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

In the debate on the previous clause, the Minister referred to a number of contracts and to parcelling that, as Members may know, takes place when a piece of land is sold in three pieces or a contract is let under four. I have always inclined towards the cock-up, rather than the conspiracy, theory, and I know that it is terribly difficult to define—I know the Bill is trying to do so—what is part of one contract. I can therefore see a situation in which an authority might inadvertently be caught up in exceeding the limits and contravening clause 24 for a worthy cause such as a children’s home, school or project with a general public benefit.

Clause 28 is a hard clause that makes various actions void. What flexibility will the Government have if there is a contravention of a direction made under clause 24? Will contracts automatically be made void, resulting in all sorts of legal action by the companies that have entered into agreements with a council, or will the Government have the flexibility not to implement a direction under clause 24? In other words, will they nod through a contract that contravenes it as the result of a cock-up or for a worthy cause, rather than leave a difficult legal jungle in which a private sector company will be left in limbo, not knowing whether it will be paid or whom it should sue?

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

The hon. Gentleman reinforces my view that he is a decent Conservative, because a decent Conservative believes in the cock-up theory of life. The former Minister for Higher Education, Lord Brooke, once said to me that the problem with my lot, by which he meant the Labour party, was that we believed in conspiracy theory, and the problem with his party was that they believed in the cock-up theory; but what I should understand was that they conspired and then cocked up. I have always remembered that, and I suspect that it is the case here. Experience shows that there are examples of decisions made deliberately to jeopardise the good running of a new authority and shadow authority.

The clause is not as harsh as it looks, but it is tough. It depends on clause 24 in the first instance and follows from it, and its meaning is that any disposal made without consent will be void—it will be treated under law as if it had never happened. Incidentally, the clause refers to disposals, not contracts.

Subsection (2) provides that any contract entered into without consent will not be enforceable against a successor authority, so the contractor will not be able to sue the successor for payment for work or services. Subsection (4) provides that a contract entered into without consent will not be considered a certified contract for the purposes of the Local Government (Contracts) Act 1997, meaning that the contract cannot benefit from the protection against legal challenge offered by that Act. The Secretary of State will ensure that information regarding any authority that is subject to a direction and the consequences of such a direction—that is the crucial point—is given wide publicity, including in the trade press, so that contractors are well aware that certain authorities will need to gain consent before entering into contracts.

I hope that the Committee will bear with me, as it is important to put this on the record. Subsections (5) and (6) provide that if an authority applies reserves to reduce its budget requirement for council tax purposes in breach of the direction, and only in breach of the direction, the authority will be treated as though it had not made its council tax calculations as required by the Local Government Finance Act 1992, and accordingly will not be able to collect council tax.

The hon. Member for Poole is right: those are tough measures—but they will be available only within the powers of the direction that we debated earlier. The measures are designed to ensure that there are consequences for authorities that choose to breach the  terms of the direction—in other words, those that enter into conspiracies, not cock-ups. The intention is to ensure that authorities that are going to be wound up do not dispose of valuable land, enter into long-term contracts, or apply financial reserves above a limit specified by the Secretary of State, to reduce council tax without consent, all of which might otherwise have a negative effect on a new authority and, importantly, on the services available to people in that area. Essentially, the clause sets out the consequences for authorities if they do not seek consent either for disposals or before entering into certain contracts. I commend the clause to the Committee.