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Lord Smith of Leigh: My Lords, I welcome the comments from noble Lords opposite, in particular, from the noble Lord, Lord Dixon-Smith, who presumably speaks with some authority about his party's conversion to financial freedom for local authorities. I am afraid that my experience of 18 years of the previous government was not quite like that.

Noble Lords may remember that I spoke on Clause 3(2) in Committee. I share some of the concerns expressed by noble Lords on that subsection. However, the comments made by my noble friend Lady Farrington helped to clarify the way in which that clause will work. Amendment No. 6 would be both restrictive in its effect and also unfair in its consequences. It returns to the old product of a penny rate. Obviously, inflation has increased the amount to £2. But that is a restrictive amount because it is not all that much for local authorities to spend and it may not be enough. It is rather unambitious.

The point made by the noble Lord, Lord Dixon-Smith, about band D being the mid-point of the range is in a sense true, since the range moves upwards from band A, but it is not the median point of the council tax range. In my own authority, over 88 per cent of all properties are below band D, with only 4 per cent being above. I am sure that in many other local authorities, that statistic could well be reversed. Therefore, the way in which local authorities could raise money would be in a sense differential. Those authorities with a large proportion of properties in the lower tax bands obviously will not be able to raise as much money as those with a large number of properties above band D. There are ways in which we

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may continue to explore the limit which appears to be in Clause 3(2), but the amendment is not the way forward.

Baroness Carnegy of Lour: My Lords, I hope that the Minister will not accuse me of being unable to speak because I am a Scot, for I cannot speak for local government in Scotland these days as it is ruled out by law.

Baroness Farrington of Ribbleton: My Lords, I apologise to the noble Baroness if she interpreted what I intended as a light remark put slightly ironically as being in any way an attempt to dissuade her from taking part in the debate. Her contribution is welcome.

Baroness Carnegy of Lour: My Lords, that reassurance is extremely kind and gives me courage and comfort. The noble Lord, Lord Smith of Leigh, has criticised the amendment. He did so in detail and I understand what he said, but I hope that when the Minister replies, she will tell the House whether, having listened to this argument again, she believes that there is in principle an argument for the Bill to define an area in which the Secretary of State cannot stop a local authority from doing something which it would like to do in the way of raising money. We must pay attention to what noble Lords have said--I believe my noble friend Lord Peyton made the point--about the need to get good people into local government.

It is absolutely desperate that if an entrepreneurial person is asked to promote the well-being of his area and comes upon a way of doing so by raising a little money to spend on something, he knows that the Secretary of State has the power to stop him if he so wishes--admittedly, after consultation. Would it not be possible to create some area of legislation in which the Secretary of State cannot do so in order to give councillors confidence that they may have the interest and satisfaction of doing something to help their areas in such a way?

Baroness Hamwee: My Lords, when the Minister replies, will she explain to the House what is to happen to Section 137? I appreciate that it will be required for parishes which will not have the well-being power, but, as I understand it, Section 137 was enacted because there were not at that time general powers for local authorities, so the raising of a penny rate had to be read alongside the additional powers which the local authorities might want to exercise. I have looked at the back of the Bill in the repeals section. Section 137 does not feature, but I realise that I am now confused as to how it lies alongside the new powers.

Baroness Farrington of Ribbleton: My Lords, again I apologise to the noble Baroness, Lady Carnegy of Lour. I learnt early on that irony is often misunderstood.

I am in the unusual position of being able to agree in part and in philosophy with the noble Lord, Lord Dixon-Smith, and all noble Lords who have taken part in the debate, because, in using the Clause 2 power,

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local authorities may spend any amount of money they wish on promoting or improving the economic, social and environmental well-being of their communities. I can tell from the way in which the debate has proceeded and the way in which the noble Lord moved his amendment that he would in fact be placing a limitation on what could be spent by a local authority in any year on improving or promoting the economic, social and environmental well-being of its area. My noble friend Lord Smith made it clear that a national limit would be inhibiting and would bite on or empower different local authorities unevenly.

The Government's position is in direct contradiction to the effect of rather than the intention behind the amendment. In our view, it is for individual local authorities, not central government, to determine how they should use the new well-being powers and for local government, not central government, to determine how much they should spend, based on their understanding of local circumstances and needs. The measures that we put in place in last year's Local Government Act and are putting in place through the Bill will strengthen efficiency and local accountability. It is to local communities that local authorities should answer on how they use their well-being powers and for the expenditure that they incur.

We welcome the conversion of noble Lords on the Opposition Front Bench and the Opposition Benches to the principle of empowering local authorities to make judgments. However, in response to the noble Baroness, Lady Carnegy of Lour, we believe that it is necessary, in the interests of people in particular areas, that where local authorities act irresponsibly, the Secretary of State has the power to ensure that rises in council tax are not at an unacceptable level.

The amendment has the effect of limiting the freedom of local authorities. I apologise if in previous explanations we may not have made that as clear as would have proved helpful, but, in the light of that explanation, I hope that the noble Lord will seek leave to withdraw his amendment. In reply to the specific question from the noble Baroness, Lady Hamwee, Section 137 will be repealed.

4.30 p.m.

Lord Dixon-Smith: My Lords, in response to the Minister's final comment, I assume Section 137 will be repealed using the powers given in Clause 5 of the Bill. I may not be correct.

Perhaps I may revert to the debate. I thank noble Lords on this side of the House who have supported the point that I sought to make. They have done that well. I regarded this amendment as unambitious, just as everyone else has done. However, when out on a fishing trip sometimes the smallest fly used is the most successful. One often sees very large fish landed on what appears to be an impossibly small fly.

Baroness Farrington of Ribbleton: My Lords, perhaps it would help the House if I were to say that the repeal of Section 137 is in Clause 7 of the Bill.

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Lord Dixon-Smith: My Lords, I am grateful to the Minister, I had missed the point. Perhaps I may revert to my fishing trip. If one hooks a fish in the right part of the mouth, one can have a degree of success beyond that which would be suggested by the tackle used. I must admit that I was seeking to hook the Government on this issue and to persuade them to unbend. Of course I accept that the Bill does not place any limitation on what is spent on this power. I have been trying to avoid repeating arguments that I used in Committee. While there are no limits on an authority's power to spend, Clause 3(2) says quite categorically:

    "The power under section 2(1) does not enable a local authority to raise money (whether by precepts, borrowing or otherwise)".

If a local authority has a budget and its budget is committed--I do not know of a local authority that does not have a committed budget--and it is then given an added power under which it is told, "You may do X, Y and Z, but you may not raise money in order to do anything about that power", I am not convinced that one can do anything about it. There are not many things one can do in local government which do not cost money in some shape or form.

I see the Minister is getting anxious about what I am saying. I am open to correction. I accept that within a budget local authorities can of course reallocate resources. Last year we debated the Local Government Bill which introduced the concept of best value. If the concept of best value is working, no under-employed resources are floating around. That may not be the case as local authorities can always take decisions. We are dealing here with a difference of degree. I do not find the Government's response entirely adequate.

The noble Lord, Lord Smith of Leigh, mentioned how unambitious I had been. I explained the reasons for that. I accept also the differential effects of my proposal. I accept that, as I have worded the amendment, it restricts expenditure. The noble Baroness, Lady Hamwee, made that point. That said, I assume that Clause 5 of the Bill, which permits a Minister to make regulations amending or repealing legislation found to be restrictive would also apply to the Bill. I envisage also that it would not be very long before a stream of local authorities were running to the Government to say, "This clause of the Bill is very restrictive. Please relax it". I envisage also that the Government might be susceptible to those pleas.

There is a fundamental problem with this aspect of the Bill. In the light of the Minister's reply, I am minded to test the mood of the House.

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