Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

I beg to move amendment No. 83, in

clause 31, page 14, line 7, at end insert

'but only after Parliament has agreed an instrument laid by the Minister relating to that grant.'.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

With this it will be convenient to discuss the following amendments:

No. 84, in

clause 31, page 14, line 17, at end add

'but only after Parliament has approved any instrument pursuant to subsection (1) relating to any grant.'.

No. 109, in

clause 31, page 14, line 17, at end add—

'(6) Any grant paid under this section shall be reported to Parliament as a special grant report pursuant to section 88B of the Local Government Finance Act 1988 within not more than five months of such grant being made.'.

No. 120, in

clause 36, page 16, line 18, leave out subparagraph (c).

No. 110, in

clause 36, page 16, line 18, at end insert—

'(6A) Any determination made under this section shall be reported to Parliament as a special grant report pursuant to section 88B at the Local Government Finance Act 1988 within not more than five months of the date of such determination.'.

No. 121, in

clause 37, page 17, line 7, leave out subparagraph (c).

No. 111, in

clause 38, page 17, line 29, at end add—

'(4) Any grant paid under this section shall be reported to Parliament as a special grant report pursuant to section 88B at the Local Government Finance Act 1988 within not more than five months of such grant being made.'.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

The Government are giving themselves total flexibility under this clause to pay grants to local

authorities at the Minister's whim. There will be no parliamentary scrutiny whatever, except, as the Minister said on Second Reading when I raised this point, on the scrutiny of the estimates. I shall come to that in a moment. All sides should be concerned about this extra grant-making power that the Government are taking.

Hon. Members may say that the Government pay out huge amounts of grants that are never properly scrutinised. They would probably be right to say that, but that is no reason to give the Government more powers. Clause 31 would allow the Minister to pay a grant at any time, to any authority, for any purpose, without there being any objective criteria by which elected Members in this place, or in local authorities that are not getting those grants, can see why that grant has been given.

The Government can pick and choose the authorities to which they want to give grants. That already happens to a certain extent, but at least there is some scrutiny of that power. I am rather worried that the Government will use the extra power that the clause gives for purposes about which people at the audit stage may be extremely concerned. We tabled amendments Nos. 83 and 84 so that Parliament could scrutinise the grants made.

The Minister said on Second Reading that the estimates procedure is available to scrutinise grants. I was surprised at that because he should know that that procedure has fallen into disrepute. Various Procedure Committee reports of the past 15 years have described as a constitutional myth the idea that the House really wants the Executive to account for spending. The estimates are debated only on the three days allowed for under Standing Orders, and we do not even debate them on those three days—we debate Select Committee reports that are attached to the estimates. When I have asked questions about the estimates during those debates, Ministers often could not answer because they had not been briefed on those matters. They had come to the House not expecting to be questioned on the estimates. The House has effectively given up the scrutiny of expenditure. We would go another step forward in that direction if we accept clause 31.

I shall not labour that point because of the time. However, to assure hon. Members that I could if I so chose, I refer them to a document that I have written called ''Making MPs Work for our money: reforming Parliament's scrutiny of the Budget'', which costs £10. Alternatively, hon. Members can download it free of charge from my website, www.edwarddavey.co.uk.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

I am not sure whether hon. Members can promote their books; otherwise Edwina Currie might never have sat down.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

You are tempting me, Mr. Conway. For the comfort of hon. Members on the Conservative Benches, I shall not go down that road.

I made the point in the pamphlet, and the Leader of the House of Commons has complimented me on some of the analysis in it—I sent him a copy, which he

claims to have read—that when one compares the supply process in the House with almost all other Parliaments in the western world, especially those in the OECD, ours is an absolute disgrace. We do not analyse the Government's budget and spending proposals in any way. The last time that the House rejected an expenditure request from the Executive was in 1919, and that was a request for money for a second bathroom for the then Lord Chancellor.

I told the Committee that I could wax lyrical on the issue. I feel passionately about it. That is why I cannot understand why we should want to give the Executive even more powers, over and above the huge powers that they already have. People are elected to this place to hold the Government to account for the way they spend taxpayers' money, and we have given up on that task. Frankly, the history of the matter shows that we never really bothered to take on that task in any meaningful way. I hope that the Minister will show us why we should trust him with extra powers that will mean that there will not be scrutiny of grants made to local authorities.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

On this occasion I wholly support the hon. Member for Kingston and Surbiton.

Mr Phil Woolas (Oldham East & Saddleworth, Labour)

The hon. Gentleman has read the book.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I have not read the book. I do not think that it will form part of my bedtime reading, although he might convince me otherwise.

Our amendments in a sense complement the hon. Gentleman's amendments and relate to what he has to say. We do not particularly like the specific grant regime, but it did at least have an element of democratic scrutiny about it. The regime that we are discussing is completely arbitrary, as the hon. Gentleman says. Clause 31(1) states, in italics:

''A Minister of the Crown''—

so that is any Minister in any Department—

''may pay a grant to a local authority towards expenditure incurred or to be incurred by it.''

That seems to me to authorise any Minister of the Crown to pay a grant for any purpose that he or she might on a whim consider—to buy, as the hon. Gentleman says, a Christmas party. The problem concerns how the power is to come under democratic scrutiny, or the normal scrutiny of the Audit Commission or the Public Accounts Committee, of which I have been a member. The Minister needs to be able to deal with that point.

In the existing system of special grants, under section 88B(1) of the Local Government Finance Act 1988, which is referred to in some of our amendments, the

''Secretary of State may, with the consent of the Treasury,''

pay a grant. Although the explanatory notes state that the Treasury must give consent, I can see nothing in the clause to that effect, so where will the money come from? Will it come from each departmental budget? If so, to what extent will we be able to learn from the Minister what must be deleted from his departmental budget? How much has the Minister allowed in the next three years for the relevant grants? Is he aware of

other Departments that are likely to make grants under the clause? The provision is pretty vague, as can be seen already from the questions that I am asking.

Clause 88B of the Local Government Finance Act 1998—which outlines the existing regime—states that the Secretary of State

''may, with the consent of the Treasury, pay a grant''

and provides that he should state

''to which authority it is to be paid . . . the purpose for which it is to be paid, and . . . the amount of the grant''.

There are safeguards. In addition to the requirement for the consent of the Treasury, the provision requires:

''A special grant report shall be laid before the House of Commons''.

It also states:

''No special grant shall be paid unless the special grant report containing the determination relating to the grant has been approved by a resolution of the House of Commons'',

and

''A special grant report may specify conditions''.

Those conditions may

''require the provision of returns''

or

''relate to the use of the amount paid''.

It is incumbent on the Minister, in introducing so wide a power in the Bill, to explain to the Committee exactly what he has in mind.

I am worried, also, that the clause is very arbitrary. We have already seen the Government gerrymandering local government finances towards authorities that are likely to be of their political persuasion. They do that by resource equalisation, pooling council receipts, subsidising an authority rental account that is in deficit with another that is in surplus and by rent rebate subsidy limitations. There are a number of subtle ways in which the Government shift money about from one group of authorities to another.

It may be my Machiavellian mind and hon. Members may not like it—[Interruption.] Whenever I start to get on to something contentious, the volume of noise opposite increases. The more the volume of noise increases, the more I know that I am on to the right thing. I have a suspicious mind and I worry about the fact that it is completely at the whim of any Minister to pay a grant to any local authority for anything that he wants. I bet that more grants go to Labour councils than Conservative councils and I defy the Minister to deny that.

Mr Paul Goodman (Wycombe, Conservative)

To buttress my hon. Friend's point, under subsection (2) it is not merely the amount of the grant that may be determined by the Minister, but the manner of payment.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

My hon. Friend is right. The more one reads the clause, which has five far-reaching subsections, the more one realises how arbitrary it is. It would be difficult for the Conservatives to make a case to vote the clause out, but I am gravely suspicious

about it and I await the Minister's explanation with interest.

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

Well, we really do have a storm in a teacup here. The powers are designed to cope with the deficiencies and weaknesses in the existing grant-making regime, which has been particularly irksome to local government. Local authorities have warmly welcomed the changes; indeed, they asked for the changes to remove some of the problems that very clearly exist at present. I understand the Opposition's wish to find a stick with which to beat the Government—after all, that is their role—but, in this case, had they sought advice from local government before tabling the amendments and making their speeches, they might have come to a different conclusion.

The new grant-making power in the clause is intended to address deficiencies in the current powers relating to special grants and to make it easier to pay grants to local authorities without artificially restricting their use. Amendments Nos. 83 and 84 would require the grant to be made in an instrument that would be subject to parliamentary approval.

Mr David Curry (Skipton & Ripon, Conservative)

How can the Minister artificially restrict a use? He either restricts a use or he does not.

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

If the right hon. Gentleman will bear with me, I will explain precisely. Unfortunately, it does happen.

Amendment No. 109 would require the grant to be reported as a special grant report under section 88B of the Local Government Finance Act 1988. That would mean that a grant made under the new power could be struck down after it had been paid if Parliament subsequently decided not to approve it. Most people will understand that it would be unsatisfactory for a local authority to receive a grant and then be told that it was going to be withdrawn because a Committee had retrospectively voted it down. I hope that Members will recognise that that would be inherently unsatisfactory.

The existing special grant procedures are cumbersome and inflexible. Grants can be made only at certain times and there is often a long delay before an appropriate slot becomes available, which can make it difficult to pay sums to local government at the time when they are needed. That encourages Departments—not necessarily the Office of the Deputy Prime Minister—to use other grant-making powers, which are, by definition, ring-fenced. That is the artificial restriction to which I referred earlier and which was picked up by the right hon. Member for Skipton and Ripon. If there is a perverse incentive to use a ring-fenced grant mechanism because the general grant mechanism is cumbersome and difficult to use, curiously, that will impose additional, arbitrary restrictions on local government. From what I gathered from debates in Committee, that was not the objective of the Opposition. I hope that they will think a little bit more about the consequences of their proposals, even though they are motivated by a suspicion of our motives.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

Could this be a mechanism for the Government to dig themselves out of a hole in

certain circumstances? Could it be a mechanism to help those 19 authorities that, because of the local government finance settlement, cannot achieve the settlement that the Department for Education and Skills achieved? The Department for Education would have to make a special grant to make up the shortfall.

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

No, I am afraid that the hon. Gentleman has got the wrong end of the stick. The circumstances that he describes, which we will no doubt discuss when we come to the local government finance settlement, relate to differences between the expectation of the Department for Education and Skills about the passporting on of education allocations to schools and councils' ability to manage that within the corporate constraints of meeting the needs of other services. As I have told many hon. Members who raised the matter with me, my colleagues in the Department for Education and Skills have made it clear that they will look sympathetically at representations from authorities that are having difficulties. There is no connection whatever; we have no intention of using those powers for that purpose.

I put it to the hon. Gentleman that all those authorities are receiving above-inflation increases, not a common experience when his party was in government.

Mr. Curry rose—

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

I am delighted to give way to the right hon. Gentleman, who has experience of that.

Mr David Curry (Skipton & Ripon, Conservative)

From time to time, the Government pay grants under the Bellwin scheme of emergency financial assistance to local authorities to cover disasters such as flooding or rail crashes. The Bellwin scheme is very complicated. How much a local authority gets under Bellwin depends largely on how many teachers it employs because it is related to its budget of the local authority. Will the Minister give us an exemplification of how clause 31 will help North Yorkshire for example, which has suffered from floods and rail crashes, as opposed to the existing mechanism?

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

The obvious example is that in the event of a major disaster that needed Bellwin assistance, the Government could use the powers proposed in clause 31 to make an initial payment to give the authority some money to take immediate action to remedy its problems while it waited for the residue to come through after the detailed grant has gone through its cumbersome processes. This is a classic illustration of how these more flexible powers will enable a quicker response to immediate needs than is possible under existing arrangements.

Clause 31, which deals with expenditure grants, will allow Government Departments and the National Assembly for Wales to pay grants without imposing undue restrictions on authorities in achieving desired outcomes and so ensure that we keep ring-fencing to a minimum. The Local Government Association has given strong support to the new power on that account; it said in its brief to MPs, which clearly has

not been read well, that it welcomed the proposals to simplify and extend the statutory basis of grant payments to local authorities. That is particularly welcome in cases in which the new power would provide greater flexibility for councils in the use of the grants.

Clauses 36, which deals with the best value grant, and clause 38, which deals with the grants in connection with service excellence—the beacon councils—provide a great deal of additional flexibility. It is not a question of removing local government finance from proper scrutiny. In England, parliamentary approval will still be needed to the ambit of each Department's request for resources, and parliamentary approval will still be sought for the local government finance settlement each year, which provides most funding to local government. There will be a proper opportunity to scrutinise how the Government have used those powers.

Mr. Clifton-Brown rose—

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

I will give way to the hon. Gentleman in a moment, but I wish to respond to the valid point that was raised by the hon. Member for Kingston and Surbiton that there may be an argument for changing the arrangements in the House for scrutinising its estimates and expenditure. However, that should not prevent our putting in place a desirable and more flexible framework that would enable us to give appropriate help to local government on a much less restrictive basis than is presently the case.

I have no reason to question the eminently sensible suggestions that the hon. Member for Kingston and Surbiton no doubt wishes to flog to us at £10 a time or offer freely via his website, but his speech was entertaining. He has shown his generosity by giving my hon. Friend the Under-Secretary a copy of the proposals. We shall study it carefully, but there is no reason to oppose the provision.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister has slightly moved on since I asked him to give way on the matter of scrutiny. The Minister and I have been around this course many times. He knows that scrutiny of estimates rarely takes place in the House and, when it does, the Budget estimates of an entire Department are covered in what is usually a three-hour debate. There is hardly time to scrutinise a specific section.

Would the Minister answer some questions before he concludes on the matter? The explanatory notes say that the Treasury must give its consent, but the clause does not. Can he clarify that discrepancy? Can he say how much money his Department has set aside for expenditure under the clause in the next three years? Is he aware of any other Department that has set aside money for the purpose? Can he say where the crossover point is between examination of local government matters, which are covered by the Audit Commission, and of other departmental matters, which are covered by the Public Accounts Committee? Which scrutiny body will have powers to scrutinise the grants? Presumably, that will vary depending on their source.

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

The hon. Gentleman has not been as assiduous as I would have expected. Subsection (5) states:

''In the case of a grant to a local authority in England, the powers under this section are exercisable with the consent of the Treasury.''

I hope that that answers that question.

On the roles of the Audit Commission and the National Audit Office, the Audit Commission's remit is local government. It would be involved, through the district auditor, in scrutinising the use of funds by local authorities but not in the process of the grant, which is a central Government matter. The grant would be subject to scrutiny by the NAO, if the Comptroller and Auditor General felt that it was appropriate.

The hon. Gentleman says that the provision is part of some secret wish of the Government to shift funds in favour of one particular type of authority. Nothing could be farther from the truth. It is in the interest of local government and enables us to make grants, if appropriate, to authorities on a more flexible basis than can be done at present. The precise proportion of money that will go to any particular political party will depend entirely on the qualifying authorities and who controls them—that is a changing pattern. I hope that I can allay his fears on that count by saying that there is absolutely no plan to use the clause in the nefarious way that he suggests. We wish to help local government in a more flexible way, and I hope that the Committee will agree with that.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

I wish to make three points in response to the Minister's comments. First, he said that local governments welcome the measure. Of course, they do—it will mean more money for them—but that does not mean that we should disregard our duties in this place to scrutinise the way in which the Government spend taxpayers' money. His argument is not valid.

We have duties in this place to the taxpayer, and the Minister should recognise that.

Secondly, he says that the measure will reduce ring-fencing. Subsection (3) states:

''A grant under this section may be paid on such conditions as the Minister of the Crown concerned may determine.''

That is the ultimate in ring-fencing. It will give the Minister the power to ring-fence every grant for any purpose. When we discuss clause 32, we will see that that is very much case.

Thirdly, the Minister says that the measure will create great flexibility. The House would probably be prepared to give the Government flexibility in emergency cases, in which grants must be paid urgently. We could have a very clear clause.

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

They cannot.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

The Minister says that they cannot. If he were to rephrase the clause so that they could, perhaps the Committee would be happier with it. It is possible to do that, and I am surprised that the Minister, who is a very intelligent man, and his officials cannot come up with a way of doing that.

I make a final point. The Minister says that he is sympathetic with my proposals for reforming the estimates systems. He has not yet read them, but I am glad that he has such confidence in them and gives me such fulsome support. It is vital that we carry out reform and, until we do, I will not understand why this place should give even more powers to the Executive. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Woolas.]

Adjourned accordingly at half-past Five o'clock till Tuesday 4 February at five minutes to Nine o'clock.