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John McDonnell: It would be invaluable—I shall give way to an intervention on this matter for an undertaking—if the impact of the Bill were to be modelled for us. In other words, it would be invaluable if we were given exemplifications of what would be excluded and what would not. It was the Committee's role to examine the model and ascertain whether it worked. However, the Bill has been so dramatically changed that the model has not been presented to anyone. The situation is rather like that of the person who understood the origins of the Schleswig-Holstein question. Lunacy is beginning to enter into the debate.

Amendment (d) would provide the maximum flexibility but it requires confidence in government. It would allow the Secretary of State to determine what is "a qualifying body". Why is that important? The amendment would overcome some of the issues that have been raised so far. The right hon. Member for North-West Hampshire suggested that the amendment was an iniquitous measure that would give power to the Secretary of State to intervene. I believe that it would introduce flexibility and accountability.

The amendment would provide that a body—a Government Department or anyone exercising the functions—would not be treated as a qualifying body

In other words, a Secretary of State could designate a school or hospital outside the exclusion. In that way, the Secretary of State would have the power to ensure that responsible bodies were not excluded. That would enable him or her to exercise such discretion when they saw fit. It would also provide accountability to the House. In this context, it would be the first stage of accountability to the House.

Mr. Hopkins: I strongly support my hon. Friend's most recent point about the Secretary of State's involvement. I would reinforce it by saying that the amendment at least brings government into the picture,

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to an extent. Without such involvement, the new arrangements would create a City of London that would be rather like Monaco or San Marino, or some such semi-independent state surrounded by a major country. The degree of independence would be unacceptable in a unitary democratic state of the sort in which we live.

John McDonnell: The point behind such flexibility is that it acknowledges that governance changes over time. As agencies change and are established in the exercise of government functions, the Secretary of State would be able to identify whether they could be appropriately excluded from new clause 1. In that way, we would gain flexibility. For example, the involvement of the Bank of England in the governance of the City of London may well be worth while for a limited period to enable its finances to be sorted out, but after that, not; the Secretary of State could therefore designate it as not excluded by the court.

9 pm

Mr. Dismore: Initially, I was taken by amendment (d). However, suppose in a far-off scenario that the Labour party is no longer in control and an extremely centralising Conservative party is in office. Could not the Secretary of State declare his own Department a qualifying body, and would that not lead to the danger of central Government being directly involved in local government?

John McDonnell: That is exactly why I said that the amendment needs a leap of faith from the Government. The Secretary of State could designate his Department, or numerous Departments, as outside the exclusion order so that they could participate.

The Secretary of State may wish to put certain matters on the agenda of the City of London corporation, including corporate governance and financial reform, so he would want to determine that certain Departments and Government agencies are not excluded and are qualifying bodies. That would give any Secretary of State the opportunity to influence the governance of the corporation and move it towards a reform agenda; virtually every other power that has been exercised to encourage the corporation to reform has failed. The amendment therefore provides an opportunity to introduce good governance in the corporation.

It is true that certain pressures could be applied, but that would be done openly through the electoral process, rather than through secret meetings and behind-the-scenes pressures, which Governments and Secretaries of State have applied in the past. To take the example of the City cash, a Secretary of State could designate Departments to influence the corporation's governance and introduce reforms. There are immense opportunities for any legislation to be hindered, delayed or even defeated by either House of Parliament. The Lords, who have often populated the City of London corporation—many of them serve as its aldermen—seek to block the legislation that we are trying to impose on the corporation, so we may well want Secretaries of State to have influence at the grass roots, which would welcome instigated reform, rather than reform from above.

My amendment would allow the Government, via the Secretary of State, to designate a range of Departments, Government agencies and bodies as qualifying bodies,

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enabling them to nominate voters who in turn can vote for a slate of reforming representatives to tackle any issue on which the corporation backwoodsmen remain intransigent. The amendment is therefore powerful; it may be a tortuous route, but such a power may be useful in future. I urge that it should receive consideration, and not be given up, underestimated, turned away or rejected lightly. It does not propose an abuse of power, but its proper exercise. Even without a big bang confrontation, it may well be best to give the Secretary of State flexible powers to define or designate a qualifying body.

There is considerable uncertainty about the changing structures of the Government and the bodies that they set up, or on which they rely, to deliver the functions that they perform under statute. The amendment would give the Secretary of State discretion and, in doing so, would prevent legal challenges—or at least provide a mechanism to minimise them—to the status of Government-linked bodies in future.

Amendment (c) would insert the words

in the Bill. It seeks to prevent any EU institutions having a direct role in the governance of the City of London. That matter was raised in Committee; I refer Members to page 20 of the Committee report for 5 May 1999. The argument went that European Union bodies were exempt from paying rates and paid a contribution in lieu of rates, so did not appear on the rating list and did not qualify to vote. That was a delicate and diplomatic way of excluding European institutions, but it did not prevent the European Bank for Reconstruction and Development from securing £1.2 million for refurbishment of its City offices. When the system of voting is based no longer on property but on employees, the fine argument that European institutions are thus barred is not tenable. The further argument, advanced on the Floor of the House, that currently there are no European Union bodies in the City of London area, bears some examination. Even if there are none at present, there could be some in future.

It could be argued that EU institutions are exercising functions on the Crown's behalf, as conferred by legislation such as the Maastricht treaty et al.

Mr. Hopkins: My hon. Friend and I number among those who are concerned about Britain's future in the European Union. Indeed, there is something of a competition between the eurozone and the City of London in pursuing business in the financial world. If we are not careful, EU influence in the City could prove unhelpful to our economy and to the City's future success.

John McDonnell: Because of the confusion arising from the move from rateable value to voting on the basis of employees, the legislation could enable EU institutions to set up bodies in the City of London area and thereby exert an influence. I find that amazing.

I do not want to stir up the European debate, but, at various stages, the hon. Member for Rochford and Southend, East (Sir Teddy Taylor) has edged towards me in the Tea Room. It is worrying, nevertheless, that there is no such specific exclusion of EU institutions.

My amendment makes explicit what might not be sufficiently clear in new clause 1—that EU institutions are not entitled to participate in the governance of the City

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of London corporation. It could be argued that the new clause already excludes such participation, but I do not accept that. I do not believe that many such institutions can be regarded as Departments—certainly not of this sovereign Government. Moreover, they exercise not Crown functions but EU functions. My amendment makes the matter explicit by excluding those institutions, and I urge hon. Members to support it.

Mr. Dismore: Will my hon. Friend comment on the position of European Economic Area bodies, which are not EU bodies per se, but can play an important role in economic and financial affairs?

John McDonnell: My amendment would ensure exclusion of their participation in the governance of the City of London corporation. There might be an argument that those receiving EU funds are exercising—albeit tenuously—functions of government conferred on them by previous legislation passed by this House. My amendment makes it explicit that they would not so participate.

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