Local Government and Public Involvement in Health Bill

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The Committee consisted of the following Members:

Chairmen: Mr. Joe Benton, † Mr. Christopher Chope

Blackman-Woods, Dr. Roberta (City of Durham) (Lab)

Brake, Tom (Carshalton and Wallington) (LD)

† Brown, Lyn (West Ham) (Lab)

† Burrowes, Mr. David (Enfield, Southgate) (Con)

† Burt, Alistair (North-East Bedfordshire) (Con)

† Dunne, Mr. Philip (Ludlow) (Con)

† Fabricant, Michael (Lichfield) (Con)

† Gwynne, Andrew (Denton and Reddish) (Lab)

† Hall, Patrick (Bedford) (Lab)

† Levitt, Tom (High Peak) (Lab)

Neill, Robert (Bromley and Chislehurst) (Con)

† Pugh, Dr. John (Southport) (LD)

Seabeck, Alison (Plymouth, Devonport) (Lab)

† Shaw, Jonathan (Chatham and Aylesford) (Lab)

† Smith, Angela E. (Parliamentary Under-Secretary of State for Communities and Local Government)

† Soulsby, Sir Peter (Leicester, South) (Lab)

† Stunell, Andrew (Hazel Grove) (LD)

† Syms, Mr. Robert (Poole) (Con)

† Turner, Mr. Neil (Wigan) (Lab)

Waltho, Lynda (Stourbridge) (Lab)

† Woolas, Mr. Phil (Minister for Local Government)

John Benger, Committee Clerk

† attended the Committee

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Public Bill Committee

Thursday 8 February 2007

[Mr. Christopher Chope in the Chair]

Local Government and Public Involvement in Health Bill

Further written evidence to be reported to the House

LGPI 08 Patient and Public Involvement—Specialist Forums of North East England

LGPI 09 Local Government Information Unit

9.30 am

The Minister for Local Government (Mr. Phil Woolas): I beg to move,

That the Order of the Committee [30 January] be varied as follows—

In paragraph 1(d) leave out ‘and 2.00 p.m.’.

Thank you, Mr. Chope, and welcome to a traditional-style sitting of the Committee. The amendment is proposed on the basis of advice from the usual channels that, due to the inclement weather inthe south-east of England, we should not meet this afternoon.

Alistair Burt (North-East Bedfordshire) (Con): I echo the Minister’s welcome to you, Mr. Chope, to these formal sittings in the more familiar surroundings of this Committee room.

On behalf of the official Opposition, I am happy to agree to the amendment. [Interruption.] There could not be a better reason for the amendment than the bedraggled state of the hon. Member for Bedford, who has arrived at exactly the right moment. There could not be a more fitting example of why the amendment is necessary. Even beyond the south-east of England,the situation is quite bad, and colleagues who haveto go back to other ends of the country will welcome the amendment, as may some members of staff.The amendment has arrived in the nick of time, notwithstanding the fact that the whole country seems to grind to a halt if there is half an inch of snow somewhere.

Mr. Woolas: The south does; we do not.

Alistair Burt: Some of us northerners might be more hardened. However, communications can be difficult and airports are closed, so I am sure that the amendment will make things more convenient for all.

Andrew Stunell (Hazel Grove) (LD): I welcome you to the Chair, Mr. Chope. It is a delight to take part in a debate that for once is not about Shrewsbury. I agree with the proposed amendment.

Question put and agreed to.

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Clause 25

Directions: further provision about reserves

Question proposed, That the clause stand part of the Bill.

Mr. Robert Syms (Poole) (Con): It is a pleasure to serve under your chairmanship, Mr. Chope. The clause deal with directions under clause 24, and mentions financial reserves. Will the Minister define financial reserves? Does it include schools balances?

Mr. Woolas: While I wait for inspiration, perhapsI should explain what the clause seeks to do. The explanatory notes say that clause 25 is consequential on clause 24 and relates directly to it. It provides thata direction under clause 24 may provide that, if an authority seeks to apply financial reserves to reduce its budget requirement for council tax purposes, consent is not required in relation to financial reserves

“of a description specified in the direction”.

Likewise, the direction may provide that consent is unnecessary for application of financial reserves below a certain amount.

Hon. Members will be aware that school reserves are reserves that belong to the school—that has been the case since the legislative changes made by the House. Although the calculation of balances and assets includes school reserves, those reserves are ring-fenced, so they cannot be accessed for council tax purposes or, indeed, other purposes outside the remit of the school. The reason for inclusion is that school reserves are part of public sector assets and are therefore related to the public sector borrowing requirement. Many local authorities think that the situation should be otherwise, but Parliament decided that school balances should be treated in that way.

A second, related factor is that of the requirements and guidance of district auditors on what constitutes a reasonable level of reserves for local authorities, which varies between authorities, but which a direction under clause 24 cannot overturn. The Secretary of State may decide that consent is not required for, say, insurance reserves. That is because an authority might require its insurance reserves to be available for use at any time and needs to adjust them annually to reflect changing risk costs. Therefore, it might be appropriate for the authority to budget to use some of those reserves to reduce the council tax. As a consequence, it is not possible to say that all reserves are treated exactly the same. One would have to make a direction in light of the provision that has just been made.

Mr. Syms: I think that I am beginning to understand what I asked. There may be various reserve funds, and some wriggle room for the local authority in termsof general day-to-day management that would presumably be approved in the order. Otherwise, the authority would have to go back to the Ministry every 10 minutes to ask, “Can we buy X or Y?” Is that how it would operate? The term that we used the other day was “financial envelope”. The Government would specify that an authority could spend a certain amount,

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but for anything over that amount the authority would have to go back to the Secretary of State for permission.

Mr. Woolas: The Secretary of State would haveto take into account the overall situation of local authority reserves, and therefore of borrowing requirements, and the assessment of the individual authority. If, for example, a local authority undertook a one-off public event that required a significant amount of liability to cover it, it could reduce its reserves and liabilities accordingly. There are many other examples in which the level of reserves, or rather the guidance about the level of reserves, would change as a result of councils’ decisions.

The clause provides the Secretary of State with leeway to allow exemptions in some areas, but the general rule as laid out in previous clauses could not change. The clause means that the Secretary of State can provide that authorities do not need to seek consent to apply some particular types of financial reserves or reserves below a certain amount. Therefore, it gives some common-sense room for manoeuvre.

Question put and agreed to.

Clause 25 ordered to stand part of the Bill.

Clause 26 ordered to stand part of the Bill.

Clause 27

Consideration to be taken into account for purposes of direction

Alistair Burt: I beg to move amendment No. 53, in clause 27, page 16, line 23, leave out ‘31 December 2006’ and insert

‘the commencement date of this Part’.

The Chairman: With this it will be convenient to discuss amendment No. 54, in clause 27, page 16,line 32, leave out ‘31 December 2006’ and insert

‘the commencement date of this Part’.

Alistair Burt: The purpose of the amendment is twofold. First, it would uphold the principle that activity under the legislation should not anticipate its passage by the House. Secondly, it would give a little flexibility to local authorities. During debate on an earlier clause, we discussed what would happen to those authorities that are in the process of disposal as a result of the amalgamation of authorities or a change in the nature of an authority due to the switch from two-tier to unitary authorities.

The clause provides some flexibility for those authorities that might be in the process of negotiating contracts. Notwithstanding the fact that the procedure does not prevent any contracts from being entered into, it does stipulate that consent must be applied for and given by persons specified under the Act. Who knows what negotiations authorities are having about their internal processes? The process of decision making from two-tier to unitary is going to take some months. As we have discussed, the proposed timetable has not given some authorities much chance to prepare for the process, and they could be quite far advanced in

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negotiations. If they are now required to go through a procedure in which they have to apply for consent, how long will it take for that consent to be given? Have the Government published what protocols have to be observed before consent is given? Is there a time scale for due diligence by the Government or specified persons so that they can look at contracts and see whether they should be allowed permission to proceed? What will be the implications if contracts are not allowed to proceed because the Government take the view that they are inappropriate? What reference criteria will the person specified use to make a decision on whether a contract is appropriate?

Andrew Stunell: Does the hon. Gentleman agree that decision making has been frozen in the 26 local authorities that have tabled bids, not simply those authorities whose bids may be subject to ministerial approval?

Alistair Burt: The hon. Gentleman is absolutely right. Nobody knows which bids will be accepted, but all the authorities are potentially in a hiatus. I do not know whether the procedure that local authoritiesare going through requires them to submit to the Government a list of contracts or potential contracts that they are negotiating. I do not know whether the Minister has such a list.

Amendment Nos. 53 and 54 are not asking for some great spend-up by authorities, but would provide those authorities with some flexibility to make their own decisions in the next few months. The authorities know the process through which they are going, and that they have to prove certain abilities to the Government if they are to have their bids for unitary status accepted, so they are hardly likely to be in a position tomake crass decisions or behave irresponsibly. The amendments recognise that sense of responsibility and would give authorities the flexibility to make their own decisions for a period, notwithstanding the bid procedure.

The amendments test out what the Government means by devolution and control. The Government could take the power and authorities should behave responsibly. However, here is a situation in which authorities are very likely to behave responsibly and do the work that they need to do. They do not know what the future will hold, but for six months or more, they could be in the position of being unable to make contractual decisions on their own account. I would therefore argue that there are perfectly valid reasons why they should be able to carry on, as opposed to having an arbitrary date forced upon them.

Andrew Stunell: I rise to support amendment No. 53, and to make the point that the huge majority of local authorities will be careful and prudent in the face of clause 27. They will not follow the example of the urban district councils of which the hon. Member for Denton and Reddish and myself are aware. In the past, those councils sometimes produced poisoned pills. Bearing that in mind, the Minister may wish to take a second look at the matter. Effectively, an authority that is submitting a bid cannot reasonably enter into a contract to, for instance, start a new school building or trade housing, until it knows whether it is going to have its bid approved and what its spending levels will be.

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Were the Minister at all tempted to accept amendment No. 53, he could be entirely satisfied because clause 29 (1)(b) will give the Secretary of State the absolute power to

“substitute another date for the time being specified insection 27(1) and (3).”

In fact, clause 29 is a complete bypass of clause 27.

Mr. Woolas: I congratulate the hon. Gentleman on the diligence he has shown in spotting that, althoughit is not quite as relevant as he has made out. Ican reassure the hon. Members for North-East Bedfordshire and for Hazel Grove that the intent and scope of clause 27 is not as they fear. Both the House and the Department will have experience of this issue, not only from urban district councils, but from the wider reorganisations of the early 1970s and the 1990s. Clause 27 is informed by those experiences.

Indeed, the hon. Member for Lichfield may not have realised how apposite his comments about the Lichfield mace were. There are provisions in local government reorganisations that relate to ceremonial issues, and legislation and direction has been necessary to ensure the protection of ceremonial assets for the people of an area. If my comments were an attack on the Lichfield mace, I regret them. I assure the hon. Gentleman of its safety under this Government and the Bill—just in case he is tempted to write a press release this weekend. [Interruption.] My Whip is looking at me.

9.45 am

Clause 27 provides for circumstances in which only disposals or contracts entered into by authorities that are to be wound up and that are subject to directions under clause 24—and only those—would countfor the purposes of the financial limits set out inclause 24. The provisions of the Bill became known on 12 December 2006, and when an authority disposes of land or enters into certain contracts, the clause refers to decisions taken after 31 December that, subsequently, also become subject to the direction under clause 24. In those cases, the value of the disposals or contracts made after 31 December will be taken into account in determining whether the authority has to seek consent for further disposals of land or certain contracts after the date of the direction. That is the fair point about which the hon. Member for North-East Bedfordshire was concerned, and had his interpretation been correct, I would have agreed with him. It would have involved an unreasonable burden on a local authority.

Contracts that will be caught are those entered into by the authority after 31 December, but before the direction was issued, and are those contracts with the same person and/or those that relate to the same or similar description of goods or services. For example, if an authority disposes of land worth £60,000 on2 January 2007 and subsequently becomes subject to a direction order under clause 24, and if it then seeks to dispose of a further piece of land worth, say, £50,000 after the date of the direction, it will need to seek consent for that further disposal because the value of both transactions is £110,000, which is more than the £100,000 consideration limit. Hon. Members can see that we are trying to ensure that, if there were a

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vexatious attempt to dispose of assets to jeopardise the sustainability of the future authority, the clause would deal with that circumstance.

These are sensible, common-sense measures. The amendment would wreck the procedure. However, I would not describe it as a wrecking amendment, because I genuinely do not believe that that is its purpose, but it is not just a probing amendment. There is a genuine fear behind what the hon. Gentleman said. The amendment would amend the date from which any disposals or contracts entered into would count for the purposes of the limit set out in clause 24. There are requirements of consent from the Secretary of State before an authority that is to be dissolved can make disposals or enter into contracts. The effect of the amendment would be that councils that are to be wound up would be free to make disposals or enter into contracts until that time, which could result in those authorities that are to be abolished acting irresponsibly and purposely disposing of assets or entering into contracts so as to have a negative effect on any new authority. The intention of the amendment is met by the clause.

If I give some more figures, it may help the Committee to understand the experience that the measure is based on. If an authority were to dispose of parcels of land or enter into contracts for new arrangements that were outside the pattern of previous contracting, such issues would be taken into account. There were many examples from the previous restructuring round when authorities that were to be wound up acted irresponsibly. I emphasise that not only did the urban district councils enter into such decisions.

We are not trying to restrict local authorities from making valid disposals or entering into necessary contracts, as consent may be given. It is simply a measure to protect the asset base of future unitary authorities.

Alistair Burt: I asked about the procedure to be gone through to obtain consent and how long consent might take in certain circumstances. Does the Minister have anything to say to the Committee about that? Can he reassure authorities how quickly decisions can be taken because some contractual negotiations could have been going on for some time and the speed of decision could be of the essence? It will be delayed by the process that he is describing.

Mr. Woolas: The hon. Member for Hazel Grove feared that 26 authorities may have their decision making frozen as a result of this provision. I assure him that that will not be the case because only the decision on the direction would be affected. We do not know when that may happen, but it would only be when the direction is in place. Previous experience shows that, in such a transitionary arrangement, the Department would be in daily contact with the local authority concerned. The Bill provides for the provision of information so that such decisions can be taken.

Andrew Stunell: I see that the Minister is trying to be helpful, but I wish to illustrate my point by referring to Northumberland where a proposal from the county council would effectively get rid of the districts and a

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proposal from the districts would effectively get rid of the county council. It therefore seems likely that the finance and legal officers in all those authorities would say to their decision takers, “You need to be aware that the Minister might be issuing a direction on this particular transaction, and the consequence of that would be to slow down matters in each authority.” Can he give us an assurance either now or at a subsequent stage that can lift that blight? Even now, there will be an inhibition on decision takers in local authorities who are far more frightened of the Minister than he realises.

Mr. Woolas: I think I can give the assurances that the hon. Gentleman seeks. I recognise that a balance must be struck Opposition Members were expressing suspicions and anxieties about the short period of the window of opportunity. There is a balance to be struck between having a reasonable time to take decisions, but not too long a period that will bring about uncertainty in local government decision making. That affects not only the function of the local authority, but the employees and personnel within that local authority who have life decisions to make about their future as a result of the changes. That is why the matter is so serious. The hon. Gentleman’s point was reasonable.It is one that the trade unions have understandably made, too.

Experience shows that the shadow authority has used the direction in the most significant number of circumstances. The clause will allow for the Secretary of State to provide for those powers to the shadow authorities. That is to ensure that the new authorities work together in harmony, because there is a period between the decision and the beginning of the life of the new authority when the districts and county come together and personnel are being transferred. However, I shall not comment on what is happening in Northumberland.

Mr. Philip Dunne (Ludlow) (Con): Given that the clause is effectively retrospective and presuming that the Committee accepts it today, is the Minister already in discussions with some of the authorities that have put in for unitary status? To illustrate my point, the county council in my constituency announced last autumn that a new school would be built underthe building schools for the future programme—a£20 million investment in Much Wenlock that is very welcome. To get that school delivered on time, contracts will have to be placed in the first six months of this year, which is precisely the period that is relevant to the Bill. Could I ask the Minster whether Shropshire county council is already in discussion with his Department as to whether it will have permission to enter into that contract? If not, how does he propose to cope with such circumstances?

Mr. Woolas: The hon. Gentleman presents me with two dilemmas. One is whether to mention his county and the other is that the Government are restricted as to what they can do in relation to conversations with authorities that have put in proposals or who are affected by such proposals. The Government’s policy and position is to remain neutral and objective so that

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we are able to judge the proposals against the objective criteria. Let me, however, give him the reassurance that he seeks.

The provision is not retrospective. It does not make unlawful any action that has been undertaken prior to the Bill’s enactment, but will allow decisions taken from 1 January 2007 to be taken into account in the decision to give a direction and thereby to provide power to the shadow authority to require consent. It will therefore allow decisions taken after 1 January on contracts and assets to be taken into account in the drawing up of those directions, should that be required, on the evidence of decision-making patterns regarding the disposal of assets or the entering into contracts.

I do not know whether the hon. Gentleman is familiar with the concept of unusual activity that the banks and the credit card companies use, but let me describe the situation in layperson’s terms so as not to cause parliamentary counsel too much concern. In his example, the normal course of business and the proper undertaking of the duties of that local authority would not be affected. Therefore we are not trying to restrict local authorities from making valid disposals or entering into necessary contracts. Let us remember that consent may well be given. The measure in the clause simply protects the asset base for the future unitary authorities.

I think my final point will give some assurance to the hon. Member for North-East Bedfordshire. If the date were to be amended to the commencement of this part or any date later than the one specified, that would increase the amount of time that the authorities that are to be wound up or that may choose to be so could act irresponsibly. It would have that perverse effect.I am sure that the Committee does not want to encourage that. I therefore encourage the hon. Gentlemen to withdraw the amendment.

Alistair Burt: I am happy with a number of the reassurances that have been given. I may come back to the issue at a later stage in the Bill’s proceedings but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27 ordered to stand part of the Bill.

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Prepared 9 February 2007