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The amendment would ask all local authorities to establish a youth council and prescribe in some detail how that youth council should be engaged with. As my noble friend Lord Tope has said, there are already youth councils and youth parliaments in many local authorities. Indeed, I recall that the former Lord Speaker-maybe the current Lord Speaker will do the same-has welcomed young people into this Chamber for a youth parliament to debate things about democracy. It is understood across Government that it is vital to engage young people in what is going to be their future. I do not think that there will be any disagreement about that.

The Government are already committed to these issues. The Department for Education has recently awarded grant funding of £850,000 to the British Youth Council for 2011-13 to provide support for young people's voice and involvement in decision-making at both local and national level in England. In addition, there is already a statutory duty on local authorities to provide sufficient educational and recreational activities for 13 to 19 year-olds, which includes a duty to take steps to ascertain the views of young persons on services and facilities and to secure that the views of qualifying young persons in the authority's area are taken into account.

The Department for Education will be consulting shortly with a view to producing new strategic guidance on this duty, which will reflect the findings of the recent Ofsted report on the commissioning of youth services, so there is a great commitment not only to the provision of these services but to young people's voice being heard. Those findings include the recommendation that rather than prescribing from the centre which services should be provided and to what level, the Government should look to local authorities to publish their own local offer of services to young people.

It is for that reason that, while I agree with much of what the noble Baroness has said, I am not able or minded to accept the amendment. As other noble Lords have said, it does not fit neatly into this legislation at this rather late stage. We do not want to be prescriptive about how local authorities provide services for young people, nor about how local authorities engage them in decision-making or how they create space for young people to have a collective voice. I reiterate that I know that a great many authorities already do this and value the views that they get.

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Lord Phillips of Sudbury: I apologise for interrupting the Minister's flow but, as she enumerates what the Government are doing to support citizenship, I cannot resist asking her whether she will make powerful representations to her colleagues in government not to take citizenship out of the compulsory secondary curriculum, as is now being anticipated.

Baroness Hanham: My Lords, I think I hear what my noble friend has to say. I will note that what he says is recorded. It is not a matter for my department, unfortunately, but I am sure that his views will be well received.

Regarding petitions, it is not right to make young people a special case in the way that has been proposed. If young people, then why not retired people, people from ethnic minorities or those with disabilities? It is difficult to group people and say that they can apply for a referendum. Young people and youth councils will, rightly, have every right to campaign and get involved in local democracy, as any other individual or group does.

The noble Lord, Lord Lucas, rightly drew attention to the fact that, while they would not be able to vote in a referendum on a neighbourhood plan, young people will be encouraged to be involved in the formation of what will affect their lives from what is happening round about.

I hope that, with that, the noble Baroness will be content to withdraw her amendment, on the understanding that there is a real commitment to understanding and engaging young people not only at national level but across the local authorities.

Baroness Royall of Blaisdon: My Lords, I am grateful to the Minister for her response and to all noble Lords who have participated in this short but important debate.

I have two or three responses. With regard to petitions, there is a specific reason why I tabled the amendment. I understand that the Minister would not wish to have separate sets of rules for elderly people, disabled people or whoever. The rules pertaining to petitions are for electors-therefore, people over 18. I am suggesting that there should be some means for people younger than 18 to be able to petition.

On youth councils, I was delighted to hear what the noble Lord, Lord Tope, said about what is happening in his council, and clearly there are things happening up and down the land. The fact is, though, that this is good practice but it is not everywhere. The Minister on behalf of the Government, we as the Opposition and indeed society should be doing more to ensure that young people are aware of what is happening. So often it is the same young people who participate in youth parliaments as participate in youth councils. I do not denigrate what they are doing-it is fantastic-but there are many other young people who we need to draw into this magic circle. We need to look together at innovative ways to do that. I trust that the Minister might go away and ask her officials to think about how we can ensure that there is a wider store of people whom we can enthuse about democratic engagement and engagement in our society.

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The noble Lord, Lord Tope, was right that so often we claim that we are going to listen to what people say, especially young people, but do not act upon it. We have to exhort decision-makers at every level, including at local council level, to take into account what young people are saying.

I am afraid that I have to return to a political point. I realise that the Government want to do their utmost to consult young people about the services that they want in their local areas, but the fact is that the cuts are such that there is no longer any money for this to be carried out by local authorities. Young people have needs that they can and do identify, but the answer that comes from local councils is, "We're afraid we can't do this because the money simply isn't there". As I said earlier, quite often local councils turn to charities and volunteers. I salute the fantastic work done by charities and volunteers, but we cannot rely on them alone. We have to have a proper youth service, properly financed up and down the country.

I plead with the Minister to go back to her officials and try to ensure that local authorities take youth services into account when they are looking at their budgets for next year. Youth services are too easily cut. At the moment, young people in our society are often not heard when they are making their arguments to people in authority, and I plead with the Minister to try to ensure that local authorities listen both to the arguments put by young people and to their needs in our society. With that, I beg leave to withdraw the amendment.

Amendment 195ZAZMAA withdrawn.

Clause 42 : Duty to hold local referendum

Amendment 195ZAZMB

Tabled by Lord Beecham

195ZAZMB: Clause 42, Page 38, line 17, leave out "one or more" and insert "at least one-third of the"

Lord Beecham: My Lords, I understand that this amendment, like many others, would become superfluous, if, as I apprehend, the Government are to accede to amendments to be moved by the noble Lord, Lord Greaves, effectively to remove from the Bill the provisions for local referendums except in respect of council tax increases deemed to be excessive. In the circumstances that I apprehend are about to occur, there is not much point in my moving this amendment, and therefore I will not do so.

Amendment195ZAZMB not moved.

Amendment 195ZAZN

Moved by Lord Greaves

195ZAZN: Clause 42, leave out Clause 42

Lord Greaves: My Lords, in moving Amendment 195ZAZN, a relatively short number compared with some we have just had, I shall speak to 17 others in this group, some of which are even shorter. The purpose

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of these amendments is to make the Bill itself even shorter, which I think would benefit the people of this country generally.

The first amendment removes Clause 42, which is the duty to hold local referendums-a duty to hold a local referendum under ordinary local election rules if a petition received by a council signed by at least 5 per cent of the electors in a ward, a county division, or the whole authority, is received. If passed, the result of the referendum would be advisory on the authority. The first amendment removes this duty from the Bill; the other 17 amendments in the group remove the remaining 17 clauses in this chapter of the Bill, which set out how the referendum procedures would operate and how the referendums would take place.

The reasons why I would like to do this were fairly fully set out when I spoke at Second Reading and described this part of the Bill as "nonsense", and in the discussions we had in Committee. It is a provision which is over the top. It would be very expensive in relation to its value, which would simply be advisory referendums, and if combined with a local election, it has the potential to distort that election. If it is free-standing, then it carries the whole costs of a local election. It is open to abuse by extreme groups; as I said in Committee, in my own ward, in Waterside in Pendle, less than 200 names would be required, and the last time I stood for election the BNP got more than 300 votes. It would also be open to people demanding large numbers of referendums on all kinds of things that the council would find it extremely difficult to refuse to hold.

There is the question of planning: the Government removed planning applications from the scope of this chapter, but not the plan-making process, where it really is superfluous to a process which already has provisions for public participation.

Councils already have the powers to hold referendums when they want to do so, and as I have already said, if passed, the referendums would only be advisory anyway. Councils could simply ignore them, and the whole thing would be a waste of money.

The Bill retains provisions for referendums in various specific cases, such as elected mayors, what the Government call excessive council tax increases, and neighbourhood plans. While I have views on those referendums I am not trying here to remove those provisions, but merely to remove the provisions for advisory local referendums in Chapter 1 of Part 4 of the Bill. I beg to move.

7.15 pm

Lord Tope: My Lords, I support my noble friend Lord Greaves in all that he has said. He has made a very persuasive case, and I would summarise it in words that we hear so often from the Dispatch Box: "My Lords, these provisions are not necessary". As my noble friend has said, local authorities are already able to hold referendums if they so choose. The provisions elsewhere in this Bill will widen that possibility-that scope-in a number of ways.

I believe that there are better ways of testing public opinion fairly than using the very suspect means of a referendum. Perhaps in the current financial climate,

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even more persuasive is the fact that they are very expensive to hold. They are misleading to members of the public, who will not unnaturally think that if the local authority has gone to all the trouble of establishing a referendum using the full electoral process, then they will actually implement whatever the result is. Yet the provisions here are not binding; a local authority, if it is so minded-and brave enough-may well then decide not to abide by the outcome of the result of the referendum.

I will end where I began, in the words that I know the Minister believes to be most persuasive, because they are the words that she and her colleagues use so often to the rest of us when we are moving amendments: "My Lords, these provisions are simply not necessary".

Baroness Hanham: My Lords, before we go any further it may be in the interests of the House if I indicate probably what is now the worst kept secret-that the Government will be minded to accept these amendments, and there may be further debate.

Lord True: My Lords, I do not wish to inject a note of dissent entirely, because noble Lords who were in Committee will know that I was one of those who was extremely critical of many of the prescriptive aspects of what was laid out in the Bill. Indeed I have laid amendments with my noble friend Lord Howard to raise the question of whether referendums might be binding in certain circumstances.

I do not fear the use of referendums; they will be possible, and I hope that in endorsing the decision of the Government, the message will not go out from the House that somehow referendums are in all circumstances undesirable or unwanted. I know that that is not the Government's intention otherwise they would not have presented us with the Bill in the first place, but in the general maelstrom of enthusiasm that I am sure will follow this announcement, it is important for someone to place it on the record that in terms of localism and popular voice, a referendum can be a powerful and legitimate weapon of public power and authority.

One of the problems with what was drafted by the Government was not only its prescriptiveness but of course the ease with which it could be used, which led to all the problems of cost and potential abuse, and that is where we got into a number of difficulties. The noble Lord, Lord Beecham, withdrew an amendment which was effectively going to restrict the ability of one or two councillors to interfere or manipulate the process of these referendums.

Since we are going to discuss this matter late here tomorrow in relation to neighbourhood orders, Amendment 207, which gives the power to individual ward members to exercise a stopping power, is not desirable. That reason why the Government's referendum provisions are not desirable is a good reason why I support the Government's action in withdrawing this. It is important to state that, from my perspective as the leader of a local authority, a referendum is a weapon that can and should be used and should be accepted by those in local government.

Lord Brooke of Sutton Mandeville: My Lords, I shall be extremely brief. My morale has been sustained throughout the Recess by the prospect of shortly

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moving Amendment 195ZB, in which I see I have the support of the noble Lord, Lord Beecham. That amendment is directed at the issue that the noble Lord, Lord Greaves, has addressed. I tabled it at the request of the British Retail Consortium. If it makes any difference to any doubts in the mind of my noble friend the Minister about what she is about to say, she will have the British Retail Consortium on her side when she does so.

I am less sure that Amendments 195D and 195E to Clause 59, which are in my name, will now be unnecessary. If we are to have a break for dinner, there may be an opportunity to find out whether they need to be moved.

Lord Lucas: My Lords, I am significantly less well informed than the noble Lord, Lord Beecham. This has caught me by surprise, particularly since, in various discussions with my noble friend's officials, the local referendum was used to ward off my requests for amendments in other areas. To go over some of my concerns, I have, throughout the passage of the Bill, tried to persuade the Government that they need to look at how localism will work in cities. In rural and suburban areas, planning is a great lever and generator of funds. All things will be possible if we get the planning side right. Once you have funds, you have the ability to do what you want in a neighbourhood to a certain extent. You certainly have a lever with which to negotiate with the local authority.

However, even in as gentle an urban area as Lavender Hill, planning has no function as a raiser of funds or people's enthusiasm. The place is built out. There is very little that planning can do. You will never get a community created in Lavender Hill, let alone some of the more difficult areas of cities, on the basis of what is in the Bill. We should be turning our thoughts to how the section on allowing local initiatives to run local services might be made less formal so that neighbourhoods might group around it. We ought to turn our minds to how neighbourhoods can make representations to local councils and be listened to on subjects that they really care about, such as school catchment areas, how parking is enforced and how decisions are made about the distribution of services.

There are many ways in which we might build localism in cities. Surely the riots have shown us the importance of doing that. However, in removing this provision the Government remove the one bit of the Bill that gives a possible voice to neighbourhoods in cities in trying to persuade their local councils to do something in the way that the neighbourhood wants them to be done. I will not argue with the Minister and my other noble friends that what is in the Bill at the moment is not an expensive and bureaucratic way of doing it, but we have to find something else. The Bill is such an opportunity to improve life in cities but the Government do not seem interested in taking it. I find that enormously disappointing. I am particularly sad that-since somewhere in the great collective mind that is the department there is an awareness of my arguments-I should be kept in the dark and not given time to prepare thoughts and arguments to compensate for

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this loss later in the Bill. I shall apply myself to it for the rest of the evening. With luck, we shall not get so far into the Bill that I cannot find ways of putting back opportunities to argue these things. As I say, my main concern is that this great opportunity to help build communities in cities is being allowed to pass by at a time when we are all acutely aware that it should not be.

Lord Beecham: My Lords, I very much welcome the Government's decision to accept the amendments of the noble Lord, Lord Greaves. We debated this at some length in Committee. The drawbacks of the system that the Government had intended to bring in were made manifest at that time. The Government, having made the egregious error-in the view of some of us-of adopting an American system for the direct election of police commissioners, were in danger of incorporating something like a Californian referendum system into local government. It has not been noticeably successful in California.

A referendum is a legitimate way of testing public opinion. That is absolutely right. It is less obvious that the proposals in the original Bill-to allow a very small minority of either elected members or the public to engender petitions on any subject under the sun, at any time and at any cost-would make a significant contribution to the kind of community engagement that the noble Lord, Lord Lucas, rightly wishes to see not only for the Lavender Hill mob but more generally. It is a perfectly legitimate and, indeed, important part of what local government and local governance must be about. However, there are other ways of involving communities and testing opinion. It is a pity that one of those ways-the petitioning procedure that was admittedly somewhat overcomplicated by the degree of regulation applied to it-has been abolished by the Bill. It required a council response to a petition from residents. It was a good measure. The noble Lord, Lord Shutt, made great play of the fact that it was extremely bureaucratic in the way that the previous Government laid out how these things should be conducted. There was some force in that but the principle was a good one. It required an authority to respond to a concern that was formally raised by petition. I hope that the Government might, even at this late stage, given that they have taken out this part on referendums, look again at whether that might be reintroduced, perhaps in some more acceptable form than previously.

There is also the councillor call for action. I do not think that the Government have disturbed that principle. Admittedly, it is up to a local councillor to make the call but, on the other hand, a councillor who declines to make a call when faced with a considerable body of opinion in his ward is unlikely to remain a councillor for long. There is also that mechanism. Generally, in recent years local government has been more inclined to establish local mechanisms for consultation and involvement. I hope that that will be reinforced. However, the substantial construction of the previous arrangements for referendum effectively constituted an invitation for people to make mischief, which would have happened, to divide communities, which would also have happened, and to involve the authority in considerable expense. It could run into hundreds of thousands of pounds for a

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significant-sized authority. The noble Lord, Lord True, expressed serious concerns on that basis. Therefore, we very much welcome the withdrawal of this proposition, which leaves three areas where referendums might occur, as we have heard. We shall come to one of those, namely the council tax referendum, shortly.

Under the circumstances, I am not sure that it is right at this point to raise some of the concerns of the Electoral Commission, with which some of your Lordships will be familiar, about how such referendums-now in only three categories-might be conducted. It raises a concern about expenditure in promoting referendums of that kind. Clearly, for local referendums that are being abandoned it will no longer apply. However, it will still be potentially applicable to other referendums-the three that have been referred to, on elected mayors, council tax and neighbourhood planning issues, which we will eventually come to. I raise it now so that Ministers might have an opportunity to think a little about the Electoral Commission's concerns. They may of course have a response already; but if they have not, then those concerns will not disappear because these particular provisions are no longer to feature in the Bill.

I hope that in the course of further debate we will have an elucidation of the Government's position in relation to what is a real concern in respect of how the remaining referendums might be conducted, and, more particularly, how they might be financed. Subject to that, I certainly support the amendment of the noble Lord, Lord Greaves, and I am pleased that the Government are, as the noble Baroness so gently puts it, minded to accept them.

7.30 pm

Baroness Hanham: My Lords, I do not know that there is an awful lot more to say. It is interesting that at this stage of the proceedings we have a rather limited number of people here to debate what, in Committee and at Second Reading, was a significant and major issue, with barely a friendly voice in place for these provisions. I therefore say to a rather muted House that we have listened to the concerns and anxieties that were raised over all those aspects put forward by the noble Lords, Lord Greaves and Lord Tope, and others, about the expense. We have decided with regard to towns that the local referendums do not need to have a place within this Bill.

If I may just briefly address my noble friend Lord Lucas, who-if he will forgive me saying so-has strayed a little bit away from what these amendments would do. This is no attack on the cities. It is nothing to do with the cities. It is a general point of view and a general provision that would have allowed anybody-urban, rural, whatever-to have referendums. It has nothing to do with planning, either, as the planning referendums are not affected by this Bill, and we will be returning-probably on Wednesday-to the whole area of provisions for neighbourhood planning and neighbourhood referendums.

As other noble Lords have said-as the noble Lord, Lord Greaves, pointed out in his introduction and as the noble Lord, Lord Beecham, has said as well-there are going to be other opportunities for referendums.

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Not only are there the council tax referendums, there are the right-to-build referendums and the neighbourhood planning referendums. Those complement the provisions for referendums which are already open to councils to carry out on governance. Any council may carry out parish polls and informal polls which are to do with its services and functions. We believe that there is pretty good coverage of this, and that there is the chance for people to have their voice heard without these provisions.

We have accepted what has turned out to be the will of the House at a much earlier stage, namely that these provisions should be reconsidered. We have reconsidered them, and therefore I tell the House that we will accept the amendments of the noble Lords, Lord Greaves and Lord Tope.

Lord Beecham: Before the noble Baroness sits down, first of all I hope that she will forgive me for not thanking her, as I should have done, for responding, as she has just said, to the will of the House. It has been another very constructive contribution, and I am sure the whole House is grateful to her. Could I ask in respect of the issue raised by the Electoral Commission, which I appreciate is a slightly wider issue, whether the Government will be looking at that before we get to Third Reading, as there will be areas in which it might be relevant?

Baroness Hanham: My Lords, I have seen the Electoral Commission's submissions in relation not only to the costs, but to questions and to how it should be involved. I cannot give the noble Lord a direct answer but it does seem to me to be inconceivable that we should not take quite serious note of the Electoral Commission's representations on this. I am sure we will come back to that issue.

Lord Brooke of Sutton Mandeville: My Lords, if I may intervene before the noble Lord, Lord Greaves, winds up: am I to take it from what the Minister said that we will not be debating any amendments which involve the clauses up to at least Clause 59, as these are in fact going to leave the Bill? If that is so-and the Minister is nodding her head-may I say that the amendments which I was going to move arose because of the serious gap in understanding between the Common Council of the City of London and her department about the size of the Corporation of the City of London's voting arrangements? I hope it will be possible-if she could perhaps give me a nod again-to deal with these matters in correspondence, simply in order to remove the misunderstandings which clearly still exist in the Bill.

Baroness Hanham: My Lords, I confirm that Clause 59 would go, along with all the other clauses, because what the amendments of the noble Lord, Lord Greaves, effectively do is to take out the whole of Part 4. If there are still areas that need clarity-and the noble Lord, Lord Brooke, has said that there are-then I will of course write to him to clarify the amendments he has tabled, although I am bound to say that I do not think that they can be of relevance any more under the circumstances.

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Lord Greaves: My Lords, my amendments take out the whole of Chapter 1 of Part 4. I would be quite happy to take out the whole of Part 4 but I do not think I would get quite so much enthusiasm from the government Front Bench.

Like my noble friend Lord Lucas, I have some concern that localism in this Bill is very rurally orientated-village-orientated and small-town-orientated-while over half the population of this country lives in large towns and cities. We have a lot of hard work to do in working out how localism will work in those areas.

I am grateful for the very welcome support of the noble Lord, Lord Beecham. I do not agree with him, as he knows, about the petitioning procedure which has been removed. When the Bill introducing that procedure came to this House, I struggled manfully to stop it. I am delighted that it has now gone, and I am delighted that struggling manfully against this Bill has had a little more success. That does not mean to say that councils should not deal with petitions properly, expeditiously and seriously: they clearly should. However, bureaucratic procedures laid down from on high are not the way to do so.

Finally, I congratulate and thank my noble friend the Minister, and the whole Government but particularly the Communities and Local Government Ministers, on and for their support for these amendments.

Amendment 195ZAZN agreed.

Clause 43 : Petition for local referendum

Amendments 195ZAZNZA and 195ZAZNA not moved.

Amendment 195ZAZP

Moved by Lord Greaves

195ZAZP: Clause 43, leave out Clause 43

Amendment 195ZAZP agreed.

Clause 44 : The required percentage

Amendment 195ZB not moved.

Amendment 195ZC

Moved by Lord Greaves

195ZC: Clause 44, leave out Clause 44

Amendment 195ZC agreed.

Clause 45 : Request for referendum

Amendment 195ZCA not moved.

10 Oct 2011 : Column 1414

Amendment 195ZD

Moved by Lord Greaves

195ZD: Clause 45, leave out Clause 45

Amendment 195ZD agreed.

Clause 46 : Duty to determine appropriateness of referendum

Amendment 195ZE

Moved by Lord Greaves

195ZE: Clause 46, leave out Clause 46

Amendment 195ZE agreed.

Clause 47 : Grounds for determination

Amendments 195A and 195AZA not moved.

Amendment 195AA

Moved by Lord Greaves

195AA: Clause 47, leave out Clause 47

Amendment 195AA agreed.

Clause 48 : Petitions: special cases in which holding of referendum is discretionary

Amendment 195B not moved.

Amendment 195BA

Moved by Lord Greaves

195BA: Clause 48, leave out Clause 48

Amendment 195BA agreed.

Clause 49 : Action following determination in response to petition

Amendment 195BB

Moved by Lord Greaves

195BB: Clause 49, leave out Clause 49

Amendment 195BB agreed.

Clause 50 : Action following determination in response to request

Amendment 195BC

Moved by Lord Greaves

195BC: Clause 50, leave out Clause 50

Amendment 195BC agreed.

10 Oct 2011 : Column 1415

Clause 51 : Resolution for local referendum

Amendment 195BD

Moved by Lord Greaves

195BD: Clause 51, leave out Clause 51

Amendment 195BD agreed.

Amendment 195BDA not moved.

Clause 52 : Question to be asked in local referendum

Amendment 195BE

Moved by Lord Greaves

195BE: Clause 52, leave out Clause 52

Amendment 195BE agreed.

Clause 53 : Date of referendum

Amendment 195BF

Moved by Lord Greaves

195BF: Clause 53, leave out Clause 53

Amendment 195BF agreed.

Clause 54 : Publicity for and in relation to local referendum

Amendment 195BFA not moved.

Amendment 195BG

Moved by Lord Greaves

195BG: Clause 54, leave out Clause 54

Amendment 195BG agreed.

Clause 55 : Voting in and conduct of local referendums

Amendment 195BH

Moved by Lord Greaves

195BH: Clause 55, leave out Clause 55

Amendment 195BH agreed.

Clause 56 : Consequences of local referendum

Amendment 195BHA not moved.

Amendment 195BJ

Moved by Lord Greaves

195BJ: Clause 56, leave out Clause 56

Amendment 195BJ agreed.

10 Oct 2011 : Column 1416

Clause 57 : Application to parish councils

Amendment 195BK

Moved by Lord Greaves

195BK: Clause 57, leave out Clause 57

Amendment 195BK agreed.

Clause 58 : Discharge of functions

Amendment 195BL

Moved by Lord Greaves

195BL: Clause 58, leave out Clause 58

Amendment 195BL agreed.

Clause 59 : Interpretation

Amendments 195C to 195E not moved.

Amendment 195F

Moved by Lord Greaves

195F: Clause 59, leave out Clause 59

Amendment 195F agreed.

Schedule 5 : New Chapter 4ZA of Part 1 of the Local Government Finance Act 1992

Amendment 195G not moved.

Amendment 195H

Moved by Lord McKenzie of Luton

195H: Schedule 5, page 278, line 38, at end insert-

"( ) On application by a relevant authority, the Secretary of State may direct that the substitute calculations referred to in subsection (5) may be increased by an amount determined by the Secretary of State."

Lord McKenzie of Luton: My Lords, the purpose of the amendment is to try to have a safety valve in the arrangements for referendums around council tax, and for the outcomes of those, whereby the Secretary of State, notwithstanding the early determination, may direct that a substitute calculation can be increased by an amount determined by the Secretary of State. When we debated these amendments before we instanced particular circumstances where it was perhaps difficult for a local authority to disclose fully some of the sensitivities around its budget. Those matters might be commercially confidential or there might be a dispute outstanding. To spell out the consequences, risks and costs associated with that that could fall on the local authority, which could be difficult and prejudice its position. Hence the proposition that there should be an opportunity for the Secretary of State, obviously after discussions, to increase the amount determined. It may be that the Minister will say that this could be

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dealt with earlier in the process when the Secretary of State designates certain categories of authority, and that there will then be scope through that discussion to itemise just a few or even one particular local authority. That would be the mechanism to allow a council tax increase which was relevant to that local authority, but which was greater than the amount generally determined. That is the purpose of the amendment. I beg to move.

Earl Attlee: My Lords, I fear that my response on this occasion will be fairly similar to the previous one. The amendment does not take account of the fact that the provisional principles for council tax referendums will be announced at the same time as the provisional local government finance settlement. Authorities will then have the opportunity to make the Secretary of State aware of any exceptional circumstances that they consider he should take into account when determining the principles.

The noble Lord, Lord McKenzie, suggested that there may be financial problems that the local authority is reluctant to disclose. But what about being open to the Secretary of State about its problems? Surely it would want to keep the Secretary of State informed. I do not understand how the situation could arise whereby a local authority was in severe difficulties but wanted to keep that quiet from the Secretary of State.

Lord McKenzie of Luton: I am sorry if I was not clear. The concern was not about being open and transparent with the Secretary of State, but about the process of a referendum laying bare some difficult situations that could prejudice the outcome of those so far as the wider public is concerned. Obviously, in due course, everything would have to be properly reported and accounted for in the public domain, but there could be some sensitivity around issues just at the point where the referendum might be undertaken. That is the issue we are seeking to safeguard.

7.45 pm

Earl Attlee: I think that I can accept, as the noble Lord describes, that you might not want to make the difficulties public at the time of the referendum, should that be necessary, but I do not understand why the local authority would not make it clear to the Secretary of State that there was a problem locally. It might have been a minor disaster, or a facility could have been destroyed, for example. The Secretary of State may or may not be aware of it but the local authority could tell the Secretary of State, and if it is a matter that does not need to be fully advertised then the Secretary of State could perhaps put it in a different category. It might be common knowledge, and therefore it would not be a surprise that the local authority was put in a different category.

In addition, if an authority is faced with difficulties prior to the referendum being held, the Secretary of State may direct that the authority need not hold a referendum if he considers that it will be unable to discharge its functions effectively or unable to meet its financial obligations. It cannot be right to allow an authority to apply to set an excessive council tax after

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it has been rejected by the electorate, nor can it be right for the Secretary of State to set a higher level of council tax after a referendum.

I do not think that this is localist. Indeed, it would defeat the whole reason for having a council tax referendum in the first place-to let the local electorate decide. I therefore ask the noble Lord to withdraw the amendment.

Lord McKenzie of Luton: My Lords, I am grateful to the noble Earl for his explanation. We had this response and exchange previously. I should stress that I was not in any way suggesting that a difficulty which a local authority may be in should not be fully shared with the Secretary of State. I was simply expressing the difficulty, at that point in time, of having to expose it fully in the public domain because of the adverse consequences that it might bring, to the detriment of the taxpayers in that area. That was the issue that I was seeking to pursue.

I take the noble Earl's point that doing this perhaps after the referendum has been lost would seem to negate that process. However, I hang on to the point that there needs to be some mechanism to deal with it. The noble Earl referred to provisions, which we will cover in a different way in Amendments 196A and 196B, whereby if the Secretary of State is of the view that an authority is unable to discharge its functions or would be unable to meet its financial obligations the Secretary of State can step in. However, when we discussed that matter last time, it emerged that that would be an in extremis situation and I am still trying to focus on an issue when that situation has not been reached but it might be a material contractual issue that the local authority is facing. The issue may have reached a critical stage in negotiations, or there may be litigation pending or under way. I am suggesting a safety valve to deal with that.

If the Minister is saying that the best way of dealing with that is to have these discussions earlier so that there can be a separate category for that authority, I would accept that as a route forward. Quite how it would be viewed by the wider public if an individual authority, which presumably would have to be named, were to be separately categorised, and the inferences that might be drawn, could give rise to some-

Earl Attlee: My Lords, you could have a category with a single authority or with two authorities that have some bad luck, where something went wrong, and they could be treated a little more generously than others.

Lord McKenzie of Luton: Again, I am grateful for that. I hold to the view that although it may help in some instances, being named separately in a category with a potential council tax increase that was greater than that of most other authorities could itself engender inquiries, concerns and speculation over what might be going on. There is no easy way round this but I am happy to accept the Minister's assurance that this type of issue could be dealt with through the mechanism that he identifies. I am content to leave it there and beg leave to withdraw the amendment.

10 Oct 2011 : Column 1419

Amendment 195H withdrawn.

Amendment 195J not moved.

Amendment 195K

Moved by Lord McKenzie of Luton

195K: Schedule 5, page 285, leave out lines 31 to 45

Lord McKenzie of Luton: My Lords, I beg to move Amendment 195K but shall not move Amendments 195L or 195M because this is an overlapping provision. This amendment would delete the detailed list of issues where guidance can be given by the Secretary of State in relation to a referendum. Regulations can touch upon provisions relating to: the question to be asked; the publicity to be given in connection with a referendum; the limitation of expenditure in connection with a referendum; the conduct of the authority, members of the authority and officers of the authority; when, where and how voting in a referendum is to take place; how the votes cast in a referendum are to be counted; and for disregarding alterations in a register of electors and so on. I contend that those issues should be left to the local authority to determine. If we are to be adherent to localism and want to trust local authorities, then we do not need this degree of prescription.

I am afraid that I missed all the fun over the removal of referendums earlier in the Bill as I was in the Committee on the Welfare Reform Bill. This is one area where referendums clearly remain in the Bill but I believe that the prescription should be removed.

Earl Attlee: My Lords, this amendment removes the power to make regulations in relation to significant issues relating to the conduct of council tax referendums. If there are to be no regulations, what are there to be? Are authorities to be left to make up their own rules on conducting council tax referendums and counting the votes?

Voters are entitled to see referendums handled in a consistent way with proper safeguards. The Government have accepted, on the recommendation of your Lordships' Delegated Powers and Regulatory Reform Committee, that the regulations should be subject to the affirmative resolution procedure.

When I responded to similar amendments proposed in Committee, I said that the regulations would be modelled on existing regulations on the conduct of referendums on local government executive arrangements and would be subject to consultation with the Electoral Commission. Therefore, we are not suggesting a completely different system for operating a referendum; we are merely suggesting changes, where necessary, for this particular type of referendum.

Given that the regulations will be given considerable scrutiny and will be subject to the approval of both Houses, I request that the amendment be withdrawn.

Lord McKenzie of Luton: My Lords, I do not think that we are going to agree on this issue. We think that the Bill is unduly prescriptive and unnecessary. Clearly, the local authority has to have a referendum if it is going to deal with its council tax levels or if it wishes

10 Oct 2011 : Column 1420

to go above the designated level. It cannot avoid that. If it acted spuriously or arbitrarily, it could obviously be held accountable for that.

There is also the question, which we touched on in Committee, of what happens if the referendum is found to be flawed in some respect in due course. What happens to the declared outcome of that referendum? That is an adjunct to these provisions but, on the specifics of seeking the removal of this prescription, I think that I understand the Government's position. I do not agree with it but I do not see that there is a great point in pursuing it further this evening and I beg leave to withdraw the amendment.

Amendment 195K withdrawn.

Amendments 195L and 195M not moved.

Amendment 196

Moved by Earl Attlee

196: Schedule 5, page 286, line 6, at end insert-

"(6A) No regulations under this section are to be made unless a draft of the regulations has been laid before and approved by resolution of each House of Parliament."

Earl Attlee: My Lords, in its report, your Lordships' Delegated Powers and Regulatory Reform Committee recommended that regulations made under new Section 52ZQ should be subject to the affirmative procedure.

These regulations will set out the rules for conducting council tax referendums, and I am content that the Bill should be aligned with this recommendation. To give effect to this recommendation, Amendments 196 and 197 will add new subsection (6A) to new Section 52ZQ of the Local Government Finance Act 1992, which is inserted by Schedule 5 to the Bill, and will amend Schedule 6 accordingly.

There are a number of further minor and technical amendments-Amendments 197A, 197ZA, 197ZB, 197ZC, 197ZD and 197ZE. These do not alter the policy effect of the council tax referendums provisions but they ensure that minor drafting errors are corrected and that the provisions operate appropriately in relation to Wales. If your Lordships desire, I can give more detail on these amendments, but I assure noble Lords that they are minor and technical. I beg to move.

Lord McKenzie of Luton: My Lords, I am content with the government amendments and have no points to raise in connection therewith. Although they are grouped together, I have not yet spoken to Amendments 196A and 196B. I do not know whether they will be called separately but I can support the government amendments as they stand.

Amendment 196 agreed.

Amendment 196A

Moved by Lord McKenzie of Luton

196A: Schedule 5, page 286, line 12, at the beginning insert "Subject to subsection (1A),"

Lord McKenzie of Luton: My Lords, this amendment takes us back to the point that we touched on earlier this evening: whether circumstances might arise where currently the Secretary of State can determine whether

10 Oct 2011 : Column 1421

an authority will be unable to discharge its functions in an effective manner or will be unable to meet its financial obligations unless it has a so-termed excessive council tax increase. Our amendment would bring to that process the right to seek an independent assessment of those same criteria, so that there is a process, other than, or in addition to, the Secretary of State's own engagement with that decision. That may, in part, provide a route for dealing with the issue that we discussed earlier concerning one-off events arising for local authorities.

My understanding is that these tests are to be judged in the extreme-only if there is a cataclysmic situation and not one somewhere along the spectrum before that. I do not think that that is what the wording actually says or what the natural meaning would be. However, I believe that an authority should have a right to an independent assessment when it is heading towards situations which are very serious for it and which, without an excessive council tax increase, it could not see its way through.

Earl Attlee: My Lords, similar amendments were withdrawn in Committee. I set out the Government's position there and my noble friend Lady Hanham followed up in significant detail in her letter to the noble Lord, Lord Beecham, dated 19 July, a copy of which has been placed in the Library of the House. I shall not repeat all those points in detail, other than to reiterate that it would be inappropriate for an unelected and unaccountable person to make the decision, which will involve a judgment about whether local taxpayers should be entirely unprotected from excessive increases for a financial year.

My noble friend's letter made it clear that authorities will be able to make the Secretary of State aware of any special circumstances applying to them during the process when council tax principles are formulated and finally determined. We talked about the possibility of having a separate category. If my right honourable friend got this decision wrong, clearly there could be very serious consequences if it turned out that a local authority was not able to carry out its functions, and there would be political repercussions for my right honourable friend. My noble friend also said the Government would keep an open mind about the context within which this power to disapply a council tax referendum would be used. With this in mind I would ask the noble Lord to withdraw these amendments.

8 pm

Lord McKenzie of Luton: My Lords, I am grateful again for that assurance being on the record. As with our earlier discussion, if the categorisation of authorities heading for severe difficulties is the route to deal with it, I am pleased to see that on record. I beg leave to withdraw the amendment.

Amendment 196A withdrawn.

Amendment 196B not moved.

10 Oct 2011 : Column 1422

Schedule 6 : Council tax referendums: further amendments

Amendment 197

Moved by Baroness Hanham

197: Schedule 6, page 302, line 13, at end insert-

"31A In section 113(3) (orders and regulations to be subject to annulment by either House of Parliament, except in certain cases) after "except in the case of" insert "regulations under section 52ZQ above or"."

Amendment 197 agreed.

Clause 62 : Council tax calculations by billing authorities in England

Amendment 197ZA

Moved by Baroness Hanham

197ZA: Clause 62, page 50, line 14, leave out "and (e)" and insert ", (e) and (f)"

Amendment 197ZA agreed.

Clause 63 : Council tax calculations by major precepting authorities in England

Amendment 197ZB

Moved by Baroness Hanham

197ZB: Clause 63, page 52, line 29, leave out second "a" and insert "the"

Amendment 197ZB agreed.

Schedule 7 : Council tax: minor and consequential amendments

Amendments 197ZC to 197A

Moved by Baroness Hanham

197ZC: Schedule 7, page 307, line 26, after "(7)(a)" insert "-

(a) in sub-paragraph (i) omit "general fund or (as the case may be)", and

(b) "

197ZD: Schedule 7, page 310, line 17, at end insert-

"(3A) In subsection (2)(a) omit the words from ", other than" to "1988 Act".

(3B) In subsection (3)(a)-

(a) at the end of sub-paragraph (i) insert "or", and

(b) omit sub-paragraph (iii)."

197ZE: Schedule 7, page 310, line 34, at end insert-

"(3A) Omit subsection (3).

(3B) In subsection (4) omit "or subsection (3) above"."

197A: Schedule 7, page 314, line 30, at end insert-

"Police Reform and Social Responsibility Act 2011

52 The Police Reform and Social Responsibility Act 2011 is amended as follows.

53 In section 19(7)(f) (function of calculating budget requirement may not be delegated by police and crime commissioner)-

10 Oct 2011 : Column 1423

(a) after "calculating a" insert "council tax requirement or a", and

(b) after "section" insert "42A or".

54 In section 23(2) (minimum budget for police and crime commissioner: amendments to section 41(1) of the Police Act 1996) for paragraph (c) substitute-

"(c) for "its" substitute "the commissioner's"."

Amendments 197ZC to 197A agreed.

Clause 69 : Duty to consider expression of interest

Amendment 197B

Moved by Lord Shutt of Greetland

197B: Clause 69, page 60, line 20, at end insert-

"(2A) The persons or bodies who may be specified by regulations under subsection (2)(d) include a Minister of the Crown or a government department."

Lord Shutt of Greetland: My Lords we now move to that part of the Bill regarding right to challenge. The first set of Government amendments-there are eight amendments in the group-seek to improve the workability of the right and to clarify certain issues that arose in response to our recent consultation exercise and indeed at the Committee stage in your Lordships' House. Our consultation on the community right to challenge showed there is a real appetite to extend the duty to consider challenges under the right to more public authorities, including central government departments. Seventy-three per cent of respondents on this issue supported this course of action and I believe it has the support of many in this House. During our deliberations in Committee the noble Lord, Lord Jenkin, suggested several services provided by government departments to which the right could be extended.

Clause 69(2)(d) already gives the Secretary of State the power to add other persons or bodies carrying on functions of a public nature as relevant authorities. Amendment 197B ensures that these persons or bodies could include a Minister of the Crown or a government department. Amendment 197C ensures that if the duty is extended to a person or body that exercises functions outside England, the right to submit an expression of interest will apply only to services provided by that person or body in England.

Amendment 197D responds to a query raised by the noble Lord, Lord Patel, in Committee about whether a public or local authority could be a community body. This was never our intention. In line with the definition of a voluntary body in Clause 69(6), we are therefore amending Clause 69(8) to clarify that a public or local authority cannot be a community body.

Amendments 197E, 197F, 197G and 197H are about enabling relevant authorities to determine timescales. They make changes to the provisions on the timescales associated with the community right to challenge in response to concerns raised by many local authorities, and others, during our recent consultation. These concerns focused on the difficulty of setting timescales nationally that could take account of the wide variations in services and circumstances and did not interfere with timescales for existing commissioning cycles. We agree with these concerns and are therefore amending

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the provisions to remove the Secretary of State's powers to set timescales in regulations and replace them with a requirement for relevant authorities to set these timescales instead. We intend to set out in guidance, to which authorities will need to have regard under Clause 73(2), the factors they should take account of in doing this.

We have outlined what we expect these factors to be in the policy statement on the community right to challenge which was recently made available to Peers. Chief among them is the need for authorities to set timescales that give relevant bodies sufficient time-whether that is to prepare and submit an expression of interest or organise themselves to bid effectively in a procurement exercise or ensure relevant bodies are notified of decisions within a reasonable time. Authorities will also be required to publish details of these timescales.

Amendment 197E therefore removes the Secretary of State's powers to specify the minimum periods which authorities can specify for the submission of expressions of interest. Clause 70(2) already enables authorities to specify periods for the submission of expressions of interest and Clause 70(3) to publish details of these periods.

Amendment 197F removes the Secretary of State's power to specify the minimum and maximum periods which must elapse between the acceptance of an expression of interest and the commencement of the procurement exercise. Instead authorities are required to specify and publish details of these periods, which can be different for different cases.

Finally, Amendments 197G and 197H remove the duty on authorities to make a decision on an expression of interest within a timescale specified by the Secretary of State in regulations. Instead the authority must specify and publish the maximum time this decision will take. In order to prevent delay, relevant authorities will also be required to inform the relevant body of this maximum period in writing, either within 30 days of the end of the period for receiving expressions of interest, or where none exists, within 30 days of receiving an expression of interest. It must then notify the relevant body of its decision within the timescale it has specified. I beg to move.

Lord Lucas: I should be very grateful if my noble friend could go into a little more detail about Amendment 197E. He has removed there the ability of the Secretary of State to set minimum timescales. I understand what he says about flexibility. But if a local authority wishes to discourage activity under this part of the Bill, then timescales are where it will squeeze most easily. As my noble friend says, community organisations will take time to get themselves organised, to get their bids in and get them up to the standard required for subsequent scrutiny and competition. It is not clear to me in all the liberalising-from the point of view of the local authority-which is going on in these amendments, how the community, or bits of the community, can effectively appeal against, or have some notice taken, of a local authority which is setting very short timescales, which make things impracticable. There is guidance there. If the local authority does not go along with guidance, there does not seem to be any set of teeth that can be sunk into the local authority.

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My experience of this is mostly in terms of parking regulations. There, again, the Government issue guidance. If the local authority goes against that guidance, no one takes any action of any description at all. Here it seems to be rather more important that in order to encourage action under this part of the Bill, there is an effective policing of the actions of local authorities to make sure that they are opening themselves up to what must be in many cases an inconvenient and, in their view unnecessary, application of neighbourhood rights and interests, with a system which they have got running very nicely, thank you very much. I would very much like some comfort that there will be an effective substitute for the backstop provided by the Secretary of State in the Bill as we have it now, which is being removed by these amendments, in cases where a local authority is acting to make this part of the Bill unworkable. I hope my noble friend can give me some comfort on that.

Lord Shutt of Greetland: I do not know whether I can give the noble Lord any comfort. The problem is that, on the one hand, people are asking for localism and letting the locals decide and, on the other hand, the noble Lord is saying, "Let the Secretary of State be on their back". We cannot have it both ways. We certainly hope that people will be reasonable. For example, to have an expression of interest that is open for five minutes would not be reasonable. I should have thought that there would be other ways in localities to put a stop to that. It is as a result of our earlier debates and concerns about the Secretary of State being too prescriptive in these matters that some of these amendments have been brought forward. I should have thought that that would be appreciated by the House. But we are seeing the other view, which I know exists from time to time, that there will be recalcitrant local authorities which will not get on with things as people hope they might. I think we have moved in the right direction and, if it goes wrong and the recalcitrant authorities become a multitude, clearly something would have to be done, but perhaps we ought to trust local people and local authorities.

Lord Greaves: I take it that that was not the Minister's reply to the debate. I have three brief points to make. We are moving on to the community right to challenge, and some of us have found it quite difficult to understand how it will work and how some of the problems which might result will be overcome. I thank the Bill team for their time and patience in explaining exactly how they see it working and being fairly honest about some of the difficulties which might exist. This is a difficult part of the Bill and it is one which, when it is enacted, as no doubt it will be, will need a careful eye kept on it. I cannot say that we have not had an immense amount of co-operation in trying to thrash it out.

I very much support Amendments 197B and 197E to 197G on the timing issues. Those are clearly a result of responding to the public consultation, but also to the discussions in Committee. I do not share the worries of the noble Lord, Lord Lucas, about the timing issues. The way in which the timing issues are now presented in the Bill is much better and leaves a great deal of initiative to local authorities. It is much

10 Oct 2011 : Column 1426

better than the existing wording which leaves it all to the Secretary of State to lay down rules and regulations. I wish that the Government had been more flexible on similar matters in the 100 or so areas in the Bill that we can point to as giving excessive powers to the Secretary of State. In this instance, the Government have listened and we welcome that.

Lord Beecham: My Lords, the Minister referred to the extension to Ministers of the definition of agencies which might be subject to the right to challenge. That is the burden of Amendment 197B. Perhaps in his reply the Minister might indicate whether that could also include next-step agencies of government, which might carry out functions. More particularly, when one looks at Amendment 197D in conjunction with Amendment 197B, it seems to me that something of an anomaly is being created. There would be a community right to challenge Ministers under Amendment 197B, and that would extend to parish councils, but it would not, by virtue of Amendment 197D, extend to other local authorities, assuming one defines parish councils as local authorities. So we could have the anomalous situation of a parish council being able to exercise a right to challenge a government department or Minister about a provision of a service, but not the principal authority in which it is situated.

I do not imagine that that has been deliberately constructed in that way, but I should be grateful if the Minister would undertake to look at that anomaly before Third Reading. Parish councils can be quite substantial bodies-there can be 40,000 or 50,000 people in a parish area-and they might bid for a government service, whereas the county or district in which they are situated could not. That strikes me as a situation which would be difficult to explain. Perhaps it has not been envisaged as a possibility, but it seems to arise from these amendments. Perhaps the Minister could indicate a willingness to look at that point before we get to Third Reading.

8.15 pm

Lord Shutt of Greetland: I thank noble Lords who have contributed to the debate. I am able to say to the noble Lord, Lord Lucas, that we are requiring local authorities to publish the timescales, so that if there were hideous timescales they would be shown up. I cannot imagine that they would endeavour to publish timescales which looked as though they were totally impossible for people to cope with. As a matter of public law, they must act reasonably. We have to bear that in mind and I hope that gives the noble Lord some comfort.

I understand the concerns of my noble friend Lord Greaves. I know how much hard work he has put into trying to understand the issues in this area. I shall write to the noble Lord, Lord Beecham, if I am wrong, but I believe it is quite right that a parish should be in a position to exercise the right. I believe that if one were able to challenge areas of government, local authorities could then become relevant. I may have to write to him to clarify that, but that was my belief when I heard people speak on that area, although it may be that some tidying up is required. I trust that noble Lords will be able to accept these amendments.

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Lord Greaves: Before the Minister sits down, and without wishing to pre-empt the noble Lord, Lord Beecham, is that an indication that there might be some tidying up to be done at Third Reading, and that that issue therefore could be considered then?

Lord Shutt of Greetland: If we can do this by writing a letter and giving comfort in that way, it will be done that way. If, ultimately, it really were needed, we would indeed have to come back to it at Third Reading.

Amendment 197B agreed.

Amendment 197C

Moved by Baroness Hanham

197C: Clause 69, page 60, line 26, after "functions" insert "in relation to England"

Amendment 197C agreed.

Amendment 197CA

Moved by Lord Greaves

197CA: Clause 69, page 60, line 33, leave out paragraph (d)

Lord Greaves: My Lords, this little group of amendments raises some important and fundamental issues relating to the community right to challenge. I shall speak also to Amendment 197DA. I think that there is also a Labour amendment in the group.

We are back in the Alice in Wonderland world of relevant bodies, relevant authorities and relevant services. Amendment 197CA would leave out the provision that two or more employees of a relevant authority-a local authority-can be specified as a relevant body, in other words, a body which can challenge to run a service. The Bill defines "relevant body" as,

The term "two or more employees" of a relevant authority does not seem to fit in with that list of defined bodies. One assumes that the other bodies defined by the Secretary of State will be community bodies. Employees are different.

That is not to say that there are not circumstances in which employees can, and indeed ought to, take over responsibility for the running of services on behalf of the principal council. Many of us would like to see far more organisations such as mutuals and co-operatives, which provide what, in a long lifetime ago in the Young Liberals, we used to call worker control-my noble friend Lord Tope remembers all that. Employee bodies or groups of employees taking over the running of services in a co-operative way is a perfectly valid and desirable way in which, in appropriate circumstances, public services can be run. They may be arm's-length or more than arm's-length bodies.

However, it is our view that if the Government are interested in that-they have given some indication that they may be-that should be addressed as a separate issue. It is not the same as allowing a couple

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or half a dozen employees to go off on their own initiative and to do their own thing regardless of what the rest of the staff think. The Labour amendment in this group suggests that any such initiative should have the support of at least half the employees. On the face of it, that seems sensible.

There is concern that a small number of employees could act as a proxy for commercial companies coming in on the back of the provision. In our discussion with Ministers and civil servants, we have been given many assurances that safeguards are set out in the Bill to avoid that happening. The Ministers we have talked to have been absolutely clear that they do not see that as desirable, that it ought not to happen and that it can be prevented. I am asking my noble friend today not just for a statement that the safeguards are there but for a clear explanation on the record of how local authorities will be able to prevent that possible abuse. It is possible, as Ministers have told us, that that is unlikely to happen very often, but that is not a reason for not taking action to prevent it.

As for the process in which the community right to challenge will take place, I am widening the debate slightly to avoid saying quite so much on the next group of amendments. The first process is that a relevant body has to be approved by the council. If it is a parish council, it is automatic. If it is a community or voluntary body, the principal council will have to approve it as being a relevant body. The second part of the process is that a relevant body may make an expression of interest to run a service and the principal council has to decide whether to accept that expression of interest. So long as it fits the rules and regulations, it will not be able to reasonably refuse it. The third part of the exercise is that, having accepted an expression of interest, the principal council has to carry out a procurement exercise.

The concern that a lot of us now have is not about the processes in this Bill for approving a relevant body, which are full of all kinds of safeguards, with the possible exception of the provision relating to employees. We are not too concerned about the process of accepting an expression of interest, which again seems to have a number of safeguards written into it. It is in the procurement exercise where the problems seem to lie. Once the expression of interest is accepted, the procurement exercise comes into effect automatically. It seems to us that safeguards against abuse of the process are crucial.

Amendment 197DA is a different amendment. In Clause 69(8), "community body" is defined as,

This amendment would add on the end of that,

The amendment restricts the definition of a community body to a body which is active in the community referred to. It restricts it to local bodies or to wider bodies which are already active in the area. Otherwise, it would be wide open, for example, to a large national charity that has no presence whatever in an area to move in and try to take over services. If it is about community bodies, surely it is about bodies which are already active in that community.

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I look forward to the Minister's comments on that and in particular to his explanation of how the safeguards will apply to prevent abuse, particularly of a small number of employees putting in a bid for a service. Also, in general, what safeguards will there be against large commercial companies using this operation to sweep up services, which is what Ministers are repeatedly telling us they do not intend to happen?

Lord Lucas: My Lords, I face in a slightly different direction from my noble friend Lord Greaves. I hope my noble friend on the Front Bench can give me some comfort that, when the regulations are set out for this, they will have in mind how desirable it is that we should encourage the creation of neighbourhood-based community organisations to take on services currently provided by the state. One of the difficulties that we face in cities is that people have become used to the comfort of state provision, although they are getting extremely grumpy in some cases with the way in which it is provided.

If a community in a city is to get together and go through the process of preparing to bid for a service which it values, it is going to need considerable comfort and assistance in the regulations to make sure that it is not going to get tripped up on technicalities and that the local council can offer advice rather than having to stand back and treat this strange creature as a competitor to any commercial interests which may come along to bid for it afterwards. We need to be equipping ourselves in this Bill to nurture local enterprises and communities in cities to give them a chance through the provision of services to generate a surplus for reinvestment in the community. That is what we are doing elsewhere in this Bill for rural communities, which will generate a comfortable surplus out of planning permission, but we are doing nothing for inner city communities. This is the bit of the Bill where we give relatively compact communities easy access to a diversity of resources. Cities exist because they have that advantage over rural communities.

We need to give the local elements of those communities a real chance to get involved in providing local services and in that way generate surpluses which they can reinvest in the community and do the things that they want to do. I should like my noble friend to give me comfort that the department has urban communities in particular in mind in this part of the Bill.

8.30 pm

I have received much more helpful responses on this subject from my noble friend at the Department of Health. Those responses suggest that, once we get the health Bill through-as I am sure we will-we will find local GP commissioning groups who are ready, willing and able to commission services from local community groups. Looking after the elderly, for instance, or making sure that people get looked after in other ways which the massive mechanisms of the National Health Service find difficult and inconvenient but which the community of patients through their doctors none the less wish should be done, will be accommodated readily and with ease and enthusiasm. We may well find communities becoming much more active in

10 Oct 2011 : Column 1430

supporting their needier members through their beneficence and redirection of funds from the National Health Service. As I said, I have found those discussions very constructive. I very much hope that the same thinking is going on in my noble friend's department.

Lord Beecham: My Lords, I certainly support the amendment of the noble Lord, Lord Greaves, in respect of the proposal that two or more employees could issue a challenge to the authority, which I would much rather were not in the Bill at all. Failing that, my Amendment 197CB, would at least require a majority of the employees affected to support such a move. I really hope that the Government will take that seriously. It does not seem appropriate that two or more employees-it might be a director or deputy director; it could be people lower in the organisation-could simply take a decision which would affect a considerable number of people without their consent and outsource a whole section of the local authority. That seems wholly unreasonable and not at all compatible with the general thrust of the Bill, which looks to secure support for a range of measures on the part of communities. I hope that the Government will acknowledge that there is an issue here and will accept one or other of the amendments. My preference would be that of the noble Lord, Lord Greaves, but, failing that, I would be delighted to accept his support for the fallback position.

However, I am less persuaded by his Amendment 197DA. I quite take the thrust of his intention, but I am not sure the wording is very compelling. The amendment refers to the body concerned being required to be,

Let us take as an example a county area and services for the elderly or domiciliary care. There might be an organisation in one corner of the county carrying out that service. It would hardly meet the description of being,

that is, across the area in which the relevant service is being provided. It is difficult to define in the way that the noble Lord seeks.

I am therefore unenthusiastic about the way in which the noble Lord reaches his objective, although I am bound to say that I am not sure that I can offer a better alternative. However, in respect of the previous two amendments, the Government need to rethink their position to facilitate at the very least a majority decision by those who would be affected by a move of two of their colleagues. I cannot see any logical reason why the Government should resist that.

Baroness Hamwee: My Lords, I have later amendments on the same issues. In relation to Amendment 197DA, I would like to say to my noble friend that I think that experience in the particular activity that is at issue is less important than the geographical link. I take his point about wanting a connection, but I am not quite convinced that it is the particular connection that he has mentioned. However, by and large I am entirely with him on this issue.

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The noble Lord, Lord Lucas, framed this in terms of urban needs, and I myself am very much an urban and suburban person. He also mentioned the comfort of state provision. Since this debate has morphed into discussion not just about two employees, but about whether two employees might, as it were, sell out to Tesco, it does remind me that there is often a very sharp divide on this issue. People do not like Tesco, but they do like being able to shop in Tesco, which creates quite a dilemma.

My question for my noble friend is whether there is any room for local variation in a local authority's response to such an expression of interest? I will come to my other questions when we come to my amendments later.

Lord True: My Lords, there is a gentle sense of irony in the representative of the workers' party, and my noble friend who is yearning for the days when his party stood for worker control, expressing so much concern at the prospect of employees, however few-less than half, I gather, is unacceptable- expressing an interest in undertaking a function. It seems to me that we are witnessing major change in communities and local government and that it is perfectly reasonable, indeed it is already happening all over the country, that groups of workers and employees are coming forward with propositions to set up social enterprises, to take on existing bodies and to take on other activities. I am sorry that I was not in the Chamber to welcome the withdrawal by my noble friend of regulation in the previous group of amendments, which I do welcome. Yet here we are being pushed to prescribe and put blocks in the way of people putting forward expressions of interest simply on the basis that they might be employees of the organisation and, still worse, that they might secretly be in cahoots with capitalism.

Lord Beecham: That is not what I said, nor is it what the noble Lord, Lord Greaves, said. What we object to is the idea of two people in a potentially large organisation committing the rest of the employees. Where is the democracy in that?

Lord True: There is nothing to say that this deals with a large organisation-some of the things that we are discussing at the moment are relatively small. It seems inconceivable to me that two employees would act against the wishes of those people that they actually want to work with in the future. For years the noble Lord endured the policy of his party being made by small, powerful executives purporting to speak in the names of millions of people-for all we know, they probably still do. I do not see any reason why a group of workers or employees should not get together and entrust their negotiations about an expression of interest to two or three of their number. I think that we should be extremely careful in framing this Bill not to put forward regulation that makes employee initiative more difficult.

Lord Shutt of Greetland: My Lords, I thank noble Lords who have contributed. The noble Lord, Lord Greaves, introduced the debate and then strolled off into the area covered by my notes for the next section, so I will trespass into them and see whether that works.

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Before I respond in general I will deal with the matters raised by the noble Lord, Lord Lucas, because I am aware that he was not particularly comforted on the last occasion that I responded to him. I hope that he will be now, because if he looks at Clause 74, he will see that it is headed, "Provision of advice and assistance". I will not say that it is littered with the words "Secretary of State", but they are there half a dozen times, which suggests that the Secretary of State may well give advice and assistance to those who want to be involved in the challenge. I understand that the department's view is that the clause would be used to give help and advice to various organisations that may be far better able to tackle the challenge.

Lord Lucas: My Lords will my noble friend clarify whether that would be the case when the Secretary of State was being challenged under the amendments made earlier by my noble friend?

Lord Shutt of Greetland: That is a little further down the road, is it not? If the clause states that that advice is being given, then that advice is being given. Therefore, if the Secretary of State is directly giving a service that is ultimately challenged, I would have thought that that had to be, quite frankly. However, that is a little further down the road and it will not happen tomorrow. Nevertheless, it is there that advice can be given and I hope that that will be helpful to my noble friend.

I will look at these notes and respond accordingly. Amendment 197CA would remove relevant authority employees as a relevant body, meaning that they would be unable to express an interest in running a relevant service. The coalition programme for government committed to empowering public sector staff to take control of their own services in new enterprises such as mutuals. That was reinforced in the recent publication of the Open Public Services White Paper. The Cabinet Office is leading on implementing this commitment by introducing a new right to provide. The inclusion of employees of the relevant authority as relevant bodies under the right to challenge will implement the right to provide in relation to local authority services.

To accept this amendment would be a great shame. Employees are often best placed to see how services could be improved and their ideas could make a huge difference in delivering more efficient, effective and responsive services. The amendment could prevent those good ideas from seeing the light of day by forcing employees to organise themselves as a charity, voluntary or community body simply in order to express an interest. Employees may not be prepared to be in a position to undertake such a process before an expression of interest has even been accepted, although of course they will have to comply with the requirements for what must be in an expression of interest.

In addition, this could create a parallel process with employees putting their ideas to local authorities outside the procedure set out in the right. This would risk jeopardising the transparency of the process: proposals should be evaluated consistently whether they originate from existing employees, a parish council or a voluntary or community body.

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It is worth noting that in the policy statement, the Community Right to Challenge, which was made available in the House Library on 8 September, we make it clear that safeguards will be in place to prevent the kind of abuse of the right that is concerning some noble Lords. For example, the policy statement states our intention to provide that expressions of interest will have to set out the relevant body's case that they are capable of providing the service and of competing in a procurement exercise. That will work to ensure that only employees serious about running a service express an interest in running it and should discourage any abuse of the right. In addition, employees submitting an expression of interest will need to set out how they propose to engage with staff affected by the expression of interest in the development of their proposal.

Amendment 197CB, tabled by the noble Lord, Lord Beecham, deals with employee support for challenges. I understand that the intention behind the amendment is to apply a condition to Clause 69(5)(e) that employees must first obtain the support of a majority of employees affected by their expression of interest before they can be considered a relevant body. The policy statement I referred to previously also set out our intention to require employees to set out in their expression of interest their proposals for staff engagement. However, we do not want to be prescriptive about how this is to be achieved. It is best decided locally rather than centrally. The experience of the way the right to request has worked in the National Health Service shows that existing, well established communication channels are likely to play an important part in engaging staff. There is no requirement for a ballot to demonstrate staff support for a proposal under the right to request. However, the face-to-face meetings, intranet updates and staff clinics undertaken when some 1,200 staff from the Hull primary care trust used the right to transfer to a social enterprise show that good communication between the staff involved is likely to be at the heart of any successful challenge.

8.45 pm

Requiring employees to demonstrate that the majority of staff support a proposal in order for their idea to get a fair hearing is an unnecessary burden and risks deterring employees from exercising the right. It would require employees to identify all affected members of staff, which may not be straightforward if they operate from several sites. Then they would have to spend time, and potentially money, carrying out an exercise to seek views and gather evidence of approval. Such a prescriptive and formal process is disproportionate. There are, of course, a number of issues that staff will need to consider and actions they will need to take where they wish to form an organisation to deliver a service, including engaging affected staff. That is why we are requiring authorities, in setting periods between an expression of interest being accepted and a procurement exercise starting, to have regard to factors such as allowing relevant bodies sufficient time to prepare the bid for a procurement exercise.

Amendment 197DA requires community bodies to operate in the area the service is delivered. This would amend the definition of a community body to require

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that the body carries on its activities in the area in which a relevant service is being provided. This is an unnecessarily restrictive requirement which could work against the interests of the communities for which services are delivered. It could deny to those within a community of interest, for example people with learning difficulties, the expertise of a national organisation experienced in delivering services geared to their needs. It would also prevent community bodies successfully delivering services elsewhere from using the right to expand that service provision into a different area. For example, Bulky Bob's is a social enterprise based in Liverpool that collects, reuses and recycles bulky household waste. It began delivering services for Liverpool City Council, but has expanded to deliver its services in other areas.

Bulky Bob's reuses and recycles 65 per cent of the furniture and white goods it collects, thereby reducing the impact on the environment and saving the council money in landfill tax. The commitment to recycling has helped more than 30,000 low-income families gain access to affordable, "pre-loved" furniture since 2000. It also runs training programmes that enable long-term unemployed people to gain the necessary skills and experience for a future career in logistics, recycling, warehousing and distribution, retail and administration. We want to encourage more service providers like Bulky Bob's rather than limiting them to working only for the benefit of one community.

I am aware of the concerns that noble Lords have expressed that this well intentioned community right might get hijacked by private companies that may have the experience and the resources to win contracts that might otherwise be awarded to community groups. There is a particular concern that local authority employees may abuse the right by expressing an interest as a proxy for private sector organisations. We intend to make provisions in regulations that will help to safeguard against these risks. These are set out in the policy statement that we made available in the House Library on 8 September, which I hope noble Lords will have seen. We have sought to balance the need for safeguards with the need to allow relevant bodies to take up the right and deliver real improvements for people using public services. We do not want to put disproportionate obstacles in the way of relevant bodies and risk harming the chances of good ideas from groups that are serious about delivering services seeing the light of day.

In the policy statement that I have referred to, we were clear that we intend to provide that the relevant body must make the case in their expression of interest that they are capable of providing the service. If there is no evidence or if the evidence is not convincing, the authority will be able to reject the expression of interest. This will also be the case if the authority considers that expression of interest to be vexatious or frivolous. We also intend to provide that an expression of interest from authority employees must include details of how they plan to engage staff affected by it. Prescribing that this should be done by requiring approval from the majority of staff would be disproportionate and would fall into the trap of over-engineering the right. It could have the effect of making it harder for employees than for other relevant bodies to take up the right.

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We strongly believe authority employees have a lot to contribute in their local knowledge and connection, their experience of delivering services to the community, and their capacity for innovation. It is therefore right that they should be able to challenge and we should not put disproportionate hurdles in their way. Clearly, were employees proved to have sought to subvert the purpose of the right, however, for example, by taking bribes or secret commissions which arise out of their employment, or by revealing confidential information, their employer would have legal recourse. Equally, others would risk damaging the reputation of their organisations, and possibly facing a legal challenge from trustees, members or other interested parties if they were found to have participated in such underhand activity.

It is, however, important to be very clear that the ultimate aim of the right to challenge is to see improvements in local services. Where a successful expression of interest triggers a procurement exercise, the result should be an improvement in the service. This means a better outcome for service users, whoever wins the exercise.

I trust that in the circumstances, after that lengthy explanation, the noble Lord will feel able to withdraw his amendment.

Lord Greaves: My Lords, I am very grateful for the long and comprehensive explanation. I am sorry-I have a cough, but I shall try to keep going until I get a drink of water. Thank you for that; I am glad that some of my elders and betters have got important things to do. I shall try not to spill water on the Bench.

I am grateful to everyone who has taken part in the debate. I shall simply say to the noble Lord, Lord Lucas, that I think that there are major problems with the whole of this Bill in urban areas, but these are matters to which we will come back time and again. To the noble Lord, Lord True, I will say that I do not think that the Liberal Party ever stood for workers control. There was a slight difference in the 1960s between the young Liberals and the party as such, as my noble friend who was in the young Liberals with me at the time will no doubt confirm.

The more explanations I hear about this, the more questions seem to come. I am extremely grateful for the efforts made to explain it all, but some of the answers that we get confirm that there are difficult questions that have not been resolved. As for the coalition programme and open public services, in a sense they confirm my concerns. Involving employees and staff in running or even handing over services to groups of staff is something quite different and requires a different approach to that of a community right to challenge. I agree entirely with the noble Lord, Lord Beecham, that employees have to be seen as a group, as a body, and not as individuals. When councils recognise relevant bodies in the community, as I read it, they are recognising voluntary groups. They are recognising community groups. They are recognising parish councils representing the community. However, when it comes to employees, any two or three or half a dozen people seem to be able to come along and ask to be recognised as a relevant body, whereas what they seem to be is a group of individuals. I think that if

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transferring services to staff is going to be successful, it has to be done by negotiation and agreement across the staff, not just by two or three individuals, who may be disaffected because they have not been promoted and think they ought to have been, or who may be senior members of staff who think that they can run things perfectly well but do not have the support of everybody in their departments. There are serious problems here that will come out in practice. I suspect the matter will come back to allow a better and more comprehensive view of it.

As the Government have said in all the briefings, they would have to show how they propose to engage their staff in their proposals. Surely they should have engaged them and got their views before they put the proposals in, not afterwards. We were told that this would take up a lot of time, energy and resources, but if asking the people who are going to be working in this enterprise is going to take up too much time and energy, how on earth are they going to find the time and energy to put in the sort of comprehensive bid that, we are assured, is an absolute safeguard that it is going to be a serious bid?

Bulky Bob's gets raised quite a lot in your Lordships' House. I suppose most of us have been there to see it at various times, and it is great. However, Bulky Bob's has done what it did under the present system by agreement and negotiation with the councils and the communities in which it works. It did not do it by challenging them from outside. In a sense, I do not think that it is a good argument for the Bill at all.

We are grateful for all the policy statements in the briefings that have been produced, even if some of them seem to confuse more than help. In Committee my noble friend the Minister said he hoped that we would have draft regulations by this time, so that at least we could look at them rather than the much vaguer policy statement. I know that he has made strenuous efforts to try to achieve that. It has not been possible, but it is not his fault at all. However, when we see the regulations, I think that we will have a better idea of whether this is going to work and how it is going to work. In the mean time, I beg leave to withdraw the amendment.

Amendment 197CA withdrawn.

Amendment 197CB not moved.

Amendment 197D

Moved by Baroness Hanham

197D: Clause 69, page 61, line 1, after second "body" insert ", other than a public or local authority,"

Amendment 197D agreed.

Amendment 197DA not moved.

Clause 70 : Timing of expressions of interest

Amendment 197E

Moved by Baroness Hanham

197E: Clause 70, page 61, line 20, leave out subsection (5)

Amendment 197E agreed.

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9 pm

Clause 71 : Consideration of expression of interest

Amendment 197EZA

Moved by Lord Greaves

197EZA: Clause 71, page 61, line 26, at end insert-

"(1A) The Secretary of State may by regulations specify an annual cost of a relevant service at or above which level a relevant authority may reject an expression of interest.

(1B) An annual cost of a service that is specified under subsection (1A) shall be set at the level at or above which a full open tendering process is required to take place by any Act or regulations."

Lord Greaves: My Lords, this is the other group of key amendments in this part of the Bill. I speak to four others in the group, and there are two more in the group from my noble friend Lady Hamwee. These amendments are all about the process of procurement once an expression of interest has been accepted from the relevant body. The problem is that once the expression of interest is accepted, the procurement procedures roll forward automatically. The kind of procurement may vary according to the scale of the operation. It could be very small-for example, taking over a local pocket park. It could be modest, such as meals on wheels in a village. It could be a bit larger, such as running a village hall, an estate community centre in a town or a local library. It could be quite substantial, such as providing adult domiciliary services across a district, refuse collection and recycling across a large borough, or county library services. So the challenge, at least in theory, could apply to a wide range of services.

All these processes will have to be carried out according to basic standards such as openness, transparency, non-discrimination, equal treatment and proportionality, which, apart from anything else, are imposed by the relevant European directive, which was transposed into the public contracts regulations in 2006. As I understand it, and perhaps the Minister can confirm this, the underlying system is unchanged relating to contracts by local authorities that contract out services.

In addition, we have the standards of auditing and supervision by, at the moment, the Audit Commission, by the system that will replace it, by the councils' own standing orders and by financial regulations. As I understand it, the community right to challenge contracts will all be bound by existing regulations in this way. The key cut-off is imposed by European rules and public contract regulations. Those regulations are set out in euros so the monetary threshold varies a bit according to how the euro goes up and down, but I am assured that it is around £156,400. That is the threshold over which the annual value of a service must be open to tender throughout the European Union.

The fear and the danger is therefore that the community right to challenge could open the way to a new and rather random form of compulsory competitive tendering and the takeover of relevant services by large commercial companies, even if that might be against the wishes of the principal council-the "relevant authority", in the

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jargon of the Bill-and the community group, the parish council, the charity or whichever relevant body put forward the bid.

Again, we have had a large number of government assurances. Ministers at all levels have stated time and again that that is not their intention with this provision. If councils want to test the market, as they are able to, they should do so clearly and deliberately, not by accident under the community right to challenge. That is what Ministers in the Government assure us is their position. However, it is not clear how that can be prevented in the Bill as it stands. May we have a clear statement that the Government do not intend the community right to challenge to be a way in for large commercial companies, and that clear guidance will be given to councils on how this can be prevented? May we please know how it can be prevented?

Meanwhile, the amendments suggest two possible ways forward as safeguards. Amendment 197EZA says that the relevant authority can reject an expression of interest for a service above the annual cost at which a full tendering process is required. In other words, if it goes over that threshold, that can be a reason for saying, "No, we're not going to put it out to tender because of the consequences". In practice, this is the £156,000-odd threshold imposed by the public contracts regulations.

Amendments 197EB, 197EC and 197ED would allow a council, instead of going for competitive procurement by tender, to carry out a full and open public service review. New subsection (3A), which we are proposing, reads:

"A service review carried out for",

this purpose,

In other words it would be a very open, transparent and, one hopes, effective process, looking at how the service was provided to see whether the challenge from a particular group could in fact provide the service more effectively, economically and advantageously for the community.

These amendments may not be the best ways to provide safeguards against the problem that we have identified, but that there is a problem seems to be the case. There does not seem to be an answer to the problem that if you go for a competitive procurement you are bound by the European rules and regulations, and if it is a service that is worth more than £156,000 each year, then there is a real risk that you are putting it out to a commercial company. I beg to move.

Baroness Hamwee: My Lords, I have Amendments 197FA and 197FAA in this group, and I am well aware that my noble friend at the Dispatch Box will tell me that what I am proposing is not lawful. What I am proposing is that a local authority can apply its own criteria essentially in assessing the expressions of interest, and include whatever restrictions and requirements it thinks appropriate-to very much the same aim, the same end, as my noble friend. I have no expectation about the amendments being accepted but, like him, I am looking for reassurances.

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My noble friend the Minister said in response to the previous group of amendments that an expression of interest by two or more employees would not be a proxy for a commercial organisation, and referred to that in terms of abuse. I wrote down what he said about that but confess that, having printed off the policy statement to which he referred some weeks ago, I have completely forgotten about it, and it is probably somewhere in a pile of papers on my desk at the moment. What he said was that those expressing an interest would have to show that they are capable of providing a service, that they had engaged with the staff, and that what they were doing was not vexatious or frivolous. I have to say that I would have thought that any commercial organisation will very easily satisfy those criteria.

A concern to which my noble friend Lord Greaves has not referred is that having set up the arrangement-and this of course is not just something that would apply to the two employees; it could apply to a community body as well-it could then sell the business or dispose of the shares in the company which it had formed to run the service. I have not seen any way in which this could be prevented. I suspect that I would be told that it would be improper to prevent it. But it concerns me that it is taking this proposal a good deal further than appears on the face of the Bill.

I turn to subsections (5) and (6) of Clause 71, the first dealing with an expression of interest, the second dealing with a procurement exercise. Both talk of the authority considering-and I will come back to that term-whether the activity would,

Well indeed, and well and good. But consider: it is not bound to apply those factors. It needs to consider them. I dare say that means that it must be able to show how it has considered them.

Turning to subsection (7), we are told that this,

There is no particular assurance at all here, if I may say so. Subsection (7) refers to the procurement exercise but I am worried that an authority may well read this as applying to the expressions of interest as well. In general, I suspect that local authorities will need quite a lot of reassurance over how they apply these provisions.

I speak only for myself in this. I am finding it difficult to articulate some of the unease that is almost more instinctive than technical. However, general expressions of reassurance and consolation may not go quite so far, technically, as to amount to real reassurance. I have rambled enough. I hope that the House has a sense of my unease.

Lord Kennedy of Southwark: I shall be brief. The amendment moved by the noble Lord, Lord Greaves, raises important concerns. The other amendments in the group seek a process to deal with these concerns. Without these amendments or something else, it is all rather open to interpretation, which is not a good place for us to be. I agree with the comments of the noble Baroness, Lady Hamwee, about the sense of unease.

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The amendments in the names of the noble Lords, Lord Greaves and Lord Tope, and my noble friend Lord Beecham, are absolutely right. They make provision for a consultation process with the users of a service, their representatives and residents of the area. If the noble Lord, Lord Shutt, is unable to accept these amendments, will he tell the House when he responds how he squares that with his previous remarks about localism? I genuinely feel that the Bill is confused. In some cases it gives power to the local community, in some cases it takes it back. There is a lot of regulation. It is all a bit confused here. I would be grateful if the noble Lord could address that point in particular.

Lord Shutt of Greetland: I thank the noble Lords who have spoken to this set of amendments. I have notes on these amendments and will do my best to deal with them. Frankly, I am not certain that there is an absolute assurance, but let us see how we go with these amendments.

Amendment 197EZA would give the Secretary of State a power to specify in regulations a service value threshold above which an expression of interest may be rejected. It further provides that this threshold will be set at or above the level at which a full, open tendering process is required to take place by any Act or regulations. I understand that the intention here is to focus the right on those contracts where it is perceived that community groups might have a greater advantage in the procurement process. However, it is worth being clear that while only contracts valued at more than £156,000 must currently comply fully with processes set out in the public procurement regulations, procurement below this level will still be subject to requirements of openness, transparency, freedom to provide services and non-discrimination.

Furthermore, it is not right to limit the range of services open to challenge in this way. It is not true that the voluntary sector delivers only small-value services. The right ensures that good ideas for improving any services get a fair hearing and gives those groups the opportunity to go for it. A threshold that prevents consideration of ideas for better or more innovative delivery of higher-cost service contracts seems unnecessary, given the safeguards that I have already mentioned, and a shame.

This amendment also risks discouraging growth and partnership. For example, a consortium of Holy Cross Centre Trust, Mind and Camden Volunteer Centre won a £2 million contract to deliver mental health daycare services. Would this consortium not be able to challenge? Or take the example of Hackney Community Trust, which started off as a small social enterprise delivering local community transport and has expanded into a highly successful social enterprise. At what point would we say "Sorry, you have grown too much, so your ideas no longer deserve a fair hearing"?

Finally, it could also limit opportunities for larger charities and communities of interest to challenge for higher value services. Nobody would argue, for example, that Age UK does not represent the interests of older people. Yet if Age UK wanted to challenge to deliver the meals on wheels service alongside other services in a large authority area, this amendment could prevent

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it from doing so. It would be inflexible to set a threshold for service value above which an expression of interest could be rejected, and we would not want to reduce the scope of services that could be challenged.

Amendments 197EA and 197EB would enable relevant authorities to carry out a service review instead of a procurement exercise following the acceptance of an expression of interest. Amendments 197EC and 197ED would require relevant authorities to consult widely in carrying out such a review. We have introduced the community right to challenge to ensure relevant bodies with good ideas for how they can deliver services differently or better get a fair hearing and a chance to compete to run the service. These amendments would put at risk both of these aims.

It is unclear what a service review would constitute under these amendments, and the authority would not be compelled to take any action as a result. Many of you will have received the briefing from 10 leading voluntary and community sector groups, including ACEVO, NCVO, NAVCA and Locality, which states:

"Giving local authorities the choice whether or not to respond to an Expression of Interest with a procurement exercise would negate the right to challenge entirely, by effectively allowing local authorities to ignore Expressions of Interest".

We are supportive of authorities reviewing their services and consulting widely as part of that activity. This is what good authorities will be doing regularly anyway. But that should not detract from or obstruct these important new rights for communities and I do not agree that they should be watered down in this way.

Having said that, if a local authority and any groups that had submitted an expression of interest can agree together that a service review is the most appropriate course of action, there is nothing to stop those groups withdrawing their formal interest and working with the authority to conduct such an exercise. Leaving the power in the hands of the community group ensures that the right is protected but gives the flexibility-where there is a good and proactive local authority-that noble Lords are requesting.

Amendments 197EC and 197ED impose an onerous duty and go beyond, for example, the best value duty consultation requirement, where the duty is to consult representatives of people who may be affected. Contacting every individual resident and service user would constitute a significant new burden. Again, good authorities already engage a wide range of service users and their representative groups as part of the commissioning and engagement process, and should be designing and commissioning services that best meet the needs of their communities.

Amendment 197FA seeks to enable relevant authorities, when assessing bids in a procurement exercise, to apply any criteria they consider appropriate relating to how they might promote or improve the social, economic or environmental well-being of their area as a result of the procurement. This amendment is unnecessary as it is already possible for relevant authorities to apply such criteria within the limits of procurement law. Any criteria applied beyond these limitations could be unlawful and subject to legal challenge.

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Amendment 197FAA would require relevant authorities carrying out a procurement exercise following the acceptance of an expression of interest to consider,

I can reassure noble Lords that this amendment is not necessary to ensure that a local authority can control the identity of the service contractor to which it lets the contract during the life of that contract. It is already standard practice for public contracts to contain a term that any purported transfer by the service contractor of its performance of the contract to another person will lead to termination of the contract.

Local authorities will want to retain control over the identity of the person providing services and will already do that in their service contracts. Even if that were not the case, EU procurement law is strict about a change of identity of the contractor. The substitution of a new contractual partner for the one to which the contracting authority initially awarded the contract could be regarded as a change to an essential term of the public contract in question. This could trigger a new procurement exercise.

We have not sought in these provisions to tell relevant authorities how they should design contracts, and nor should we. We have heard many times in these debates that we should be less prescriptive in what we ask of authorities, while ensuring power is really pushed down to communities. A local authority may already impose restrictions or conditions that apply to all persons bidding, as long as such restrictions or conditions are lawful and do not discriminate between bidders. Any attempt by a local authority commissioning a service to impose conditions or restrictions on some but not all persons bidding in the procurement exercise would risk being unlawful as being discriminatory.

I hope that noble Lords will feel able to withdraw their amendments. Yet, I understand the concerns that many noble Lords have about the Trojan horse issue-whether employees, a charity or someone else is challenging just with the idea of someone else coming in on the exercise. Clearly, all that has been proposed is a community right, and it is all about communities. The question comes when the community has challenged-I suspect that the community will have done that because of dissatisfaction-and the authority then says, "Well, we had better have a procurement exercise". Certainly, if that exercise is beyond the EU figures there is no question that the exercise will be open. People will have put work in, as will have the community bodies and so forth. However, I do not see circumstances in which that procurement exercise can somehow be limited, because that would be outside the law of the land because of our involvement with the European Community. We must be careful not to kid ourselves about that.

However, having said that, everything in these proposals is about the community's right. In my view, the community would be exercising that right because it thinks that it can do things better and that the service that it is getting would be better in the future than it received in the past.

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Lord Kennedy of Southwark: I am pleased that the noble Lord understood the concerns raised on this important group of amendments, spoken to by the noble Lord, Lord Greaves. Is there nothing that the Minister can offer us in terms of looking at this further? Perhaps he may agree to consult with colleagues and come back at Third Reading.

Lord Shutt of Greetland: What I will say is this: I have been giving some thoughts regarding guidance, to which there has been reference all along. Guidance will be given and notes will be available from the department, but there may be circumstances where that guidance will be, "This is something on which you make your own mind up". I am sure that the department will cull the debate and look at where offers ought to be made. Certainly, if guidance is required, guidance will be given. However, there will be instances where, because we are talking about localism, local people and people on local authorities will be making their own minds up.

Lord Kennedy of Southwark: Before the noble Lord sits down, can I ask whether there is any possibility of guidance being available by Third Reading, even in draft?

Lord Shutt of Greetland: It is extremely unlikely that the noble Lord will get it as quickly as that, but I believe that it will be available before 31 March.

Lord Greaves: Before my noble friend sits down and before I stand up, perhaps I may ask a question which has just occurred to me. If a service-for example, the refuse and recycling service-goes out to a contract and it is for well over £156,000, will an existing in-house provider be able to take part in that tendering exercise and compete against outside contractors in exactly the same way as it would under the old compulsory competitive tendering system or under the system in which councils sometimes put out a contract to test the market against their own in-house provision? Under the community right to challenge, if a contract goes out to tender like that, will the in-house provider still be allowed to take part in the exercise or will it be doomed?

Lord Shutt of Greetland: I may need to think about that and write to my noble friend. However, it seems to me that the in-house provider here could be the "two or more employees". Those in-house people whom my noble friend speaks of would be the group of workers. That is how I think it would be done but, if I am wrong about that, I shall let him know. It seems to me that that is how the challenge would be used. However, if my noble friend is talking about procurement and there is an existing body, I do not see any circumstances in which that existing body will not be able to participate in the procurement exercise. I hope that that is helpful.

Lord Greaves: My Lords, I am grateful for that. I realise that my noble friend has not had a chance to think about that question but I think that the issue of "two or more employees" is totally irrelevant in this case. We are talking about a challenge made by an outside body or organisation. The contract is put out

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to general tender and there is not a two-person or six-person challenge from inside the organisation. There is an existing department full of staff who are currently working for the council and who may or may not be able to take part in the competitive tendering exercise. The more I think about this, the more it seems to be a crucial point, and it would be very helpful if the Minister could come back to us on it. This is a very new point and perhaps some clarification of it at Third Reading, if only to put the Government's view on it on the record, would be extremely helpful. I hope that that will happen.

There are times when I listen to Ministers reading out their briefing when I think, "If that is the best they can do, I must be on to a good point". The attempt to rubbish my amendment concerning a service review by suggesting that it would involve consulting every single resident, which would not be possible, was really rather derisory. I do not blame my noble friend for that; he has his briefing to read out. Councils and other bodies consult users of services all the time and they know how to do it. It is not difficult and you do not have to be absolutely certain that you have consulted every single resident. You put out a consultation by whatever means are reasonable. It might be through the internet, leaflets, articles in local newspapers or whatever. Therefore, I thought that that response was a bit pathetic.

The Trojan horse argument is important but the real problem arises when that Trojan horse is accidental. If you get a community that is really keen on taking over a service and it has real local support but the contract has to go out to tender and the community cannot possibly match what an outside commercial organisation can provide in terms of cost, then that community is not going to be very pleased. It is going to say, "We challenged and these people from outside who have come in to make a profit have stolen our services away from us". They might well have preferred the service to stay with the council rather than for that to happen. That kind of scenario will simply lose public support. It is not about rights for communities, it is about communities potentially being set up to provide rights for the commercial challenges from outside. The advice to councils is going to be absolutely vital. It has got to be clear, it has got to be strong and it has got to provide councils with all the safeguards they need-not to stop communities challenging and taking services over-but to stop it being abused.

9.30 pm

This process is going to be very closely watched by a lot of people, including the unions. I should pay tribute to the help I have had from Unison in drafting some of these amendments and discussing these issues. But I am all in favour of residents and citizens and local people taking over services. I am all in favour of groups of employees taking over running services, because they can do it very well indeed. What I am not in favour of is a process which is going to be misused and end up with things happening which Ministers tell us they do not want to. I fear that this might happen. I am very grateful for all the time and effort that has been put in to providing briefings and answers and everything else over the last few weeks on this; the more briefings I get, the more worried and concerned

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I am. It may well be that it will end up back in your Lordships' House if it all goes wrong in a few years' time. For the time being, I beg leave to withdraw the amendment.

Amendment 197EZA withdrawn.

Amendments 197EA to 197ED not moved.

Amendment 197F

Moved by Baroness Hanham

197F: Clause 71, page 61, line 33, leave out subsection (4) and insert-

"(4) A relevant authority must specify-

(a) the minimum period that will elapse between-

(i) the date of the relevant authority's decision to accept an expression of interest, and

(ii) the date on which it will begin the procurement exercise required by subsection (2) as a result of that acceptance, and

(b) the maximum period that will elapse between those dates.

(4A) The relevant authority may specify different periods for different cases.

(4B) The relevant authority must publish details of a specification under subsection (4) in such manner as it thinks fit (which must include publication on the authority's website).

(4C) The relevant authority must comply with a specification under subsection (4)."

Amendment 197F agreed.

Amendments 197FA and 197FAA not moved.

Amendment 197FB

Tabled by Lord Greaves

197FB: Clause 71, page 62, line 4, at beginning insert "Subject to subsections (5) and (6)"

Lord Greaves: My Lords, I think we have thrashed this to death now. I do not think there is anything else to come. I will therefore not move it.

Amendment 197FB not moved.

Amendment 197FBA not moved.

Clause 72 : Consideration of expression of interest: further provisions

Amendment 197FC

Moved by Baroness Hamwee

197FC: Clause 72, page 62, line 7, at beginning insert-

"( ) A relevant authority that is considering an expression of interest from a relevant body may require the body to provide any information that the authority considers desirable in connection with its acceptance or rejection under section 71(1)."

Baroness Hamwee: I shall not speak at much length. This amendment was tabled at the last stage as well. It would provide for a relevant authority being able to require whatever information it thinks desirable. I dare say my noble friend will confirm that it is not necessary to state this because it is implicit or provided for elsewhere. The reason I am moving it is because I want to quickly comment on some of the things he said in

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response to the last group. As it was Report stage I could not come back on them then. He said, "It's all about community". But what my noble friend and I are saying is that we fear that it is not. I very much welcomed his comment that guidance might well say, "Make your own minds up". That is exactly what one would want to see. But I wonder if I could suggest to him that guidance might include some sort of flow chart which would assist authorities to understand what they can do and what they cannot do, and what direction they have got to be thinking in. I also say that my noble friend Lord Greaves's point about how a procurement exercise allows for a tender from the authority-from the in-house service-is very serious. It may be one of those things where the answer is so obvious that none of us can see it because it is blindingly obvious. If it is not obvious, and if it is not answered in a way in which the Minister will understand we would regard as satisfactory, then it is so serious that we must not lose sight of it. We should not discard it now and we should return to it at Third Reading to ensure that it is entirely clear. I hope that will not be necessary. I beg to move.

Lord Shutt of Greetland: These matters are grouped together. I thank the noble Baroness. There are four amendments in the group and two have not been moved. This is the third one and I take it that the fourth will not be moved. On that basis I respond to my noble friend Lady Hamwee.

Amendment 197FC would enable a relevant authority to ask a relevant body for any information it considered desirable in deciding whether to accept or reject an expression of interest. The amendment is unnecessary. Clause 69(1) already enables the Secretary of State to specify in regulations the information to be included in an expression of interest. The majority of respondents to the consultation broadly agreed with our proposals on this and the policy statement placed in the Library of the House sets out the information we intend to specify be included in an expression of interest. This information will enable the authority to decide whether there is one or more grounds for rejection. If expressions of interest do not include any of the required information, we would expect relevant authorities to take a common-sense approach and simply ask for it.

This amendment would enable authorities to place additional requirements, and potentially a disproportionate burden, on relevant bodies, and treat expressions of interest from different relevant bodies differently, which would be unfair and could potentially leave authorities open to challenge. If the experience of implementing the community right to challenge shows that a relevant body may need to provide further information to enable authorities to take a decision on an expression of interest, then we can consider whether we need to amend the regulations to allow for this.

In the circumstances, I trust that my noble friend will feel she does not need to press this amendment. Following her other comments about guidance, I am sure that the resources of the department will provide guidance, flow charts and material in any form that clearly gets over to authorities the information that they need. As I have indicated all along, I believe that all these proposals are right, but, in the event, it is about

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trust and it is about communities; it is not about exposing big contracts to organisations under the umbrella of something which has been done for communities. I trust that everyone has got that trust and that it will work in this way.

Baroness Hamwee: I thank my noble friend for that response. Of course, I shall not press the matter, but I note that he talked in terms of the Secretary of State making regulations which will allow for certain information to be requested. I am looking for a little more individuality than that. However, I shall use this opportunity to add a coda to my point about the in-house service and procurement. I am not asking for an answer now, but I shall put the question on record. In order to take part in it, would the in-house service have to form a separate, new entity in order to be able to bid? That would seem to involve a lot of extra bureaucracy and work, which I do not think any of us would want to see. I shall put my noble friend out of his agony and beg leave to withdraw the amendment.

Amendment 197FC withdrawn.

Amendment 197FD not moved.

Amendments 197G and 197H

Moved by Baroness Hanham

197G: Clause 72, page 62, line 13, leave out subsection (3) and insert-

"(3) A relevant authority must specify the maximum period that will elapse between-

(a) the date on which it receives an expression of interest submitted by a relevant body, and

(b) the date on which it notifies the relevant body of its decision in respect of the expression of interest.

(3A) The relevant authority may specify different periods for different cases.

(3B) The relevant authority must publish details of a specification under subsection (3) in such manner as it thinks fit (which must include publication on the authority's website).

(3C) A relevant authority that receives an expression of interest from a relevant body in accordance with this Chapter must notify the relevant body in writing of the period within which it expects to notify the relevant body of its decision in respect of the expression of interest.

(3D) The relevant authority must give the notification under subsection (3C) -

(a) where the expression of interest is one to which a specification under section 70(2) relates and is made within a period so specified, within the period of 30 days beginning immediately after the end of the period so specified, or

(b) otherwise, within the period of 30 days beginning with the day on which the relevant authority receives the expression of interest."

197H: Clause 72, page 62, line 17, leave out from "of" to "and" in line 18 and insert "its decision in respect of the expression of interest within the period specified by it under subsection (3),"

Amendments 197G and 197H agreed.

Clause 73 :Supplementary

Amendment 198 not moved.

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Amendment 199

Moved by Lord Wills

199: After Clause 74, insert the following new Clause-

"Freedom of information and contracts

(1) Any contract for any sum over £1 million made by a relevant authority with any person after the coming into force of this section shall be deemed to include a freedom of information provision.

(2) Where such a contract is to any extent performed by means of a sub-contract, that sub-contract shall be deemed to include a freedom of information provision.

(3) In this section a "freedom of information provision" means a provision stipulating that all information relating to the performance of the contract which is held by-

(a) the contractor,

(b) a sub-contractor, and

(c) any other person on behalf of the contractor or sub-contractor,

is, notwithstanding any contrary provision, deemed to be held on behalf of the relevant authority for the purpose of section 3(2)(b) of the Freedom of Information Act 2000 or regulation 3(2)(b) of the Environmental Information Regulations 2004.

(4) A freedom of information provision shall not require-

(a) a contractor to disclose to the relevant authority any communication between itself and a professional legal adviser in connection with the giving of legal advice to it with respect to its obligations, liabilities or rights in relation to the relevant authority under the contract;

(b) a sub-contractor to disclose to the contractor any communication between a professional legal adviser and itself in connection with the giving of legal advice to it with respect to its obligations, liabilities or rights in relation to the contractor under the contract."

Lord Wills: My Lords, I shall speak also to Amendments 200 and 201 in my name on the Order Paper. The amendments are similar to those that I tabled in Committee, so I do not intend to detain your Lordships' House long by rehearsing at length the arguments that I made for them then.

However, the noble Lord, Lord McNally, was good enough to write to me on 18 July setting out why the Government felt that they could not accept those amendments, and placed a copy of that letter in the Library. Despite all the fine words in that letter- some noble Lords may even have read it-about freedom of information, I found the arguments advanced by the Government so weak that I felt I had no alternative but to table the amendments once more in the hope that the Government might think again.

I hope that I have good reason to think that the Government might think again about the amendments, designed to promote transparency, because of the pledge that they made in their coalition agreement, to,

However, as I set out in Committee, if the Bill works as it is intended to, far from extending the scope of freedom of information, it will restrict it. This comes in the context that, nearly a year and a half into the life of the Government, they have done virtually nothing to extend the scope of the Freedom of Information Act beyond the actions taken by the previous Government.

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By any account, the Government have a considerable way to go if they are to demonstrate that they made that commitment to transparency 18 months ago in good faith.

In his letter, the noble Lord, Lord McNally, rejected what is now Amendment 199, which deals with the question of what information the public can obtain under the Freedom of Information Act about the work done for a local authority under contract. He did so on the grounds that the Government are committed to reducing the regulatory burden on business. That is a commendable commitment. I say that as someone who set up a small business and ran it for 12 years. But it is not an overriding commitment. However irksome business may find regulations, Governments still impose them in the public interest. This Government have, for example, quite recently proposed to do that for the banking sector.

The Government say that they believe that freedom of information is in the public interest, so presumably, if businesses want to profit from taxpayers' money, they should be prepared to account for the use of it to the taxpayer. I should be grateful if the Minister could say in his reply whether the Government agree with that principle. If so, why are they resisting the amendment, especially as I have reworded it to ensure that very small businesses are not caught by it because there is now a limit of £1 million on the size of the contract that would be covered? That is particularly the case as the Freedom of Information Act and regulations already contain exemptions to protect the legitimate interests of business-for example, trade secrets or information likely to prejudice their commercial interests.

Much the same arguments apply in support of Amendment 200, which would bring companies controlled by local authorities within the scope of the Freedom of Information Act. In his letter, the Minister rejected that on the grounds that,

I agree that there might occasionally-not often, but occasionally-be some such uncertainty, but it could easily be clarified. It hardly constitutes a compelling argument for keeping secret from the public important information about how their money is being spent. Clearly the Minister recognised that this was not the strongest of arguments as he then added:

"Where a company is only partly owned by the public sector, there is an increased likelihood that areas of its business will be unrelated to the public sector".

That is true but it is not a reason for keeping secret those areas of business which are paid for by the public and operate on the public's behalf. It is not beyond the ingenuity of all those clever officials and lawyers who work for the Government to draft accordingly.

9.45 pm

Finally, the Minister rejected what is now Amendment 201, designed to provide greater transparency for the way in which local authorities discharge their responsibilities under the Freedom of Information Act 2000 and so to improve their performance. This

10 Oct 2011 : Column 1450

amendment was designed simply to bring local government into line with central government. In this case I have to say that the Government did not produce a weak argument for the rejection of this amendment. They produced no argument at all. The sum of their case was:

"The Government is not currently convinced of the need to make this a statutory requirement".

Why are the Government not convinced? I am afraid the letter was silent on this point. We know for a fact that the performance of local authorities in delivering freedom of information in compliance with the legislation is variable. It can be excellent but can also be poor. Why would a Government claiming to be committed to transparency not compel local authorities to adopt a mechanism which has been shown to improve the performance of central government and which, by any stretch of the imagination, hardly constitutes an onerous burden on local authorities.

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