Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

Clause 18 concerns local authority companies. As on the previous clause, I seek clarification from the Minister. We are concerned to ensure that there are no possible loopholes that would give rise to misuse of public money. For example, no draft regulations under clause 18(4) have been published. Could the Minister tell us what those draft regulations might include?

Will the Minister also tell the Committee what borrowing safeguards there will be for local authority companies and whether local authorities can give shareholder guarantees to the companies? With what

auditing regime will the companies have to comply, and will they be subject to best value and comprehensive performance assessments? How will local authorities be protected from fraud in relation to those separate companies, and what other safeguards provided in the Bill will apply?

Mr John Pugh (Southport, Liberal Democrat)

May I make a simple point about the clause? I tried reading subsection (1) several times before I managed to attribute any meaning to it. At first I thought it was tautologous, but eventually I worked out what it meant. It appears to say that the actions of a body covered under subsection (2) are to be treated for the purposes of the chapter as the acts of local authorities. However, it says that in a very cumbersome way, and would not pass a plain English test. Would the Minister consider re-drafting it in a more felicitous fashion?

Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)

I believe that subsection (1) is reasonably drafted. It simply says that the regulations would allow local authority company activities to be regarded as if they had been undertaken by the local authority itself, with regard to capital activities and borrowing, and in so far as they relate to the affordability test. The clause concerns local authority companies and defines—

Mr John Pugh (Southport, Liberal Democrat)

That is indeed what it says, but I think it would be better, for the sake of clarity, to say it without using a sentence that includes the word ''regulations'' with three different functions.

Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)

I would prefer statute to be drafted in a certain way, but it is sometimes drafted in a repetitious manner so that it does not exclude any possibilities and avoids loopholes. That brings me to the point made by the hon. Member for Cotswold. The broad purpose of the clause is to preserve and continue the current system. The current system prevents local authorities evading capital controls by operating via companies, and that principle will be preserved in the new system,not only for the prudential limit, but for the national economic reasons limit, which we discussed under clauses 3 and 4.

The hon. Gentleman asked about borrowing safeguards, the auditing regime and protection from fraud. The company laws, including the Companies Act provisions, will apply to local authority companies just as they do to any other limited company. That law contains perfectly adequate protections relating to the auditing of accounts and other matters raised by the hon. Gentleman. Local authority companies do not need to be treated in the different way suggested.

It is important that, if a company is controlled by a local authority and has significant borrowing or significant liabilities, they can be classed and held together with those of the local authority, so that it can properly calculate its liabilities and be certain that it can afford to service the borrowing undertaken in respect of all its activities. That is the simple purpose of the clause. I hope that I have helped to answer some of the points that have been raised.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Under-Secretary has been helpful and given us a reasonable explanation. I therefore hope that my colleagues will support the clause standing part of the Bill.

Question put and agreed to.

Clause 18 ordered to stand part of the Bill.