Localism Bill — Committee (3rd Day) (Continued)
8:30 pm

Clause 39 : Non-domestic rates: discretionary relief

Amendment 118A

Moved by Lord McKenzie of Luton

118A: Clause 39, page 35, line 35, after "tax" insert "or non-domestic rates"

8:31 pm
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Lord McKenzie of Luton (Labour)

My Lords, I shall also speak to the other two amendments in the group. These are probing amendments, at this stage. We are on record as supporting the thrust of these provisions. They would allow local authorities complete discretion to offer business rate discounts to other hereditaments of their choosing, in particular to support businesses. However, the cost of these discounts will be met, one way or another, by the local authority. Under existing arrangements, the local authority can provide discretionary rate relief in a number of restricted circumstances-for example, by topping up the 80 per cent mandatory relief given to charities and providing 100 per cent relief to other non-profit-making bodies. The cost of existing discretionary rate relief is shared between the local authority and central government.

My first question to the Minister is: whether or not a local authority uses the opportunity to offer discretionary relief, will the cost of ongoing relief to existing types of hereditaments be shared on the same basis as now-partly by central government and partly by the local authority? Is there any change to that regime? Clearly, there will be little appetite for any new discretion, given that the costs will in effect have to fall on council tax payers, with referendums constraining council tax increases.

This leads to our first amendment. The relief can be granted when the billing authority is satisfied that it is reasonable to do so, having regard to the interests of persons liable to pay council tax set by the authority. However, we know that the Government are considering localisation of the business rate, which was discussed in the amendment we considered before the dinner break, and that a resource review is under way. If another potential source of income were to come about, with another group of peoples' interests to consider, would that be one of the factors to be taken into account, or are the Government saying that those people can be ignored for these purposes?

The second amendment seeks only clarification-although I accept that it relates to a pre-existing form of words-of what is included in the definition of "fine arts". This is relevant for the purposes of identifying who is eligible for discretionary relief. In the Bill, non-profit-making bodies include:

"each of whose main objects are charitable or are otherwise philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts".

Having read that, I was genuinely unclear as to the dividing line between fine arts and other arts. The House of Lords Library helped a little and referred me to Stroud's Judicial Dictionary of Words and Phrases. It refers to a judge, who said at one stage:

"I am prepared to accept the wider meaning assigned to the 'fine arts' in the definitions and to treat them as including, for example, poetry, eloquence and music, as well as such 'arts of design' as painting, sculpture and architecture. We are indeed bound for the present purposes to include music amongst them. It is possible that dramatic art should also be included".

However, can the Minister help with perhaps a more contemporary definition? I am aware that his noble friend Lord Taylor has a very keen and current interest in carnival arts, for example. Would that be included? This might seem a somewhat frivolous point, but there is a real issue about why the word "fine" is attached to the arts here. Perhaps the Minister can help me on that.

Our third amendment just deletes the Secretary of State's powers to issue guidance. Surely this is about local discretion, and local authorities can make up their own minds about how they go about it. However, if the noble Lord seeks to defend the inclusion of that provision, perhaps he might elaborate on the type of issues that would be encompassed by the guidance.

These amendments do not seek to undermine the thrust of the clause. There are issues about how valuable discretionary rate relief might be. There is some evidence that landlords eventually factor the reduced rates into increased rents. There are some issues about authorities undercutting each other; indeed, the result of that can reinforce the inequality of resources that exists at the moment, making those worse, although lower business rates can lower the entry barrier for certain businesses. This is important at the current time because reports, for example in Sunday newspapers and earlier this week, about the challenges that high streets face are very real.

Action on rents may be needed as well as action on business rates. I note the concerns of the right reverend Prelate the Bishop of Exeter, who is going to speak on this issue in a moment. I presume that those concerns are focused on the fact that the wider discretion is allowed and whether that will undermine the support given to existing recipients of the benefit. However, I do think that we have to allow discretion to local authorities in the hope that they will do the right thing but also balance the issue of benefits in the medium and longer term, perhaps forgoing some revenues in the short term. Having explained the thrust of these probing amendments, I look forward with interest to the noble Lord's reply, particularly to his definition of "fine arts".

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The Bishop of Birmingham (Bishop)

My Lords, it might help to progress the debate if I admit that I am speaking on behalf of my right reverend friend the Bishop of Exeter and that I fly under the flag of Birmingham, although I share a Scottish name with the noble Lord opposite.

My right reverend friend the Bishop of Exeter gave notice of his intention to oppose the question that Clause 39 stand part in order to seek an assurance from the Minister on the future of discretionary relief for charities from non-domestic rates. I probe, from these Benches, the Government's intention in this area.

Currently, under the terms of the Local Government Finance Act 1988, buildings used by charities qualify for a mandatory 80 per cent discount on their non-domestic rates. In addition, as already mentioned, local authorities have discretion to waive some or all of the remaining 20 per cent. Clause 39 deals with the exercise of that discretion. The clause appears to be largely a simplification measure. It removes a series of detailed conditions that must currently be applied when deciding whether to grant discretionary relief. In effect, it appears to replace those detailed conditions with a simple "yes" or "no" exercise of discretion by the billing authority. However, under the terms of new subsection (5A),

"the billing authority may make the decision only if it is satisfied that it would be reasonable for it to do so, having regard to the interests of persons liable to pay council tax set by it".

We all know that local authorities are currently under severe financial constraints and I am aware of fear among some in the charity sector-here, I declare an interest in several charities with which I am associated as a trustee, president or patron, but hope that noble Lords will excuse me from listing them all now-that the discretionary relief is under threat because cash-strapped councils are looking to make any possible savings that they can. The change proposed in Clause 39 might of course be totally innocuous, but what worries charities is that it might be the green light to cease granting discretionary relief. What does the phrase,

"only if it is satisfied that it would be reasonable for it to do so",

mean in this situation? Is this what might be called the traditional Wednesbury "reasonable" from 1947 or is it a milder test? My question is very simple: do Ministers expect councils to continue giving discretionary relief or are the Government trying to make it easier for councils to refuse such requests? If the DCLG is trying to make it easier for councils not to give the 20 per cent discretionary relief, how does that square with the big society agenda? Looking to the future, how secure is the 80 per cent mandatory relief?

I very much hope that the Minister can reassure us on both the general intention of this clause and the precise meaning of the words to which I have referred.

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Lord Cameron of Dillington (Crossbench)

My Lords, I support the right reverend Prelate in his intention to oppose the clause standing part. In so doing, as this is the first occasion on which I have spoken in this Committee stage, I declare all my interests as a landowner and farmer and, in this instance, as chairman of the Charities' Property Association, whose membership includes many charities that either have property as part of their core business as a charity or own property as part of a wider portfolio. I have been asked by my members to probe the Government's intentions here and, without repeating what the right reverend Prelate has said, I hope that we get some encouraging words from the Minister.

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Lord True (Conservative)

My Lords, I intervene briefly from the perspective of a local authority. I think that most local authorities would have enormous sympathy with what the right reverend Prelate has just said. I am generally very suspicious of definitional creep. I do not think that the charity world has necessarily been helped by the major attempt to redefine a charity after doing away with the great simplicity and proven law of the Elizabethan statute. Therefore, I hope that we are not going to move down another definitional road.

I would not want to see local authorities not being able to have constructive dialogue with charitable organisations, because I think that discretionary relief is extremely important. On the other hand, sometimes premises are certainly not used as efficiently as they might be. It might be for the general good if two or three charities shared offices that might be improved, and I would not want to see that kind of exploration forbidden. Therefore, I, too, should like to hear from my noble friend, but I certainly feel that this is a provision that local authorities would like to stay long in law.

I could speak for a long time on the subject of the fine arts but I do not think that I will. The noble Lord, Lord McKenzie, referred to eloquence and I wondered whether his much admired contributions to these debates meant that debating was a fine art as well. If so, he should be part of it.

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Lord Shutt of Greetland (Liberal Democrat)

My Lords, I thank the noble Lords who have contributed to this debate. It might be easier if I start with the right reverend Prelate the Bishop of Birmingham on the whole business of relief. The message is that there is to be no change in relief for charities. Whether it is mandatory or discretionary, the answer is, "No change". There is no element of change in this provision. To me, the words that the right reverend Prelate is concerned about are a bit convoluted, but that convolution is because of the business rate element. For charities, however, I repeat that there is no change.

I return to the three amendments. Amendment 118A would require an authority to have regard to the interests of business rate payers as well as council tax payers. When the noble Lord, Lord McKenzie, spoke to the amendment, he was looking at contingent events rather than where we stand now. The words,

"only if it is satisfied that it would be reasonable",

are included because the local authority that wanted to assist a business rate payer would have to realise that the council tax payer would in effect be funding it. The Bill is saying that a local authority has to be certain that it is reasonable, bearing in mind who will carry the burden.

8:45 pm
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Lord McKenzie of Luton (Labour)

Just so that we can tick off this item as we go along, my amendment to include the business rate would still be qualified by "set by it". It would not cover NNDR, which are set nationally by the national multiplier, and would come into effect only if circumstances arose in which there was local discretion on the business rate. Just as council tax is set by it the business rate would be set by it. My amendment sought to include those circumstances and the interests that had to be considered when applying discretionary relief. It was not meant to include NNDR as currently constituted.

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Lord Shutt of Greetland (Liberal Democrat)

I understand that this is in order that the national business rate can be relieved by local government saying, "This is a bill that you don't have to pay or that can be reduced".

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Lord McKenzie of Luton (Labour)

I am sorry. I promise not to interrupt the noble Lord again, well maybe no more than once. I accept that what are being relieved by this provision are NNDR-the business rates-but the clause requires that when making judgments about discretionary relief there must be,

"regard to the interests of persons liable to pay council tax".

Currently, they are the people who bear the cost of the discretionary relief. Should not the Government localise the business rate so that it is set locally in the future, it is another source of income set by the billing authority, and the interests of the persons involved in that are reasonably taken into account?

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Lord Shutt of Greetland (Liberal Democrat)

My Lords, that may well be the case, but that is for another day. This clause makes it clear that the council tax payer in effect foots the bill, and it is for the local authority to say, "Look, be careful, the council tax payer is going to have to suffer this. Are you certain you are doing the right thing?".

On Amendment 118B, I, too, have been having trouble with the definition of "fine arts". All I know is that the "fine" is not the same "fine" that my noble friend Lord Attlee was having difficulty with. It is a different use of the word. The best thing to do is to go back to the Local Government Finance Act 1988. I have it here because I dug it out. The first thing I thought about 1988 was that it was the year after 1987. Actually I am thinking of 1997 and the previous Government, but it was a long time ago. That Act refers to premises,

"whose main objects are charitable"-

which in itself covers many arts organisations-

"or are otherwise philanthropic"-

which may also well cover arts organisations-

"or religious"-

which may also cover arts organisations. It then says,

"or concerned with education, social welfare, science, literature or the fine arts".

We are exactly where we were before. The Bill does nothing to disturb, in a positive or a negative way, what can be done so that charitable, et cetera, bodies do not have to pay the full rates. I think that is a fair position. Others may well still have to consider the precise recognition of a fine art that does not happen to be charitable or philanthropic, or indeed whether it is an art that does not happen to be charitable or philanthropic, but many people will find a way of discovering that they are charitable or philanthropic. There is no reason why a local authority could not give grant relief to any arts organisation, provided that it considers the interests of council tax payers and fund the relief itself.

Under Amendment 118C, there would be no statutory duty on authorities to have regard to any guidance. If the Secretary of State chooses to issue guidance, it is likely to be largely administrative in nature, covering such matters as state aid issues and the relationship between billing authorities and precepting authorities. Such guidance may well be welcomed. Of course, authorities would only have to have regard to the guidance; they would still be able to grant relief in accordance with the law as they see fit.

I hope that I have responded to those three amendments and, indeed, the major matter of the integrity of the position on rate relief that remains for all sorts of charitable and other bodies. Therefore, I trust that the noble Lord will be able to withdraw his amendments and, indeed, that we will be able to stick to this clause.

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Lord McKenzie of Luton (Labour)

I am very grateful to the Minister for his full explanation and for dealing with these points. In particular, he reassured me and, I am sure, other noble Lords-I apologise to the right reverend Prelate the Bishop of Birmingham for referring to him as the Bishop of Exeter-that there is no change to the existing system of mandatory relief and sharing costs for the current categories of relief that are shared between government and the local authority. That is a very important thing to have on the record. I do not think, with respect, that the noble Lord has fully dealt with the point-although I do not propose to pursue it further-about having to include the prospect in the future, because if we had a local business rate, then, in a sense, they are excluded from these provisions and I am not sure that that is very wise.

I accept that the term "fine arts" is not new-it has been used before-but I would hate that definition to exclude circumstances that, in the modern era, with the development of arts over the years, was not necessarily thought of when these definitions were established. However, I do not think that this is the most important matter that we are going to debate in the Bill. I very much take his point about guidance. He reminded us, of course, about the issues of state aid: that discretionary relief could amount to state aid. It is for individual local authorities to work their way through that treacle, that minefield. That could, in itself, be quite a significant deterrent, but I can see that local authorities would welcome some guidance and help from central government. I beg leave to withdraw the amendment

Amendment 118A withdrawn.

Amendments 118B and 118C not moved.

Debate on whether Clause 39 should stand part of the Bill.

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The Bishop of Birmingham (Bishop)

My Lords, I am grateful for the Minister's categorical, firm and straightforward support for charities in this connection and do not wish to test the mind of the House at this moment, although, considering the possible changes in the sources of funding, discretionary funding or mandatory funding relief in the future, we may want to come back to this on Report.

Clause 39 agreed.

Clause 40 : Small business relief

Amendment 118D

Moved by Lord McKenzie of Luton

118D: Clause 40, page 36, line 26, at end insert-

"( ) A billing authority in England must promote the opportunities provided by small business rate relief."

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Lord McKenzie of Luton (Labour)

The thrust of Clause 40 is to automate the small business multiplier to improve uptake of the small business rate relief. We support this, but there are two components of the relief. Fundamentally, it is obtained by a small business multiplier-essentially the rate of tax-which is applied to the rateable value of a property, but, additionally, properties with rateable values of less than £6,000 are entitled to a further 50 per cent relief, with properties between £6,000 and £12,000 getting tapered relief. Currently, before the change proposed in the clause, the benefit of the multiplier and the further relief depend generally on a business occupying only one property as well as falling within the rateable value thresholds. In addition, a business has to make an application to that effect.

To make eligibility more automatic, the provisions of Clause 40 do away with the requirement for a business to make an application, and for the purpose of the small business multiplier, it is no longer necessary for a business to occupy just one property. However, for the further discounts to apply, it is necessary for the business to occupy just one property. Clearly, this latter component cannot be delivered automatically, and our amendment seeks to address this quite narrow and particular point. There is no formal requirement to make an application and, according to the impact assessment, it is left to each authority to determine how it goes about identifying those who are eligible. In essence, we consider that there should be an ongoing obligation for billing authorities to promote the small business rate relief. Noble Lords will be aware that the amendment has the backing of the FSB. Authorities will be helped in this by having on record prior applications concerning eligibility based upon single property occupancy. Noble Lords will be aware that the benefit of the relief is met by increasing the multiplier on other properties, so it is not met by government, but by other occupiers of hereditaments. I trust the Minister will be able to support this modest amendment. It is not a cost to government.

I shall close with two questions. Removing the requirement for single occupancy for the small business rate multiplier will lead to large as well as small businesses being able to benefit. Before, single property occupancy was equated with a small business, but now you can occupy lots of low rateable value property and still benefit from the relief. Have the Government made any estimate of the additional cost associated with large businesses now being able to access the benefit of this relief? Is single occupancy judged on an individual company basis, or are there rules which require matters to be dealt with on a group basis? I shall be grateful if the Minister is able to deal with those points. I beg to move.

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Lord Shutt of Greetland (Liberal Democrat)

I thank the noble Lord for moving this amendment. Authorities are already under a statutory duty to provide information about small business rate relief with bills every year, and last year, we also requested authorities to write to all ratepayers with rateable values below £12,000 to remind them that they may be eligible for the relief. Take-up of the relief is already high, and the changes we are making will be able to push it even higher.

This amendment would therefore just place another unnecessary duty on authorities, which is something to which this Government are strongly opposed, and it would be one which central government would have to fund, so I cannot agree the amendment as such.

The coalition agreement contained a commitment to find a practical way to make small business rate relief automatic. Clause 40 amends Section 43 of the Local Government Finance Act 1988 by removing from the Act the requirement for ratepayers to submit an application to their local billing authority in order to claim small business rate relief. Currently ratepayers have to apply for the relief and it is a criminal offence for a ratepayer to knowingly submit an application that contains false information. However, authorities will have no discretion over the eligibility criteria. If a ratepayer meets the eligibility criteria set out in an order made under Section 43 of the 1988 Act, an authority will have no option but to grant the relief. The Government ruled out the option of making the relief automatic by giving it to all properties below the threshold, whether they are occupied by large or small businesses, since that would have been contrary to the nature of the relief and would have greatly increased the costs for the larger businesses that fund the relief.

It is intended to implement the measure from 1 April 2012. As part of this measure, secondary legislation will be amended to ensure that ratepayers below the £18,000 rateable value threshold-£25,500 in London-will have their bills calculated using the small business multiplier regardless of the properties that they occupy. I may end up having to write to the noble Lord. I have a note that the cost will be an additional £20 million if all ratepayers claim the relief to which they are entitled, and a further £20 million once all bills for businesses below the thresholds are calculated using the small business multiplier. This will add only marginally to the supplement. There may be points raised by the noble Lord, Lord McKenzie, later in his remarks that I shall need to reply to in writing, but this is what I am sighted on at the present time.

9:00 pm
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Lord McKenzie of Luton (Labour)

My Lords, I am grateful to the Minister for that response. It would be helpful if he could write with some of the numbers so we have some clarity on the record. If some regulations are coming through shortly perhaps we will have another time to dip into this. I do not know whether they are affirmative or negative but one way or another we will try to get a debate around them.

I simply do not follow the point about imposing an extra burden on local authorities. If they are promoting the small business rate relief at the moment, having a provision in the Bill that requires them to do it does not seem to be an extra burden, but that is a matter for another debate. I beg leave to withdraw the amendment.

Amendment 118D withdrawn.

Clause 40 agreed.

Clause 41 : Cancellation of liability to backdated non-domestic rates

Amendment 118E

Moved by Lord Tope

118E: Clause 41, page 36, line 32, at end insert-

"( ) The chargeable day must not fall outside the period 1 April 2005 to 31 March 2010."

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Lord Tope (Liberal Democrat)

My Lords, Amendment 118E is fairly clear and straightforward. In view of the time and in order to make progress and get on to the next part of the Bill, I will move this amendment formally so that the Minister can reply and we can have the reply on the record. I beg to move.

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Lord Shutt of Greetland (Liberal Democrat)

My Lords, from day one, the Government have been committed to providing meaningful help to businesses hit by certain backdated rates bills, such as some businesses in ports. Despite the financial situation that we inherited, we have honoured our commitment to find a permanent solution to the problem and safeguard jobs and businesses. We are taking the necessary powers through Clause 41 of the Localism Bill to cancel these bills.

I welcome the spirit behind the amendment, which aims to clarify that only backdated rates liabilities between 1 April 2005 and 31 March 2010 can be cancelled. However, the current draft achieves this by limiting the cancellation to the 2005 rating list which only applies to chargeable days between 1 April 2005 and 31 March 2010, as the new 2010 list would apply from 1 April 2010. The draft regulations are clear that only an alteration to the rating list that occurred on or before 31 March 2010 can qualify for the cancellation. The amendment is not needed. New Section 49A(2)(a), as inserted by Clause 41, limits the cancellation policy to properties entered in the 2005 rating list, so the current draft already achieves the aim of the proposed amendment. I trust that this will be sufficient for the noble Lord to be able to withdraw the amendment.

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Lord Tope (Liberal Democrat)

My Lords, I am grateful to the Minister. It is indeed sufficient.

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Lord McKenzie of Luton (Labour)

Does the noble Lord have a figure for the extent to which those who are getting the benefit of the removal of the imposition of backdating under the eight-year agreement have already discharged in whole or in part their obligations?

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Lord Shutt of Greetland (Liberal Democrat)

My Lords, I have several papers here but that figure is not within them. I imagine this was raised when we discussed this a year or two back. However, I will write to the noble Lord and see that a copy of the letter is placed in the Library.

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Lord Tope (Liberal Democrat)

My Lords, I beg leave to withdraw the amendment.

Amendment 118E withdrawn.

Clause 41 agreed.

Clause 42 : Duty to hold local referendum

Amendment 119

Moved by Lord True

119: Clause 42, page 37, line 20, leave out "must" and insert "may"

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Lord True (Conservative)

My Lords, I rise to speak to Amendments 119, 120 and technical Amendment 121 in my name. I also support Amendments 123, 124,125,126 and 129 in the name of my noble friend Lord Cathcart. This is an exploratory group to which question other noble Lords have come forward with other potential solutions, but it goes to the heart of a critical question relating to the purpose and the workability of this Bill. Accepting that there may be a right of referendum by the people to a local council, and I made clear at Second Reading that I see a case for that, what are the appropriate triggers for a referendum and how do we restrain potential mischievous use of the power and the risk of escalating costs? I freely admit that the solutions that we are offering may not be the right ones. In terms of the numbers concerned, other noble Lords have tabled amendments, and the amendments tabled by my noble friend Lady Hanham in the following group raise interesting questions and may well offer some answers from the Front Bench.

I do not think that the Bill, as currently drafted, has set the threshold high enough to trigger a referendum in any local authority in this country. Authors of the Bill perhaps underrated also the political difficulty of refusing a request for a referendum. Although the power is given to do so, it is not necessarily that easy a power to exercise, particularly as an election approaches, even in the case of those types of proposals described in Clause 47(6) as "vexatious", which in itself is a dangerously justiciable word. The reality is that, in practice, if a referendum is requested, the local authority lies under a legal duty to hold it under the original Bill unless it can find cause for exception. As I have just said, it would be quite difficult for some referendums to be refused. My Amendment 119 builds the presumption of discretion in if we are to retain in the Bill thresholds as low as they are now set, and I note that the Government appear to be moving in that direction in relation to special petitions. I should say that 5 per cent might be 300 or so voters in an urban ward, or perhaps a few dozen in a rural community, but these figures are not very hard to make with a minimum of political organisation. Some of these proposals benefit political organisations more than they may members of the public. I suggest that as a potential compromise a local authority should have discretion on whether to hold a referendum on a petition at that low level. I feel that the Government may be moving in our direction.

There are many other ways to respond to a petition from the public, which need not be put in legislation or regulation but often could be dealt with, and indeed are dealt with, under a local authority's standing orders. A local authority might simply do what the petitioners ask, at least in some modified form. That was how this Parliament came into being: the Commons came to Westminster, or to wherever the Parliament was meeting, to petition the Crown and noble Lords to hear their complaints on particular subjects. Very often, the Crown readily responded without a referendum. In the end, it saddled itself with the other place, but that perhaps is a subject we should not go into.

It might have a debate in council, which would be a perfectly reasonable way to respond. It might hold public meetings to explore the purpose of a petition. It might set up a process of consultation. All these might get to the desired end quicker than a referendum and sometimes in a far less divisive way than in circumstances, say, which one can readily envisage, where in an urban area 300 people wanted a controlled parking zone introduced or perhaps removed and a couple of hundred others were implacably opposed. One can see the whole formal process of the referendum ending in dividing rather than uniting a community.

However, I recognise the Government's wish, which I support, to make some petitions inescapable. We therefore suggested in these amendments that the referendum should be mandatory, subject to Clauses 46 and 47, if 20 per cent of the electors in an area ask for it. The noble Lord, Lord Beecham, has suggested a figure of 10 per cent. I believe that the noble Lord, Lord Greaves, with that plebiscitary fervour of the Liberal Democrats, has suggested that 25 per cent might be the threshold. I certainly would not want to come between the noble Lords, Lord Beecham and Lord Greaves. Certainly, 20 per cent might not be the right figure but it is a figure that we offer.

The reality is that well above that level of electors participated in a recent contested referendum in my authority, so I do not think that 20 per cent is an impossible figure to reach. But I equally accept that it may well be too high and we in this Chamber would want to hear arguments for other figures set down in other amendments and other proposals, including interesting ones from my noble friend which we will consider later.

The purpose of laying these amendments originally was to enable your Lordships to consider in Committee another way of approaching the difficult question of the trigger. I will get out of the way to allow your Lordships to do that shortly. I certainly do not want to anticipate the speech of my noble friend Lord Cathcart but I would, from a local authority standpoint, like to draw your Lordships' attention to the potential difficulties of Clause 42(3), taken with Clause 45. As I read it, this means that in a typical three-member ward in a politically split urban area, two members from a minority party might be able to provoke a referendum without any significant local support and with no particular effort to collect signatures. I might have found that power rather tempting in the past in Opposition but I am sure that I would have resisted the temptation.

This provision is very open to political exploitation with members seeking referendums that they do not really want, perhaps just to make a political point or even one that has salience outside their own ward by challenging the local authority to refuse a referendum. I do not think that that is a wise, helpful or even very localist provision. My noble friend Lord Cathcart suggests that such a proposal would have to be supported by at least 5 per cent of the electors in an area. Without going over the issue of the appropriate level again-I hope that my noble friend will forgive me for anticipating that important amendment, which I support -that additional trigger would avoid short-term political exploitation. I beg to move.

9:15 pm
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Earl Cathcart (Conservative)

My Lords, my noble friend Lord True has ably moved those amendments where he is the lead name, and he has also talked to some of mine. I will not go over the ground of his amendments again. I would like to discuss those amendments where my name appears as the lead name.

At Second Reading, I, too, questioned whether 5 per cent was not too low a threshold. I believe that 5 per cent is far too low, and would give rise to a plethora of referenda. Five per cent for a referendum for a whole district, or a whole London borough, might seem reasonable. With an electorate of somewhere over 100,000 people, 5,000 or 6,000 signatures might seem like quite a lot to get. But look at electoral areas that are smaller than those. The electorate for a market town might be between 15,000 and 20,000, so between 750 and 1,000 signatures would be required. Far more likely, a petition would come from a single ward, within the town, or London borough, requiring signatures from only about 350 electors.

It will not be difficult to get signatures. "Let's put it to the vote-sign here-it's democracy at work, and anyway, it's not going to cost you anything, because the council will pay". If you go further down the chain to parishes-they are, after all, a single electoral area-many villages in Norfolk have only a few hundred electors, so that a village of 300 electors would require just 15 signatures to request a referendum. Even more ridiculous would be my parish, which has just over 50 electors, so that just three people could request a referendum.

Amendment 123 raises the percentage to 20 per cent. I see that there are amendments in this group that increase the threshold to 10 per cent and 25 per cent, and I will be interested to hear those noble Lords' arguments. The Government should consider raising the bar; otherwise, there will be a plethora of referenda, at huge cost to local authorities.

Amendment 124 increases the threshold to 20 per cent, but only to 15 per cent where the number of electors is above 10,000. The idea is that we want the Government to consider different thresholds for different numbers of electorate, so that the larger the electorate the lower the threshold needs to be. At Second Reading I gave the example of the recent referendum in West Norfolk, over a proposed incinerator near King's Lynn. That cost the council £80,000. I believe that referenda will certainly be called on all the contentious issues, and where the size of the electorate is relatively small, on nearly all the other issues-and why not? Let democracy prevail. This will cost councils an arm and a leg, at a time when they can least afford it.

That brings me on to Amendment 129, which allows the local authority to recover the cost of the referenda from the electorate in which they are held. Note that we use the word "may", which leaves it optional for local authorities. It would be relatively easy for a local authority to recover costs by putting the cost on each parish or ward precept for the following year.

The last two amendments-Amendments 125 and 126-relate to the idea in the Bill that every councillor can request a referendum. This may be unwise without some brake. If you are a councillor in a minority group, this is manna from heaven. Imagine what fun you could have. After all, although you can be heard at council meetings, no one listens to you, you are always outvoted and the local press never report what you say. What better way to raise your profile, ensure that you are reported in the press and irritate the ruling party than to call a referendum? To prevent any abuses and mischief, the amendments say that a councillor can call a referendum provided that the petition is supported by a small percentage of his or her electorate -we have put in 5 per cent.

I do not expect the Government to accept the amendments, but I would like them to consider the arguments. I would like them also to consider my belief that 90 per cent of referenda will be held on planning issues. I note that, later on, amendments to Clause 47 propose that we exclude planning issues. If the Government, having listened to the arguments, agree that we should exclude planning, then 5 per cent may be the right answer. But if they say that they will not exclude it, we must increase the threshold from 5 per cent.

Photo of Lord Rennard

Lord Rennard (Liberal Democrat)

My Lords, I should declare an interest as a recent vice-president of the Local Government Association. Perhaps I should also say that I am a member of your Lordships' Select Committee on the Constitution. Therefore, I wish to consider this evening some issues of principle about when referendums are appropriate.

On 12 October last year, we debated the Select Committee's report on the principle of referendums. I said that,

"the Select Committee was right to see significant drawbacks to the widespread use of referendums".-[Hansard, 12/10/10; col. 428.]

The House expressed many reservations about holding referendums in a representative democracy.

Many noble Lords who spoke in that debate quoted powerful evidence given to the Select Committee about the problems of referendums. They included: people potentially voting on issues different from those on the ballot paper, or voting for or against a Government rather than on a specific issue; problems with getting sufficient turnout for any result to be legitimate; problems with ensuring that both sides of an argument had sufficient resources to make their case; and problems with undue influence being exerted by dominant media groups or party machines.

The case against widespread use of referendums was made very strongly. My noble friend Lord McNally said that he had not found a committee report that had been so much respected by officials and Ministers. He said:

"This is not a report that has been put on the shelf and forgotten".

My noble friend drew attention to the fact that in his official response to the report, Mr Mark Harper, on behalf of the Government, agreed that,

"referendums should be exceptional events".-[Hansard, 12/10/10; col. 471.]

These were seen as being required only for major constitutional changes such as to abolish the monarchy, to leave the European Union, or for any of the nations of the UK to secede and so on.

The question must now be asked whether we should have similar concerns about local referendums. Should they become common or should they be rare? On what sort of issues should they be held, and how easily could they be triggered given all these potential problems? There seems at the very least to be a possibility of an allegation of double standards being made if national government are saying that their policy programme should be subject to a referendum only on major constitutional issues, but that all issues decided by locally elected representatives should potentially be subject to referendums, with all the problems that we know about of conducting referendums fairly.

No national Government have ever suggested, for example, that their powers of taxation be subject to a referendum. Many national controversies have been debated in this House, the other place and across the country without the suggestion that national Government should resolve the issue by putting it to a referendum.

Since that debate last October we have also had experience of a national referendum. Many of those on the no side in that referendum campaign argued that a reason for voting no was simply the cost of holding the referendum, even though these costs were minimised by holding it at the same time as many other elections. Those who argued this case on the no side must now argue why local referendums should be conducted at the expense of council tax payers in addition to the cost of electing local councillors.

If such local referendums are to be held, then we should be much clearer about when they are appropriate than is outlined so far in this Bill. There must be substantial proven public demand for them locally. They should not simply be a device that either a local council or the Secretary of State can simply use to avoid the sort of considered judgment that should be taken by elected representatives and be subject to examination at election times.

There may be problems with some council administrations being unrepresentative of the areas that they serve. Some councils are effectively one-party states. The answer is to make those councils more representative-not to make each of their decisions potentially subject to a referendum.

Photo of Lord Greaves

Lord Greaves (Liberal Democrat)

My Lords, I am grateful to my noble friend for turning up in time so I did not have to deliver his speech, which he did far better than I would have done. I just want to add one or two things and speak to the specific amendments which my noble friend and I have put forward.

The noble Lord, Lord True, and the noble Earl, Lord Cathcart, spoke about how opposition parties and opposition councillors might well use referendums to promote their own interests. In my own local political career I can think of major issues where I would have had, in the words of the noble Lord, Lord True, a great deal of fun. We would have made useful political points but it would have cost people a lot of money and it would not have been the right way to do it.

What concerns me more than what opposition parties and opposition councillors might do is the way in which parties in control, or mayors or anyone else with the ability, might use referendums to manipulate the political and electoral process by launching referendums on populist issues to entrench their own local power. I am not suggesting that all such local leaders would ever do that but, without naming names, I can think of one or two around the country who might regard this as manna from heaven. You organise a referendum on a good populist issue or a bad populist issue to coincide with the year of your re-election and have it on the same day as your re-election to turn the referendum campaign into your election campaign and-Bob's your uncle-you are probably back. As I understand the Bill, there will be no limits on referendum expenses so it would blow a huge hole in the rules for local election expenses.

People organising referendums-whether they are organising a petition for it or whether they are persons in power trying to use it for populist purposes-may be goodies. They may be doing it for benign purposes but they might not: they might be malign extremists movements or commercially motivated and commercially biased or politicians seeking re-election, as I just said. Whatever it is, there is a severe risk that they undermine the processes of representative democracy, which rely a great deal on proper procedures, democratic deliberation, debate and compromise and the role of the council as a mediator in the community-which I think the noble Lord, Lord McKenzie, was talking about last week.

You cannot compromise in a referendum. Everything is black and white; everything is yes or no. It polarises the community and, while it might be a lot of fun for people taking part in it, it simplifies what are often quite complex issues and runs the risk of undermining the whole process of liberal democracy in the local community. We are generally sceptical about the value of Chapter 1 of Part 4 of the Bill and if it is to remain, we believe it needs a much stricter tying up so that the number of referendums which can take place are relatively few and are on appropriate subjects.

I want to say one more thing about the dangers of extremism. I am really very fortunate in that I represent a small, compact urban ward on my local council. We have small wards and the electorate is under 4,000. I say that I am fortunate because you get to know a large number of people in the area. I was looking at the result for the last time when I had to stand for election, three years ago-I did not have to, but I did-and the party which came second in that ward was the BNP. The BNP got 337 votes, which you might not think is a huge amount but 5 per cent of the electorate is under 100 voters in a ward of under 4,000 electors. I worked it out as 95; I could go and get 95 signatures on a petition for almost anything, on any afternoon that I wanted to, because that is the way that things are with people signing petitions. If somebody goes along and gives them the blarney, they sign it and do not necessarily look at the words on it. That is unfortunate but true.

In an area like that, which does not have a large ethnic minority population but does have a significant number of Asian ethnic minority families, I can imagine the real danger that would occur with an appropriate subject question for the referendum. If they were clever, it would not fall outside the rules but everybody would know exactly what it meant. I would be very unhappy with a threshold of 5 per cent. Certainly, for smaller wards, our view is that it should be very much higher. We are suggesting 25 per cent in the first of our amendments. In the second, we question whether the Secretary of State should by order be able to move the required percentage threshold up or down. It is such a sensitive matter that we question whether the Secretary of State should have that power, which is set out in the Bill.

The third thing that we question is whether a council ought to be able to regard a petition for a referendum as being valid even if it does not have the right number of signatures on it. It is a very odd provision which says if you want a referendum, you have to go through these hoops-you have to submit it according to the rules and have a certain number of people on it-but that if you do not manage to get that number of people, we can think, "It's on a good thing, after all, so we'll have the referendum anyway". If you are having rules on referenda, it is our view that they need to be pretty rigorous and not be open to continued political argument on whether the petitions fit those rules. We have some doubts whether it is possible to set out a sufficient number of rigorous rules to make the system foolproof against the kind of populist and perhaps extremist manipulation that I have been talking about, and we will be scrutinising the rest of this chapter of the Bill very strongly indeed.

9:30 pm
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Lord Shipley (Liberal Democrat)

My Lords, I shall speak to Amendment 122 and briefly make the case for a 10 per cent trigger. There seems to be general agreement in your Lordships' House that 5 per cent is too low. That is for two reasons. First, when you have an actual referendum-as opposed to simply a petition on an issue-you ought to have a clear demonstration that there is significant public support for the question. Secondly, referendums cost money and if there is going to be a substantial cost to holding the referendum, it is legitimate to expect that a higher threshold than 5 per cent is generated to merit the cost of holding the referendum.

Seeing this now from the perspective of those who are gathering the petition, is it reasonable, given that there could be a referendum, to ask people to collect more than 10 per cent of the relevant area? That would be quite hard to do. First, I believe that 10 per cent is a reasonable figure in all the circumstances. If it was 20 per cent and all the people signing it were all in favour of the referendum question, a turnout of 40 per cent would mean that in effect the 20 per cent is almost a majority. Presumably some people would sign for a referendum even if they were unsure which way they might vote, but I think 10 per cent is a reasonable trigger.

Perhaps more importantly, it strikes me that if people can gather 10 per cent it is actually not that difficult for them to gather 20 per cent. You might just as well accept the fact that at 10 per cent the trigger has been achieved. That is my view and that of some other noble Lords.

The other method of triggering a referendum is through members, then a petition and potentially a percentage threshold. I do not understand why members are treated differently from the general public. We should have a single system and as a rule of thumb the best and most reasonable figure that I could think of is that 10 per cent would be publicly understood as a reasonable number in all the circumstances, whether or not members are involved.

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Lord Beecham (Labour)

My Lords, not for the first time Newcastle is united in connection with the amendment in the name of the noble Lord, Lord Shipley. A working figure of 10 per cent is probably about right. The figures suggested in some other amendments are on the high side; 25 per cent is more than half the average turnout in a council election. It is asking a lot to postulate a requirement for a petition to have as high a signature rate as that.

I tabled amendment in this group in relation to the areas from which a referendum might be called. The Bill provides for the whole authority or one or more electoral areas, provided they are contiguous within it. That sounds plausible, but if you take, for example, Birmingham, you have wards with an electorate of about 20,000. That argues a population of something like 30,000. It is in effect a small town. That is big enough to contain more than one discrete and substantial community. My amendment simply suggests that in addition to the two criteria laid down in terms of area in the Bill, there could be a further provision, namely,

"such area as may be determined by the authority".

An authority could say: go and petition the area, we acknowledge it is not the whole of the ward, but we are prepared to accept a smaller area than an electoral division. It gives a degree of flexibility which I think might be reasonable. That is the effect of Amendment 120J.

I was interested to hear the observations of the noble Lord, Lord True, who was emphatically endorsing the principles of petitioning as an alternative to referendums. I wish he had been here to support me and the absent noble Lord, Lord Shipley, when I proposed this afternoon that the provision that would strike out the petition procedure should not be supported and that the provisions of the 2009 Act should continue to apply. Be that as it may, he is right to prefer petitions to referendums; they are undoubtedly better. I pay tribute to the noble Lord, Lord Rennard, for his analysis of the defects of referendums, taken at large, and his reference to the report of the Constitution Committee last year.

He and other noble Lords are right to point to some of the dangers that can arise and the mischief that can be made. In the next group of amendments, we shall come to the point about members of councils calling referendums. I agree with the noble Lord, Lord Shipley, about that and support his amendment. However, one can clearly see a variety of difficulties. For example, in my own ward there is currently a proposal for a historic building, which has been acquired by the Muslim community, to be made into a school and community centre. The BNP is already stirring up hostility to that proposal. It is not just a planning proposal; it is a proposal for a school and so on. The amendments on planning would cover the planning side but it goes beyond that. One can clearly see the difficulties that could arise from the referendum process, a public vote and so on.

I put another case: tomorrow we shall debate elected police commissioners. If you wanted to stand to be an elected police commissioner and were building up your campaign, it would not be difficult to orchestrate a series of referendums across the area-which might be a single county or an area bigger than that-in the run-up to the election. A local election does not have to be a straightforward party political contest. There are all sorts of ways in which the system could be used and manipulated, which underlines the need to be very careful about substituting plebiscitary democracy for representative local democracy. As the noble Lord, Lord Greaves, said at some length and with some eloquence in our first debate on the Bill, the core principle in a series that he enunciated is that of support for local representative local democracy. There is danger even in non-binding referendums. There may then be pressure for binding referendums, although not from the Government, except in one particular. You can see that outside the major political parties, there could a build-up of pressure for binding referendums to be held on the Swiss or Californian models, nether of which are very persuasive as instruments of good government.

With the characteristic generosity that marks the political approach of the Opposition, we support most of the amendments proposed by the Liberal Democrats in this group. However, with respect to the noble Earl, Lord Cathcart, and the noble Lord, Lord True, their proposed figure is too high and difficult to justify.

We shall probably just have time to move on to the next group of amendments. I note with some alarm one amendment in the name of the noble Baroness, Lady Hanham, which would reduce the percentage to 1 per cent and fix it at that, which strikes me as going much too far. We shall come to that this evening or on Thursday. We are not voting tonight but I invite the noble Lords to continue to convey to the Government their concerns about the way in which these proposals have been made. I hope the Government will take another look, particularly at the threshold figures if they are not prepared to depart from the principle of promoting referendums. I look forward to our debate on Report and to a response that reflects the views that have been expressed tonight.

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Lord Greaves (Liberal Democrat)

Before the noble Lord sits down, will he comment on the view that in many cases, whether or not a referendum is mandatory, if it has been high-profile and hard-fought, it will be very difficult-certainly for a district council-to go against the decision? In practice, and in political reality, they will have to abide by it.

9:45 pm
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Lord Beecham (Labour)

It will be a real test of political leadership to withstand populist pressure of that kind. One of the concerns expressed by many of us during discussions on the Bill is that it gestures too much in the direction of populism and will make life more difficult, particularly, as the noble Lord says, for smaller local authorities that are likely to come under greater pressure than those in bigger urban areas or counties.

Photo of The Earl of Lytton

The Earl of Lytton (Crossbench)

My Lords, as this is my first contribution at this stage of the Bill, I declare an interest as the president of the National Association of Local Councils, which noble Lords may know as the national body for parish and town councils. I am also president of the Sussex Associations of Local Councils. I will limit my declaration of interest to those two because they are most relevant.

I appreciate the way the noble Lord, Lord True, introduced this particularly important set of issues. He started off with the question of triggers. That led the noble Earl, Lord Cathcart, to comment on triggers for parish and town councils. It may save time if I deal with an aspect of that by way of illustration. We will later get on to a question in relation to paragraph 18 to Schedule 12 of the Local Government Act 1972. Subsection (4), which relates to parish councils, states:

"A poll may be demanded before the conclusion of a parish meeting on any question arising at the meeting; but no poll shall be taken unless either the person presiding at the meeting consents or the poll is demanded by not less than ten, or one-third, of the local government electors present at the meeting, whichever is the less".

As one can readily see, that is a very low trigger. I am aware of a situation where a coastal parish council considering an extension to its village hall found the process hijacked by a small group of people who raised the 10 minimum. As the matter then proceeded to a parish poll, they were faced with the cost of something approaching £4000 for conducting that, because it had to be dealt with by the principle authority under the normal rules.

One gets a sense that this is devoid of proportionality. We have talked about the gravity of the subject, but there has to be some sense of proportion. I know that there is an amendment in the Minister's name about this. There are other issues concerning overlaps. I think the noble Lord, Lord Beecham, referred to this, sort of, in code. By overlaps, I mean the possibility of a referendum being used to countermand the other duties of a principal authority. We cannot be having that many bites at this particular cherry. Mayhem lies down that route.

Regarding the cost-benefit and cost-burden, if there is no proportionality, it is a free bet in economic terms and we will have free riders, people who have an agenda and who want to take charge. This could be the moneyed who have moved into an area or whatever it happens to be, or some particular cause célèbre. The noble Lord, Lord Greaves-or it may have been the noble Lord, Lord Rennard-referred to the fact that the run up to an election might be a good time to trigger something that would get in the local paper, or whatever it happens to be. Democratic coherence is at stake here. We are talking about localism and about having the elective democracy, to which the noble Lord, Lord Beecham, referred. We cannot bypass that by a process of sectoral interests.

Why do I mention this? It is because I strongly believe that when it gets down to the parish pump level, it is important to have something that is proportionate, cannot unduly fetter the operation of parish or town councils' affairs, and respects the principle that when you elect a body of people to represent your interests they must to some extent be given a free hand. The test is at re-election. That is not to say that there are no matters that lie outside the normal voting pattern, but there must be a clear way of making sure that they do not cut across one another.

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Lord Taylor of Holbeach (Conservative)

My Lords, I thank my noble friend Lord True and, indeed, all other noble Lords who have spoken on this important subject and on the innovative development of this aspect of community empowerment. We are rather constrained by the rules of debate in the sense that these amendments are primarily about the threshold, but of course the threshold needs to be taken in connection with a series of government amendments and measures in the Bill that protect the whole process of referendums. While I shall try to focus principally on the threshold, I hope that noble Lords will be mindful that when we meet again to discuss these matters we will have further opportunities to debate a complex subject that runs across several aspects. I hope that what I have to say at least places the Government's position in some context.

One of the most important aspects is the risk of populism. That was the theme of a number of speeches. To those who fear populism, I should say that leadership in institutional local government has nothing to fear from populism. If it strengthens leadership in local government, this innovation will, in itself, be important. We are quite clear that people should be able to trigger a local referendum by submitting a petition to their council containing the signatures of 5 per cent of the electorate. My noble friend Lord Cathcart and the noble Earl, Lord Lytton, mentioned the problems of this low threshold in connection with parish councils. I should emphasise that the Bill's provisions in this area do not provide for referendums relating to parish councils, which are not part of the Bill. We will have an opportunity later to discuss parish councils.

A large number of amendments have been tabled that seek to amend the figure from 5 per cent. Figures of 10 per cent, 15 per cent, 20 per cent and, indeed, 25 per cent have been suggested. As the noble Lord, Lord Beecham, said, I am thinking of turnouts and of my experience as a canvasser. I think how many households one can actually canvass and how many voters one actually speaks to. Collecting signatures is no mean task. I say that as a political activist. All noble Lords will have had experience of that and we should put the 5 per cent figure in that context.

There is a question as to whether there should be a higher threshold for small electoral areas. Clause 209(2) of the Bill provides for different arrangements in different areas to be made by regulations, if there is a need. I am not persuaded that there is a need, but the Bill does provide for that if becomes evident that a higher threshold is necessary. We believe that 5 per cent is a fair threshold, building on the established precedent. It appears to us to strike the balance between setting a fair and achievable threshold for issues in which local people are seriously interested but at the same time a high enough hurdle to deter potentially frivolous campaigns. I think the whole Committee would wish to see that. I would say to my noble friend Lord Greaves that, for example, a 25 per cent threshold in Pendle would require the signatures of some 17,000 people. That is an enormous threshold for any campaign to secure. Indeed, one could argue that if one secured 17,000 votes in a referendum, the result was a foregone conclusion.

I can give other examples and I hope to persuade the Committee that 5 per cent is no mean figure. Noble Lords will be aware that the figure of 5 per cent in the Bill is based on the petition threshold for binding referendums on council governance, introduced 10 years ago. In using this figure, we recognise that these referendums are far wider in scope, so we will want to monitor the threshold to see if it is the right one in practice. That is why we have included a power for the Secretary of State to amend the threshold by order if experience shows that the 5 per cent threshold is not quite right. Amendment 124C seeks to remove this power, so it leaves the Bill without that flexibility.

The debate that we have had today and the various thresholds put forward in the amendments show just how difficult it is to agree an appropriate petition threshold. In this area of referendums the Government are listening to these debates and want to get it right. We want a workable system that will reinvigorate community politics without at the same time making representative government difficult and threatened in the way that some noble Lords have implied. Therefore, getting the balance right is very important. We have taken the established threshold of 5 per cent, as I have said, to provide consistency. While we do not rule out a change to the threshold in the future-that is why we have included the power to vary it in the Bill-it would appear sensible to wait and see whether a variation is necessary.

Amendment 120J would allow local authorities to change the area in which a referendum is being held from the one stated in the petition. We believe that the amendment is unnecessary. If a council wants to hold a referendum throughout the area of the authority, it can resolve to do so irrespective of whether a petition has been received with the requisite number of signatures to trigger a referendum in just part of the area. Indeed, the council can resolve to hold a referendum of its own accord, separate from the issue of the petition threshold. We take the view that if a referendum is to be held in just part of an authority's area, it is right that the people in that part should have a say in whether there should be a referendum. They can do this either by joining in the petition or getting the councillors for that area to request that a referendum in their area be held.

Amendment 121, in the names of my noble friends Lord True and Lord Cathcart, seeks to retain the duty on authorities to provide facilities for the hosting of petitions in electronic form. In fact, the provision that the amendment seeks to omit is essentially a technical one. It attempts to deal with the situation that might arise if the referendums provisions that we are currently debating are brought into force before the petitions provisions in the Local Democracy, Economic Development and Construction Act 2009 are repealed.

In practice, we intend to abolish those petition obligations as soon as possible. I think it is fair enough for us to debate the principle of whether it would be right to impose a new obligation on councils to host electronic petitions calling for referendums. However, I cannot say that from anything I have heard today I am persuaded that that is a necessary imposition. The Government's view is that it should be up to local authorities to decide whether they provide for this, and our provision in Clause 43(4) makes that clear.

There has been a lot of concern about councillor requests for referendums and how they might impact on local campaigning and perhaps be extremely disruptive. Amendments 125 and 126 would provide safeguards against inappropriate calls for referendums by councillors, and I can certainly support the intention behind those amendments. In fact, we have already provided what I believe to be an important safeguard in Clause 49. I believe that the safeguard we have in place-that, following a request from a member, a referendum may not be held unless the full council has resolved that it be held-is a better check. These amendments would make a councillor call for a referendum redundant, as, if a petition is supported by 5 per cent of local voters, there will be a referendum in any event.

Finally, my noble friends propose in Amendment 129 that local authorities may recover the cost of a referendum from electors in the area in which the referendum is held. The amendment is, however, silent on how the cost would be recovered. My noble friend has voiced his concerns about the frequency of referendums-indeed, many noble Lords have thought that the numbers might be excessive-as well as the resulting cost burdens.. He is concerned that some areas within a council will, through the legislation, have all the opportunities to vote in a referendum, while the cost of the referendum will come out of the council's overall budget, meaning that those who are not part of the referendum will bear some of the cost. Their amendment seeks to ensure that the costs of holding a referendum are spread across the area over which it is held. However, our approach already enables that to happen. It puts in place a scheme that enables referendums to be held in the relevant council area for the issue at hand. Therefore, if it is a district council matter or a matter over which the district council has influence, the referendum can be held at the district council level, whether it be across one or more wards of the district or the entire district council area.

I should now like to refer to the comments of my noble friend Lord Greaves, who was concerned that the rules should be rigorous. The rules on referendum petitions relate to when a council must hold a referendum. A council has discretion to hold a referendum whenever it wishes on any subject it feels to be appropriate. Thus, if a council believes that it is right to have a referendum on any subject, it can do so, irrespective of how many people sign a petition, and indeed irrespective of whether there is a petition. The noble Lord, Lord Beecham, worried about the 1 per cent threshold, the concern having somehow been lodged that the Government had tabled amendments to change the threshold to 1 per cent. We are not reducing the threshold to 1 per cent but in the case of London, in addition to the 5 per cent requirement, each London petition should contain the signatures of 1 per cent of the electorate in each London borough to demonstrate London-wide support for the petition. This is a safeguard; it is not meant to be a lightening of the burden regarding petitions.

There has been some concern that, by doing away with petitions and introducing the concept of referendums, we are destroying something positive and useful. We think that local referendums are more effective for two basic reasons. First, they have greater visibility than a petition. It is difficult to create the same impact with a petition than with a local referendum where every elector gets a chance to give their view. Petitions are essentially about one voice; referendums are about two voices, so that those who do not agree have the opportunity of voicing that. We must not assume that every referendum that is presented automatically results in a positive vote. Secondly, the effect of a referendum is almost certainly that more people will be engaged. If more people are engaged in holding a referendum the local authority will benefit as a consequence.

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Lord Jenkin of Roding (Conservative)

My noble friend said earlier that the Bill gives the Government power to alter the minimum numbers for a referendum by order, and helpfully he referred to Clause 209. It may be that I am totally misunderstanding it, but Clause 209(1) says:

"Any power of the Secretary of State ... to make an order or regulations under this Act is exercisable by statutory instrument".

The next subsection is the one to which I think he was referring, which states:

"Any power of the Secretary of State ... to make an order or regulations includes ... power to make different provision for different cases, circumstances or areas".

I sense that my noble friend was rather relying on that for his proposition that the Secretary of State would be able to change the figures in the Bill by order. Nowhere in the Bill on the question of the minimum levels is there any power to make an order. It just does not apply. There are regulation powers towards the end of the part dealing with voting in and conduct of local referendums. Clearly, that would invoke Clause 209. Unless I have completely misunderstood, Clause 209 applies only where the Bill contains a power to make orders, unless in relation to these minimum figures it does not. It may be that my noble friend already has an answer. I went on long enough to ensure that perhaps he would. If I have misunderstood, I am happy to be corrected. I am not clear that my noble friend stated the provisions of the Bill properly. Perhaps he can reply before he finishes the point he was making.

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Lord Taylor of Holbeach (Conservative)

I thank my noble friend. One can rely on one's noble friends to provide the testing question. Clause 44(2) on page 39 of the Bill states:

"The Secretary of State may by order amend subsection (1) to specify a higher or lower percentage than the percentage for the time being specified in that subsection".

Perhaps I ought to have relied on that provision rather than the more complex structural arrangement.

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Lord Jenkin of Roding (Conservative)

I am extremely grateful to my noble friend. He was quite right when he said originally that Clause 209 would allow the Secretary of State, as he has an order-making power, to make different orders for different figures, different areas and different sizes of electorate. I am greatly relieved to know that he was able to get an answer as quickly as he did, and I am very happy to be assured.

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Lord Taylor of Holbeach (Conservative)

My noble friend is not the only one to be pleased to have got the answer as quickly as that. Throughout the Bill noble Lords will discover that the residual powers vested in the Secretary of State are frequently to be able to modify the provisions of the Bill in the light of experience because, as noble Lords will know, it is intended that the provisions of the whole of the Localism Bill will indeed be subject to review under the terms of the Bill.

What I was going on to say was really by way of peroration. We will be debating amendments to Clause 47 when we meet again and they limit to some extent the number of referendums that may be held. Councils will be able to refuse to hold referendums on issues for which there is already a statutory process-a planning application and the right of appeal and issues such as planning or licensing applications. Repeat referendums may be refused if within four years of the original, and councils will have discretion to refuse if the costs of holding a referendum are disproportionate and above certain limits.

I hope that, taken in the context of the debate we have had this evening and future debates we are going to have on this subject and the approach of the Government, which is, indeed, to take note of the issues raised by noble Lords, my noble friend will feel free to withdraw his amendment.

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Baroness Byford (Conservative)

Having listened very patiently, I have a very short question for the Minister. In his response he said that it obviously does not affect parish councils and I appreciate that it does not at this stage in the Bill. However, Clause 56 clearly does look at parish councils. I hope I am not too out of order-it is only a quickie-but will there be any trigger as to a percentage that would have to be considered for parish councils to able to hold a referendum? It is not clear; nothing is laid down in the Bill. I simply wonder, as we have been looking at the various percentages to trigger things, whether he has any information on that.

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Lord Taylor of Holbeach (Conservative)

I am not able to give a specific answer to that. All I can say is that the noble Baroness will be aware of the current situation in respect of parish polls and we will be consulting on the parish regime and, no doubt, consulting the noble Earl, Lord Lytton, in particular.

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Lord Greaves (Liberal Democrat)

I have just a couple of points. When we get to Clause 56 on parish councils we will have a stand part debate. It would be extremely helpful if the Government had some fairly clear ideas on where they are going on parish councils because those are the questions we will be asking.

The Minister said that the Government thought that it was right that people in an area should have a say on whether or not there should be a referendum, but if there is a petition signed by 5 per cent of the people to have a referendum, why should that prevail over an alternative petition in the same area signed by 10 per cent or 20 per cent of people who do not want a referendum?

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Lord Taylor of Holbeach (Conservative)

My noble friend poses a complex question at this hour of the day and I am sure he will forgive me if I do not give him a full answer to the conundrum. The decision on whether or not to hold a referendum-on the basis of a petition, or on the basis of a councillor requesting a referendum-can be taken only by a full council agreeing to hold that referendum. The power to hold a referendum is vested in the council concerned. That is the most important provision, which would take care of that difficulty.

10:15 pm
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Lord True (Conservative)

My Lords, I am very grateful to my noble friend for his very thoughtful and considerate response to the debate and also to all noble Lords who have taken part. It is an important matter. I apologise to the noble Lord, Lord Beecham, for not being present when petitions were discussed-I was in proceedings on the Education Bill-but I can assure him that if a petition were presented to my council, it would be considered under the standing orders of the council at the next council meeting.

As far as the debate is concerned, I take the point that seeing it only from the point of view of the opposition was a defect in what we said-perhaps it comes from being under the control of my noble friends for 23 years-but I think the point made about the temptation on parties in power to procure referendums is important, and I hope my noble friends will consider it. Equally, the point made about the BNP by the noble Lord, Lord Greaves, was important, and I hope my noble friends will consider it further.

I did not comment on the amendment tabled by the noble Lord, Lord Beecham. I shall comment on it further when we come to neighbourhood planning matters, but in the processes that we have undertaken, local people have defined areas that they believe are their communities which are different from ward boundaries or electoral area boundaries. I believe that they could be capable of being recognised in petition and referendum procedures. I hope that my noble friends will consider that matter and that flexibility further because I have amendments down in relation to neighbourhood planning.

My noble friend and I did not seek to find the final answer on the issue of the threshold. The triggers in terms of ward councillors and, I still think, for a mandatory referendum-potentially a percentage-are too low in certain circumstances. I will reflect very carefully on what my noble friend said. I welcome the fact that he said he would reflect on the position of potentially having different thresholds for different quantities of population, as suggested by my noble friend Lord Cathcart. I thank all noble Lords who have taken part in the debate. I beg leave to withdraw the amendment.

Amendment 119 withdrawn.

Amendment 120 not moved.

House resumed.

House adjourned at 10.18 pm.