Clause 9 - Capital Receipts
Local Government Bill
3:00 pm
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
I shall endeavour to be brief so that we can make some progress. Amendment No. 2 would leave out subsection (3), which is the usual nonsense that I have noticed creeping into Bills. First, it makes substantive provisions and then it gives the Secretary of State God-like powers to determine that something that is black will be treated as if it were white, and something that is white will be treated as if it were black.
I noticed such a provision in the Employment Bill last year, and here I see it again with almost exactly the same structure. Paragraph (a) says that black is white, if the Secretary of State says so, and paragraph (b) says that, on the other hand, white is black, if the Secretary of State says so. Clearly, that is not an acceptable way to proceed, and although Ministers, after some time in office, no doubt start to perceive themselves as having God-like characteristics, reversing definitions is a step too far.
I suspect that we have no argument with the use of those powers in draft regulations 9 and 10, but that does not detract from the fact that the Secretary of State will have sweeping powers to define something as being something that it patently and palpably is not.
I have a more substantive concern about draft regulation 8, which concerns the treatment of repaid loans and grants. That regulation depends on the assumption, which is clearly fallacious, that all loans and grants are made from borrowed money. On the loans and grants that are to be repaid to an authority, the notes on the regulation say:
''If it could be used for revenue purposes, the authority would, in effect, be paying its running costs with borrowed money, contrary to the 'golden rule'.
With a tortuous argument, one could just about propose that interpretation where the original loan or grant had been made from borrowed money, but where that is not so, there is simply no case for what the Government propose in draft regulation 8.
I would be grateful if the Under-Secretary could specifically make a case in equity for requiring a local authority that originally made a loan or grant out of its own resources, without borrowing, to treat the repayment as if it were a capital receipt. I invite him to consider how the argument in support of draft regulation 8 is framed in the explanatory notes, which implicitly assume that all such expenditure will originally have been financed by borrowing.
Amendment No. 37 is an alternative—proposing, at the very least, to make a change if the Under-Secretary is not prepared to delete subsection (3). It would simply make the subsection inapplicable to debt-free authorities. There is a cogent argument that when an authority is debt-free, it is unnecessary and burdensome for the Secretary of State to have wide powers to treat a receipt as a capital receipt, with all the consequences arising from clauses 10 and 11—joys yet to come. It seems entirely reasonable that debt-free authorities should be excluded from the hazard of the
Secretary of State using these sweeping powers to define things as something that they are not, and to include their receipts from the repayment of loans and grants as capital receipts.