authority. In each of those situations, the Secretary of State may exercise one or more of the specific order-making powers provided to her, depending on the circumstances.

But the key point is this: no order can be made without one or more of the local authorities having first prepared and published a scheme that proposes using those powers. That restriction on the Secretary of State’s powers is contained in Clauses 96(1), 99(1), 107(1) and 110(1). They all provide that the Secretary of State must have regard to a scheme before making

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an order to either establish or change one of these bodies. It follows logically that without having a scheme to regard to, the Secretary of State may not exercise her order-making powers.

Furthermore, the Secretary of State has no power under any circumstances to require that a scheme is prepared. So it is simply not possible for the Secretary of State to exercise any of her order-making powers in this part without one or more of the local authorities having made a request, in the form of a published scheme, that she does so.

I hope that I can give the noble Lord, Lord Hanningfield, further reassurances in regard to his Amendment 168B. The amendment would require local authorities not only to consent to the scheme for a new EPB before it is submitted to the Secretary of State but also to consent to the order that is produced from that scheme before it can be laid. The amendment provides an opportunity for me to put assurances on the record. I can assure the noble Lord that the Secretary of State would make only minor deviations from the scheme when making that statutory order because she would have to have regard to the scheme. The deviations would be necessary to ensure that the EPB worked effectively. The order would not contain any more significant changes unless they were agreed by all of the local authorities involved.

I hope that what I have said and the amendments that I have tabled will assure noble Lords that the bodies really are for the local authorities to choose to pursue and in no way for the Secretary of State to dictate.

The noble Baroness, Lady Hamwee, raised the issue of democratic accountability and the fact that these local authority bodies are not directly elected for the task. As I have said, I believe EPBs are a helpful option, but there are various precedents for local authorities pooling functions. In previous debates I have mentioned that integrated transport authorities and joint waste authorities exist to allow local authorities to set up a single entity. I know that EPBs are, admittedly, a significant extension because they allow a greater range of functions to be pooled, but they are the same principle.

As the noble Baroness said, democratic accountability is an absolutely fundamental issue. We take it very seriously and that is why we have provided in the legislation that there will be bodies that are completely controlled by the authorities concerned. They will have at least a majority of local authority members; other members will be there only because the local authorities want them and choose them; and all voting members will be councillors unless those councillors decide for themselves otherwise.

The noble Lord, Lord Hanningfield, raised issues of bureaucracy with me outside the Chamber and I should like to put on the record my response to his concerns. He was concerned that this could lead to additional layers of bureaucracy. We expect and want the opposite to happen. By working closely together within a formal structure, local authorities will be able to pool and streamline their activities across the sub-region and engage more effectively. For example, local authorities could second existing economic development staff to the EPB, providing for reduced duplication of tasks.

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