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10.14 pm

Alistair Burt (North-East Bedfordshire): I am grateful to both the hon. Member for Bedford (Mr. Hall) and the Minister for allowing me a couple of minutes.

I am glad that the hon. Member for Bedford has raised a matter that is of great concern to his constituents and to mine, and I associate myself with what he has said. The whole thing appears to be a classic example of circumstances in which personality is allowed to cloud judgment, notwithstanding the seriousness of the allegations that are made. Words spoken or written in, or shortly after, the heat of an election battle are perhaps not always the wisest. My constituents are appalled that the matter has gone as far as it has, and appalled at the cost.

Bedford borough council is running out of time in which to re-establish credibility with its electorate, as was shown in a recent vote on the possibility of electing a mayor. It is time for the council to put aside the variety of personality issues that have beset it in recent years and damaged its effectiveness. It is time for serious thought about the council's good name, and its ability to serve properly residents who deserve rather better service than they have had in recent years from a council that has been hung and unable to perform its duties effectively. Perhaps this debate will fire a final warning shot over the bows. I look forward to hearing the Minister's response.

10.16 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead): I am grateful to my hon. Friend the Member for Bedford (Mr. Hall) for giving us an opportunity to discuss this subject. The debate is timely: the issue is one that we in Government have been actively considering, albeit, as I shall explain, in a slightly different guise.

I must make it clear that I do not intend to comment on the case itself. As my hon. Friend will appreciate, it is currently before the courts, and I consider it inappropriate to comment in such circumstances. I am, however, happy to comment on the general principle of circumstances in which local authorities can and should indemnify their members and officers, using public funds, for any personal liability arising from actions or decisions made by them in the course of their official duties.

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In the past, local authorities have relied on various statutory provisions to provide indemnities—provisions dating back even to the Public Health Act 1875—but doubts have been raised from time to time about the extent to which authorities can rely on those powers. Given the importance that the Government attach to modernising local government and to local authorities working in partnership with other bodies, it is important for those doubts to be removed. That is why, in section 101 of the Local Government Act 2000, the Government took order-making powers to allow the Secretary of State to enable authorities to indemnify their members and officers in respect of personal liabilities. The scope of that provision is deliberately wide, and permits the order made under section 101 to remove any doubts about the circumstances in which authorities can provide indemnities.

The next step is for central Government to consult on how we might give effect to such an order. I will now outline the ideas that we are minded to present in a consultation paper that we intend to issue this summer. We are minded to permit the indemnification of members and officers within certain bounds, but I want to make it clear that we are still considering those issues, within Government and with stakeholders, and that we will not make final decisions until we have received responses to the final consultation paper.

In the making of an order under section 101, the following questions need to be addressed. Which relevant authorities are to be allowed to provide indemnities? Who should authorities be able to indemnify? In what circumstances should indemnities apply? Should any restrictions be placed on authorities' ability to provide indemnities? I will say something about each of those questions.

First, there is the question of which authorities should be able to provide indemnities. Section 101 allows the Secretary of State to enable all relevant authorities in England, and police authorities in Wales, to provide them. Although the range of functions undertaken by the various authorities varies considerably, the Government see no reason to withhold the right to give indemnities from any relevant authority. Parish and town councils are as likely as other authorities to appoint members to serve on outside bodies such as charitable trusts. In such circumstances they need to be able, if they so wish, to indemnify those individuals against personal liabilities in the same way as other authorities.

Secondly, who should authorities be able to indemnify? The 2000 Act allows the Secretary of State to provide that authorities should be able to provide indemnities to some or all of their members and officers.

The Government believe that it should be for authorities themselves to determine which members and officers should be granted indemnities. Accordingly, our consultation will propose that the power should be widely drafted and not limit the class of member or officer to whom indemnities can be given. Instead, the power will permit authorities to grant indemnities to specific individuals, at the discretion of the authority. However, we also believe that the power to grant indemnities out of public funds should be limited to circumstances in which the member or officer acts in an official capacity.

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Thirdly, what liabilities should authorities be able to indemnify? The Government believe that authorities should be permitted to indemnify individuals against any personal financial liability that they incur in the service of the authority.

Accordingly, authorities' powers should be wide enough to remove any doubts about their ability to indemnify individuals, including where an individual becomes personally responsible for the debts of a body to which they have been appointed by the authority; or where an individual incurs costs defending himself against legal proceedings brought by a third party—including any in which the member is co-joined with the authority.

Fourthly, should any restrictions be placed on authorities' power to provide indemnities? This is the crux of the concerns of my hon. Friend the Member for Bedford, and of the hon. Member for North-East Bedfordshire (Alistair Burt).

Again, the House will understand that I cannot comment on the detail of the Bedford case. However, I can say something about the Government's views on the principles of the use of public funds to meet costs of legal action for libel.

The Government believe that indemnity at public cost should not be used to allow individuals to avoid all personal responsibility for their actions. Accordingly, we intend to propose that members and officers should be able to rely on indemnities only if the action giving rise to the liability was taken in good faith, and was not unlawful or reckless.

We are therefore minded to propose to prohibit authorities from indemnifying members or officers for the cost of taking legal action for slander or libel. We are content that authorities should be able to provide indemnities to individuals against the costs of defending such actions, but we do not believe that individuals should be funded at public expense to bring proceedings against a third party. That would risk, among other things, an increase in litigation, and it could stifle legitimate public debate. My hon. Friend the Member for Bedford mentioned the comments of judges on that issue.

Of course, I must stress that none of that would prevent someone pursuing legal action for libel in a personal capacity. However, we are also minded to prohibit authorities from indemnifying members or officers in two further situations—when they provide guarantees or

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letters of comfort to third parties on behalf of the authority, and when they incur costs answering allegations that they have breached codes of conduct.

As a matter of principle, the Government do not believe that public money should be spent by members as part of the process of establishing whether or not they have behaved improperly. Moreover, the procedures to be adopted by the new standards board and adjudication panel should preclude the member from having to be legally represented by affording him or her a full opportunity to make their case without having to undertake the cost of additional legal representation.

Proposals on which the Government will shortly be consulting will give authorities a role to play in the investigation and determination of allegations of misconduct. In such circumstances, if authorities were also faced with having to meet members' legal costs, there would be a potential conflict of interest. Authorities would have a legitimate interest in minimising the potential cost to the authority, and in ensuring that allegations were properly investigated and dealt with. It is possible that, on occasion, those interests might conflict.

These are the ideas that we are likely to put forward in our forthcoming consultation paper. Before going out to consultation, we will discuss the issues further within Government and with the Local Government Association. We will also prepare a draft order so that consultees can see how we intend to give legal effect to our proposals.

In closing, I emphasise again that nothing is set in stone. We will consider carefully the responses that we receive from authorities and other interested stakeholders to our consultation paper, which we expect to issue in the summer. I shall ensure that my hon. Friend the Member for Bedford and the hon. Member for North–East Bedfordshire are sent a copy.

After we have considered the responses, we will consider the need for further changes. We will then lay the order before the House for debate under affirmative resolution procedures. I hope that the order, once laid, will provide the clarity concerning indemnities that does not exist at present.

I hope that this information is of some help to my hon. Friend, and thank him again for providing an important opportunity to discuss the issue.

Question put and agreed to.

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