Clause 30 - Authorisation of agreements during the prohibition period
Local Government Bill
4:45 pm
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
You may have thought that you were on a roll, Mr. Conway, but all rolls have to stop somewhere. We have not tabled amendments to clause 30, but it would be wrong to let it pass without a debate, because it is the nuclear option. The clause gives chief finance officers considerable powers. As the explanatory notes to the Bill suggest, section 114(3) of the Local Government Finance Act 1988 states:
''The chief finance officer of a relevant authority shall make a report''.
Subsection (6) deals with what should happen
''If the chief finance officer is unable to act owing to absence or illness''.
There are some pretty draconian duties under that section. Section 115 relates to where such a report is to be considered by the full council within 21 days of its issue. During the period from the report's issue until the day after the council meeting, the authority is prohibited from entering into any new agreement that may involve expenditure by the authority.
We are talking about pretty severe circumstances, but perhaps not quite as severe as the situation in Walsall, which has required special measures. By the time such powers were needed, the council would already be running into some difficult financial circumstances.
It would be interesting to know what is wrong with the existing legislation—is it that chief finance officers have draconian powers? I have asked that question on so many occasions, but I have never received a proper answer. Perhaps the Minister will explain that in a moment. What is wrong with those draconian powers that already exist that we are seeking to supplement them through the clause? Perhaps the Minister will answer that question at some length in relation to this important clause.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
I am happy to do that. The clause stands apart from the other clauses in part 2 and it might help if I sketched in a bit of background to aid the Committee's understanding. The other clauses in part 2 aim to ensure that authorities maintain sound finances. We are dealing with a problem that, as the hon. Gentleman said, is already serious.
Sections 114 and 114A of the 1988 Act already contain significant powers that allow chief finance officers to report to their authorities in certain circumstances. We are concerned with the reports under section 114(3), which must be made when, in the chief finance officer's view, the authority will not have sufficient resources to finance its expenditure for the year in question. That is not just a matter of budget deterioration; it pertains to a complete exhaustion of all available resources, including reserves. Once the chief finance officer has issued a section 114(3) report, section 115 requires the full council to meet within 21 days to consider the report. However, from the issue of the report until the day after the council meeting, the council is prohibited from entering into any new agreements involving expenditure.
We have already discussed the point that too much of the legislation may be based on the experience of the London borough of Hackney. Our working with Hackney has been a useful experience, not least because we have discovered a slight deficiency in the section 114 power. That power was used by Hackney because of its serious situation and an unintended consequence of that led us to bring forward the amendment. In the period after the section 114 notice had been served, and before the council could meet, the recovery team tried to put together a grouping of new finance officers and advisers to tackle the serious budget problem, but it was stymied because it could not make any appointments. It was debarred from any expenditure, even though the small sum involved was critical in getting an expert finance team in place to begin to turn around the authority's finances.
We recognise that although there could be circumstances in which the objective of section 114 powers as they are defined in the 1988 Act were right, a modest amendment would help to ensure that they would not have a perverse and negative consequence. The purpose of the provisions in the clause is to amend
section 115, so that there can be a little bit of flexibility where expenditure is necessary to help the recovery. I hope that the hon. Gentleman will recognise that, in the light of experience, this is a necessary and sensible addition to an existing power, and I hope that the Committee will agree that the clause should stand part of the Bill.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
Again, the Minister has, in a reasonable manner, analysed a problem that I had already outlined and he has, also very reasonably, described what the clause would do to remedy the problem. If a section 114 notice is served, it is nonsense if those who are trying to remedy the situation have no budget with which to appoint new people or take whatever steps are necessary, whether that applies to the reletting of contracts or other matters. There must be a default power and the clause makes sense in terms of the nuclear option—the situation would be pretty bad if it had to be used. On that basis, Mr. Conway, I shall not seek to persuade my colleagues to vote to remove the clause, even though the power that it gives is pretty draconian.
Question put and agreed to.
Clause 30 ordered to stand part of the Bill.