On the face of it, the Bill is a technical measure that dots some i's and crosses some t's on contract law and regulations, but I believe that it is more important than that. The Government's approach in some ways bodes ill. It gives us a glimpse of a centralising tendency that I thought had gone when the Conservatives went into opposition on 1 May. Some aspects of the Bill show that centralisation is still alive and kicking in the Government.
I have several fundamental and practical concerns. No additional powers are granted to local authorities. As I understand it, it takes away the rights of council tax payers in the event of a council acting outside its powers.
Two weeks ago, the UK ambassador to the Council of Europe signed the declaration of local self-government. I echo the comments of my hon. Friend the Member for Newbury (Mr. Rendel) in welcoming that important step by the Government to acknowledge the essential role of local government in Britain. However, more than words are necessary. We need action to turn those important statements into something practical on the ground.
As a local authority member for the past 11 years, I have seen at first hand how the previous Government lost their local government base and then sought to replace local democracy with ministerial regulation, direction and ever-tighter financial controls. The new Government must sound a new note for local government. While some recent ministerial speeches suggest that they desire to create a new relationship between central and local government, we remain to be convinced that that is what will come about. Even in the darkest days of the last Government, local government was innovative, inclusive and able to respond to the needs and aspiration of local communities. Local government does not need more duties imposed on it. The news that Ministers propose to consult their colleagues in local government about the scope of a new duty to promote economic, social and environmental well-being misses the point entirely. Local government needs a power of general competence. Such a power would make the Bill unnecessary. It would help us to rejuvenate local government and give substance to the Government's rhetoric about community leadership, and to the Liberal Democrats' commitment to the idea of local government's role as the leader in the local community.
Before the general election, a Select Committee in the other place investigated the relationship between central and local government and produced a powerful and persuasive report entitled "Rebuilding Trust". The report must not be allowed to gather dust and its recommendations should form the basis of legislation. It recommended
a new statutory power of local competence, enabling an authority to act in the interests of the local community within the limits of financial prudence but without a need to be certain that no other powers are available".
That seems to me to be the way forward, and it is a shame that the Bill contains no such proposals.
The Bill targets private finance initiative contracts; it tries to make a bad idea work. If the Government think that the PH is the answer to all their—and local government's—financial difficulties, they must have been asking a strange question. Throughout the 1980s, creative finance in local government—lease-back and deferred purchase arrangements—was pilloried by the Conservative Government. Their reason for such attacks—that they put costs on to future generations for providing today's services—seems odd when we consider what the PFI does. By simply changing the words, it gives credibility to something that was attacked when local government did it in the past.
The PFI is a way of circumventing strict Treasury rules. The problem is not the Treasury rules but the mindset that regards them as God-given and unchangeable. I hope that something can be done about that. I welcome the Minister's statement about the creation of a task force to examine the PFI. I hope that it will question the basis of the Treasury rules, how they treat capital expenditure and the way in which they confine and restrict unnecessarily.
I have several practical concerns. My research suggests that there are still anxieties in the City about how the Bill will assist PH contracts coming into being. It may cover situations such as that faced by my local authority a year or so ago with Morgan Grenfell and the Wellesley housing association, but it does not cover contracts such as those that involve the transfer of residential homes, where the contract provides only services, not assets.
There is also the problem of length of time and the lack of a financial cut-off. I hope that the Minister will respond to this. For example, a large contract that lasted for less than five years could have substantial financial implications, but a contract that runs for a long time, such as social services spot purchase contracts, could have only a small financial implication. As I understand the measure, and I look forward to being corrected if I am wrong, the compulsion to certify such contracts would increase the local authority bureaucracy involved in dealing with the documentation and in the democratic process. Perhaps in Committee we will be further enlightened about that.
Despite its accompanying explanatory notes, the Bill has practical implications for local authority officers who certify such contracts that need to be clarified. The Minister mentioned the Waltham Forest case, in which individual officers were, I believe, found liable. The officers who may become responsible for certifying contracts are worried about whether they will be caught by the Bill. A monitoring officer expressed concern to me about the increased cost of having constantly to go to counsel for advice on signing such certificates.
Finally, what checks and balances will apply to the compensation arrangements negotiated between local authorities and businesses set out in clauses 2 and 3? Will the Minister spell out what rights of challenge will be available to enable the reasonableness of arrangements to be tested? If he will not, there will be serious concern that private interests will be protected by the Bill at the expense of public interests. Clause 7, as I understand the explanation of it, means that the taxpayer would always lose out, and that cannot be right.
I believe that the House should be debating legislation to give local government the power of general competence. Measured against that radical proposal, I have to say that the Bill is a timid mouse of a measure.