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Lord Mishcon: I do not intend to oppose this amendment, the reasons for it having been given so lucidly by my noble and learned friend to the Committee and in a letter which he very courteously sent to me on the subject. I have merely one caveat which is inspired by what the Automobile Association said to me. At present a procedural step has to be taken before a warrant is issued. As the noble and learned Lord explained, once information has been rendered it must be sworn to in court by a police officer. We are changing that situation by way of this amendment so that it will be processed by an administrative machine. We all know that computers can do extraordinary things. It is not very pleasant to receive a warrant at one's home. Moreover, if it happens to be a mistake it is a very grievous suffering that the recipient of that warrant unnecessarily sustains.

I am authorised by the Automobile Association to confirm that that is its view. While the association does not oppose the amendment or the spirit of it--nor indeed do I--it feels that we ought to keep a careful watch on the situation. As the process before such a warrant is issued will now become merely an administrative matter, we should ensure that mistakes do not occur. If they do, we ought to be ready and able to do something about the situation.

The Lord Chancellor: I appreciate what the noble Lord has said and indeed his reasons. I certainly would be discomforted if I were to be the victim of an administrative mishap of the kind that he outlined. However, as the noble Lord acknowledged, we must

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remember that we are removing a procedure of so-called "substantiation" on oath by officers who are very often not in a position to substantiate. I am grateful to the noble Lord for accepting the principle of the amendment. I certainly recognise his reservations about administration. I can assure the noble Lord that my department will certainly attend to how these new arrangements work in practice, should they find favour with Members of the Committee.

On Question, amendment agreed to.

Clauses 3 and 4 agreed to.

In the Title:

The Lord Chancellor moved Amendment No. 2:


Line 1, leave out ("section 12") insert ("sections 12 and 13").

The noble Lord and learned Lord said: This amendment is consequential upon Amendment No. 1. I beg to move.

On Question, amendment agreed to.

House resumed: Bill reported with amendments.

Chronically Sick and Disabled Persons (Amendment) Bill [H.L.]

Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Lord Ashley of Stoke: My Lords, I should like to speak now because I have some comments to make on the Bill--

The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, I must apologise for interrupting my noble friend but, as I understand it, an intervention at this stage of the proceedings is out of order because the Question has been put to the House.

Geneva Conventions (Amendment) Bill [H.L.]

Read a third time, and passed, and sent to the Commons.

Local Government Finance (Supplementary Credit Approvals) Bill

3.45 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.--(Baroness Hayman.)

On Question, Motion agreed to.

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House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 1 [Power to take account of reserved part of capital receipts]:

[Amendments Nos. 1 and 2 not moved.]

Clause 1 agreed to.

Clause 2 [Power in place of duty to specify amortisation period]:

Lord Bowness moved Amendment No. 3:


Page 1, line 20, leave out from ("words") to end of line 21 and insert (" "seven years" substitute "twelve years" ").

The noble Lord said: I apologise to the Minister for not being present when this business was called. I move Amendment No. 2 from the starting position that the less a local authority is in debt the better. Certainly it ought not to be in debt for the purpose of financing revenue spending. Perhaps I may say at the outset that I realise there are circumstances in which some expenditure which would normally be classified as revenue is capitalised in connection with particular major projects. However, this clause appears to be about any kind of revenue spending.

I must apologise to the Committee. In my haste to enter the Chamber I thought that I heard the Chairman of Committees refer to Amendment No. 2, not Clause 2. However, Amendment No. 2 contains similar wording to that of Amendment No. 1 which was not moved. I now understand that Clause 1 has been put to the Committee. I believe I misinterpreted the Minister's look of concern as indicating that I was talking to the wrong amendment.

The Chairman of Committees: For the sake of clarification, I should confirm that I did in fact put the Question on Clause 1.

Lord Bowness: As I said, I thought we were discussing Clause 2 which appears to concern any kind of revenue spending. I hope that the Government will explain why they wish to relax the regime in the way that is proposed and why the greater flexibility of the 12-year period which is proposed in the amendment in place of the seven-year period is considered insufficient.

Perhaps the Minister can tell us on how many occasions the seven-year period has posed a problem in the past. I hope that the Minister will tell us the circumstances in which it is proposed that the power should be used. Have the Government received applications to use this power? Is it correct--as was mentioned in another place--that Thurrock has applied for funding for the costs of reorganisation? I read carefully what the noble Baroness said at Second Reading. She said,


    "This is a measure to deal with exceptional circumstances, where an authority is facing severe revenue difficulties but has an urgent need to undertake significant revenue expenditure".--[Official Report, 23/7/97; col. 1463.]
That is a wide provision. It seems to me that under that formula any local authority which has been imprudent in its financial management may appeal to the Secretary of State to be bailed out. That is perhaps not as

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far-fetched as it sounds. The worst run authorities may by definition face severe financial difficulties and they may have an urgent need to undertake significant revenue expenditure. Is this proposal a way of avoiding the cap which it appears the Government propose to keep in one form or another? Can the noble Baroness give an assurance to the Committee that where financial difficulties have arisen as a result of mismanagement rather than some unexpected misfortune strict rules will apply? Surely the Government would not countenance helping bad local government escape the consequences of their actions at the expense of the council tax payer.

If this amendment is not accepted by the Government, do the Government have a maximum period in mind? Do they propose to issue guidance on how these new proposals will be implemented? And will that guidance dictate the kind of circumstances in which this clause is expected to operate? Bearing in mind that the capitalisation of revenue expenditure is generally a bad thing which has an adverse effect on the total cost of whatever is involved, it is right that until there are answers and assurances on this point there should continue to be a maximum period even if it is longer than that which currently applies.

I hope that we shall be given some certainty and some clarity on this point. Certainty and clarity are lacking in this Bill in general. On this important issue it is vital that we are given that certainty and clarity. I submit that the whole basis of the Bill is flawed. A commitment was given by the Government in their manifesto to release moneys which had been generated by the sale of council houses. At Second Reading in another place the Minister of State said,


    "In our manifesto we stated our long held commitment to help meet housing need by building new houses and rehabilitating old ones through the phased release of capital receipt from council house sales".--[Official Report, Commons, 17/6/97; col. 119.]
We know that not one penny of accumulated receipts is released. We know that this Bill does not apply to future receipts. We also know that this clause, which I now seek to amend, asks us to accept that revenue spending can in effect be capitalised over an unspecified period with unspecified consequences.

It has been said that the Bill deals with the phased release of council house receipts. However, it does not deal solely with council house receipts. The Minister should inform us why a maximum period should not apply as regards this vital issue of costs to the council tax payer. I hope that the noble Baroness will be able to help the Committee. I beg to move.

Baroness Hayman: I shall certainly do my best to respond to the amendment proposed by the noble Lord, Lord Bowness. I believe that he is overly concerned about widespread consequences of what is quite a limited but, we think, useful provision within the Bill. The effect of Clause 2 is to remove the obligation on the Secretary of State, when issuing a supplementary credit approval in respect of capitalised revenue expenditure, to impose an amortisation period not exceeding seven years and to replace this with a power to specify an amortisation period. The amendment

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proposed today by the noble Lord, Lord Bowness, seeks an extension of the present seven-year period to 12 years. We do not believe that that would give the flexibility that we seek in this Bill.

To be clear, an amortisation period is the time over which amounts must be set aside as provision for repayment of a loan. Local authorities which borrow must always make provision for repaying loans. The Local Government and Housing Act 1989 sets out requirements for the treatment of borrowing. Section 54(5) requires that when a supplementary credit approval is issued in respect of certain capitalised expenditure, the credit approval must specify an amortisation period of no more than seven years.

Making full provision for the repayment of loans over seven years or less is a tough requirement. If the loan was for £700,000 and the amortisation period seven years, the Committee will have no difficulty in working out that the authority would have to find £100,000 from its revenue resources in each of the following seven years. The Government believe that the present requirement to impose an amortisation period of up to seven years is too inflexible in some circumstances. Simply specifying a different maximum period, as proposed in the amendment before us, would not solve that problem. What is needed is a power which is sufficiently flexible to decide on a period for debt provision that is appropriate to the circumstances of the authority concerned. There is no point in imposing on a local authority an unrealistic revenue burden.

The noble Lord, Lord Bowness, referred to the costs of local government reorganisation and the possibility of supplementary credit approvals being authorised in those circumstances. Those costs were certainly recognised by the previous administration and SCAs have in consequence been issued to allow authorities to spread those costs. Several councils have written to the Secretary of State to highlight the continuing burden on revenue as a result of the statutory seven-year limit on the redemption period. The Secretary of State has at present no power to change that even if he considered it reasonable so to do. I stress that we do not seek a power always to extend credit provision. What we seek is the ability to do so in circumstances where that seems reasonable.

I emphasise that the issue of credit approvals and setting of amortisation periods under this measure is not a matter of routine. First, the Secretary of State must issue a direction to a particular authority to allow specific revenue expenditure to be capitalised. Then the Secretary of State will consider whether to issue a credit approval, bearing in mind the implications for public expenditure, the authority's individual circumstances and all other relevant factors. Some of the factors that the noble Lord mentioned in proposing the amendment would certainly be relevant in this regard. If the Secretary of State is then satisfied that it is right to help the authority, he will issue a supplementary credit approval, and for that purpose, unless he decides not to impose an amortisation period, he will decide what period will be appropriate in all the circumstances.

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Clause 2 enables the Minister issuing a supplementary credit approval to take careful account of the circumstances of the authority and to choose an amortisation period which is neither too generous nor too onerous. We think that it is a useful flexibility. I urge the noble Lord to withdraw his amendment.


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