Robert Syms (Shadow Minister (Local Government), Communities and Local Government; Poole, Conservative)

There are a few items that I wish to raise. Clearly, much can go on with residuary bodies. Commitments can be entered into by local authorities  for the long term. For all their benefits, private finance initiatives can sometimes land authorities with considerable costs in the long term, committing them to office buildings and other matters such as computer contracts. Will the Minister reassure us about how residuary bodies will operate and confirm that the consequence of reorganisation will be that the successor authority does not inherit more longer term, higher cost contracts than need be the case?

Under the clause, the residuary bodies will turn over most of the assets but, as we know, a lot of local government is tied up with ancient charities, gifts of land or school buildings which the authority is not sure whether it owns. Things might be vested into a charitable or residuary body for some years to come. I want reassurance from the Minister about how the process will operate. Will the costs of running residuary bodies dealing with the loose ends of reorganisation be taken into account for what was described earlier as the aggregate financial envelope?

Andrew Stunell (Shadow Secretary of State for the Office of the Deputy Prime Minister (Communities and Local Government), Department for Communities and Local Government; Hazel Grove, Liberal Democrat)

A lot of local government mythology is backed up by some pretty clear-cut anecdotes, if not evidence that could be put before a court, of circumstances in which councils going out of existence have left poisoned pills for their successors in one form or another. A notable case in my constituency goes back to 1973-74, so such cases can be enduring. With all the attention of the Minister and the Government on the performance of local authorities and their regulation, will he say something about how that will be prevented from happening in this round? What role will the residuary bodies play when dealing with it? What will happen to the finances of the new receiving authority if such an event takes place? The financial predictions on which the original decision was made could easily be blown out of the water. I should be interested to hear what the hon. Gentleman hasto say.

Phil Woolas (Minister of State (Local Government & Community Cohesion), Department for Communities and Local Government; Oldham East & Saddleworth, Labour)

The hon. Gentleman has made an entirely fair and reasonable point about residuary bodies. Indeed, I remember representing an employee of a local authority that had been abolished under the previous process. He had been employed to count the number of oak trees in the area and had then been employed subsequently by the residuary body. It took some seven years to unwind the contract, during which time the number of trees had not changed. That is the stuff of employment tribunals.

Clause 24 deals with the contracts that local authorities may enter into during the period. A probing amendment has been tabled to the provision, which hopefully we shall debate. The clause under discussion enables the Secretary of State to establish one or more corporate bodies to take over property, rights, liabilities and the functions of those local authorities that cease to exist as a result of either structural or boundary changes. They are the residuary bodies to which the hon. Gentleman refers.

The use of residuary bodies is not, in fact, common. We do not expect that there will be a requirement for residuary bodies in this round of restructuring. However, it is prudent to allow a power to the Secretary of State to provide for them until the precise implementation arrangements for each new authority  are known. I am sure that members of the Committee will wish to ask questions about such matters when we reach that stage in the Bill.

A residuary body could be used, for example, to take responsibility for any property, liabilities or functions not transferred to the new authorities because we do not expect that they will be required within the configuration. For example, following a reorganisation, if there is property surplus to the requirements of the new authority, it might be more appropriate to transfer it to a residuary body responsible for the property’s maintenance until it is disposed of. The residuary body would meet the costs out of its assets, and the net proceeds would be returned at the end of that period to the new authority. That approach was taken in the 1980s when the metropolitan counties were abolished. There were residuary assets, and the Committee can probably guess by now where the tree counter was employed.

Subsection (2) will allow the Secretary of State to make provision relating to a residuary body, including provision for its constitution, membership and power to borrow and lend money. It will also allow the Secretary of State to require such a body to submit to him or her a scheme for its own dissolution, because by definition residuary bodies are intended to have ashelf life.

Subsection (3) provides for the Secretary of State to transfer any property rights, liabilities or functions of a residuary body to any other body and provides for him or her to give effect to a scheme for the dissolution of that residuary body. Subsection (4) provides that the Secretary of State may make any incidental, consequential, transitional or supplementary provision, in particular those mentioned in clause 15, which relate to the modification and so on of an enactment.

The clause therefore provides for the Secretary of State to establish residuary bodies as the result of an order for structural and/or boundary change under clause 7 or 10, whichever contains the relevant procedure. That is the intention. As I said, it is not envisaged that that will be required under the window of opportunity, but it might come up through that route or through boundary changes resulting in structural change. I therefore think it sensible for the Committee to adopt the clause.