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Dr. Pugh: The Minister uses the word ''flexibility''. What is the difference between a clause that allows unlimited flexibility and a catch-all clause? Does what he has just said to an extent justify the accusation made about a particular clause—that it is in fact a catch-all? Although he would prefer not to use that term, there is no semantic difference between what he is saying and what we are saying about that particular clause, is there?
Mr. Leslie: I simply draw the hon. Gentleman's attention to the subsection, which is clear about what it intends to do. The main exemption, as the draft regulation shows, will be in relation to private finance initiative contracts, which are hybrid. They provide capital assets and services, and the regulations will ensure that PFI contracts are not inhibited by the restriction on the use of credit arrangements.
To elaborate on the issues set out in draft regulation 7 and the accompanying commentary, I should say that PFI contracts will not automatically count as credit arrangements under the new system—that will happen only when they score on the authority's balance sheet. If they do, however, the regulation will provide the necessary safeguard. That is the purpose for seeking to foresee how the subsection might be used in such circumstances.
Amendments Nos. 57 and 58 would require specific consultation with CIPFA, the Comptroller and Auditor General and the National Audit Office. I believe that they are unnecessary. The Government will, of course, fully consult all relevant bodies as appropriate whenever we make such changes. Indeed, that is one of the reasonable requirements that fall on those in government.
Mr. Turner: Does ''all relevant bodies'' include not only all local authority associations and bodies purporting to represent local authorities, but all local authorities themselves?
Mr. Leslie: It could well do. That is precisely the point that I am highlighting in suggesting that the Committee reject those amendments. To define two particular persons or bodies as a limited list rather than perhaps allow for wider consultation is a topsy-turvy way to consult. There are plenty of provisions throughout the Bill and throughout other legislation relating to where consultations would be appropriate and reasonable. I do not believe that it is necessary in drawing up good statute to specify every single consultee at every single opportunity. For those reasons, I urge the Committee to reject the amendments.
Mr. Turner: The Minister appears to be saying that it is not necessary to specify two consultees, on the ground that that might imply that other consultees or classes of consultee need not be consulted. Yet at the same time he is refusing to say that every local
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authority, for example, shall be consulted. He says that they may be consulted or that it may be appropriate to consult them, but he is not saying that they will be consulted. That leaves a huge gap into which all manner of consultation arrangements may fall, none of which is satisfactory to local authorities.
Mr. Leslie: I understand the sentiments behind the hon. Gentleman's point. We do not know what circumstances may arise, so I cannot say what issues may require in-depth consultation and what may simply require consultation with representative bodies, such as the Local Government Association. That may suffice in certain circumstances. All that I am saying is that it is wrong in principle to specify a definitive list of consultees to the exclusion of others. That sends a message that some consultees are more important than others, which is not good for harmony and good will in the local government community. There are good reasons why such a specifically bureaucratic provision is not required in this clause, and I urge the hon. Member for Runnymede and Weybridge to withdraw his amendment.
3 pm
Mr. Hammond: The Under-Secretary has not addressed the central point, which is that the subsection gives more power, not less, to the Secretary of State. We have seen this trend in Bill after Bill during Standing Committee scrutiny, and unless and until the arrangements for scrutinising and debating regulations are improved, so that the increasing part of our body of law which is dealt with in secondary legislation is properly scrutinised, we will have to go on resisting the Government's inclination to include more and more sweeping regulation-making powers in Bills. I must therefore urge my hon. Friends to vote for the amendment.
Question put, That the amendment be made:—
The Committee divided: Ayes 9, Noes 14.
Division No. 5]
AYES
Curry, Mr. David
Davey, Mr. Edward
Doughty, Sue
Goodman, Mr. Paul
Hammond, Mr. Philip
Pugh, Dr. John
Swayne, Mr. Desmond
Syms, Mr. Robert
Turner, Mr. Andrew
NOES
Borrow, Mr. David
Caton, Mr. Martin
Cruddas, Jon
Davey, Valerie
Dean, Mrs. Janet
Hall, Patrick
Iddon, Dr. Brian
Lepper, Mr. David
Leslie, Mr. Christopher
Mountford, Kali
Raynsford, Mr. Nick
Sawford, Phil
Todd, Mr. Mark
Woolas, Mr. Phil
Question accordingly negatived.
Clause 8, as amended, added to the Bill.
Clause 9
Capital Receipts
Mr. Hammond: I beg to move amendment No. 2, in
clause 9, page 4, line 20, leave out subsection (3).
The Chairman: With this it will be convenient to discuss amendment
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No. 37, in
Mr. Hammond: I shall endeavour to be brief so that we can make some progress. Amendment No. 2 would leave out subsection (3), which is the usual nonsense that I have noticed creeping into Bills. First, it makes substantive provisions and then it gives the Secretary of State God-like powers to determine that something that is black will be treated as if it were white, and something that is white will be treated as if it were black.
I noticed such a provision in the Employment Bill last year, and here I see it again with almost exactly the same structure. Paragraph (a) says that black is white, if the Secretary of State says so, and paragraph (b) says that, on the other hand, white is black, if the Secretary of State says so. Clearly, that is not an acceptable way to proceed, and although Ministers, after some time in office, no doubt start to perceive themselves as having God-like characteristics, reversing definitions is a step too far.
I suspect that we have no argument with the use of those powers in draft regulations 9 and 10, but that does not detract from the fact that the Secretary of State will have sweeping powers to define something as being something that it patently and palpably is not.
I have a more substantive concern about draft regulation 8, which concerns the treatment of repaid loans and grants. That regulation depends on the assumption, which is clearly fallacious, that all loans and grants are made from borrowed money. On the loans and grants that are to be repaid to an authority, the notes on the regulation say:
''If it could be used for revenue purposes, the authority would, in effect, be paying its running costs with borrowed money, contrary to the 'golden rule'.
With a tortuous argument, one could just about propose that interpretation where the original loan or grant had been made from borrowed money, but where that is not so, there is simply no case for what the Government propose in draft regulation 8.
I would be grateful if the Under-Secretary could specifically make a case in equity for requiring a local authority that originally made a loan or grant out of its own resources, without borrowing, to treat the repayment as if it were a capital receipt. I invite him to consider how the argument in support of draft regulation 8 is framed in the explanatory notes, which implicitly assume that all such expenditure will originally have been financed by borrowing.
Amendment No. 37 is an alternative—proposing, at the very least, to make a change if the Under-Secretary is not prepared to delete subsection (3). It would simply make the subsection inapplicable to debt-free authorities. There is a cogent argument that when an authority is debt-free, it is unnecessary and burdensome for the Secretary of State to have wide powers to treat a receipt as a capital receipt, with all the consequences arising from clauses 10 and 11—joys yet to come. It seems entirely reasonable that debt-free authorities should be excluded from the hazard of the
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Secretary of State using these sweeping powers to define things as something that they are not, and to include their receipts from the repayment of loans and grants as capital receipts.
Mr. Davey: I rise very briefly because I know that my hon. Friend the Member for Guildford (Sue Doughty) wants to say a little more about the amendments.
The Liberal Democrats support the two amendments, although it was remiss of me to forget to sign up to them. What the hon. Member for Runnymede and Weybridge has said is exactly right. Subsection (3) seeks to do something rather odd and is one more example of the Government's taking unnecessary regulatory powers to themselves, and amendment No. 37 would free debt-free authorities from some of the controls and powers that the Government seek. I shall not speak at length on amendment No. 37 because in many ways it looks forward to the debates that we shall have on clause 11.
Sue Doughty (Guildford): On Second Reading, I was concerned that the Minister almost implied that there was something wrong with debt-free authorities; that they were not prudent or sensible, that they did not seem to be using their money in the wisest way, and that the Government knew best. In reality, different types of councils, whether Barking and Dagenham or Stevenage, or my own councils of Guildford and Waverley, each had reasons why they chose to become debt-free. One was that they had no other way of managing their housing finance.
The Government seem to think that spending power should be redistributed from richer authorities to poorer authorities, yet the need for housing can be as great in a richer authority as in a poorer authority because of the economic nature of the area. Housing in Surrey is hugely expensive, and people pay up to six and a half times their salary to buy a modest house, compared with three and a half in other parts of the country. Such people will not be able to buy their own homes and the cost of rented housing is commensurately higher too.
Waverley council submitted a memorandum to the Select Committee. It had to consider the need for affordable housing because its finances could not meet that need. The council's housing need register had more than 1,300 families and single people. Council housing associations had 580 households that needed to transfer to another home because of overcrowding or other reasons, and 400 households were homeless or at risk.
Some Labour Members may be surprised that Surrey has homeless people. As in other parts of the country, people become homeless not because they are feckless but because of the cost of living. In 2002, the average house price was about £220,000, and it is now £270,000. Public sector earnings among the lower paid have not gone up to meet those costs and never will. Therefore, in order to use its money in the best possible way, the council decided to focus on becoming debt-free and not to spend on areas
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outside housing in order to obtain the necessary leverage.
In the four years that it took Waverley council to achieve debt-free status, the borrowing forgone was about £4.2 million, yet the benefits of that will be lost if the Government proceed with the Bill. Therefore, we support the amendments. We need a recognition of why local authorities have had to go debt-free and we should trust well-run local government to understand its finances and to manage them appropriately.
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