Clause 2 - Control of borrowing
Local Government Bill
10:00 am
Mr Edward Davey (Kingston and Surbiton, Liberal Democrat)
The Minister does not quite understand the thrust of the amendments, perhaps because he feels that they are directed at him and his colleagues. The amendments would take the Secretary of State out of the equation. Whitehall interferes far too often in local government, and particularly in local government finance. Contrary to the criticisms made by the hon. Member for Runnymede and Weybridge, we have constructed the amendments so that they provide the flexibility for independent professional outside bodies to set up the code for borrowing. There is flexibility in amendment No. 54, as the Minister implied. Under that amendment, the Secretary of State could choose which accountancy body would draw up the code. CIPFA is the obvious choice, as the Minister readily accepts, but the amendment provides flexibility. If CIPFA decided not to draw up a code, the Secretary of State could choose another accountancy body.
I am reminded of the Government Resources and Accounts Bill Standing Committee, on which I had the privilege to serve. That Committee debated how we should draw up accounting definitions and a new set of resource accounting budgets for the Government. The then Conservative Front-Bench spokesman, the right hon. Member for West Dorset (Mr. Letwin), and I agreed that the Government relied on themselves far too often to set the definitions, and that bodies outside Government, Whitehall and the Treasury should be involved in drawing up the definitions. If the Government keep that power to themselves, they will be judge and jury in their own case.
We are discussing a slightly different issue, because under this Bill, the Government are judge and jury in respect of local authorities, not themselves. Nevertheless, the same argument applies, namely that there is a role for independent bodies. As the Conservatives and I said in Standing Committee on the Government Resources and Accounts Bill, there should be provision for such bodies in the Bill, and we should give them a statutory role. There may need to be some flexibility in case we have to change the body because it has ceased to exist.
As the hon. Member for Runnymede and Weybridge said, the body would be independent and so might fold. We would then need to appoint another body. However, as we discussed at length in
Committee on the Government Resources and Accounts Bill, such bodies exist in the accountancy world. There is, for example, the Accounting Standards Board and the Financial Reporting Council, which the Government set up with the accountancy profession. Those bodies are used to doing the sorts of jobs that we are suggesting that they could do under amendments Nos. 52 and 54. The amendment provides flexibility, and I believe that there is a precedent to the provision that the Conservatives supported.
The Minister says that the Government need the extra powers to control authorities such as Hackney. As I have said, I disagree with him because I believe that the Local Government Finance Act 1992 provides those powers. The Minister said that the 1992 Act deals only with revenue, but all borrowing has a revenue consequence. There is real worry about the Government attitude and the fact that they are divorcing capital from revenue. The reason why the Conservatives focused on revenue powers when they brought forward the 1992 Act was to include the capital consequences in the revenue calculation. There is a close inter-relationship between borrowing and the revenue control mechanism in the 1992 Act. I think that that provides the Government with the powers that they need, which they should not go beyond.
My next point is more philosophical and relates to an underlying difference between the Government and Liberal Democrats: our position on local democracy. Other countries that really devolve power allow the equivalent of local authorities to go bust.