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Baroness Hanham: I thank the Minister for that reply, which was clear but left me almost as confused by its clarity as I was when we started. I now do not understand the need for the power. One problem

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about specific grants has been precisely what the Minister identified: local authorities have been highly restricted in their use of them. I well remember the mental health grant, for example, under which one was confined as to what could be done. Ultimately, it was absorbed into the local government finance settlement, after it had run its course.

If specific grants are not really part of the Government's thinking, I do not understand why the power is required at all. Ministers could include whatever they want as part and parcel of the local government finance settlement and the money that local authorities receive. If grant is to be allowed to be used for any purpose at all, I do not understand why the power is necessary. If it is only to control Ministers, it may just have some benefit, but I suspect that they are not its prime target.

I understand that there are times when there are urgent, emergency reasons—natural disasters or something else catastrophic—that would normally fall under the Bellwin formula. But, as far as I understand it, the Bellwin formula will still apply. So that is not what this is about. It is about additional money that is being given to some local authorities to be used for any purpose, irrespective of why it is provided and by which Minister. I still find that extremely strange. The fact that this matter will not even come before Parliament before the grants are agreed makes the whole thing even more disturbing.

Unless I have completely misunderstood—not wilfully—the Minister's remarks, it seems to me that this grant-making power is not necessary, because of the wide way in which the Government are now looking at money to be given to local authorities, in what would truly be a block grant. It would be welcome were the Minister to tell me that we are returning to a true block grant, enabling local authorities to use it for whatever purpose, in whatever way and in whatever proportion they believe to be right. If that were correct, we should perhaps be getting somewhere. But in that case this power would be unnecessary. I remain very sceptical, and quite confused, about the benefits of this power, particularly when it is so wide-ranging.

4.30 p.m.

Lord Rooker: I want to be able to guarantee—but I can never guarantee anything—that by the time we discuss Amendment No. 95, the final amendment on Clause 31, everything will be clear. As we give a reasonable explanation in response to each of the Opposition amendments, the picture will form as to how Clause 31 operates. It is difficult. Were the amendments grouped together I could read out all the notes, but they have been split up and we should do better to deal with them separately.

Perhaps I may give an example, which I hope will be helpful, of the use of other powers. Section 93 of the Local Government Act 2000 is used to make various health grants to local authorities. But grants made under the power must, according to the legislation, be spent on health and social services. Those grants are

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therefore inherently ring-fenced. The new power under Clause 31 will avoid this. It will in effect replace mainstream funding.

We are trying to move back from ring-fencing. We are not giving local authorities money to do anything that they want. The functions of local authorities are prescribed by Parliament anyway—some are statutory, some are non-statutory. But we want to reduce the amount of ring-fencing. It ties local authorities. They can have several streams of ring-fenced money, some of which are fully used, some of which are under-used. There is no possibility of vying between the two. Ring-fencing curtails and restricts the freedoms and flexibility of local government, and that is what the Bill is designed to open up and avoid. It is part of the process of trusting local government.

Lord Hanningfield: Would this be the beginning of the end of ring-fencing? I refer, for example, to the Bill dealing with bed-blocking. If local authorities are able to be fined for bed-blocking, will the Secretary of State for Health give local authorities some money in the first instance specifically to help with the problem? Would that kind of ring-fencing cease under this clause? Is it intended that money should go to local authorities and that they might then use it for different purposes?

Lord Rooker: First, I cannot talk about what is happening at present: the powers will come into operation only when the Bill is enacted. On the other hand, the example that I have given—the planning delivery grant—requires parliamentary approval. It is a good example of where we wanted to see improvements in the performance of local authorities. The question of bed-blocking is slightly different: on the one hand, NHS beds are being blocked, but on the other hand there are the social services, so one is vying between the two. I shall take advice, but it may well be the case that in such circumstances the Secretary of State could pay the grant to the local authorities with a view to solving the bed-blocking problem, and do it under this power. But the local authority would have to perform. There would have to be a measure of the outcome; namely, whether it had solved the bed-blocking problem. However, the number of beds or pillows that are ordered, the number of bureaucrats who are put on the job, which ambulances and which particular buildings are used are all restrictions in terms of the ring-fenced grant. Incidentally, none of the grant can be used outside the direct limits that we have given. That could come under the terms of the Bill and make the system far easier to use and, at the end of day, much more effective.

Baroness Hanham: I thank the Minister for that explanation. I am breathless to see whether, by the time we reach Amendment No. 95, we shall have solved the problem. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Baroness Hanham moved Amendment No. 81:

    Page 14, line 25, leave out "A Minister of the Crown" and insert "The Secretary of State"

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 87. The Minister indicates that he was expecting me to do so and that it will not cause confusion in terms of his briefing.

The purpose of the amendment is to probe why such a wide-ranging power should be given to any number of Ministers of the Crown. We have discussed to some extent the fact that grants will come from various departments, and that may be the explanation. But we also want to ascertain which departments are to be included and why such grants should be subject to the Treasury and not also to the Secretary of State who has responsibility for the particular area.

In reply to the previous amendment, the Minister gave some examples but was not specific about the departments that are likely to be involved. The amendment gives him another chance to be so, and a further chance to explain clearly and specifically before we reach Amendment No. 95 what the intention is. I beg to move.

Lord Rooker: There is a simple, short explanation. Amendment No. 81 would mean that only a department that had a Secretary of State could use the new grant-making power in Clause 31. This would mean that any department that did not have a Secretary of State but had a Minister would not be able to use the power. The Lord Chancellor's Department would fall into this category.

Prior to the change in May last year, when MAFF became DEFRA, MAFF did not have a Secretary of State; it was a Whitehall department with a Minister but no Secretary of State. Therefore, in those circumstances the power could not have been used. DEFRA does have a Secretary of State.

Amendment No. 87 would restrict the determination of the amount and the manner of payment of a grant under Section 31(1) to a Secretary of State. Again, it would mean that this power was unusable by, for example, at the present time, the Lord Chancellor's Department. That is the reason, and that is the answer to the amendment.

Baroness Hanham: I thank the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham moved Amendment No. 82:

    Page 14, line 26, leave out "incurred or"

The noble Baroness said: The purpose of the amendment is to remove the provision allowing for grant to be made to a local authority for expenditure incurred by it in the past. This power would presently allow a government to make payment retrospectively—potentially to bail out an authority which had incurred expenditure for which it might or might not have had government authorisation or had

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got itself into trouble. This is potentially a kind of National Enterprise Board for the 21st century, except that it would be bailing out failed councils rather than failed companies.

Such exceptional central powers should not be retrospective. Retrospective power is a dangerous thing. It is not normally favoured in our law and it puts pressure on Ministers to intervene where otherwise they might not. We have now established that the Minister intervening would not necessarily be the Secretary of State.

The wide-ranging powers in this clause, if they are to be used at all, should be used only on the basis of the most scrupulous and objective conditions. Ideally, they should be subject to proper forward planning as any other use of taxpayers' money. So, I put my questions again: how exactly is it planned to use the retrospective power, or how does the Minister see it being used, and how retrospective can it be? Could a grant be made under the clause for some pet project—I have noted the example of Brighton Council; I cannot think why. On the face of it, it could be. There has to be some cut-off, limit or control.

I will move from the example of Brighton to that of Haringey council. It cannot be right that a Minister can say: "Haringey has got itself into a mess by over-spending on a particular project. Let's give it a grant to get it out of trouble", without proper scrutiny of the situation. This provision potentially leaves a Minister or the Government open to charges of partiality or bias. Furthermore, it is not a proper use of taxpayers' money. The powers in this clause, if they are used at all, should be forward-looking, open and planned. I beg to move.

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