Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I beg to move amendment No. 108, in

clause 25, page 10, line 42, leave out 'the' and insert 'a properly qualified'.

Clause 25 deals with the powers of the chief finance officer. The Government may have got their clauses the wrong way round. Clause 30 refers to the definition of ''chief finance officer'', which is contained in section 114 of the Local Government Finance Act 1988, subsection (3) of which says:

''The chief finance officer of a relevant authority shall make a report under this section if it appears to him that the expenditure of the authority incurred . . . in a financial year is likely to exceed the resources''.

From that subsection, one can begin to see that chief finance officers have an important and far-reaching role. Subsection (6) says:

''If the chief finance officer is unable to act owing to absence or illness his duties under subsections (2) and (3) above shall be performed''

by, the subsection continues, a member of his staff.

It is important to consider the training and qualifications of chief finance officers who have such far-reaching powers. They should be properly qualified to exercise their functions. The Minister will probably say that the amendment would be burdensome and unnecessary.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

Correct.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

In that case, I shall put an idea to the Minister. People who are not qualified to carry out their roles should be assisted by members of other authorities who are properly qualified. Someone who is trying to keep an authority on the straight and narrow financially, and trying to warn profligate councillors that they are running into trouble, will need to have a convincing argument about why they should not be profligate. That person is more likely to be convincing if he is properly qualified.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

Yes.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister agrees. We are getting on nicely together. Perhaps our amendment will be accepted.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

No.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I thought that I was carrying the right hon. Gentleman too far along the road of temptation, but at least we are half way along it. Before more far-reaching events occur, surely a properly qualified officer from another authority should examine the situation. I commend to him and my colleagues amendment No. 108. The Minister has been agreeing and disagreeing with me, but I have not heard his explanation. It had better be a good one,

otherwise I may urge my colleagues to press the amendment to a Division.

Mr John Pugh (Southport, Liberal Democrat)

We oppose the amendment. I believe that we can trust local authorities to look after their finances. They do not need undue interference from the Secretary of State. If we can trust them to look after their finances, presumably we can trust them to appoint properly qualified financial staff. If we cannot trust them to appoint properly qualified financial staff, we cannot trust them to look after their finances. The amendment goes against the grain of other amendments.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

It now leaves me to disappointment both the Conservative party and the Liberal Democrat party for surprising reasons. I agree wholeheartedly with the hon. Member for Cotswold who emphasised the importance of local authority chief finance officers who have considerable responsibilities being properly qualified. The only matter on which I disagree with him is the need for his amendment. It is wholly unnecessary.

The officers referred to in subsection (3) are required to be members of one of the professional accountancy institutes under part VIII of the Local Government Finance Act 1988 and amending legislation. Nothing needs to be added to the existing provisions on qualifications. No doubt the hon. Member for Southport would prefer us to repeal the provision, but we feel that it is a sensible and necessary safeguard. It is appropriate and there is no need to add to it.

Mr. Turner rose—

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I urge the hon. Member for Isle of Wight not to prolong the debate. The amendment is unnecessary and I hope that the hon. Member for Cotswold will agree that it should be withdrawn.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister's explanation was useful. I must admit that I was not aware of the provision to which he referred under which accounting officers have to be members of a recognised body. That goes a long way towards meeting the purpose of my amendment.

Will the hon. Member for Southport read the words that loom large in clause 25(2) and other parts of the Bill. In such circumstances, the authority has only to ''have regard to'' profligate councillors. It cannot dictate to them. That is the real problem. Although the authority may appoint an adequate accounting officer, he is more likely to convince councillors that they are erring if he is properly qualified. It has been useful to have on the record the Minister's explanation. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr Andrew Turner (Isle of Wight, Conservative)

I do not want to detain the Committee unnecessarily, but I refer to subsection (2) which, as the Minister pointed out, requires the authority to have regard to the report by the chief finance officer. My concern is that that imposes an obligation on a

corporate body. It is difficult to demonstrate whether a corporate body has regard to particular rules or regulations or the law. It is much easier to ask individual members of corporate bodies whether they have had regard.

In my judgment, many members of corporate bodies do not have regard because they do not always understand the advice that they are given, no matter how well qualified the chief finance officer may be. Individual members do not understand and therefore cannot have regard, or in some cases, they understand but decide not to have regard or even to act perversely having had regard to the advice.

How may one clarify a clause of this type to make it clear to individual elected members that it is their duty, not only the duty of the chief finance officer, to blow the whistle? Nine out of 10 elected members who claim no interest in or no understanding of financial matters could allow two or three elected members to lead them down the garden path.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

As the hon. Gentleman implied, there is an interesting tension between the role of the chief finance officer and the role of the council. We have sought to put in place a proper relationship that recognises, as the hon. Member for Southport emphasised, that councillors are democratically elected and should ultimately carry responsibility and take the final decision. We recognise that. However, they should be properly advised and the chief finance officer should have not only the power to make representations but the ability to do so and a clear statutory obligation to make a report in certain circumstances.

We feel that we have achieved the correct balance. Councillors will be advised. They have a duty to have regard to that advice. They make the decisions, but if they seem to have acted perversely, I have no doubt that there would be electoral consequences when such actions were exposed. However, if very imprudent decisions were taken by the alleged profligate councillors referred to by the hon. Member for Cotswold—I hope that he was not referring to his own councillors in Gloucestershire; they will not be at all amused to hear him describing them as profligate, but we should let that pass—and they ignored advice from a chief finance officer, for example on the adequacy of reserves, provisions in the Bill propose fall-back arrangements. The Conservatives will support us if they want to see proper, prudent financial management and the protection of authorities from decisions that could expose the council tax payers to serious difficulty.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

Of course I was not referring to any councillors in the Cotswolds. I referred to profligate councillors in extreme circumstances. The Minister was just causing mischief.

On a more serious point, will the Minister tell the Committee at what stage he expects the Government officers to become involved when chief accounting officers make reports under clause 25 and, more seriously, about minimum reserves under clause 26?

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I do not wish to tempt your wrath, Mr. Conway, by moving ahead to clause 26, so I will

confine my remarks to clause 25. Clearly, it would be a matter of concern if a chief finance officer had made a report that had been capriciously ignored or rejected without good reason by a local authority. We must achieve a balance between maintaining the democratic legitimacy of local authorities reaching their own decisions, and creating a prudent framework of financial management. That is what the structure is designed to achieve. We would not necessarily expect to be involved immediately. However, as we shall say when we discuss later clauses, the Government believe that there should be a reserve power to cope with a case in which there are grounds for believing that an authority is acting imprudently, running its reserves down dangerously low, and ignoring the professional advice of its chief finance officer.

Mr John Pugh (Southport, Liberal Democrat)

Are we not in danger of setting up rules that would apply to councils but not national finances? In this place, people have, from time to time, voted through budgeting proposals in a fairly inattentive—and even downright reckless—way. We are setting up a different kind of regime for local authorities, and may be in danger of overstating councils' capacities for profit. I would like the Minister to confirm that the chief finance officer has the capacity not only to advise the authority but to declare the authority's budget illegal when it is running into deficit. Will the Minister say whether, if the authority continues to act against that advice, there would be consequences for the councillors that agreed to it?

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

The hon. Gentleman makes a perfectly good point. Under clause 30, we intend to amend the regime set out in section 114 of the Local Government Finance Act 1988, which gives the chief finance officer power to serve a notice prohibiting an authority from incurring further expenditure in such circumstances as those that the hon. Gentleman outlined. That is a pretty draconian power, and in certain circumstances it might have the perverse consequence of holding back an authority that is taking steps to improve its financial affairs. I shall say no more about that now, as we will cover the issue under a future clause, but add that we recognise the important powers of chief finance officers. They should be able to report freely and fearlessly on their authority's financial affairs, and councillors should have regard to their advice. That, in our view, is the correct balance, and I hope that hon. Members accept that and agree that the clause should stand part of the Bill.

Mr Andrew Turner (Isle of Wight, Conservative)

The Minister has made it clear that there is a lack of clarity. He said that councillors, not the authority, should have regard to the chief finance officer's advice. Perhaps we will debate that at greater length under clause 30. However, the issue is whether we require councillors to have regard to the advice of the chief finance officer, rather than allowing them merely to look at the report on paper, and allowing one or two of their number to lead the other councillors down a road that might be inappropriate.

Question put and agreed to.

Clause 25 ordered to stand part of the Bill.